The first thing we did was to preplan his trades. We used some fairly simple techniques to identify intraday support and resistance points within a 7-10 tick range. The plan was for him to stand in the pit and wait for the price to hit his target(buy support or sell resistance), execute the trade, wait for the market to hit his objective, and then exit the trade.
If the market traded through his entry point in the opposite direction by more than two or three tricks, he was supposed to execute the loss without hesitation. Based on our assessment of the reliability of the support and resistance numbers, we believed he didn’t need to risk more than two or three ticks to know if the trade was going to work or not.
The first day that he tried to execute his plan, he did very well waiting for the market to hit his entry point. However, when it came time to execute the trade, he couldn’t do it. He was supposed to buy at a support level, and he couldn’t do it. He was supposed to buy at a support level, and he didn’t do it because he thought it was going to keep on going lower. When the market didn’t keep on going lower and bounced two and three ticks higher than what was his original entry point, he went ahead and bought one contract. From there he was supposed to wait until the market rotated back up to test the resistance which was 10 ticks higher than his originally intended entry point, but now it was only seven ticks away.
Instead of waiting for the market to rotate to his objective, he got out to the trade as soon as he had a tow-tick profit. A short time later when the market rotated up to the resistance area, he did the same thing that he did in the first trade. He didn’t get in at his price because he thought that the market was going to keep on going, it didn’t., and he sold three ticks lower than he originally intended and then got out for a one -tick profit, not waiting for a full rotation.
When we talked about what he did later on that day, he was extremely displeased with himself. He didn’t get in at the price he intended or out where he intended, ” leaving several ticks on the table,” so to speak. This is a very wealthy man who only had to risk two or three ticks at the most to find out if the trade was going to work and couldn’t wait for his profit objective, stating that he couldn’t hang on because he has been burned too many times.
Obviously, his backlog of negative experiences had nothing to do with the market’s behavior or the probability of any particular strategy working or not. What was even more important, however, was his lack of acceptance for his current level of skill development. His intense anger over his performance clearly indicated that he could not accept where he was at or the results it produced. That first day was not a positive experience for him, even though he had his first winning day in a long time. His lack of self-acceptance certainly won’t help him hang on to winning trades in the future, in fact, he will be digging himself into a deeper hole that he will eventually have to work his way out of if he wasn’t to achieve the success he desires.
As time went by, he became increasingly more confident with his ability to define an opportunity with a high probability of success. Almost every trade he put on would immediately go in his favor, so he would rarely find himself in a losing trade. But each day was also becoming ever more experience because he was still only holding on for a one or two -tick profit and leaving several ticks on the table as the market rotated to test the next level of support or resistance.
What was even more difficult for him to deal with was that many times he had bought the low or sold the hight of the day. Of course, he didn’t know at the time it was going to be high or low of the day, but looking back, he just couldn’t deal with the fact that he only got one or two ticks out of it.
I knew the pressure was building inside of him because each day he had more excuses related to the market for why he wasn’t doing what he as supposed to and had less and less tolerance to listen to anything I had to say about the situation. All these excuses were just an indication that he would not accept who he was in relationship to who he desperately wanted to believe that he already was. He was obviously indulging himself in illusion. To be the person he wanted to believe he already was would require that he learn how to be patient, acknowledge who he now was so he could concentrate on what he needs to learn and forgive himself for what he believed to be his past mistakes and inadequacies.
However, this would be very difficult because being impatient with other people had always got him what he wanted as long as he was dealing with people who perceived themselves as weaker than he. So Why should he have to learn how to be patient now?Besides if he was patient with himself, it would make it difficult to justify his impatient, intolerant stance toward others who didn’t “learn” fast enough or made”mistakes”
Then one day after the close he called to tell me that he was going to start trading a 20 contract position. Otherwise, nothing else about what he was doing had changed, except that he had several winning days in a row consisting of one- and two- tick winners.
I knew he was setting himself up for a big losing day, although I didn’t indicate this to him in our conversation. In his mental system, he was reasoning that by trading a larger contract size he would make enough money to prove to himself and everyone else that he had finally arrived, that he was a successful trader and that he was not a person subject to deep-rooted fears. Not being one to stand in the way of “progress,” all I said was that I didn’t think it was very prudent for him to be trading a 20 contract position since he hadn’t developed the psychological or mechanical skills to handle a position of that size. He hung up the phone.
The next day he lost almost $3,000.00 trading 20-contract positions. He gave back to the markets all his profits, plus more, from all his successful efforts over the last two and a half weeks of trading. At that point, he was ready to listen to a plan on how he could learn how to be more accepting of himself and how to hang on to his winning trades.