Bo Yoder, who recently added a weblog to his site, has posted an excerpt from his book about the payout/payback cycle. It's split into two parts: Part 1 - Part 2. Some snippets of the article:
For every style of trading there is a "perfect" market environment. When the market is aligned to your style, everything you touch will turn to gold. Your patterns will set up and run without stress to your target zones, your excitement and confidence will soar as your win cluster grows. But these glorious periods seldom last long. Stops will begin to appear again, and then perhaps a loss cluster. This constant cycle from "zero" to "hero" and back again is why trading is the manic depressive business it is. This constant shift from in alignment to out of alignment is what I call the payout/payback cycle.[SNIP]
Once I became aware of the smooth cyclicality of the payout/payback cycle my outlook began to change. I began to see the money flow in these patterns as the tide in an ocean of money. I began to see this payout/payback cycle as simply the manifestation of a natural ebb and flow inherent to market action. One would certainly never try to fight the tide of an ocean, so why was I trying to fight this tide of money?
I think most traders can relate.
