Trading without emotion

by Ryan Barr on March 7, 2011

in Investing,Trade Log

These last couple of years have been quite a learning process for me.  I’ve been fortunate enough to have the opportunity to complete my MBA (I’ll be done in two weeks) at Kellogg, experience the birth of two fantastic little boys, enjoy a great job with a fantastic company and grow a lot as a trader in the process.

Given the myriad of other things that I am doing on a daily basis, I obviously cannot commit the time and effort to trading that a lot of others do.  I don’t have the time to stare at a trading screen all day long, and quite frankly I don’t trade a large enough account to make enough money to even consider it!  However… I really enjoy being a participant in the market and generating some spending cash.

With some basic constraints around what I can and cannot do, I’ve turned to very technical, very system driven trading.  I’ve dabbled with a few newsletter services (not a fan), I’ve played with options quite a bit but I’ve really found a home in commodity futures.  My trading method is horribly simple, just follow the trend.  I use a combination of some very basic indicators to get into a positions and as long as I trade without emotion, I’ve done pretty well!

My problem is that I get in my own way!  I can’t tell you how may times I’ve given away everything that my simple system has earned in a series of gut feel trades.  It’s as though I start to get overconfident about my personal ability and I try to time the market rather than simply go along for a the ride.  To make matters worse, I’ve noticed that I tend to trade in size on these horrible gut feel trades and blow up my account in spectacular fashion really quickly!  I’ve managed to remain profitable, but I’ve given back far too much money by letting my emotions drive my trades rather than analytics.

This year, I’ve committed to knock it off.  I’m only trading things that I’ve tested successfully.  It isn’t quite a full quarter of the year in, but the results are awesome so far.  It’s great to just set it and forget it based upon my rules, in fact if the year continues to be this solid I will likely transition to a fully automated system sometime this year for my futures positions.  I’ve spent a good amount of time developing and testing this little system, and it works really well.  This year I’m going to take advantage of that.

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