Originally appeared in October 2011.
If you have read the blog for awhile you know the story about the first day I sat down at my own machine. I was placing a few trades a week though a friend with success. It was limited to whether I found a good setup and he was in a good enough mood. I thought it was going to be easier, no restrictions. So the first day I made $670 dollars. I did the math. 220 trading days times $500 (you know because I may have a bad day and make $170 less) I was going to make 100k.
I had absolutely no idea how I made that money, I just did. I thought I had a plan but I didn’t. The next day I lost around $620. I was short the Russell and the S&P and it went in my face. I forgot to put a stop in one of the markets and lost like $300. I was so great I could trade two markets at the same time the same direction.
What was the difference between those two days? I happen to find the good trades before I found the bad ones the first day.
I can’t stress how important it is for you and every trader to understand the difference between an anomaly and a trend. If you take a single data point and extend it across time the results are never accurate. The math went from making 100k to losing a 100k that year. Neither of those things happens.
Remember winning never lasts forever and losing does not have to last forever, do not get caught up in a single personal data point. Determining if it is an anomaly or a trend will dictate the adjustments you need to make. Those adjustments will allow for a smoother equity curve and stability. Work hard each day and improve.
No matter what happens in trading it does not define you as a person.
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