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Discipline is Key

  • Preparation
    • Mental – Think through risks, know in advance how to get out of the trade and at what point. Alcohol takes up to 24 hours to leave the blood system, so don’t consume alcohol from Sunday through Thursday.
    • Technical – Scan charts daily for opportunities.
    • Physical – Do exercise to release tension in a positive way
  • Execution
    • Control risks – cut losers
    • Follow the trading plan
    • Hold winners
      • Ask yourself the following questions:
      • Has the market changed since I placed the trade?
      • Is the original pattern still valid?
      • Has anything occurred that causes the original position to be suspect?
      • Has the initial price objective been reached?
      • Can I afford to take the risk on this trade?
      • If yes, stay in the trade.

Embracing the Fear of Losing Money

  • FEAR = False Evidence Appearing Real. Almost all fears never materialize.
  • When facing these fears, and we must face them, it might be good to ask the question “what is the worst thing that could happen?” If the pain in the answer to this question is too much to bear then simply exit the trade.
  • The main reason traders’ exit their losers is that the pain of losing one more dollar becomes almost unbearable. All of this pain could be eliminated by using a trading plan and learning to think in probabilities — nothing is certain.
  • Ask yourself what is the worst possible thing that could go wrong with the trade and what would be the best possible outcome that could happen with the trade? Somewhere in between these two extremes is the logical outcome.
  • Differentiate between rational and irrational fear. If it isn’t life threatening, it is probably irrational fear.Investor fear hits trading business at Close Brothers

Get Your Confidence From Good Trade Management

  • How to Set Up Your Trading ScreensI believe many traders believe that if they just have a string of winners, that will give them the confidence they need to forge ahead. Can there be confidence on the losing side of trading?
  • After many ups and downs with “confidence” I finally learned that my true confidence comes not with my winning trades but in my ability to control the losers and manage my trades.
  • I noticed a consistent positive attitude that was associated and linked with how I was handling my losses! I started to feel good about how I would take a loss.
  • There was an immediate down emotional feeling if I experienced a larger loss than necessary or exceeded a maximum daily loss. So that led me to change the behavior that led to that feeling that I didn’t like.
  • I cannot control the markets, but I can sure control my trades, i.e. entries, exits, stops, how much I trade during the day, how many positions at one time, etc.