How do you build confidence? There are many ways but only one process: multiple small successes. I am very much an advocate for boring trading. What I mean by that is I trade the same edge over and over again without variation. By trading the same edge over and over again I know when to get in and when to get out. I know what to look for when a trade is working and I can safely add to my position. On the other hand, I know what to look for when the trade is not working and I can exit with a small loss. By following the rules EVERY TIME you can succeed, not in making money every time (impossible!), but by following the same plan every time. These small successes give you the confidence to trust yourself each and every time your edge presents itself. This is true in any new venture, whether it be golf, bowling, drawing, flying, etc. Each small success gives birth to greater confidence which in turn brings further successes. You can then replace a vicious circle of failure with a confident circle of success. It is so EASY to want the lottery ticket or the home run every time at bat but HARD to accept when the numbers do not add up or when all the preparation leads to nothing more than the hard earned single.
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Focus
The goal of a successful professional in any field is to reach his personal best. You need to concentrate on trading right. Each trade has to be handled like a surgical procedure – seriously, soberly, without sloppiness or shortcuts. This is a stock trading risk management plan. A loser cannot cut his losses quickly. When a trade starts going sour, he hopes and hangs on, and his loses pile up. And as soon as he gets out of a trade, the market comes roaring back.
- Trends reverse when they do because most losers are alike. They act on their gut feeling instead of using their heads. The emotions of people are similar, regardless of their cultural background or educational levels.
- Emotional traders go into risky gambles to avoid taking certain losses. It is human nature to take profits quickly and postpone taking losses. Emotional trading destroys those who lose. Good money management and timing techniques will keep you out of the hole. Losing traders look for a “sure thing”, hang on to hope, and irrationally avoid accepting small losses.
"If you don’t take a hard look at risk, it will take you.”
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Heads or Tails
“There is a random distribution between wins and losses for any given set of variables that defines an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like “right” and “wrong” or “win” and “lose” no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”
What chart study/studies do you use most often?
Like trading styles, the way a trader analyzes a chart can vary from trader to trader and so today we want to know what chart studies you rely on.*
Risk, fear and worry
They’re not the same.
Risk is all around us. When we encounter potential points of failure, we’re face to face with risk. And nothing courts risk more than art, the desire to do something for the first time–to make a difference.
Fear is a natural reaction to risk. While risk is real and external, fear exists only in our imagination. Fear is the workout we give ourselves imagining what will happen if things don’t work out.
And worry? Worry is the hard work of actively (and mentally) working against the fear. Worry is our effort to imagine every possible way to avoid the outcome that is causing us fear, and failing that, to survive the thing that we fear if it comes to fruition.
If you’ve persuaded yourself that risk is sufficient cause for fear, and that fear is sufficient cause for worry, you’re in for some long nights and soon you’ll abandon your art out of exhaustion. On the other hand, you can choose to see the three as completely separate phenomena, and realize that it’s possible to have risk (a good thing) without debilitating fear or its best friend, obsessive worry.
Separate first, eliminate false causation, then go ahead and do your best work.