Anxiety is a future oriented emotion. You never will get anxious about events that have already occurred. Suppose we had been anxious about a trade but now it’s over with profit hit or stopped out. We no longer feel anxiety – only feel nothing, or satisfaction, or remorse, or disappointment, or sorrow, or some other past oriented emotion.
Anxiety communicate a message that there’s something in our future for which we need to prepare. This is a vital, a self-protection message. (more…)
If you have ever played poker, you will know the high of going “all in”. Your heart is racing like there’s no tomorrow, and you are hoping and praying that the cards will go your way. It’s the thrill of knowing you can double your money in a few moments and also knowing it can all disappear if things don’t go your way.
This type of excitement should not exist in any form in your trading. If you are a thrill seeker, go skydiving. If you are a gambler, go to a casino. If you are afraid to lose money, open a savings account.
Successful Day traders do not let their emotions interfere with their trading. Too often, we let fear, greed, or pride get in the way.
Fear
Fear will prevent you from making the right trades and make you lose out on immense opportunities. Fear stems from lack of knowledge and proper education. You are afraid because you can’t see that a trade is the right trade since you don’t know what the right trade looks like. Once you acquire the knowledge and training, you can begin to trust your decisions because they are based on facts and not emotion.
Greed
Greed is another emotion we must overcome to be successful. Many beginners experience “beginners luck”, and come out on top on their first few trades. Then they start believing that they should have traded with more money so their profits will be larger. So on the next trade, they trade with a large sum of money and they lose it all. Logic will dictate that they should trade with a smaller amount the next time around since they have less capital now. Unfortunately, humans are not logical creatures. Our greed takes over, and we start believing that if we put in more money, we will make up for the lost amount, and come out on top. Sadly, this cycle can only continue until you are completely out of money. The worst thing that can happen to a beginner trader is to have a successful first trade. (more…)
1. Don’t trust the opinions of market gurus. Remember that it’s your money at stake, not theirs. Listen to what they say, then step back and do your own homework.
2. Don’t believe in a company. Trading isn’t investing, so you need to focus on the price action and forget the balance sheets. Leave the American Dream to Warren Buffett.
3. Don’t break your entry and exit rules. You made them for bad trades, just like the one you’re stuck in right now.
4. Don’t try to get even. This isn’t a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.
5. Don’t trade over your head. If your last name isn’t Kass or Cramer, stop trading like them. Just concentrate on playing the game well, and stop thinking about making money.
6. Don’t seek the Holy Grail. There is no secret trading formula, other than good position choice and solid risk management. So why are you looking for it?
7. Don’t forget your discipline. Anyone can learn the basics of the trading game. Sadly, most of us will fail because of a lack of self-control, not a lack of knowledge.
8. Don’t chase the crowd. Tune out the groupthink and dance to the beat of your own drummer. Get out of the chat rooms and off the stock boards. This is serious business.
9. Don’t trade the obvious. Everyone sees the most perfect-looking patterns, which is why they set up the most painful losses. Simply stated, if it looks too good to be true, it probably is.
10. Don’t ignore the warning signs. Big losses rarely come without warning. Don’t wait for a lifeboat before you abandon a sinking ship.
11. Don’t count your chickens. That delicious profit isn’t yours until you close out the trade. Trail stops, take blind exits and do everything possible to get that money into your pocket.
12. Don’t forget the plan. Remember the reasons you took a trade in the first place, and don’t get blinded by greed or fear when the position finally starts to move.
13. Don’t have a paycheck mentality. You don’t need to get paid every week or every month, as long as you take advantage of the opportunities as they come. Classic wisdom: traders book 80% of their profits on just 20% of the days the market is open for business. (more…)
