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Should I Stay or Should I Go?
Discipline is a strange and difficult concept to grasp. If we rigidly stick to a system or strategy that isn't working we will go broke and if we jump from one approach to another every time a trade doesn't work out we will also, most likely, go broke. How do we decide when it is appropriate to stick to our strategy and when we should recognise that it isn't working?
There were other traders though, who did not care whether they were long or short, they just wanted to be on every move the market made. What most of these traders found was that they were forever on the wrong side and chasing moves that were already peeking.
It takes discipline to stick to a strategy when it is losing money and some other approach would have produced great profits. For every strategy, some days they just don't work and there is always something that would have worked perfectly.
Reading Market Wizards, by Jack Schwager (US click here, UK click here) it becomes clear that the common factor that these successful traders share is not their trading strategy or approach, they are all different. I think what determines a trader's success is how they react to profitable trades and how they react to losing trades.
An unsuccessful trader will trade modestly when they are right (cut their profits short) and aggressively when they are wrong (add to and hold on to their losers). A successful trader will trade very modestly when they are losing and very aggressively when they are winning. This is why floor traders could have opposite strategies and still both come out ahead.
In order to decide whether you should change your strategy or stick with it, you need to determine whether your losses are down to you or your strategy.
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