Maintaining Composure in Drawdown, Detaching Yourself From Your PnL & Technical Analysis Pitfalls | Alejandro & Noah's Essential Themes, Tips and Tricks of Trading
Sep 5, 2023
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Experienced trader Alejandro and trading expert Noah cover current market environment, handling account drawdown, negative impact of checking PnL, and common technical analysis mistakes like moving stop losses. They emphasize emotional control, adapting to market shifts, and detaching from PnL for trading success.
Recognize market shifts and adapt strategies accordingly, sizing down and staying patient during transitional periods.
Handle account drawdowns calmly, focusing on long-term longevity, discipline, and necessary adjustments.
Avoid emotional attachment to profit and loss (P&L), concentrate on technical analysis, and trust a well-tested trading system.
Deep dives
Understanding market shifts and adapting strategies
This podcast episode explores the concept of market shifts and how traders should adapt their strategies accordingly. The hosts discuss the recent market environment, highlighting the aggressive rally experienced from March to July, followed by a shift to choppier and more volatile conditions in August. They emphasize the importance of recognizing these shifts and adjusting one's mindset and approach accordingly. Traders are advised to size down and stay patient during transitional periods, rather than abandoning their strategies or making impulsive decisions. The hosts also stress the significance of conducting thorough backtesting over a long period to ensure the robustness of one's trading system.
Managing drawdown with the right mindset
The episode delves into the psychological aspect of handling account drawdowns. The hosts underline that drawdowns are normal and experienced by all traders, but they acknowledge the emotional toll it can take. They caution against panicking or making impulsive decisions during drawdowns, as it is a natural part of trading. Traders are advised to focus on their long-term longevity and not get caught up in short-term gains or losses. The importance of maintaining discipline, protecting capital, and making necessary adjustments during drawdowns is stressed. The hosts also discuss the differences between day trading and swing trading, highlighting the need for traders to choose a style that aligns with their personality and risk tolerance.
The pitfalls of trading based on P&L and the role of technical analysis
The podcast explores the drawbacks of trading based on profit and loss (P&L) and recommends turning off the P&L display to reduce emotional attachment. The hosts discuss how focusing on P&L can lead to errors, such as prematurely moving stop-loss positions or missing out on potential gains. Instead, they encourage traders to concentrate on the technical analysis and the trading system they have in place. The importance of having a well-tested system that can adapt to different market conditions is emphasized. Traders are advised to control their emotions, trust their strategies, and avoid making impulsive decisions based on short-term P&L fluctuations.
Embracing the Long Game
Trading is a long-term journey that requires perseverance and a focus on longevity. Instead of getting frustrated with losses, use them as opportunities to learn and improve. Feel the emotions, but channel them into productive actions like studying, self-improvement, and self-care. Avoid revenge trading and impulsive decisions that can worsen your situation. Remember that losses are part of the process, and with time and continued effort, you can bounce back and reach new highs.
Trading Mistakes and Failed Patterns
Mistakes in trading are a crucial part of the learning process. The key is to reflect on your decisions and avoid repeating them. Setting a maximum daily drawdown limit helps manage risk and prevents excessive losses. Recalibrating your mindset and staying disciplined after a drawdown is essential for successful trading. Additionally, failed patterns, like head and shoulders patterns or false breakouts, can provide valuable trading signals. By understanding how these patterns trap traders, you can position yourself to trade the counter move with higher probability.
On this Episode of Trading Camp, Noah and I cover 4 key trading topics. We begin by discussing the current market environment, before sharing tips on how to handle an account drawdown. We then discuss why constantly checking your PnL can be negatively impacting your trading, and then uncover some common mistakes traders make when it comes to technical analysis.
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Produced by: Ryan Novak @novakproduction www.kane-capital.com
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