To tough it out in a marriage when things get difficult it takes faith in your spouse. It takes faith to stick with a career when at the beginning it seems like you are not being paid fairly for all your hard work, but you believe that one day your efforts will be rewarded with a promotion or pay raise.
Anything worth having takes perseverance and you must have faith to get through the rough times and ultimately succeed.
Trading is no different. You develop a great system, you back test, you adjust, you paper trade. You think you have found the holy grail, you immediately trade it. You take too big of a position and risk to much and “wham!” big loss right out of the gate. Then the next two trades are losses and you are down 25% in your trading account. After this, many not only stop trading the system but stop trading altogether.
To avoid this you must risk only 1% on any one trade based on your total available capital. I don’t care how great your system is you will experience a string of 5 to 10 losses in a row at some point. You could very easily lose the first 5 trades in a row, it is much easier to maintain faith in your system with a 5% drawdown than a 25% drawdown.
You have to be convinced that your trading system will be profitable in the long term and the effort will be worth it. Trend traders keep going with the trend waiting to catch the big trend they know will eventually come their way. Swing traders keep buying low at support believing they will be able to sell high when it swings back to resistance. Momentum traders keep taking the break outs knowing that one huge trade could make their year.
Always trade what you believe about the market, but don’t risk too much on each bet, it is hard to keep the faith in your system when your trading account is screaming it doesn’t work. Many times it isn’t the system, it’s the risk management.