When we follow a standardized process for trade execution, we help negate the impact that emotions can have on that process.  And when we create a set of rules within which is a subset of rules that allow for less mechanical, more intuitive management of our trades, we can potentially realize additional profits from those intangible insights into market direction without over-exposing our account to risk.  Here is how it works:

  S – Scan your charts .  Create a “Watch List” to help manage your inventory of trading opportunities.

I – Identify a high probability set up.    

 M – Map out the trade’s entry point, stop-loss exit point, and profit exit point. 

P – Pull the trigger.  By systematizing the process as we are talking about here, the anxiety associated with executing a trade is greatly reduced.  Instead of focusing on whatever issues keep you from pulling the trigger, your focus is on following a procedure, a set of instructions.  Mapping out and understanding exactly what our risk is also reduces the anxiety of entering a trade.    

 L – Let the market do its thing.  It’s not very often that you won’t have to take some heat on a trade.  It’s a great feeling when a trade goes in your favor immediately and stays that way.  But that’s the exception and not the rule.  As a good friend of mine would say, “Let it breathe!” 

 I – Isolate your feelings, emotions, and inclinations to tinker with the trade.  The best way to do this is let go of the mouse and pick up a pen.  Journal your thoughts to explore and understand why you are wrestling with the urge to adjust your pre-established parameters for the trade. 

 F – Focus on your rules for managing the trade both mechanically and intuitively.  I have established strict rules for when I will allow myself to manage a trade intuitively.  First, one-half of my position must meet my first profit target and be filled.  If I feel the position has continued potential beyond that point, I allow myself to be risk no more than the profit banked from the first half of the trade.  This is very important: when allowing myself to trade less mechanically, my risk never exceeds break-even on the entire trade. 

Y – You.  That’s right.  You.  No matter how mechanical we try to make it, each trade carries with it some level of stress.  So take some time for you.  Walk away from your trading station after you’ve exited your trade, even if it’s only for a minute.  Take a few deep breaths and allow the last trade to get put behind you and begin to prepare for the next.