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!” (more…)
