Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word – expectation. If you expect to win all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war – not the battle.
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rssIt's not the trade, it's the battle.
Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word – expectation. 
If you expect to win all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war – not the battle.
THE 7 DEADLY SINS OF STOCK TRADING
In their book, Tools and Tactics For the Master Day Trader, Oliver Velez and Greg Capra, outline the 7 deadly sins of stock trading. Are you guilty of commiting any of the following?
1. Failing to Cut Losses Short: The most frequently committed error among traders. “We are of the school of thought that believes that traders’ most precious commodity is their original capital, and that they are doomed to utter failure if they do not do everything in their power to prevent its erosion” (91).
2. Dollar Counting: Focusing on how much a trade is up or down at any given moment can rob traders of profitable opportunities. “Once a trade is taken, traders must work to forget their profits…and focus on the proper technique” (94).
3. Switching Time Frames: This is the error of buying in one time frame and selling in another. The trader may buy in a longer term time frame, say the daily, but see a reversal on a 60 minute chart and sell. This is “nothing more than a rationalization to ignore stops” (96).
4. Needing To Know More: Everyday traders must face the fear of pulling the trigger. One of the symptoms of this fear is the need to know more but “the fact of the matter is that the brass ring goes to those who can act intelligently without the need to know more” (98).
5. Becoming Too Complacent: It is easy to become complacent when there has been a string of winners. “When a winning streak has fattened your purse, you must do everything in your power to keep your hard-earned gains and maintain the same intelligent mind-set that helped to produce those gains” (100).
6. Winning the Wrong Way: Many novice traders make money the wrong way and will eventually pay for it. Traders make money the wrong way by not adhering to a rule or a stop loss and end up making money anyway. This sets up a “taste of false success, and the market will eventually ensure that they give back this unearned profit sooner or later” (103). The next time a rule or a stop is ignored the losses will far outweigh the previous gains.
7. Rationalizing: This is a form of denial when in a losing trade. Honesty, real honesty, no matter how ugly the truth, will put you above most market players unable to summon such strength from within, preferring instead to be comfortable, blaming their losses on something or someone other than themselves” (106).
No matter which one of the seven deadly sins we have committed, we should ask ourselves the question: have we learned from them, asked for forgiveness, and are we ready to turn over a new leaf? The market is a great teacher if we will only listen and obey.
It's not the trade, it's the battle.
Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word – expectation. If you expect to win
all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war – not the battle.
Overcome Indecisive Trading- Take 5 Steps
Admit it. Face up to what it is. Call it a slump, call it shattered confidence, call it a big scary market monster. Whatever “it” is, you have to get it on the table so you can deal with it.
Seek help. Maybe you shouldn’t go it alone. Without some accountability, it’s easy to relapse. Find a mentor or some coaching to get you back on track, and add some skills to your repertoire. The fact of the matter is that left to your own abilities as they currently stand, you may very well be facing a similar situation again.
Take inventory. Take an inventory of what’s left of your capital, both in terms of cash and confidence. It may be that you simply don’t have enough left to consider a comeback right away, so perhaps you incubate for a while and prepare in other ways for your eventual return. Or perhaps you assess your situation and realize you have more than enough to start the process.
Get uncomfortably familiar with the cause. What was it that put you in need of recovery to begin with? Overconfidence? Lack of respect for the market? A series of small mistakes which compounded your problems? Understanding the root cause of your wounds, even if painful, will help you prevent it from happening again in the future. After all, you’ve already paid the tuition, you might as well get the lesson.
Get back in the saddle. The last step in the sequence is to return to trading and begin rebuilding. Start thinking about what that’s going to look like for you and how you’ll avoid the same pitfalls which got you this time around. Visualize yourself back in the routine again, making plays, staying disciplined, and having success.