DAS Trader Advanced hotkeys part 13

How to make DAS Trader prevent you from averaging down.

Introduction

This post came as a request for one of my readers and I realized, it is such a common problem with traders that it might deserve a separate post.

It is basically an extension of part 6 where I describe how to put some basic conditions before an entry.

The problem is that the trader often averages down which is adding into a losing position, exposing himself into higher risk. This is exactly how most of the accounts get blown.

The origin and the psychological challenges

In my case, most of my psychological mistakes come from deep flawed beliefs. As an example, here are a few of them:

• trying to fix the losses

• hoping for one big winner

• overtrading

• being triggered after a losing trade

• expecting satisfying results

I believe that, being able to fix a flawed belief by yourself is nearly impossible, as it is you who is missing the thing that you do not know yet. At the same time, it is only you who can fix it, so how do you get out of this circle? As simple as it sounds: Ask for help. If you struggle asking for help, try to read this to understand that it is the right thing to do.

If you cannot do it on your own, who and what can help you?

• a fellow trader with more experience

• a coach (not only trading)

• a psychologist

• reading a book

• get inspired by watching videos (free or paid)

I have tried all the things above and each of them worked partially. If you ask me for recommendations, the most effective is the coach. Usually it is the most expensive one too, but there are cheaper options like joining a group. Everybody is different so if you are really an introvert the book might be a good option for you, but my struggle with the books was that being not familiar with the psychology topics I have not understood what is going on and ended up reading it with quite a lot of aversion.

For some recommendations, feel free to PM me and ask.

I have touched the topic of averaging down in one of my previous posts, by injecting logic into the wrong belief, so take a look at it. Maybe it could help you to inject some logic into your flawed beliefs. Injecting logic is one of the techniques working very well for me, as I consider myself as a reasonable person.

An example of the technique (as described in the book The mental game of trading by Jared Tendler):

1. describe the problem

   e.g. I am averaging down - adding into losing trades

2. explain why it makes sense that you believe in the action you do at the time

   e.g. If I add to the position, and it goes my way, I can make the loss disappear or even make it more profitable

3. explain why the statement in step 2 is flawed

   e.g. the technique is proved to be costing me much money, eventually I run out of money, and it still will go against me. I am not prepared to take a big loss mentally. This is how the accounts get blown.

4. come up with a correction to the above

   e.g. Follow the trade book and always use a stop loss. Use technical solutions to promote the behaviour and make it feel natural.

5. explain why the correction is correct

   e.g. My edge from my trading comes from disciplined entries and exits, not from improvisations. Adding to a losing position is not part of my strategy, so it has questionable and only occasional results. Believing that this time it will work is gambling, and I am not a gambler, I am a trader.

The psychological part at point 4 shall be something that resonates in you enough to make it pop in your head while you trade. Sometimes when doing some actions, you do it from the habit without any thinking. Like driving a car. That is the reason why bad habits are so hard to master. Imagine you would need to use your left foot to drive a car from now on. It would take some time.

It is good to have an identity definition in the point 5. As explained by James Clear in his blog here.

More technical solutions to help with the flawed psychology

This is where the DAS Trader Pro comes with help with the advanced scripting.

The goal is to avoid adding up into a losing trade.

The logic of the script would be as shown on the following picture:

The same can be achieved by comparing the unrealized profits/losses for the current symbol, which is slightly more complicated to read, so we stick with the comparison of Average cost of the current position to the current price of the symbol.