I have been on a relatively hot streak in my e-mini trading the last couple of months and my returns have been impressive by any standard.  Frankly, I have been feeling pretty good about my trading ability and consistently.  I was pretty cocky about my trading results, perhaps verging on arrogant.

I had let a few trades run a bit too far in the red, and delighted in watching the market double back my way and allow me to turn a lousy trade into an impressive winner.  I doubled down on some of these trades when I was deep in red, which further enhanced my gains and ego.  Doubling down has always been forbidden in my trading, but since it worked so well I decided that I had been foolish to adhere to my long held trading taboo of adding contracts to a losing trade.

Let’s face it, I thought, after several decades in this business, I could trade any market, any trading environment, and I had gained enough skill that the money management skills I had worked hard to maintain were no longer necessary for my success.  I felt I had the Midas touch.  I thought I could turn lead into gold, I felt I had mastered the art of the e-mini, which is always a dangerous mindset.  I had a stretch where I went 26 for 28 with my new, somewhat reckless, style of trading.

Then last week rolled around and I received a heavy dose of humility and respect for the market.

The first two days went well, and then self-inflicted disaster set in.  After several days of 4-digit losses my confidence was shaken.  I was a rank amateur again, flailing away at the market and chasing after low probability trades with fervor and hopes of regaining my past trading glory.  I broke my trading rules, I ignored long-ingrained personal money management guidelines, and I felt like it was my first day of live trading.  Worse yet, by abandoning my long standing, written in stone trading guidelines that are the basis for successful trading I lost a substantial amount of money and shattered my self-confidence.

A couple of losing days will affect your whole outlook on trading.  Worse yet, my trading and money management techniques are the core concepts of what I teach and relentlessly drill into a new trader’s mindset.  Since I trade with my DOM on the screen for the entire room to view, my embarrassment was compounded by the deafening silence as my audience watched me flail away at the market and break the very set of rules I harp on throughout the course of every day. 

It was a complete meltdown by an experienced and successful trader, and the only variable that changed was the fact that I was initiating substandard, low probability trades trying to salvage the day’s losses.

In summary, it not unusual to read about the fantastic returns trading educators feature on their websites and performance reports, but even the most experienced traders can fall into unprofitable trading patterns if you fail to stay vigilant and true to the trading principles designed to minimize losses and maximize returns.  The lessons I relearned restored a much needed dose of humility to this traders psyche and reminded me that complacency has no place in any traders thought process; and that complacency shows no respect for how long a trader has spent trading.  Great traders are always vigilant and respectful of the rules that keep us in the business and last week I missed the mark.