Monday, January 24, 2011
1/24/11 The chicken or the egg......
So which one came first? The correct answer is the chicken, but forget that for a moment. In my quest to follow my systems I've come across the whole concept of faith being greater than fear to follow a system. Now the question is the classic chicken and egg question. Which comes first... Faith in the system or following the system.
In order to follow the system you need faith in the system to follow it. It is very hard to follow it without faith... but without faith you won't follow. Which comes first? Neither. For me it was a very gradual increase in both. I would follow it a little and it would work and then I wouldn't follow it and bad trades happen. It was a process of gaining confidence to follow it more and more and as I did I build more faith that the system worked which allowed me to follow it more consistantly and with less emotions involved. There was a process for me that I can clearly see. I didn't see it as it was happening but now I can see it and I find this very valuable for me as I develop other systems. I will need to know how to trade them successfully. Here are my steps that I took.
1.Develop system with edge.
2.Backtest to establish that edge does exits
3.Trade it with smallest contracts size possible and be aware of your TEA.
4.When you screw up stop trading and review your mistakes.
5.Trade small size again and stop when making mistakes.
5.Keep reviewing daily.
Eventually you will make fewer mechanical mistakes, which cause emotional mistakes of not following system. The fewer mechanical mistake, and by cause and effect the fewer emotional mistakes, will allow you to start making money. Once that happens you will build even more faith and it's just a circle from there. It will continually build to a very high Q number. I'm currently 90+%
The review of each trade daily... or as soon as you make mistakes, is the key issue here. With out that review you will never know what you should have done and what the outcome would have been. The more you review and see that if you had just followed the plan it would have been a + outcome, over time, in money, confidence, and performance. It is a vicious circle and the only way to climb out is to review your system and how well you trade it.
If the system doesn't make money you can always change it to one that does. If your system does make money and you don't follow it then you have no one to blame but yourself!
Trader X
In order to follow the system you need faith in the system to follow it. It is very hard to follow it without faith... but without faith you won't follow. Which comes first? Neither. For me it was a very gradual increase in both. I would follow it a little and it would work and then I wouldn't follow it and bad trades happen. It was a process of gaining confidence to follow it more and more and as I did I build more faith that the system worked which allowed me to follow it more consistantly and with less emotions involved. There was a process for me that I can clearly see. I didn't see it as it was happening but now I can see it and I find this very valuable for me as I develop other systems. I will need to know how to trade them successfully. Here are my steps that I took.
1.Develop system with edge.
2.Backtest to establish that edge does exits
3.Trade it with smallest contracts size possible and be aware of your TEA.
4.When you screw up stop trading and review your mistakes.
5.Trade small size again and stop when making mistakes.
5.Keep reviewing daily.
Eventually you will make fewer mechanical mistakes, which cause emotional mistakes of not following system. The fewer mechanical mistake, and by cause and effect the fewer emotional mistakes, will allow you to start making money. Once that happens you will build even more faith and it's just a circle from there. It will continually build to a very high Q number. I'm currently 90+%
The review of each trade daily... or as soon as you make mistakes, is the key issue here. With out that review you will never know what you should have done and what the outcome would have been. The more you review and see that if you had just followed the plan it would have been a + outcome, over time, in money, confidence, and performance. It is a vicious circle and the only way to climb out is to review your system and how well you trade it.
If the system doesn't make money you can always change it to one that does. If your system does make money and you don't follow it then you have no one to blame but yourself!
Trader X
