We’ve all heard that psychology plays a crucial role in trading when it comes to achieving positive or negative results. Many of you are here because, like me, you struggle with separating emotions and isolating strategies without letting feelings get in the way.
Some of you mirror my recommendations, following the same contracts, execution times, and suggested days. This is fine if emotional interference or your work schedule doesn't allow you to closely monitor the strategies. However, I’ve noticed that the members who achieve the highest payouts from funded accounts are those who are more actively involved in their day-to-day trading.
This doesn’t mean they are trading manually. They use strategies as tools and apply discretion to adapt to dynamic market conditions, where daily news can significantly influence results. A practical example is what's happening with the Nasdaq right now. We see risk diversification towards more traditional assets like the Dow Jones. This week, YM has been the clear winner, while NQ has been the clear loser.
Even though I provide weekly recommendations for strategy mix and sizing, you are the ones who must pull the trigger on executing your strategy. My recommendation may not always be the most accurate in every situation, and you need to adapt accordingly.
What is a Winning Strategy?
A common obstacle many traders face is the lack of patience and the desire for profits from day one. Unfortunately, things don’t work that easily. Even with the drawdown of any strategy—like NQ, which recently wiped out about 25% of its gains—if we consider the performance of a Mini with a $2000 margin, the annual return, even with the drawdown, remains around 200% to 250%.
The solution is simple—stop focusing on NQ and move to YM or a YM and ES combo. This is where active decisions make a difference. If a strategy has been losing or breakeven for several weeks, why not switch to the one that is making money?
Knowing When to Stop
Another factor heavily influencing your weekly results is knowing when to stop trading, especially after a winning day. This week is a great example: red Monday, red Tuesday, break-even Wednesday, and a super winning Thursday. What’s the logic in trading on Friday when the odds are 50-50? It would make more sense to secure the week's gains.
Yet, many of you give in to temptation and trade on Friday. Even though I recommended YM as your best option, it doesn’t guarantee a win. We could still have a red day. If you traded on Friday and saw a loss, it would have been logical to stop and not give back half of the week's gains. It’s crucial to know when to win and when to lose.
Creating Your Own Strategy Mix
I want to emphasize that you need to detach from official results and start creating your own strategies. Secure your weekly gains and aim for days with better probabilities. Two weeks ago, we had major events like the release of CPI data, FOMC announcements, and other key economic reports. The market waited in anticipation, and in the days leading up, there was barely any movement.
So, what’s the logic in trying to profit from these quiet days when we know the chances of significant market movement before the news release are low? This doesn’t mean you have to trade at the moment the news is released, but recognize that news serves as a "price and volume unlocker," offering clearer trends in about 80% of cases.
When markets close within a 0.20% range, either positive or negative from the previous day’s open, strategies are likely to lose money because there wasn’t enough directional movement. We need at least half an hour to an hour of an uptrend or downtrend for strategies to work well.
The Right Psychology
To wrap up, I want to emphasize once again the importance of having the right psychology and realistic expectations. This is not a money-making machine where you just plug it in and get guaranteed results. Remember, this isn’t a guaranteed hedge fund.
I hope you have an excellent week. As always, if you need anything, don’t hesitate to reach out. Wishing you all the best.