This 1 minute Dan Zanger clip changed my life when I fully HEARD its power.
"Biggest lesson was to not be in the market all the time and to trade far less than I do."
"Market may have two big moves during the year. They may last 6, 8, 10, 12 weeks... other than that they just exhaust themselves."
"Just trade out then go golf, swimming, go to cash, just have fun and enjoy and wait for everything to set up and do it again."
You ever see White Men Can't Jump?
When Woody Harrelson puts on Jimi Hendrix and Wesley Snipes says, "No no no. There's a difference between HEARING and LISTENING. White people can't HEAR Jimi, yall just LISTEN."
I have found that most traders LISTEN to Zanger but they don't HEAR him.
There is nothing more difficult than changing your day to day market behavior on a dime after months of activity giving you overtly positive feedback.
With today's follow through selling, it's clear the environment has drastically changed in a week's time.
I constantly work on my mental state and the goal is to never have PnL effect your life outside trading. Unfortunately, I am a simple Neanderthal and I am happy when I win and angry when I lose. So I tirelessly work on myself to understand when I win and how to avoid losing.
So I push push push risk when I'm hot and have unbelievable market feedback and traction. Then I completely stop when that changes.
I can only do this, because I have NOT done it so many times in my career and the emotional pitfalls of giving so much PnL back FORCED me to change the behavior.
Most trader's fail because they don't understand the importance of dynamically approaching their activity levels. You do not want to come into the market risking the same amount everyday, you want to let the opportunity set guide your risk-taking.
When markets are viciously trending its wise to be as risk-on as possible as you will have the greatest gains in your equity curve during those periods.
HOWEVER, where most traders fail, is unlearning the button clicking when environments change. To me, Friday's selling shows a clear change in character from that hyper-momentum to a period of consolidation.
If you have been putting on new trades daily during the span of this run, you've probably done very well for yourself. But if you continue that behavior and the market proves to be choppy the next month or two, that can wipe away all those hard fought gains from the 'easy' period. The mental pitfall from this will be much greater than what happens to your equity curve.
I am not bearish nor do I know what happens next, or when new highs are created. I do know that after Friday's selling hits the tape, traders remember what it's like to lose money. The buy-the-dip mentality proves much more difficult in the subsequent days of that drastic selling when it first hits the tape.