Hesitating before a trade

Hey Joe! No matter how hard I try, I still find myself hesitating before a trade. Any comments about that?

There are any number of reasons why a trader hesitates before a trade. The main one is lack of planning. Without a plan, there is no degree of confidence a trade will be successful, it’s all wishful thinking. Unless they are outright gamblers, traders usually have a strong need to protect their assets and avoid risk. This is especially true for beginning traders. It can take a long time to build up sufficient capital for serious trading. By that I mean sufficient capital to be able to trade for a living. It is quite understandable to fear losing all or part of your initial capital. Beginners tend to seek absolute certainty before taking a risk, and gaining true confidence in you ability to trade successfully can take time. Unscrupulous marketers of mechanical trading systems and methods take advantage of the beginners fears and lack of confidence by advertising “sure-fire” “magic” ways to trade, instead of revealing the truth about the difficulties in becoming a consistently successful trader.

When it comes to short term trading, there isn't very much time for long deliberations. Market conditions are in continuous flux. Decisions need to be made relatively quickly, and if one waits too long to execute a trade, he or she may miss a significant opportunity. The reasons for hesitation are everywhere, and traders must be aware of them, and create a plan to prevent them. Let’s look at a few of the things that cause traders to hesitate:

*The complex charting software available these days tends to increase hesitation. Traders think that the more confirmation they can get from indicators, the more certain they can be that a trade will be successful. However, all indicators lag the market. The notion that an indicator can somehow predict what will happen once a trade is entered is nothing more than wishful thinking. An indicator may give some degree of confidence about entering a trade, but the indicator cannot trade the trade, only the trader can do that. Once a trade is entered, it becomes entirely a process of management. It's tempting to look at as many indicators and signals as possible. Doing so, however, can be very time consuming. That's why seasoned traders advise looking at only a few if any key indicators.

*Hesitation is often related to a lack of confidence in the trader’s trading strategy or trading ability. There are numerous reasons for such lack of confidence. Some of the reasons are shallow and mostly on the surface, like being distracted by watching financial TV while trading. Other reasons are more deep-seated, and actually reflect psychological problems dating all the way back to early childhood. A trader may not believe that his or her trading plan is adequately developed. Nevertheless, they are determined to trade, so they muster up their courage and finally jump into a trade almost guaranteeing that the outcome will be a matter of pure chance. Some traders may question their trading plan because they know that they did not spend enough time preparing it. Sometimes hesitation is intuitive, warning the trader to avoid the trade. All too often, traders are not tuned into their own intuitive feelings. In the case of intuition, hesitation can act as a motivator. If the trader feels the hesitation is because of lack of adequate preparation, then that trader must learn to spend more time preparing for trades. By studying the markets a trader can come to see new higher probability setups, thereby reducing doubt and indecision, and in turn stop the hesitation because of more adequate preparation.

*Hesitation sometimes reflects a deep desire to be right and a fear of being wrong. It has been our experience that many of the people who are attracted to trading fit into this category. Great care must be taken by physicians, engineers, scientific types, and mathematicians, who seem to be the most prone to this type of hesitation. They are often perfectionists afraid to face their inadequacies. By putting off a decision, they don't have to face their limitations, and can pretend they are better traders than they really are. If I had the time and space, I could give you dozens of examples of this kind of hesitation. The perfectionist’s reality states that everything must be in order and follow rules. They think strictly inside the box. They want everything to be perfect, so they continually second guess and doubt themselves and what they are doing. They believe that they cannot cope with being wrong. This occurs in trading decisions as well as other life decisions. Extreme perfectionists often think that once they make a bad trade, it will be the start of a downward spiral and a complete blowout of their trading account.

*Hesitation very often relates to low self-esteem or other deep-rooted psychological issues. We see these more times than we would like to. Traders with low self-esteem usually lack confidence, not only in trading, but other areas of life. Beneath it all, they doubt their ability to trade, and hesitate making a trade until they the guilt of not doing so overcomes their fear. At that point in time, they enter a trade out of pure compulsion driven by guilt. This exposes them to a trade with no real plan to support it. They become victims of pure chance.

We also find that traders who hesitate may have a conflict regarding their success. They can actually fear success. They have been told by parents or others that they were no good, that they would never amount to anything, that they were “bad.” These people strive for success at one level of their consciousness, but at a deeper level, they secretly believe they cannot attain it, or do not deserve it.

Identifying, directly facing, and eventually eliminating a problem of hesitation is the only way to truly deal with it. Chronic hesitation will eventually destroy the confidence a trader needs for success. If the problem is not dealt with and the traders continues to hesitate, miss important market moves, and see his or her equity begin to dwindle, that trader runs the risk of becoming a phantom trader, a pretender, becoming convinced that the imaginary trades being made are real. If you are prone to hesitation, it's vital that you deal with this problem early in your trading endeavors. Identify the reasons for it, confront the problem, and make changes as soon as possible. These are changes you have to make within yourself. If you will truly engage in self-examination with the object of eliminating hesitation, you can trade become consistent and successful in trading profitably.

 

All that writing? No wonder you have a piss poor plan.

Everybody hesitates, even those self-proclaimed experts.

 

Pure jenius

 

I found that trading in my sim account over the past couple months is helping me overcome hesitation. I rarely hesitate in the sim account (nothing to lose) and it's getting me in the habit of getting in quickly.

Also focusing on trading just 2-3 things is a big plus, because I'm getting to know them well, I know their S/R levels and common channel reversal zones, price action during certain times of day, etc, so when the setup sets up, I can often anticipate in advance the best entry zones.

 

joe,

good stuff im sure there will be tons of people that benefit from your post.

 

Thanks for your post. I can agree with most of what you have written and I think all of us who trade actively have encountered hesitation from time to time--especially in the beginning stages.

 

I find that i hesitate when the money I am risking is too big of a percenttage of my account.......my psychological rist tolerance seems to be between 2 and 2.5% of my account......

now that i have a bigger account, I risk one half of one percent of equity and do not hesitate at all....

 

Take a careful look at how long carving a trading turn is available.

It is about 20% of real market time.

To see this trading window clearly, a good method is to have a display that allows you to see the end of profit segments coming up and beginning of a new opportunity coming into the picture.

The name of this window, in trading terms is called trend end effects.

80 % of the time the market is translating and the profit segment is bulding more profits.

The strong support, comfort and confidence in trading has a definite and continuing source: you know three things all the time as a consequence of one routine.

To better understand Joe's warnings to others who do not use these things; look at the methodology of the Covel System as explained and tested by the Phoenix based outfit: Blackstar Funds, LLC. They enter on the LTL after point 2 Which is termed the highest closing price of the stock so far in it's history and exit on a fixed % offset of the price peak. You can see this illustration, roughly speaking, on page 231 of Covel's book.

What is it that engenders this fear, anxiety and anger Joe cements into the picture? It is not knowing three things at all times.

How would Blackstar test a method that included the rules given the Trader666 so many years ago? First they would have to switch from price to volume to get the signals. Why did the Covel System omit volume as a variable in trading?

Trader666 did a test on an equities relationship and left out a variable, too.

None of the above uses prediction except for Joe's stuff. Traderzones and Covel differ on prediction. TZ insists on it and Covel rejects it.

Logic dictates that predicting is superflous and unnecessary.

The Covel System feels it is a safe bet that a stock is trending if it closes at a new high relative to its entire history. Short trends were not tested, however.

What is it like to learn to trade and trade in a context of support, comfort and confidence. It is like....necessary.

You have those feelings from the beginning of learning, if your purpose is to build and differentiate your mind. Try to remember anything you did in your life under those circumstances. This is what you repeat doing to learn to trade.

There are many successful means of trading. People who do these things do have the feelings of support, comfort and confidence. These feelings don't just come from having capital and the means to have your desires, wants and needs taken care of.

"Knowing that you know" is a bottom line composed of three parts when making money. When a person goes OCD it is because he successfully learned failure by his choices.

1. Always know the right side of the market and be on it.

2. Always keep focused on knowing when and if a trend is continuing.

3. Always use the overlap of trends as the time interval to switch from one side of the market to the other.

In stocks there are always more opportunities than a trader has capital. So any technique that makes money can be used to assure profits over time. Why doesn't money management and risk management work for the passive investor who signs up a money manager to handle his retirement capital? Money managers apparently do not use trading as a means of supporting their client's interests.

How did the Covel System get so far away from optimizing the money velocity of traded capital? There is no plan in the Covel System.

If a person reflects back on one of those sucessful learning efforts, he does discover there was a plan. One of those short learning experiences was to learn to drive a car. What made it so easy? It was the long term existing environment with respect to cars.

Covel's book was the result of an eight year "hazardous journey". (See the first sentence of the Preface on page xv of the book) What about Joe Ross or Traderzones or Trader666 or Whiskey?

Any learning trader has a long term existing environment with respect to the most important part of learning to trade. Recognize that this most important thing is learning and it is NOT making money. If you grew up as Covel did, you did not have any way to acquire a background. Take a look around and find what is important in your background and make use of it instead of beginning a long harzardous journey.

Find the places where you were successful in figuring out things logically and deductively. They all were step by step places where the steps were reasoned out and you did the same thing over and over in a context that you knew that you knew and you felt supported comfortable and confident. that is how learning to read worked and how Arithmetic worked. So did sports and geometry and science classes. Sex works that way too.

What didn't work with respect to having support, comfort and confidence? Learning to swim in water over your head? Not wearing a condom? Drunk driving? Speeding during winter conditions?

In trading, inventing under conditions of ignorance is a real winner. So is revenge trading. Predicting is nonsense and people still do it.

Learning to trade begins bgins with a bar for each variable and then adding another bar to the picture and only deducing logically from that point onward. Why would only one pattern emerge?

 

Is this the same Joe Ross who wrote "Trading The Ross Hook"?

If so, I just wanna say I loved your book. One of the best trading books ever!

 

The hook is in fact not his. There is a much older book that a lot of the people of the sixties and seventies read and regurgitate from, each giving a different name from the methods in it.

Ross's hook, williams order in markets, etc. All saying the same thing, but never stating the source.

The only original guy from the 70's is hurst, with his work on cycles.