Friday, 13 August 2010

Monkey business

This week has been a slog. Probably did just over a ton. Then again, I made over that today and lost -£77 of it in bad / unlucky trades.

I find that I go into the sessions with a clear head and sensible action plan. A few hours in and fatigue sets in or something because I have a tendency to throw chunks of money away. If I work through tea time and well into the evening I'm always mentally exhausted at the end.

I like to think by ploughing on I'm being single-minded in my quest for financial independance; others may call it stubborness, short-sightedness or just plain stupidity!

On the recommendation of others, I've started to read Trading in the Zone by Mark Douglas. A few pages in and he posed an interesting thought about monkeys and their response to being rewarded for hard work.

I haven't got the exact text in front of me but it is something along the lines of:

1) If you give a monkey a reward for doing some work, they'll continue to repeat the activity that reaps the reward.
2) If you stop the rewards, the monkey will eventually stop trying because it knows a reward isn't coming.
3) The final scenario is where you sporadically reward the monkey. In this instance, the monkey will keep doing the work in case a reward is imminent.

Mr Douglas then goes onto explain that scenario 3) is like the trader that can't stop trading even when a signal isn't present; in their quest for the reward they trade through thick and thin in the hope that something will come of it. He then states that this types of trader is addicted to the potential of a reward, unlike monkey 1) who is assured that one is coming.

That really hit home with me because I do have a tendency to get involved in everything that moves which, in my mind, perpetuates the tiredness and leaves me vulnerable to losses due to the speculative natures of some trades.

Whilst I can certainly see where he is coming from, the problem I have is that my strategies aren't exactly set in stone and only by being in the money can I decide what the next move is. Don't get me wrong, this approach has served me pretty well until know, but I'd much prefer to be monkey 1) that enters a trade which reasonable assuredness that a reward will materialise at the end of it.

That would ensure that I have lots of more time to swing from trees and eat termites off a stick.

"When you've closed your position can you come round here and pick the mites off my back?"

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