Hi guys, hi from Andrea Unger.
Who is my opponent?
In trading obviously, I am shooting this video because I got an email from a trader and she, she was a woman, she was asking me some information about her behavior.
She’s a newbie in the market and she said that she understood that averaging down in an underlying is considered a bit outrageous and therefore punished.
This is obviously a sort of a crazy idea because nobody is sitting there and judging our behavior on the markets.
If we average down we are increasing our position on a week underlying, we are exposing to an increasing level of risk because we increase our exposure, our position.
So we are increasing the risk, we are doing something that might hurt us very much.
So it’s the risk perspective of this behavior which is completely wrong, but there’s nobody there, sitting there, looking at our trading and saying: Hey look at that, that’s really a tremendous guy, now I’ll show you how to behave in the market!
Absolutely not, we are not trading against the broker.
This derives sometimes from a mindset built by, I can say, Meta Trader, I mean somebody claim: You are always against Metatrader!
No, I’m not, I just say that Metatrader, being the bridge to the OTC market or CFD or Forex and so on, obviously sometimes it opens the door to trading against a market maker, against the broker and so on directly and we have the feeling that that broker is watching at us.
That might be true in some extreme cases and it might be true, obviously if we do something which is wrong, some dirty arbitrage and so on, playing tricks at the broker himself, but generally speaking, the broker is not there, sitting there, if it’s a serious broker, and looking at us as a signal trader and try to take our money.
So it’s true that we are fighting in a parallel market, the real market is there, and this is a copy of that, but it’s still a copy where we have to move in a proper way to make money or we lose money, but it’s not the broker himself.
So it’s not, there is not that kind of enemy sitting there and making us lose money.
So who’s the enemy?
Who’s the opponent?
The opponent is not even the market itself.
Ok, we lose money in the market, against the market, but it’s not the market.
The opponent is in ourselves.
This is not very philosophical, I mean I’m not the kind of person, but what do we have to do?
We have to build a plan to trade, we have to stick to the plan, and from time to time evaluate our plan to see how it was doing.
So if we go and trade without a plan, it’s our fault, it’s our fault!
We are putting our money at risk because we don’t know what we’re doing.
If we don’t stick to the plan, we had a good plan, but we don’t stick to a plan, it’s again our fault.
Because we don’t trust ourselves, we built a plan, but we don’t follow the rules of the plan and we just do what we have a feeling to do in that very moment, so it’s again our fault if we lose money.
If we keep on losing money and we don’t evaluate from time to time what our plan was so, if we don’t decide to revise, to study again, to look at why our plan isn’t working it’s our fault again, because we don’t consider that we might have built a bad plan from the very start of our experience.
I’m an algo trader, I build a plan based on numbers, I build systems, I have a plan to switch systems on and off and I evaluate my plan from time to time because I might accept that I’ve done some mistakes in putting the rules together.
I have to stick to that.
The averaging down method, which I was talking about before, has some mistakes in that.
First of all, there is no real plan.
The plan to average down is something that derives from the situation, it’s not something that we built from the very start as a trading method.
The first mistake so is that I don’t know what I’m doing, I’m trading on something which is weak, which on the contrary I should not, I should buy something which is strong obviously, and I’m not accepting to be wrong because I am averaging down and I’m not even accepting losses, because I’m not closing my position.
It might be better to close the position and to try to recover what we lost somewhere else, but this is psychologically unacceptable most of the times, not because we are very stubborn, okay we are, and the same happens to my systematic traders, I will explain to you how, but it’s because once we keep on trying and playing with a specific underlying, we get some experience on that specific underlying and that experience helps us, or we think it helps, to understand the next moves, while if we moved on a different underlying we start from scratch and we don’t have the palest idea of what to do.
It’s like when your girlfriend leaves you alone, so you might try to recover her and you don’t say: okay this is done, stop, the story is closed, I look for another girlfriend.
You think you know her and you want to recover the situation with her, you are not looking for another girlfriend.
Again this is normally wrong, normally I mean, I have nothing personal against anybody, but it’s psychologically what we accept as the easiest way to go.
Also in systems, even though sometimes we have systems that are broken, which happens, and our plan tells us when and how that system should be stopped, canceled, thrown away, we might consider keeping that system at work because we believe that it will recover.
That system is a good system, it has been good so long, now it can recover and we keep it like trading and losing money.
The only case it will recover money is if you really throw it away with and it will gain money, I am just kidding.
So again we have to face the markets with consciousness, the right mindset, building a plan, sticking to the plan and evaluating the plan.
I mean, we have to be sure about what we do, we have to build a plan that makes sense, as said, I’m a systematic trader, I build rules, I build systems, I test the systems, I backtest them, I stick to the rules because my systems run automatically, so the machine does what I wrote inside to do and I evaluate from time to time what the whole situation is to understand if something is deeply changed or if I made some clear mistakes.
Right today a have found that I have to change a rule in a system, this happens always with losses.
When you make a lot of money you don’t see the evidence of something wrong, my fault.
You see, I’m not the one who knows and you are the guys who are here to learn, everyone is here to learn, but the opponent is ourselves.
I am my opponent, I am not fighting against you or all the other traders, I am fighting against myself, I am I fighting against my incapability or understanding of what is right and wrong in what I do.
I have to improve the consciousness of my approach to the market to be good enough to make money, which is something that everybody has to do.
I hope this help, see you next time, ciao from Andrea Unger.