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.No more and no less.But many traders think that theprobabilities of "tail" are higher now because the three previous coin tosses resulted in"head".Some traders might even increase their bet because they are convinced that now"tail is overdue".Statistically this assumption is nonsense and a dangerous and manytimes costly misconception.Let's get back to our trading example: If you have a winning percentage of 70% and youhad 9 losers in a row, what are the probabilities of having a winner now? - It's still 70%(and therefore there's still a 30% chance of a loser).It's important that you understand this concept!© by Rockwell Trading, IncRe-transmission or reproduction of any part of this material is strictlyprohibited without the prior written consent of Rockwell Trading, Inc. www.rockwelltrading.comWhat it takes to be a winnerRecently I received the following email:"Hi Markus, CoinCollector rocks today! Thanks for your encouragement to patientlywait.It's been a painful wait, but now it pays off."What happened? - Well, today our trading strategy CoinCollector made $1,100 in profitson a single contract.Reading this email reminded me about an article for sports coaches I found a couple ofweeks ago.It's called the "Four Characteristics of a Winner", and in my opinion thesecharacteristics apply to successful traders, too.Here they are:1.A winner knows what it means to be a winner.2.A winner must set high goals.3.A winner is disciplined.4.A winner has strong motivation.Especially the latter two characteristics are extremely important when trading a system.They make the difference between a winner and a loser.The customer who sent me the email today started trading the CoinCollector on March28, 2005.In the first week after his start he went into a $300 drawdown.He startedquestioning the strategy and thought about changing it.But he maintained his perspectiveand discipline and continued trading the strategy according to the rules.In the second week of his trading the strategy really tested his patience by producinganother $200 loss.Nothing unexpected, but the trader thought about stopping thestrategy.I don't know for sure, but he might have considered buying the next system.Now, in his third week of trading, his patience and discipline paid off: Yesterday andtoday the strategy produced some very nice winners, and is now perfectly in sync withthe expected results as you can see from the performance report below (results between03/28/2005 and 04/12/2005):© by Rockwell Trading, IncRe-transmission or reproduction of any part of this material is strictlyprohibited without the prior written consent of Rockwell Trading, Inc. www.rockwelltrading.comAs you can see the system is right on target: The average profit is back to normal, and sois the winning percentage and the profit factor.Within just two weeks the system normalized itself.That s exactly what we expect froma robust trading system.It takes motivation and discipline to trade a strategy, but if are patient you will eventuallybe rewarded.The system will adjust itself and produce the expected results.These four characteristics make the difference between a winner and a loser:1.A winner knows what it means to be a winner.2.A winner must set high goals.3.A winner is disciplined.4.A winner has strong motivation.Keep this in mind when trading a system.© by Rockwell Trading, IncRe-transmission or reproduction of any part of this material is strictlyprohibited without the prior written consent of Rockwell Trading, Inc. www.rockwelltrading.comMaintain Your PerspectiveA few days ago I received an email:"I have been following your strategy CoinCollector for the past two weeks, and it seemsthat the strategy is down by $360.Did your strategy stop working?"When trading a system you need to maintain a long term perspective.In the past twoweeks the system made 14 trades.That's definitely not enough to judge the performanceof a system.Trading a system means playing a number's game: You need to place at least 40 tradesbefore you can look at the performance of the system.Most traders only evaluate theirperformance once a month and try to have as many profitable months as possible.HedgeFunds evaluate their performances quarterly or yearly.If you look daily at the results of atrading system it will drive you crazy.Sure, nobody likes going through a drawdown.But losses are part of our business andyou need to deal with them.The famous Richard Dennis once said: "It is totallycounterproductive to get wrapped up in the results.You have to maintain yourperspective.Being emotionally deflated would mean lacking confidence in what I amdoing.I avoid that because I have always felt that it is misleading to focus on short-term results."Many traders focus on short term results and lose their perspective.That's why they fail:They experience a loss or a bad week and shop around for the next system.And while thetrading system they just abandoned is recovering from the drawdown, the new tradingsystem might produce first losses, and they start looking for the next system.They are like the dog chasing many rabbits: At the end of the day he's totally exhaustedand didn't catch a single one.Maintain your perspective!© by Rockwell Trading, IncRe-transmission or reproduction of any part of this material is strictlyprohibited without the prior written consent of Rockwell Trading, Inc
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