Don't Quit
Don't Quit
Archives of “February 2019” month
rssRisk and Reward
Before placing any trade, a strategic trader must always know and identify the maximum risk exposure for the trade. Once the risk is identified, it should be compared to the possible profit target. If the profit target does not justify the risk exposure, the trade should not be taken. It does not make any sense to risk a dollar to earn a penny. One of the common mistakes that cause traders to consistently lose money is that they fail to let their winners run. They quickly close out their trades as soon as they become profitable. While no one can argue against taking a profit, consistently taking profits that are not consistent with the desired risk/reward ratio ultimately leads to a net loss. Once a stop is hit, it immediately eradicates the small profits of three or four trades that were prematurely closed. It is hard to leave your money on the table, but there are ways to move up your stops and use a trailing stop to allow you to stay in your trades to realize your designated target.
Once a trade is placed, prices will always fluctuate; that’s the nature of the auction process. Rarely will a trade directly navigate to the profit target without a retrace. This is where paper trading comes into play. It allows a trader to watch, learn, and record how long it takes to reach a profit target and whether the risk/reward strategy that they are using is in fact feasible and workable.
Thought For A Day
Your Dream Has To Be Bigger Than Your Fear
Free will is overrated
Genuine confidence comes from hard work and experience
Count down 3, 2, 1 to develop as a trader
Count down 3, 2, 1 to be a trader!
3) Focus on the psychology and mental skills that are necessary to succeed in the market. Learn to read the market charts in terms of the pscychology of the other traders.
2) Learn about risk control in depth. What this really means, options available to you, how you can marry it up with your financial objectives in the market place etc.
1) Only when you have the above dialled in should you investigate ways of putting trades on in the most advantageous positions to generate the returns you are looking for.
I think if people were to count down 3, 2, 1 there would be many more successful traders.
Is Venting Emotion Good for Trading?
Does venting emotion help a trader regain focus or does it exacerbate emotional and physical arousal and interfere with concentration and decision making? Research actually suggests that venting emotion after a traumatic event can lead to worse psychological outcomes. The key seems to be whether the venting allows for a reprocessing of the stressful events. If the venting leads to new ways to interpret what has happened–new perspectives–it can be helpful. If there is no such transformation of the stressful event, venting can simply amplify stress responses and reinforce them. Venting in a social manner to gain control can constitute good coping. But losing emotional control simply reinforces a sense of lost control.
Traders -Remember These Two Words-Won't & Can't
Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.
Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.
14 Questions for Traders
1) Do I treat my trading/investing like a business? Have I prepared for it the way I would for any other business?
2) Do I have a business plan – a working document to guide my trading business?
3) Do I have a set of written rules to follow?
4) Am I following a regular procedure to prevent mistakes? A mistake means not following your rules that you have laid out for yourself.
5) Do I have a tested trading methodology?
6) Do I know how my methodology will perform in different kinds of markets?
7) Do I know what kind of market we are currently in now and what to expect from my methods in such a market? Should I be trading these markets?
8) Do I trade with exact exit points that are preplanned for every trade (position) I take?
9) Have I developed specific objectives for my trading/investing?
10) Do I understand that I achieve my objectives through a POSITION SIZING METHOD? Have I developed a specific position sizing method to meet my objectives?
11) Do I truly understand the importance of all the questions mentioned above?
12) Do I understand that I create my own trading/investment results through my thoughts and beliefs?
13) Do I accept full responsibility for that creation?
14) Do I regularly work on myself to make sure that I follow the very important points (questions) above? (more…)