Tuning Up a Trading Mind !!!!

[rakamath]

excellent post. pl keep it up

 

[rkkarnani]

This is the FOURTH and final installment of your 4-part:
'Tuning up your Trading Mind'
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REMEMBER :
When you fail to plan in trading, you are planning to fail!!
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In this PART is covered the biggest operational reasons traders fail to reach their trading objectives.
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Reason #1: Lack of a clear cut Trading Plan
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Along with under-capitalization this probably ranks as the #1 reason traders fail. Beginners (and some more experienced) traders will frequently be swayed by intraday news and price action.

They may have started the day with a clear plan for the day, but when the bell rings and the market starts they lose focus and become mesmerized by the next tick as the price action unfolds, alternately looking to buy or sell every couple of ticks/minutes and getting whipped all over the place.

A trading plan should give one criteria to measure trend against and determine a direction to trade. Once the direction has been decided the picture is significantly clearer as one side of the market has been taken out of consideration and one is free to focus on locating low risk opportunities to enter in the direction of the trend.

The plan should address such things as:
- Criteria for Trend determination
- Criteria for recognizing Entry opportunities
- Risk Management / Stop placement
- Trade Management (i.e. how to determine when a trade isn't working)
- Profit objectives
- Exit strategies

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Reason #2: Overtrading - Trading round the clock
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The aforementioned lack of a trading plan coupled with today's lightning fast executions available through electronic trading as well as the extended opening hours for electronic trading get a number of traders in trouble. (In India we have traders switching from Stock to Commodities, bullion etc.)
When they see all the price movement and translate it into dollar terms it is very easy to become impatient waiting for good trading opportunities.

One may get caught up in the minute to minute fluctuations to the point where he loses sight of the overall picture and starts buying and selling every couple of minutes (seconds even) to grab a couple of ticks, just because the trading software is so responsive and the fills so fast that he thinks he can get away with it.

We are so used to getting paid for our time in the real world that it is difficult to sit in front of the screen patiently waiting for a trading
opportunity (that may or may not present itself for another hour or two).

Seeing all this fluctuation the trader is tempted to "hurry up and make some money" and take a couple of quick trades to get paid for his time while waiting for the next trade that qualifies under his trading plan, however illogical that may sound.

Clearly, if the trader knew this type of trading to be profitable, based on his research, he would have incorporated it into his trading plan.

The very fact that it is not part of the plan should eliminate such trades from consideration, but it is easy to get bored and impatient and hard to resist forcing things when the next trade is but a mouseclick away.

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Conclusion
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This fourth installment focuses on the single biggest reason (aside from under-capitalization) traders fail to reach their objectives in trading - a lack of a trading plan (and/or poor discipline in following their plan).

It may sound cliche, but it is true that the patience to wait for proper setups and the discipline to act on them when they occur is the hallmark of a good trader.
When there is nothing to do under your trading plan, that's what you do - NOTHING!
If you need more excitement in your life try bungee- jumping, sky-diving or other similar pursuits to spice it up.

Don't look for excitement or to alleviate boredom in the marketplace, it is no place for that and will quickly eat up your capital if you try.

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A Summary of 4 Parts together
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Throughout these 4 parts we've talked about several mistakes, misconceptions and damaging beliefs held by a surprising number of traders that affect their daily performance.

Some are easily avoided, once they have been brought to the trader's attention ,while others must be constantly guarded against as they are easy traps to fall into.

Any time you find your trading results deteriorate you may wish to re-visit the points we have brought up and check your recent behavior against them - you may well find that you have inadvertently slipped into bad habits.

These points are but some of the major concerns one should address with
himself. Trading is not just about picking good entries or 'timing the market'.

You have to have a structure and framework to read/analyze the price action and combine that with a coherent comprehensive trading strategy that allows for the element of chance.

Remember to place those stops!

 

[uasish]

Good article ,infact saw an article of Saint on Trading Plan ,to day morn itself.(Yesterday's episode highlighted the need of a trading plan more emphatically.With my personal plan i missed an oppurtunity yesterday.)

 

[beginner_av]

rk added reps...problem is that even a professor can utter these generalizations. take for instance trend determination. the real challenge of the trader is "accurate implementation"

 

[CreditViolet]

take for instance trend determination. the real challenge of the trader is "accurate implementation"

Correctamundo.