KF,
I have a similar reaction, though I think we would agree that taking average $10K losses to more than wipe out many gains is being overly stubborn. Perhaps because I find myself more closely fitting the pattern of trader A, I consider it to be just as bad, and perhaps worse than trader B behavior. The real trick, it seems to me, is finding the proper balance between these extremes. Constantly taking small losses is not always a mark of discipline. In fact, it may just be a sign of fear and over trading, reacting too quickly to every little turn in the market. If a large percentage of those small losses are on trades that would have become profitable had the trader been a bit more courageous, then refusing to risk a somewhat greater loss when the record shows that you may have to live through sudden counter moves even when you are ultimately on the right side is as much a lack of discipline as the opposite extreme. A really damaging side effect of developing the itchy trigger finger of a trader A is that after hundreds of small losses one begins to believe that every trade is likely to become a loss unless you get out of your winners fast. Then after realizing you were "wrong" getting out too soon, you wind up getting back in at inferior prices with a higher probability of taking future losses.
I just came off the longest day after day winning streak I've ever had in short term trading. I did it by forcing myself to sit through bigger drawdowns on trades I could still defend based on the bigger picture, but I still did a rather poor job of riding good trades to full potential. My goal is to migrate the patience I managed to give trades that jumped against me a bit to letting my winning trades develop. The late Friday rally ended my streak, and may wipe out a substantial portion of what I gained (Globex managed to shut down at a rather inconvenient time on Friday), but unless the market gaps up huge on Monday I will still feel good about the changes I have made and will retain a net profit that resulted from getting myself away from that trader A behavior.
Dan |
