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overtrading
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ROBOS TRADING STRATEGY RESULTS WEEK ENDING 2 October 2015

(scroll down for screenshots of each day’s trades)

Trades: 1 / Winners: 0 / Losers: 1 / Break Even: 0

[wp_lightbox_anchor_text_display_external_page link=”https://www.forexistentialist.com/wp-content/uploads/2015/03/ROBOS_RESULTS_2015-2percentRisk.htm” width=”640″ height=”728″ class=”center_text” text=”2015 Progressive Results at 2% Risk“][wp_lightbox_anchor_text_display_external_page link=”https://www.forexistentialist.com/wp-content/uploads/2015/03/ROBOS_RESULTS_2015-5percentRisk.htm” width=”640″ height=”728″ class=”center_text” text=”2015 Progressive Results at 5% Risk“][wp_lightbox_anchor_text_display_external_page link=”https://www.forexistentialist.com/wp-content/uploads/charts/backtests/ROBOS_2013-2014.htm” width=”640″ height=”728″ class=”center_text” text=”Jan 2013 – Dec 2014 Results at 2% Risk (2% TP)“]

As many of you are aware, I moderated an online trading room for several years, as part of a consultative service to Forex and commodities-based educational firms. The experience I gained during this time led me to realise that trading rooms are of very limited value to new traders, because they tend to encourage dependency on others for trading decisions. I admit to an unshakeable belief that traders have little hope of being truly successful until they are able to fully accept responsibility for their actions and outcomes. However, that’s not to say I believe trading rooms have no value at all. Online forums where trading is conducted and broadcast in real-time by experienced traders, actually highlight the fact that trading is, for most part, quite a boring pastime. Hours, sometimes days, may pass without any legitimate entry signals occurring. The skill of the moderator during such periods, shifts from being able to demonstrate entry techniques, to that of managing crowd expectations. Silence can be agonising for those entering the room and expecting a roulette wheel experience. But that’s how it is. For the majority of the time, nothing happens. In fact, if your trades are coming thick and fast, then it’s highly likely your entry rules need tightening up.

I don’t conduct trading rooms anymore for this reason (along with a couple of others I’ll save for another post). Instead, I prefer to conduct one-on-one classes or small group sessions where I’m able to address the main issues facing most new traders, i.e. managing emotion and risk. About seven or eight years ago, some time after I’d first released my Escalator strategy to the public, one of my trainees (let’s call him Hank) telephoned me with a request. The conversation went something along following lines…

Hank: “Hi Alan, I’ve been trading the Escalator now for a few months. Do you have any more strategies?”
Me: “Why Hank? Is the Escalator not working for you?”
Hank: “Yes, it’s working great. That’s why I want to know if you have any more like it!”

I relate this conversation because it demonstrates the typical response of new traders to winning. They like it, and they want more of the same. It’s a human trait to want more of those things that give pleasure, and making money is a very pleasurable experience. But like anything in life, too much of a good thing often leads to destruction. A series of winning trades frequently leads to a sense of invincibility. But a winning period is inevitably followed by a period of drawdown, more times than not because undisciplined trading creeps into behaviour. The irony with Hank’s request, was that he had in his hands, a strategy that was making him money, yet by wanting more, he was opening himself up to greater risk. He stood to lose all the advantage the Escalator had afforded him by mixing it with another strategy. Greed is a very powerful emotion, on its own quite capable of bringing a trader undone. But when greed is coupled with fear, all logical reasoning flies out the window, only to be replaced by panic. Where there was once euphoria, now lonely depression.

Recently the ROBOS strategy entered a period of sparse trading opportunities and a small drawdown. This is to be expected, and if you look at all of the trades I’ve documented, going back to early 2013, the same thing has happened at other times. During such periods, I typically get questioned on the viability of the strategy, or of its ability to ‘feed the need’ to trade. My response is always the same; if you crave excitement, stop trying to be a trader and head to a casino – you’ll have more fun losing your money there! Despite the similarities, trading is far removed from gambling, where punters will bet on anything that moves. Trading, by way of contrast, is a game of patience, where the player must search for opportunity. The very best traders (and consequently the most profitable) measure their success as much by the trades they stay out of, as by the ones they enter.

The bottom line? Be patient, disciplined, and stick to your strategy rules. Keep your risk under control and any losers you may have will be quickly recouped when the winners return. Keep your greed in check, and have courage in the face of drawdown. Look at the big picture. The world is full of opportunity and Forex markets offer this opportunity in abundance.

Check out last week’s trades below…

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