Are You In A Trading Rut?

business-icon-blue-gear-300There are periods of binary options trading you will experience that are characterized by incredible strides forward—times when you hone your abilities, make new learning connections, and rake in the profits. There will be other times when you struggle and lose trade after trade, and actually find yourself falling backwards. But I think a lot of traders’ careers are largely characterized by long, flat periods—seemingly endless plateaus where not a lot of movement is made in any direction.

Sometimes during a trading plateau you are actually profitable. But you are not pushing your boundaries, and you are not growing your abilities. Your bottom line is increasing at a relatively steady rate, but you are not picking up the pace or empowering yourself—and you are secretly worried that one day soon, it is all going to fall apart.

Other plateaus are not so profitable. You might be only winning the occasional trade, more or less holding steady in your bankroll or only increasing it marginally. Or you might not be building up your profits at all. You could be stuck in a testing phase, not ready to go live.

I actually think that traders are prone to getting stuck in ruts. Why? Well, I actually believe that a lot of the advice traders get pushes them in this direction. It is not that the advice is bad, it is just that it can easily be twisted into an excuse to justify a lack of growth.

I am talking about advice like this:

“You need to create and stick to a process.”

“You have to be disciplined.”

“Your aim is to eliminate uncertainty.”

“You need to control your emotions.”

Like I said, none of these suggestions are bad; they are actually all excellent recommendations. But when they get pounded into your head again and again, and especially if you have a personality that resists uncertainty and change, they can quickly turn into excuses.

Let’s look at some examples of what I mean.

1. “You need to create and stick to a process.”

No system is going to provide you with 100% performance. If you have figured that out, that is good; a lot of traders struggle with that for a long time. But you should still expect to get a reasonably high win percentage and to achieve reliable results.

If you are expecting the occasional losing streak, that again makes sense. But what does not is when you stubbornly stick to a system that is not performing. Think about this example:

Suzie has been trading with her system for several years with good results. The past six months, though, her performance has taken a nosedive. Her win percentage has dropped from 83% to 71%, and she regularly has been experiencing losing streaks.

Suzie continues to trade as she has been trading, following the exact same rules and mechanics, even though her account is growing a lot more slowly. There are times when she looks at the charts and is not sure what she is seeing anymore, but she trusts her system and her process. There are moments when she secretly worries that her system is crumbling into dust, but the system is tested, tried and true.

She wants to do something about it, but every time she thinks about making a change, the words of her trading mentor echo in her head: “Stick to your process!” If she no longer trusts in her process, then what will she have? If she tries adjusting the process, will it not lose its power?

In the above scenario, Suzie is stuck in a rut. She may not be losing yet, but her secret suspicions are probably right on the mark. With her performance languishing and her understanding of the charts beginning to collapse, she is likely on the road to failure. And even if she is not, why should she accept a much lower win percentage just because it is what she gets when she “sticks to her process?”

Processes are great because they help us to stay on track and to trade accordingly to orderly rules instead of our messy emotions. They keep us focused and help us make sense of the market—up until a point.

When they stop helping us to read the charts and understand the market, and when they are no longer delivering us sterling results, then it is time to evolve them. Processes can change, and so can we; they do not have to be set in stone. Stick to a process that helps you succeed, but do not stick to a process of stagnation! You can codify failure just as easily as you can codify success. Why would you want to codify a reliable process for failure? Faith in trading is important, but should never be confused with blind faith.

2. “You have to be disciplined.”

This is closely connected to the concept above. Just as some traders get stuck on the notion of a set-in-stone mechanical process, they also become convinced that any deviation from their plan points toward weakness of character.

James has been trading binary options successfully for a year now using price action. He gets a solid win percentage which he is happy with, but he does not take as many trades as he needs to in order to pull in any real profit. He is secretly scared to push his boundaries and try trading different assets or testing new price action setups. But he never tells himself that. Instead, he tells himself that he is a disciplined trader, and that trading outside the rules he has set for himself would be undisciplined and irresponsible.

While jumping right into trading new price action setups or assets probably would be irresponsible, James is blinding himself to the fact that sitting on his hands is also irresponsible. There is nothing undisciplined about testing changes to his system, but he tells himself that if he starts bending the rules, even on paper, that he will no longer know how to stick to his process. He is deluding himself into staying in his rut.

What is the difference between this and the scenario with Suzie? Suzie’s excuse for her rut involved concerns about her system—she persuaded herself that she was facing a crisis of faith in something outside of herself, whereas that really was not the issue at stake. James’ excuse directly involves concerns about himself. Ironically, this is a much truer crisis of faith, but it is not recognized as one. Whereas Suzie is scared to question her system even a little, James spends way too much time questioning himself.

3. “Your aim is to eliminate uncertainty.”

Here is another example of noble trading ambitions gone awry:

Helen knows that trading is an activity of risk, and has watched a lot of her fellow traders plunge recklessly into trading without systems in place to curb that risk. These traders were confident in their instincts or in untested (or under-tested) systems to lead them right. Without exception, they lost money, and most of them quit trading.

Not wanting to repeat history, Helen is determined only to start trading when she has eliminated as much uncertainty as possible. Gradually she worked her testing results higher and higher. Her win percentage started around 72%, then climbed on subsequent tests until it reached the 87% it is at now. Another trader once told Helen his trading system gave him a 95% win percentage. Helen is determined to follow in his footsteps, and continues testing. She has been testing for years now. One day, she will go live. One day.

This story about uncertainty is actually based on my own experiences. Like Helen, I never was one to just jump into an activity of risk. And like Helen, I knew a successful trader who made astounding claims about his win percentages. Determined to follow in his footsteps, I too spent endless hours desperately trying to improve a system which was already actually performing pretty well.

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