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if it is a valid setup with your rules and it gos to your pre determined stop and takes you out then that is a great trade.
if imediatly after that it provides you with another setup that is again to your rules although in the opposite direction and you take it straight away then that is a great trade regardless of the fact it works out or not.
My point was that if you approach each trade as a great trade, regardless of its success or not you cant fail. the best way to do this is not to put yourself into the trade buy saying i believe it will go this way as my system says so.
just say, this is a valid setup and i have taken it with a predetermied risk therfore whichever way it gos its a great trade.
Exactly right, I believe the same thing. Stop focusing on predicting where market will go or what market will do next, instead take all that energy and focus it on mental discipline and good money management.
I think traders mainly lose because of lack of consistency, which even they will readily admit is due to their lack of discipline. Traders also lose when they make poor money management decisions, like trying to make a winning trade pay for the last two losing ones. This is the crap you cannot do if you are going to be a long-term profitable trader.
Worth repeating I agree completely. The reason a lot of traders take bigger losses than they want, and then turn around and realize they just missed a perfect opportunity the other direction (reverse) is usually directly tied to getting to emotionally connected with your trade.
It's been said before, but once someone buys something, they believe its value is now higher than it was before. Someone that buys a baseball card is probably unwilling to turn around and sell it at a loss a few minutes later. They believe that it should be worth MORE than what they paid, not less. It's human nature. For it to be worth less, you would have had to buy it at a bad price. And it's hard to come to grips with that.
Trading exercises these brain muscles a lot You have to remain unattached to each individual trade, you need to not have a bias that the market will or will not do something. I prefer to look at it like this: I have a set of conditions that IF the market does something, then I will do something too. But there is an important key word here, "if", not when. When presupposes that it WILL. If just says, well... if!
I think it's an important distinction.
Mark Douglas talks a lot about having a positive attitude in his Trading in the Zone book. He states that happy people that trade do not try to be happy, they simply are happy. He also says that about consistency. Consistent traders do not try to be consistent, they are consistent. Important distinction.
Like rassi said, if you approach each trade as a great trade, with a positive attitude, and just focus on clearing your mind of any bias and instead focus on looking at the charts -- what does price tell you? and then just follow your trading plan. Do this for each trade. When you have a loser, so be it. Next. No big deal.
Experiencing a losing trade is like experiencing a bad french fry. In this box of dozens of french fries, one of them is maybe burnt to a crisp and not so tasty. Do you completely lose control when you eat this fry? Do you throw your plan for using a napkin and not smearing food all over your face out the window? (analogous of discarding a trading plan)? No! You don't start throwing food, you don't start smearing food in your face. It's no big deal! Next french fry! To a successful trader, it's the same exact thing with a bad trade. A successful trader knows a bad french fry is nothing to get upset about and simply eats the rest of the fries and goes "yumm". A losing trader lets that bad fry screw with his head, and goes hungry.
What a great post Mike, emotional attachment, thats a big deal for all traders and thats what i loved about marks book, that trading is just a statistical game and when you break it down like that you can help to remove the emotions.
There are certain times when you can have a better than chance idea of where the market will go and where it will stop, that is without doubt. Some setups have an 80-87% chance of moving in a certain direction (which are the setups I normally use).
One time when it is very hard to tell what will happen, is in the very short term, which is why you need to take the heat that the market throws at you. The market will always want to pick you up and shake the change out of your pockets (and the notes too) and by running stops that are too tight or not taking the heat you are donating money to others. Targets and stops need to be placed at appropriate levels, every setup is different and the stops and targets need to be optimal for that trade. Mechanical targets and stops are not optimal.
My trades often go negative several times during the trade, but I have a stop placed appropriately and likewise a target, I know the odds of the trade working, so I simply sit back and relax.
Keep in mind this can also not be true. While no money management system can make a system with negative exception into a winning system, you can quite easily take a system with positive expectation and turn it into a loser by over leveraging and not being able to survive a random losing streak.
Here is a trade I bailed on last night that fits some of the above discussion.
Took a calculated risk that the trendline would be tested, shorted. Decided if it did not go my way immediately I would bail & wait to see if a sell-off reversed.
Wish I could say I made the next, but many times better trade, as life takes priority over trading 24/5.5.
R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
I used to have a hard time taking stops when I thought that the market would setup up a trade in the same direction sometime in the near future. This would happen in strong trends when anything countertrend looked like a desperate ploy. So I enter with trend and the trade goes against me more than I like. At this point it's easy to start thinking things like 'this is a strong trend, I entered with trend, EVENTUALLY the trade will go my way.' Those EVENTUALLYS can be fatal. The market doesn't have to do anything. In a trending market sometimes it's best to take a small stop and look for the next chance to jump on board. But if this is going to work you have to be just as disciplined abouit re-entering as you were in taking the small loss.
Well if you have you stops placed in a strategic place, then you let them get hit and if that happens it happens. Moving the stops out more and more can hurt, thats for sure.(moving them too tight can also hurt you) I remember doing that when I first started trading.
You should setup the stop and once the stop is placed, then don't touch it, except perhaps to move it from a stop loss to a stop target if the trade is a few points in, but even that can get you knocked out early if you have it too tight.
I agree completely. The reason a lot of traders take bigger losses than they want, and then turn around and realize they just missed a perfect opportunity the other direction (
