Especially while trading discretionary, I am pretty clueless about what I should be doing. What are the patterns on that chart? Are they telling me to go long or short, or am I just fooling myself that they are telling me anything at all? Since I am trading discretionary, it is my discretion to decide when to do what. Isn't it? Or if I already knew what is to be done, then where is the discretion?
(While trading mechanically, at least I have pre-decided rules and hence know what exactly is to be done in each scenario, though the rules themselves may be pretty clueless.)
Now, given that I am clueless about how to use my discretion, and half believe that the markets are somewhat random, how can I still trade? My (current) genius tells me to trade by Statistics. The core idea remains what is described in this post about System Hopping. I need to be profitable, have small drawdowns, and a high rate of capital growth. (Peace of mind is not statistically measurable though, I think)
Add to that the guidelines/core values/motto of whatever system.... and I know that I have to take trades with small Stop Losses, and the high Win Rate. How many losses I log before I net a big win counts more than where I enter trades. It's all about the Payoff Ratio and the System Drawdown. I need to keep my wins much bigger than my losses and reduce the frequency of losses. Let the graphs and probabilities on the Statistics page tell me what to do, rather than the Price chart. Let the numbers scare me into booking a profit, or calm me into relaxing my Stop Loss. The objective is to get the Statistics to look better.... and increase the probability of ending the day positive.
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