PSYCHO GUIDELINES TO REMEMBER WHEN TRADING 3 SECTIONS : BEFORE/ DURING / AFTER BEFORE MARKET OPENS PERFECTIONISM and FORCASTING ⢠A Trader must allows assume they do not know what a market will do but to identify high probability key decision point. ⢠Donât try to predict where the market is going⦠if you do, it gets you sucked in an opinion instead of thinking in probability. Itâs better to be reactive. Just look at the patterns and trend and play with that . Trade what is in front of you. ⢠if you are daytrading, one of the really neat things about it is you can trade both sides of the market without having to predict. At its simplest level, if the market is making lower lows and lower highs, then sell against the previous pivot high, vice versa for a bull trend. Of course, there are days when this will not work. but even so, you will be taking quite small losses. On days that trend you will more that make up for it. It does not have to be complicated. Learn to do this one thing and you will make money, not get hurt on bad days, and will learn about the mkt. in the process. ⢠You must always be prepared to adapt a new orientation as market conditions change. But, if you are not sure, just stay out. With time and experience you will be able to adapt to changes quicker. ⢠Understand why your are trading== not to be right , but to make money!! ⢠Accept that you will NEVER totally make it as a PERFECT trader. We are always learing more and more about ourselves. Enjoy the journey, not the destination. ⢠Mistakes are inherent to the process of doing anything, and certainly are an essential part of learning to walk without falling. Did you ride your bike the first time without wobbling? Of course not. Neither can you learn to trade effectively without making mistakes. You make a mistake, and then you make an adjustement. Maybe you over adjust and you need to readjust. Mistakes are like feedback. If you donât recognize a mistake or take responsibility for a failed action, you cannot learn from it. This leaves you primed to repeat the same error. Instead of saying: I will never do that mistake again say: What a wonderfkul learning experience! If you make a mistake ask yourself : what can I learn from this? Itâs easier to admit mistakes when you hold the attitude that mistakes are acceptable and are a natureal part of the learning and maturing process. For goodness sake, donât expect yourself to be perfect. Trading is not a game of perfect. ⢠The only thing that counts is to make money consistently. Having the perfect high or low of the swings is not the goal of the game. The goal is to take out of the market the most amount of money with the least risk. If you try to be perfect in trading you will never make it and give up since perfect does not exist. Even Tiger woods makes mistakes . ⢠Be emotionally detached of your actions & analysis; Donât let the emotional decision of greed & fear interfer with you analyses & action. ⢠Wanting to be right instead of making money .i.e. playing the forecast instead of the market ⢠Do not get married with you bias opinion.. only play it until proven wrong. Donât get married with your out view..adjust your view if warns you or shows you that the picture has changed. ⢠Better be reactive than proactive ⢠Never volunteer advice and never brag of your winnings. This would might cause you to be married to your position because of pried .Better staying humble. Or only discuss a trade once you have closed it. ⢠If a market doesn't do what you think it should do, get out. ⢠Good trading is less about predicting and more about reacting. ⢠Market not going where you expected. Turns sooner on you ⢠I seldom catch exact tops ot bottoms or bottoms... (Tomâs Comments) ⢠You must always be prepared to adapt a new orientation as market conditions change. But, if you are not sure, just stay out. With time and experience you will be able to adapt to changes quicker. ⢠Trade market not forecast. Trade to make money not to be right. not only that but u have to continually evaluate the situation and yr logic has to change according to market action, whatever u do don't try to force yr bias ⢠if the price action alters the pattern u were first regarding then u must change yr logic to match ⢠Loss is part of the gameâ¦accept that ARE YOU STARTING TO DOUBT YOURSELF? IS YOUR CONFIDENCE GETTING SHAKY? ⢠Donât listen to others opinion during your trading; stick with what you see on your chart ⢠Itâs important to believe in your trading plan and methodologyâ¦that is where confidence comes in. Good traders get out of their slump by trading to get their confidence back. ⢠Always discipline yourself by following a pre-determined set of rules & steps. ⢠Consistancy leads to confidence with time . Consistency means taking profits from all profiable trades. Not allowing the paper profit to dissapear again. ⢠The worst possible thing for me in the past was to see a good paper profit given back. More disturbing than a straightforward loss. ⢠The market will trying to consistently test your confidence by making head facks when you put on a position trying to give you an illusion that you put on a bad trade..the only way to avoid falling in itâs trape is to know that you did your due diligence by waiting for a good time to enter the market at a high probability level. ⢠Always discipline yourself by following a pre-determined set of rules & steps. ⢠If a trade doesnât jump at you then donât take it..if you hesitate then donât do it⦠If you are not sure of the trade that you are taking by not being sure of it when you took it, you are not going to have the conviction to stay with the trade; so it is best to wait for a set up that really makes sense and fits with your rules. This will make it much easier to stay with the trade. DISCIPLINE: ⢠Be disciplined to follow your rules & steps. ⢠Be sure to document all your trades with why you entered. Why you exited, how you felt , general comments, profits or losses, trade management on chart. If you do that you can learn from your mistakes + will help you to become a better trader.
DURING THE MARKET IS OPEN DID YOU MISS A BIG MOVE OR A TRADE? ⢠You may miss a very big move sometimes but donât worry there is always be other moves out there. And the market sometimes retraces enough so that you can jump on it again once it has already started. Sometimes it might not so then wait for the next moves. Market will be here tomorrow , in a year in 25 years from now. Some trades are your trades and some trades are other peoples. The goal is to make money everyday thatâs all you want to do .. if you take 1 trade or 10 trade .Donât be frustrated some days you did not make money that is part of the game too..you canât win them all..even Michael Jordan did not make all his shoots but on average is make a great job at it. And even Micheal Jordan did not win every game of his carrere yet overall he won the championship 6 times in a row. ⢠Mistead opportunity Keve never chase anything, there are a millioin trades available per year, if u miss 99.99% of them no big deal. I should have said more than 5.5 million trades per year if u could initate 1 every second, but u get my point ⢠Don't worry about missing trades or try to trade every single day. There will be opportunities tomorrow and the day after and the day after and the day after that with other great opportunities and big moves you will catch. Even if somedays you do not put on a trade, itâs ok⦠ARE YOU GETTING IMPATIENT AND BORD BECAUSE MARKET IS GOING NO WHERE? YOU HAVE THE NEED FOR ACTION? ⢠Be patient to wait for a high probability trade..donât shoot from the hip. Never get into the market because you are anxious because of waiting; donât be Impatience. ⢠Never get into the market because you are anxious because of waiting. ⢠Try to take a brake or go for a walk and come back a little latter..this will avoid you to just jump in and get whip sawed by market ⢠If you feel impatient itâs maybe because your life is boring..spice up your life then outside the market by bunggy jumping or doing some exiting stuff. ⢠Be patient to wait for a high probability trade..donât shoot from the hip. Never get into the market because you are anxious because of waiting; donât be Impatience. ⢠If you feel impatient itâs maybe because your life is boring..spice up your life then outside the market by bunggy jumping or doing some exiting stuff. ⢠Never get into the market because you are anxious because of waiting. ⢠Never try to find a trade in a chartâ¦if it is there it is ..if it is not then it is not . Otherwise you could have a tendency to overtrade and trade everymove. ⢠To train you patience, take a small glass and let drops of water come out of the tape until the glass if full. ARE YOU GETTING EXITED AND TOO EMOTIONAL ABOUT A TRADE? ⢠If you find yourself in a losing battle with your emotions, (heart is racing, pulse is pounding, say you âRelax key wordâ silently & repeatedly until you find yourself back inside that memory. The âRelax Keywordâ should be a phrase ar one word memory cue, such as âGOLDENâ. Close your eyes & think through your life to a time & place where you were completely content. It is important to re-experience the way you felt a that time ( what did it smell like? What did things look like? Where there any noises? What did things feel like?) Allow yourself to sink fully into the memory. The âFOCUS keywordâ should be an object that you peg with a memory when you felt centered & in control. This is when you have fear & canât take effective decisions. ⢠Banish negative self-talk immediately instead use empowering talk. ⢠Early each morning take a few moments to determine how you are feeling. Ask yourself: Am I rested? Did I sleep well last night? How am I feeling right now? Am I carrying any unresolved grievances with me today? Pay attention to your answers & work on solving any issues that may keep you from peak performance. Peak performance = fully rested + well feed + happy + content+ alert + ready for any and all challenges= effective trading. THINGS ARE NOT GOING YOUR WAY..YOU HAVE HAD 2 or 3 LOSSING TRADES IN A ROW? ⢠Trade with the trend..donât trade against the trend for too long. ⢠Loss is part of the gameâ¦accept that ⢠Go back to your trading plan and see if you are really following it.If yes then fine . If not the readjust yourself. ⢠Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don't let ego and greed inhibit clear thinking and hard work. ⢠It is quite common for a good trader to lose 3-5 times out of 10 trades. Losses are part of the game and the sooner you accept them the better off you will be (rsofhouston.com) DID YOU SEE YOUR PAPER PROFIT DISAPPEAR? ⢠If you are position trading and your bias is that we are only in a bear correction and that is proved wrong (invalidates at new highs) and you are still short this market at this level then you have not been "reactive". You have returned a wonderful paper profit because your stupid bias was wrong. GENERAL TIPS: ⢠Never add to a losing position. ⢠Cut your losses short and Let your profits run. ⢠The less on your chart the better off you are ⢠- I try to indentify and trade the trend in effect. I do not try to catch every minor swing, especially the counter trend trades. ⢠Never try to find a trade in a chartâ¦if it is there it is ..if it is not then it is not . Otherwise you could have a tendency to overtrade and trade everymove. ⢠If I'm going to scalp. I do so with the trend as I have identified it to that point in time. ⢠The task of the trader is to find simple things that can be consistently applied to make profitable trade decisions. Ultimately, it is not your analysis that will make you money; it is your trade tactics and strategy. That is the holy grail of trading. ⢠Learn what confirms or invalidates any given pattern and have a plan in place to trade accordingly. . It always gets back to trade tactics and strategy ⢠STOPS: : "Initial Stops" are just that - INITIAL. They should be adjusted to lower risk as the mkt. moves in your direction. } if the market takes u out 4 a profit, all well and good, u can always reeneter at a better price if the setup warrants it. Move your stops with the market using pivot stops once the trade moves in yr favor. ⢠find one or two patterns/condtions that you know and understand and trade only those. You may only take two-three trades a week. But if you will be disciplined it will greatly increase your confidence and probability of success ⢠Cut your losses short and Let your profits run. ⢠Never add to a losing position. ⢠As a trader you must be able to deal with uncertainty and probability. You must have confidence In yourself and in your methodâs ability to rebound after a string of losses. This is essential. This confidnced is the most important asset you have e as a trader and without it you will fail over time. It is your confidence as a trader and in your method that is them ost important asset you have.Having confidence to continue trading through a drawdown is the only way to recover from it and restore profitability. ⢠Never volunteer advice and never brag of your winnings. This would might cause you to be married to your position or have to spend too much time about arguing what went wrong etc.. ⢠Vacations from trading are healthy and should be done frequently. Remove part of your trading profits regularly. Spend some of the money. Otherwise, whatâs the point in trading ⢠Having the proper mindset, attitude and psychological makeup becomes increasingly important as you progress through the steps. The focus of the earlier steps is on external issues i.e. developing proficiency in the mechanics of trading while the focus of the internal issues i.e. improving ourselves mentally and psychologically maturing as traders. ⢠Trading is work and an art form that requires a time commitment and practice. Success cannot be purchased, it as to be experienced. Itâs that simple. Trading is like any other occupation, if you hang around long enough youâre going to pick it up. ⢠Judgment will always be required for success â¢
AFTER MARKET CLOSED YOU HAD A LOSSING DAY? ⢠Lower expectations are better than too high expectation. Consistently making 2-3pts on average a day is already very good. If you can achieve that then you can consider yourself a successful trader. You cannot win them all. On average Iâts 2-3 pts so some days could be -2 then +6 then + 5 then 0 then + 4 then no trades taken in the day..that = 2pts . If you get more points perfect but donât be disappointed if you make 2 pts consitently on average but be very happy since you can consider yourself a successful trader ARE YOU EXPECTING MORE MONEY OUT OF YOUR TRADING? ⢠Keep you trading goals realistic and moderate your expectations, that makes it easier to achieve and exceed them. Those who set lofty goals right off the bat are doomed for failure and disappointment. Whatâs wrong with learing to make $100-200$ per day. Nothing. But all the media would have you believe you should be starting out making 1000-2000$ per day. These unrealistic expectations will put you in the poor house .Set reasonable goals given your financial situation and trading account. If you have a $10 000-$20 000 account $200 a day or so is not unreasonable. If your account is $250000 to start, the n you will of course be able to trade bigger size and $2000-3000$ per day would be within your reach. Now if you can make more than $100 or $200 a day then fine. Better for you ..itâs all gravy. FEELING DOWN BECAUSE IT WAS AGAIN A LOSSING DAY. Two or more days in a row ⢠Document your trades ; this will be bring out a lot of the positive in your trading the because our mind usually remembers only the bad trades We always remember the loser that we took but often forget the bad trades we avaided or the positive trades we made . Therefore it is important to review your trades. HOW TO BUILD and REBUILD YOUR CONFIDENCE? ⢠Trade you method for 1month the reavaluate it then and make adjustementsâ¦take all the trades . ⢠At the end of each day review your trades and make comments what you felt , why you did this or that mistake, what you did right , what could maybe be improved â¦etc.. with time this will give you a road map to your success. THIS IS VERY IMPORTANT TO HAVE A TRADING JOURNAL. ⢠Also take small profits with one contract and let the other run..small wins will build your confidence. ⢠Donât listen to others opinion during your trading; stick with what you see on your chart ⢠After the trade is done ask yourself â If I had to do it all over again with the information I had at the time of the trade would I take that trade again? If the answer is YES then great you did what you had to do and followed the rules and move on to the next . If the answer is NO then why did you take the trade? was it because you got impatient or where you forcing the trade, reasonâ¦(WRITE IT DOWN) and if NO then what adjustements would have made and should get disciplined again and trade the plan . Itâs not about losing or winning but trading correctly. Itâs simple but very effective thing to do. ⢠Review all your trades and enter your comments in your Trading Journal. ⢠-Print charts and paste to form ⦠⢠Go back to the dayâs chart and tell yourself: âwould I have taken that trade? i.e. is it my pattern:â Why and why not and what can you learn from it. ⢠Fill out your end of day fellings for the day in your Dairy. SOME OF THE PSYCHOLOGICAL BLOCKS I HAVE TO WORK ON. (knowing your weaknesses are key in this business) NOT FINISHING WHAT I START (big issue) ⢠Stick with one method that you like and fits your personality. ⢠Every time you start something repeat yourself âfinish what you startâ a few times like a mantra..say it before you start and just when you see yourself drifting off on something else⦠this will put you back on track to finish what you start. EXTREMS i.e. perfectionism or donât care ⢠Taking too many trades or no trades at all by fear of being wrong WORRYING ABOUT WHAT PEOPLE MIGHT THINK. ⢠Donât tell others what you are doing. LACK OF SELF CONFIDENCE NOT WANTING TO HURT SOMEBODIES FELLING FEAR OF FAILURE Take only 1% risk per trade max . ⢠Fear of failure leads to fear of being wrong leads to fear of losing i.e. taking losses. Leads to unsuccessful trading ⢠Fear of failure is a nature human emotion and the fear usually arises after a series of losses. But you have to consider each loss as a lesson to successâ¦what you did wrong is has important has what you did right⦠you grow from your wrongs and losses (that is why keeping a trading journal is so important)⦠Real failure is only when you donât get up and try again. Temporary failure is needed to growâ¦you cannot avoid it; itâs like breathing . Keep in your mind the example of a toddler learning to walk; He might falls 100âs of times but he never gives up until on day he is walking. If it was in a toddlerâsâ nature to give up then we would all be crowling like snakes on this earth. Be like the toddler and never give up. Donât be discourage when you just had 1 , 2, 10 or 100 failures or losses but be discouraged when you give up on trying. Temporatry discouragement is natural and is also part of the process of the psychological cycle of growth; The key though is to strive and continue and get up again. Now the definition of insanity is doing always the same thing and expecting different results. So in your search, if one things seem not to work; then first adjust it a little; then if it still not working adjust it some moreâ¦and if it still not working then try something differty. Try different things and adjust until you get it right and were you see that you are fall less and less. Donât forget to give everything a fair trial though before moving to something else⦠and even if you do move to something else you will still be able to keep some of the things you learned and apply it or use it to your new thing. But remember at one point you have to stick with one think and stop running around like a wild chicken. At one point you have to stop searching and sticking to something you feel confortable even if it is not perfect . Perfection is not of this world. Pick the best of all the best things that you learned and make your own receipy of success that works for you.. Making your own receipy will give you confidence in what you are doing. Fear of failure will disappear slowly has you get better at what you are doing . It will never totally disappear and might crowl up some times but it wonât affect you much anymore since you know by experience that you will get out of the slump. Once you know how to walk you are confident that you are not going to fall anylonger. Repetition breaths habits and habits breaths confidence. So keep on repeating . FEAR OF SUCCESS TRYING TO BE PERFECT (wanting to be right instead of making money) My psychological weaknesses are: - Worrying of what people might think. - Not wanting to hurt somebodies feelings - Not finishing what I start - Always going to Extremes - Perfectionism > wanting to be right > > get you married to a position > losses -Fear of rejection - Fear of failure - Fear of Success - Lack of Confidence How to overcome them? ⦠(psychologist , work on one self )
Kevin, all excellent observations, well done. Would you care to share any charts which illuminate your trenchant observations?
- Worrying of what people might think. Nobody cares - Not wanting to hurt somebodies feelings Somebody will always take offense - Not finishing what I start Shows up later as fate - Always going to Extremes Moderation is mediocre -Fear of rejection - Fear of failure - Fear of Success Fear of fear