I think I realized why some of traders(me) easily make money in the earlier days, but having difficulty after gaining and winning some trades.
I think it lies in the psychology. If I reminisce correctly, during my earlier trades, I was very cautious and very doubtful in my trades. This of course favor heavily in my money management process as my entry would be tight and my loss would be very tight as well.
But as I was winning more and more, I found myself to be more lenient in money management and trading entry.( eg. my entry was not as tight as it used to be due to oversimplifying analysis). I think part of the reason was my subconscious is telling me that I have won excess money before, therefore I could be more lenient and could afford to take more losses. This of course will subsequently results in me over-leveraging and becoming too flexible in letting the trade floats(loose stop). The confidence that I have gained from my previous trading endeavor of course did not help me in the situation above. Is this just greed that lies behind the mask of self-esteem/confidence?
Haha yes I remember these days. They were very frustrating and took me a while before I realised where I was going wrong. What you described: taking loose trades after you’ve had a few winners can really affect your profitability. Worse than that, if you dont follow your rules or have the insight you could even hold onto a bad trade and blow your account.
What I found is, it is not greed but complacency. This complacency presented by making me believe that I could make money regardless of the strategy and therefore I would have a SL further away. As if I have control over the market and it’ll do what I want.
A few winners in a row and you also start feeling that the next trade is a free trade as you are only risking profits. This is why a trading journal or reviewing your trades is important. It focuses your attention to why you took the trade and was it part of your plan. You have to remind yourself that each trade has nothing to do with the one before it or after, they are independent. Therefore regardless of the winners or losers, keep trading your strategy.
I find trading to be like a job that can only be done with one mindset. If you relax or forget you are against the market then you will be proven wrong.
I personally don’t think greed is your issue and be more inclined to say you have become over confident and even more so, complacent.
The idea is that trading is all about making sure that the trade you are in or are about to enter meets your trading rules. It doesn’t matter what the last trade was as that trade has been taken and is now done and dusted. The result of that trade matters nought in you entry and management of the trade that you have just entered or about to enter.
Concentration on the execution and management of each trade and less about profit and loss will help you make consistent trades.
The old saying is “Look after the pennies and the pounds will look after themselves.”