Ebb! Overcome…..

John Gault wrote: “Most of my trading is in Ebb. How do you survive?”

Before I answer the question, it’s best I define what I mean by “Ebb”.

Firstly, a precondition of the “Ebb” state is a positive expectancy return. Without this return, “Ebb” is meaningless. In other words, you have to be a profitable trader for “Ebb” to be meaningful.

With that in hand, I believe that any trader will experience one of three states at any one time:

• Normal: when wins and losses are roughly aligned with the positive expectancy of his trading.
• Flow: when everything you do is right! You are God’s gift to the trading world!
• Ebb: when everything you do is wrong! All you seem to do is lose money. If you buy, the market goes down. If you sell, the market goes up. For newbies – if you place a stop, the stop get hit and the market then goes your way; if you don’t place a stop, you blow your account.

“Ebb” is the state when our confidence in our trading is shaken to its foundations, when doubt in the efficacy of the trading plan reaches new heights and when the temptation to abandon our discipline becomes almost unbearable.

So, how do we overcome it?

I adopt a two-pronged approach.

The first is to remind myself of my goals, and, the strategies and tactics I have devised to attain them. In trading, this refers to my Method and Money rules. The second:

at all times, to be even more conscious of bringing the “observing self” to my trading. In this way, I retain my confidence to execute my rules and to maintain my discipline.

Here’s a personal example.

I have been in “Ebb” from the start of 2019. The snapshot below is my analysis of the stats. I have chosen the Psyquation account because it’s a public record. (By the way, if you are a Psyquation observer, the syncing problems have been overcome. Make sure you select the “PQ” account).

My normal win rate is 57%. The current win rate is a mere 18%. But, what you want to note is that despite the drop in the win rate, the expectancy return is still positive. Why? Because the 4-Phase Framework has allowed me to manage my soft stops more effectively.

Let me explain………

In every trade, I placed a “hard stop” (i.e. a stop order in the market) and a “soft stop” (i.e. a stop that is dependent upon price action). The hard stop is based on my risk management rules.

I risk no more than 0.05% for every trade ($1000) partially because of my trading results, and partially because I cannot lose more than 10% of my capital base, USD 200,000. (Note that I have deposited USD 100,000 with the broker, Axicorp).

The soft stop I use to exit trades before my hard stop is hit.

If you look at the losses, you will see:

• I have not had a single losing trade due to the hard stop.
• The normal range of losses have been between $250 to $550

The account stands at above – 1% despite the “Ebb” 18% win rate,

To answer John’s question then: keep your losses are small as possible, maintain your discipline and confidence, and know that “Ebb” is but a passing phase.

So how about you? How do you cope with “Ebb”? I’d love to hear your strategies.

(Oh by the way, if you want to register as a Psyquation observer go to the link below to register and follow the instructions).

https://barrometrics.lpages.co/psyquation/

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