Avoid Trading Errors
A series of comments from the Van K. Tharp
Provided by Bill McCready of FuturesTradingSecrets.com
What Is An Error?
I think that most traders would agree that spotting mistakes
and putting things in place to prevent them from happening
again is one of the key paths to improving your trading.
In fact, making the same mistake twice and expecting different
results is one of the definitions of stupidity, and we all
know successful traders are not stupid, right? :-)
The question I have been struggling with in a previous
If you are a discretionary trader, how do you define
a trading error,
and how do you differentiate it from 'good' trading?
For mechanical/systematic traders, an error would be any
deviation from your trading system/rules/plan (or the incompleteness
of your plan or method).
Are there any experienced discretionary traders out there
that participate in this forum that can shed some light
on this issue?
Reply To This Message
Discretionary traders also have trading plans. I think
there is a general misconception that a discretionary trader
is nothing more than a gun-slinging, shoot-from-the-hip
cowboy who has less than a precise and qualitative approach
to the markets. Perhaps in some instances that is accurate,
but certainly is not in my case.
I view discretion (my definition) as the flexibility to
read the market in real time. In addition, it is discretion
within a structured context. I use technical indicators
like anyone else to give me the edge that I need based on
my personal experiences. Some people might look at the way
I trade as some kind of mystical intuitiveness, but I view
it as a probability statement based on my personal interactions
with the markets through the years.
My personal beliefs are that trading is 95% psychological
and my definition of what constitutes a trading 'error'
is probably not much different from yours. I've made an
'error' when I push a trade that should not have been made
in the first place. I've made an 'error' when I get mentally
sloppy. I've made an 'error' when I don't adhere to the
trading rules that I've made for myself.
As I create a list of trading 'errors,' I realize they
are all psychologically based. Losing money on a trade means
nothing as long as I have executed properly. Good trading
is executing properly and most importantly, being in control
Being mentally in control has always been the most difficult
aspect for me, but I seem to get better at it through the
years. But it is something I am constantly addressing on
a daily basis.
I don't think there are too many traders who are purely
discretional or perfectly systematic. I think most traders
blend the two approaches to various degrees. I certainly
am structured in my approach but I also realize the artwork
involved in creating opportunity the market presents
I hope I have been able to 'shed some light' on your question.
Thanks for your informative answer. I agree with you that
most traders will not be at the very extremes of the systematic-discretionary
I started out with the belief and objective that 100% mechanical
was the way to go, but have moved slowly towards the discretional
end as each year has passed. I am approximately 95% mechanical
right now, and I see as my trading evolves that this percentage
will continue to drop slowly as my 'feel' for trading increases
based on the gradually increasing number of trades in my
I can envision a time in the future where my systems become
a 'framework' for my trading, with a larger proportion of
discretion. I think this is only natural as we evolve from
novices (where discretion has a negative effect on performance)
to experts (where experience can improve the performance,
and make up for the caveats of a purely systematic approach).
Trading Secrets Course covers just this type of situation.
You should be able to walk by any market, stock, index or
FOREX chart and know in one second whether to go long, short,
You can trade in less time with more contracts and be
more profitable with the Futures
Trading Secrets Course than any other program because
they teach you how to recognize the signals dynamically
at the right edge of the charts.