Avoiding Bad Trades

Discussion in 'Psychology' started by Lucias, May 21, 2011.

  1. Lucias


    I want to share a method I developed to keep me out of bad trades. This method is really interesting the way it works because it has nothing to do with bad trades.

    It has to do with good trades. Basically, I imagine that a great trader is looking over my shoulder and is able to see the same opportunities in the market that I am. And, I don't perform then I'll get sacked.

    So, the method is too basically take every good opportunity. The idea is that trading is very competitive and you have to make as much as possible.

    This method helps to keep me on the right side of the trade because bad trades often are the result of missing good trades and feeling bad about it. I want to be pushing really hard to get every good trade, take every opportunity, and therefore I wont feel the need to do something when I might miss a good trade.

    I think it works also because the good trades are easier to see but harder to execute on.

    I don't use this method all the time because it requires working 24/7. Really intense.. very worthwhile though.
  2. NoDoji


    This is a Holy Grail in the psychology of trading. Maybe you could be an effective mentor after all :cool:
  3. Pretty solid.

    Avoiding bad trades and simply cutting down on my trading has helped me quite a bit as I feel I'm starting to turn the corner.

    Trading out of boredom was an issue.I have my basket of stocks to trade and scan them rigorously throughout the day.Yes,rigorously I say.If nothing is there I'll have something to distract me, ie music.
  4. ammo


    use a similar method,i imagine the perfect me sitting up on a cloud looking down at the human me,i expect to make and accept mistakes,don't make a big deal about em,just try to minimize,this acceptance also minimizes the overall market, the emotional drawdown on bad trades,and euphoric elation on good trades,works in all areas,not just trading
  5. Another way to avoid bad trades is to only trade one set-up. You get to know that set-up like the back of your hand and know that over time, you'll end up ahead of the game, regardless of what happens on any specific trade or even group of trades. If the set-up isn't triggered, I don't trade. Period. If it is triggered, I trade it. Period.
  6. BSAM


    Exsqueeze me, but you only take good trades? Well now, that's a grand revelation! Uh...Why would you look at a trade and think it is bad, then take it?

    Gee, Lucias. You can do better than this, can't you??

    Stop with your guru bullshit and start a journal.
  7. Lucias


    I have a journal already. I'm sharing one of my key psychological methods. The idea was crystallized from this video:

    Billion Dollar Day

    Especially the video on this section:

    The method is to set yourself to perform at a high level. It is not just about meandering into the market but striving to take every opportunity. What this does for me is keep me on the right side of the market -- usually.

    A good example was crude on Friday. I was sick and don't typically trade crude. I wanted to get short but kinda half did it. I didn't get filled. So I sold above the market. I seen the momentum come back in and knew I was in trouble. I got myself in trouble because I wasn't in the right trade.

    If I had got filled, I'd been out for a profit (very likely) and finished for the day or may have even got long the momentum.

    "keep at it, day and night"

    This is an advanced psychological tool though and not for the beginner because it requires one to really push themselves.

  8. BSAM


    Okay, great! I was unaware. I thought you were trying to direct traffic to another site. The "guru" posts here are a real turnoff. At any rate, I hope you do well, if you are for real. Good luck!
  9. NoDoji


    Lucias made a good point with his opening post. Good setups can "look" bad. They can appear counter-intuitive at the hard right edge. This causes traders to hesitate. Traders who've studied well and have seen the result of trading particular setups understand they're supposed to trade this setup because it's a "high probability" setup. They've seen the setup on static charts over and over again and they know that more often than not the result of that particular pattern is a significant positive move in their favor.

    But in real time at the hard right edge (where you can't see "what happens next") it can look wrong, ugly, uncertain. The trader, fearing loss, hesitates, thinks of all the reasons the trade could go wrong, then suddenly the move gets going, and the trader's afraid to get in now because half or more of the profit they expected to take out of the trade is already beyond them, price keeps going, they're pissed they missed out, price keeps going, they're still not in!

    Then, because they missed the move by not trading the good setup, they try to get back what they missed and trade poor setups, trade the wrong direction, over trade/revenge trade. The Big Move is over and price is consolidating or whipping around in a range and they're now getting chopped to death trying to trade junk price action.

    This is how traders who have a trading plan with a positive statistical edge can end up treading water or, worse, consistently losing.
  10. BSAM


    If Lucias sees a setup that he knows is good, he executes it. But, who wouldn't? Anyone in their right mind wouldn't execute a "bad setup". Now, if one doesn't know the difference, that's a whole other story.

    Trader "A" might see a good setup that is different from a good setup that trader "B" sees, yet both can profit.

    If one knows that a setup is good, then it can't look bad.
    #10     May 21, 2011