Archives of “January 5, 2019” day

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Trade Your Plan

  
  Education
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After yesterday’s close, we received an e-mail from a long-time subscriber, who asked us the following question, “When you see a position that is going against you and the market is dropping, and you are losing money on a trade, but your stop loss hasn’t been hit yet, how do you stay with the position? What is your secret? Do you pullback and look at the big picture or do you simple assume its all noise as long as it doesn’t hit that lower low? This is my biggest problem with tracking your trades and most of the time you are right in holding on.” … Because we thought our answer to his question may be beneficial to other traders as well, we wanted to share our reply to his e-mail, which was…

“The key point you stated is ‘but your stop loss hasn’t been hit yet.’ When we put on a trade, it’s like entering into a contract, so we try to stay the course and simply follow the plan. Over the years, we’ve found it’s best to stick with our original analysis because we usually plan a trade at night, or in the pre-market, without the stress of live trading. During the trading session, in the heat of the moment, there is so much pressure that we have to fight the voice in our heads telling us to sell the position when everything around is crumbling. It basically comes down to planning the trade and trading the plan…easier said than done, right? Sometimes, if you have a feeling things are going bad, and you’re an active trader, you can maybe sell 1/4 or 1/3 of the position to ease your mind. However, you must have the discipline to get back in once the coast is clear. Try to lay out a plan, write it on paper, and stick to it. The one thing every trader must accept, in order to be successful, is a loss. You must be fully prepared to lose what you’re risking. Once you accept losses as part of the trading game, the pressure to be right is not so intense.

The reason 95% traders lose: Humans 'have six-hour window' to erase memories of fear

  
Analysis, Education, Life
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Researchers have found that humans have a six-hour window of opportunity when fearful memories can potentially be erased, a study says.

Reliving a harrowing memory opens what experts call a “reconsolidation window” – a time-limited period when it can be changed from bad to good.

This is probably why 95% of traders lose – because mistakes or traps in trading are easy to come by, but erasing those bad memories is not easy after the six-hour window. This also suggests that you would need to go over the same trade within six-hours and somehow neutralize the bad memories (tequila or vicodin?).

six-hour

Never Argue

  
  Education

Remember, the market is designed to fool most of the people most of the time. Sometimes, the market will go contrary to what speculators have predicted. At these times, speculators must abandon their predictions and follow the action of the market. Never argue with the tape. Markets are never wrong, but opinions often are. I only try to react to what the market is telling me by its behavior.——Jesse Livermore

The Victim vs The Conquerer (Loser Vs Successful Trader )

  
  Education
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The victim wonders why nothing ever goes their way.
The conquerer wonders how lucky they are.
The victim wishes things were different.
The conquerer makes things different.
The victim passes blame and points fingers.
The conquerer accepts blame and moves on.
The victim argues minutiae.
The conquerer understands what matters.
The victim accepts reality and waits for for someone to create their own utopia.
The conquerer rejects reality and chooses to create their own.
The victim whimpers.
The conquerer roars.
The victim complains of unchanging impossibility.
The conquerer relishes the challenge of the impossible. (more…)

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