Although I know Iīm still learning and at the beginning (trading for about 1 year and a half), I know any trader should live with the following problem. I am refering to situations one should have enter a trade and didnīt.
Today, I traded for about 3 hours. In a scenario of 7 entries buy/sell signals, I was right 5 times regarding the way I judge the situation and wrong 2 times. However, I didnīt enter the trade because of fear that the market would go against me.
I suspect that the fact of intending to trade more contracts than usual increased my anxiety and somehow insecurity.
By my calculations, according to my plan, I would have made about 730. Iīll have to digest this situation once again and to learn to accept better the ones Iīll have in the future.
The whole purpose of the market is to accept the risk of others, e.g. grain traders accept the risk of farmers and processors. As a trader I have to be comfortable (absolutely, totally comfortable) with the amount of trading capital I put at risk on each trade. I also have a (X) US Dollar amount I am absolutely, totally comfortable with losing each day. I hate losing as much as the next guy but I know if I stay within these limits without question I can return to trade another day. These risk management rules I impose on myself allow me to "trade the market not the money." It's been said on this forum many times but I'll repeat, if my DAILY loss limit is 50 ticks I can take 10 trades with a 5tic stop, 5 trades with a 10tic stop, 2 trades with a 25tic stop or 1 trade with a 50tic stop. Reading the market and "knowing" when to risk "what" is of course very important. Entering emotional driven trades with any amount of trading capital is definitely a NO,NO.
When I get a buy signal, I believe the market will go up. When I get a sell signal, I believe the market will go down. If I trust my analysis and enter either a long or short position, in reality I'm putting my trading capital at risk on a belief I have about the future of price movement. I also have a belief about where and/or when to exit my trade. I have a "general rule" about the market I trade, that is, take profits "going to" a whole number not "going through" a whole number. This is nothing more than a belief I have that price often struggles at these levels and often retraces a bit (giving back paper profit).
Conversely, before entering a trade I hold a belief that if price movement moves in the other direction and reaches (X) price level this will signify my analysis is flawed. If this (X) price level is reached I must close my trade for a loss.
So it would appear by reading the above my trading is based on beliefs, I agree. But there's another concept to consider, behavior. If my behavior is not inline with my beliefs, my trading success will suffer greatly. If I don't enter the trade when my signal appears I may miss a good portion of the trade or the entire trade. If price hits my target and stalls and I don't take profits according to my (pretrade) analysis and begin to dream about a continuation, my behavior is not inline with my belief. Most importantly is my behavior when price approaches my stop. The more I focused on my behavior and aligned my actions with my beliefs my trading results were enhanced, maybe it will work for you.
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I agree! The most harsh to accept is that, about a week ago, Light Crude was in the $106 zone. My analysis told me I should sell short. Well, I didnīt, once again for the same reason. As all we know, oil fell to $97. I usually trade 3 contracts. So, once again I didnīt make a lot of money...!
I know what my problem is. I intend to trade more contracts than I should. Pure greed, but the same greed leads to anxiety and fear of a possible loss.
I usually trade 3 contracts (Light Crude and Dow Jones Index). My stop loss is set at a maximum of 2% of my trading acount.
So, for Dow Jones, my stop loss can reach 40 points, if I trade 3 contracts. The same for Light Crude.
Yesterday, I decided to trade...15 DJI contracts. My stop loss would be just 8 points. So, somehow I got anxious thinking the market could eventually hit my stop easily. So I did not enter the trade.
Iīll have to follow my rules!
Last edited by Lord Sidious; May 9th, 2012 at 07:28 AM.