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The Disciplined Trader: Developing Winning Attitudes by Mark Douglas Category : Psychology
Focus on the Trading - Not the Money
It takes a certain strength of character to trade successfully. One who can stay focused on the task at hand, and not be overly concerned with the outcome. You must simply enjoy trading for trading's sake, rather than be excessively interested in the money. Ask any successful actor, business person, athlete, etc. and they'll tell you they don't do it for the money.
But that's easier said than done. When every trade represents money made or lost, how does one go about focusing on the trade itself, rather than the bottom line?
Professionals do not sit and mentally calculate how much money they are making from moment to moment, so if you are doing this as a trader, you are focusing on the wrong thing.
Focus on Trading System - Instead of Money
Focus instead on your trading system or your technique.
1. How quickly do you recognize and respond to a trading signal?
You've decided when A, B, and C are lined up, you're going to take the trade. At the precise moment you see that the above criteria are in place, do you ...
Obviously in daytrading, the correct response is A. Hesitation is a luxury
you cannot afford if you are daytrading. If you discover you just cannot
overcome this hurdle, then look to a longer-term outlook, swing trading,
or position trading.
Anything except D is a waste of energy.
3. If you missed the above trade, and it turns out to be a loser, do you:
If you didn't follow your rules and it produced a winning trade, the
worst thing you can do is congratulate yourself for it. Why? It reinforces
your idea that you can trade on hunches or instinct, rather than with
a rule based trading system. Do this and you'll never be consistent in
following a trading system, and
Losing Trades are not Always Failed Trades
A losing trade is not necessarily a failed trade -- make that distinction right now. If you followed your trading plan, the trade went against you and you exited the losing trade quickly (as per your rules), then that trade was a successful trade.
If you didn't follow your system, whether you won or lost money, that is not a successful trade. Do not fall into the trap of being inconsistent. Consistency is the key to successful daytrading.
Likewise, adjusting your trading system continuously means you don't have a trading system.
Follow Your Trading System for Success
After your trade, judge your success on whether you followed your trading plan, not whether you made or lost money. Keep a log to make sure you do this for every trade, and make a simple hash mark or check to indicate you followed your rules.
You can do this on a piece of scratch paper. The point is to start focusing
on your rules, and whether you are following them. If you want to add
up your tally at the end of the trading day, that is fine, just don't
do it trade-by-trade.
Capture as much as you can of what you are really doing. Capture any self talk - that is especially important.
This is not an easy thing to do because most traders get so focused on
the trading itself, they forget to write down anything, let alone how
they were thinking. After a losing trade, they might be so busy flogging
themselves, they don't want to think about, much
If you have the discipline to daytrade, you have the discipline to become a better trader and this simple process will go a long way toward that end.
Consistency is Key to Trading Success
Once you have discovered some of your consistent patterns, then you'll have a roadmap of how to address those issues. You can work with a trading coach such as Kathryn, who specializes in working with daytraders, you can find someone locally that understands trading and uses rapid change methods such as NLP or EFT, or you can self teach by reading and studying trading psychology. The goal is discovering your core motivation and criteria for success. ~~
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