The key to success is a trading plan and sticking to it in all times. So why it is so hard for traders to stick to the plan? Answer can be complex, but to put matters in simple way is it the emotion that get over the traders. Emotions are number one distraction in terms of sticking to trading plan, so dont underestimate them.
Can you take emotions out of trading? You cant. As long the action is lasting your heart is pumping and emotions are taking over. Emotional highs of trading is one of the reasons people are attracted to trading in the first place. You put the trade and you make money, you can imagine the rush flowing through you.
Focus on the price - focus on the price and what should you be doing with your trade around that price, not so much on how much you earned or lost.
Its not right vs wrong - market doesnt care if you were right or wrong, so dont get caught up in "i was right" and you still lost money. Dont take it personal if your trade was wrong, you are going to make mistakes. At the end its all about dollars.
Learn how to loose - you are going to lose, everybody loses. People who say they are right all the time are lying. Its about cutting the loses and letting profits run.Its all in money management.
Showing posts with label trading plan. Show all posts
Showing posts with label trading plan. Show all posts
Monday, August 23, 2010
Thursday, August 19, 2010
Trading plan
No matter which trading style fits you best you should have trading plan or you will mostly likely start losing money immediatly. Trading plan is a set of rules you have set for specified trade based on the analysis you have made. Its is important to follow rules of your trading plan if you wish to succedd.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
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