1. “Between stimulus and response, lies our freedom to choose” – Steven Covey
This quote is very important. What it tells us as traders is that there should be a specific setup you’re looking for (a pattern of sorts) and then aspecific protocol that follows it. Too many traders just “wing it” when they are trading instead of having a specific setup and plan that they know works and they know what their risk/reward is. If you don’t know what you’re looking for and you don’t know exactly what you’re doing when you see it, you’re likely headed down the wrong path.
2. Stick to your plan.
It’s extremely easy to lose focus of what you’re doing and start doing what someone else is doing. Stick to your trading plan and what you know works.
3. Ignore the noise.
Noise comes in a variety of ways. At times it’s economics news, at times it’s other traders. It’s not uncommon for traders to seek what other traders think about their trades because they are unsure about their trade setups. Noise for many traders usually results in less profits and larger losses.
4. Be patient.
Anyone who is successful at anything has patience. Whether it’s an athlete, your favorite musician or successful entrepreneurs, they all have patience. You don’t become successful without having patience. Just as important it is to have a set plan and rules, patience is just as important. (more…)
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rssEmotions
Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts. Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.