Tuesday, July 14, 2009

Trading Is 99% Mental

Trading ruts are horrible. They mess with you mentally and make you 'feel' like you are a terrible trader and that there's no way out. How many of you felt like that? Show me someone who never felt that way and i'll show you a liar. no offense.
I have been trading fulltime for over 6 years now and i consider myself a 'professional trader' and i can tell you that I FEEL THAT WAY from time to time as well. Once you get these feelings of insecurity it is IMPERATIVE that you TAKE ACTION, positive action. Holding a position that isn't working longer and hoping it turns, removing the stop loss, drinking heavily is NOT positive action.
You need to seek 'help'. Seek help how? well, how about stop trading for 1-2 days and actually doing it? how about talking to someone else, another trader who knows and understands the ups and downs of trading? how about going for an intense gym workout?
Doing these things will NOT cure your problem but it is the beginning of the healing.

The more i trade the more i realize, that "over trading" is THE SINGLE BIGGEST downfall of traders. Over Trading clutters the mind after a loss. Traders do all sorts of IRRATIONAL stuff after a loss. The initial small loss snow balls and gains momentum against YOU. WHY? Simple, you allowed it to happen. Over trading ruins winning streaks and boy-o-boy does it dent holes in the account when you are managing a losing streak. Watch YOURSELF!

In trading you cannot control what the market will do and you cannot control whether a stock responds to your BUY SIGNAL or not. You cannot control unforeseen events or FED action and how the market is being manipulated(FYI: markets have always been and always will be manipulated by deeper pocketed traders). The only thing you can control is YOURSELF and how YOU will react to prices as they dance, tease, tempt, trend, reverse and chop in front of you. Your eyes and your mind will be the ultimate fate in the trade.

Here are some tips that might help which i have developed from years of trading battles:

1. Before each trade, write yourself an email and explain to yourself what you are seeing and if after 1-2 minutes of writing the email and you PRESS send, if the trade still makes sense to you, then take it. Make sure you know where the stop loss is and stick to it!

2. How about this cool tip: Try and watch the chart screen from across the room. Stand up, take 5-10 steps back and step very far away from the screen. Now, is that pattern you were looking at really a bull flag or choppy random noise? Was this stock really breaking out or was it a double top? step away from the screen and you'll "see it a little more clearly".

3. Do ONE trade per day. That's it, no more! ONLY ONE TRADE PER DAY!! That's it, ONLY ONE TRADE PER DAY!! Make this damn trade count and give this trade a personality and a character. Make it special. Does it have a good reasoning or a good story behind it. Is it a TRADE YOU WOULD BE PROUD OF???? Be 100% confident it'll work.

Remember In Trading: Less is ALWAYS More.

good luck.


Kyle said...

Great stuff man, thanks a lot. I'm there right now. It's really cool you posted that. I overtraded the last few days after a good week and then just couldn't make a trade work to save my life. I took today off to cool down, went for a run and back tomorrow. I want to be good at this really bad. I;ve only been trading for a few months. These ideas from you and other successful traders really help.


Matthew M said...

Well said....

Stewie said...

Treat trading like a game of chess. each trade(move) falls within a bigger picture battle plan of achieving check mate. make each trade(move) count!

Stewie said...

Kyle: ONE TRADE for you bud. trust me. only one. come back and tell me about it bro.

rain said...

I agree, we could learn technical and fundamental in month even a several week but psychological factors is diffrent things,we must change our behavior or point of view and that was the hardest part on trade.

I wish we could exchange link, thanks

David Blair said...

We definitely think the same way:

Blog Archive