*Originally published in French on objectifeco.com, April 26, 2013. The site was purged in 2016; this text survives only in the Internet Archive. Snapshot. Translated, not rewritten: what follows is the original argument as it was made, including what time has since proven wrong. Where that happens, you'll find a note from the desk, dated 2026.*
When you take a new position, your emotions are about to be put through the wringer.
It usually starts with losses. Small ones, even. It's obvious, really. You can't buy at the exact low. And even if you buy on a breakout, it's not unusual to watch the market come back and test the very point where you got in.
So naturally you start asking yourself: did I get in right? Is my strategy even the right one? How long do I give the market to prove me right or wrong? And so on.
At this stage, the trader goes through phases of doubt, sometimes fear, occasionally outright dread if the losses are big enough.
Then, if all goes well, the market starts moving the way you expected.
The trader starts having fun, but not only that. Very quickly, the next questions arrive: how long do I hold this position? Do I want, can I, sleep on it? I've already banked this much, am I prepared to let those gains melt away waiting for a bigger move? How high is this going to run? And the most dangerous question of all: the market's gone up nicely, I'm sitting on a gain, shouldn't I flip and play the other side too, for a double win?
If you hold on that long, you generally pass through a stage of euphoria along the lines of: I've never made this much on a single position, wonderful!
And generally, your brain is going a mile a minute. You tell yourself, I really wouldn't want to have to cut this with smaller gains than I've already got. So maybe I should cut it now, right? Except the move is so strong I could make a lot more, couldn't I? Trading is hard, this is my biggest gain of the year and I have no idea what to do!
Whenever a client asks me to review their trading results and their method, I find the same two constants, every single time:
A trader holds positions for a remarkably similar length of time. If a trader is used to trading five-minute bars, for instance, they'll generally hold positions for somewhere between 20 and 60 minutes. It's not even unusual for them to hold their losing positions longer than their winning ones.
Which means this kind of trader will struggle enormously to hold a position for several hours, let alone across two full trading sessions.
It's very rare to see a big gain show up in more than 5% of trades.
These two facts are obviously linked. If you don't hold a position long enough, it stands no chance of catching a market move wide enough to produce a big gain.
And mathematically, your long-term hope of making money on the financial markets rests entirely on those occasional big wins. If you're not producing enough of them, the randomness of the bad ones will eventually ruin you.
In terms of how your gains break down, your ideal trading should contain as few really bad trades as possible. You can't avoid them entirely, but they need to be rare, or it's impossible to come out ahead. That's exactly why you absolutely have to cut a badly-behaving position, or you're digging your own grave, statistically speaking. You might get away with it once, twice, ten times, but the market will get you in the end.
A majority of small wins and small losses that cancel each other out. That's what I call chasing the best trade. You multiply your ideas while waiting for the perfect moment to appear.
And then a small minority, which absolutely has to outnumber the big accidents, of really big wins.
With that kind of distribution, you secure a genuine mathematical hope of winning at trading.
So what's the problem?
Well, the trader's problem is that he's been told a trading plan must include an exit, and once he's in the trade, that's all he can think about.
With that mindset, there's no chance of coming out ahead. Your emotions will never let you hold a position long enough to win big.
So how do you need to think, to have a real shot at making big gains?
Study the behaviour of a trading robot, and you'll quickly understand how you need to change your own way of thinking.
A trading algorithm is generally made of two basic instructions: the instruction that gets you into the market, and the instruction that gets you out of the position. Sometimes the exit instruction is the same one that flips you into the opposite side. Let's not complicate things here, and just consider a simple exit.
So you have: if such-and-such happens, I enter a position, AND THEN, IF I'M IN POSITION, I'll exit on SUCH-AND-SUCH occasion.
If this trading robot has been validated, that's because we've tested, over a long enough period, that these two rules, played systematically, make money over the long run. And there's every chance that if the robot makes money over the long run, that exit rule has, at times, let it win big.
So why the robot, and not you? For two FUNDAMENTAL reasons:
1/ The robot has no qualms. It knows no emotion. It follows a logic. That logic is single. It never questions it. It's time and systematic application that let it win, not any capacity to adapt.
A lot of people believe man is superior to the machine for trading, because he has this capacity to adapt, to understand what the machine can't see or perceive. That capacity is undeniable, sure, but is it actually an advantage in trading?
The more complex a system becomes, the harder it is to prove that system has a genuine edge on the market, because it becomes more likely that its excess of parameters has simply let the robot adapt to the past, and only to the past. A human trader does exactly the same thing. In this situation, if this, and if that, and if this other thing… then that would happen. The only trouble is, by multiplying the rules, you drift further away from a genuine, PROVEN mathematical edge on the market.
2/ Not only does a robot not change its mind halfway through, or get swayed by its emotions. It will only exit a position once the conditions it was tested on are actually met.
Starting to see the big difference? When a robot is in position, it isn't thinking about managing that position. It isn't wondering how much it's winning or losing. It follows a logic, and only that logic.
Sure, some robots are programmed to exit on this or that profit target, but those aren't the ones capable of producing the biggest gains, and generally, their edge on the market is thin.
By contrast, a robot that asks no questions about the size of its gain, and reacts only to the market, is going to be capable of winning big. And that's the mindset you need to manage your positions in, if you want to turn your trading into winning trading.
Let's take a very concrete example.
More than 240 points of gain on the CAC in just 16 four-hour candles. Early this week, the CAC took off at a rare speed.
How could a trader have held a position for as long as possible, and banked the biggest possible gain in so little time? Certainly not by continually watching what the gain actually amounted to. The trader needs to think about the market, about what the market is doing. It matters, of course, to analyse your gains and your losses. But while you're trading, you should be analysing prices and technical situations, not what's happening to your trading account.
Not easy, is it?
A robot sitting in a position won't think about anything except watching for the exit condition it's been taught. And if you want to make big gains, you have no choice but to learn to do the same.
Because I promise you: if you let your emotions get hold of you, you will never be capable of holding a position like that.
And the maths prove it. It's precisely these big gains that give you a real shot at succeeding in trading. Without them, it's lost before you start.
It's never too late to change your habits, and your trading account will thank you for it.
Related. Winning Trades Make All the Difference and What Price to Buy At: The Question You Shouldn't Be Asking. Background: trend following in the Ouinex glossary.
About the author. Samuel Rondot has traded financial markets since 1995 and is self-taught. He wrote a book on technical analysis, published a long run of trading columns between 2009 and 2016, and now runs the algorithmic trading desk at Ouinex.
Trading leveraged products carries a high risk of loss.
