Archives of “personal issues” tag

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Emotion, Stress & Trading

  
  Education
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I was recently asked by a member to share my thoughts on how I manage the high stress levels and how you keep emotion out of the mix. I will get to the the stress handling in a second, but let me start by addressing “keeping emotion” out of it.

While many traders say they can keep emotion out of their trading, I believe when it comes right down to it they’re being disingenuous. Unless those same traders really employ a completely robotic trading system which requires absolutely no supervision or control, that simply cannot be true. This is one of those things that I’ve seen many traders say to impress others, but in reality it just isn’t possible or even realistic.

When you have real money on the line and have also invested your own time and energy beyond that, emotion will play a significant role in every decision. After all, none of us are trading robots! We all have feelings and egos and therefore our trading and investment decisions will be impacted from those even in subtle ways that you may not even realize. The key is to learn how to use those emotions to your advantage. For some of you, trading completely contrary to your logical fears is an excellent way to make big money in the markets. Just look at all of the people who went short hoping for Hindenberg Omen type crash in August and who’ve been fighting it every step of the way!

As far as coping with stress, we all have to develop our own methods. But, this is what I’ve learned over time. For me, stress comes primarily from three things:

  1. Not having a plan and being out of position in a challenging market

  2. From not staying on top of my work and not sticking to my rigorous routine (usually from unforeseen events like technology issues or personal issues that all of us experience from time to time)

  3. Stress and pressure I place on myself in hitting my daily, weekly, and monthly goals especially when I’m not performing up to my expectations

So, how do I cope with these? Here are a few thoughts… (more…)

Two Steps to Consistent Profits

  
  Education
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tworules1. Work on yourself and your personal issues so that they don’t get in the way of your trading. This step must be accomplished first; otherwise, it would interfere with each of the other steps.

2. Thoroughly understand your objectives and develop a position sizing strategy to meet those objectives. Probably less than 10% of all traders and investors understand how important position sizing is to trading performance and even fewer understand that it is through position sizing that you meet your objectives.

Five Steps To Consistent Profits

  
  Education
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  1. Work on yourself and your personal issues so that they don’t get in the way of your trading. This step must be accomplished first; otherwise, it would interfere with each of the other steps.
  2. Develop a business plan as a working document to guide your trading. This business plan is not to raise money, which is the purpose of many business plans. Instead, it’s designed to be a continual work-in-progress to guide you throughout your trading career. The business plan actually helps you with all five of the steps. The plan also includes an overview of the big picture influencing the markets you will be trading and a method for keeping on top of those factors so that you will know when you are wrong.
  3. Develop several strategies that fit your view of the big picture and understand how each of these strategies will perform under various market types. The ultimate goal of this step is to develop something that will work well under every possible market condition. It’s actually not that hard to develop a good strategy for any particular market condition (including quiet, sideways). What’s difficult is to develop one strategy that works well under all market conditions—which is what most people attempt to do. (more…)
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