“Only execute the trade when the chart matches your plan,
if it doesn’t – no trade.” -
Gavin Knoesen
Intelligent speculation includes some salient aspects like
opening of trades, trade management, emotions control and strategy
optimization. There is no way around the fact that these salient aspects can
never be avoided by active traders, but our attitudes towards them can make a
big difference between good and bad trading habits. These are the questions
traders need to ask themselves often and often:
Did I open my trade according to my entry criteria?
It’s imperative that you open a trade according to strict
entry criteria. Trading discipline entails your refusal to trade a setup that
doesn’t match your entry criteria; no matter how attractive the setup is.
Trades shouldn’t be opened randomly. No matter what the news shows or how
attractive the markets are, we won’t open any trades until our setups appear.
You make mistakes only when you don’t follow your trading rules. A loss trade
isn’t a mistake, provided that you opened the trade according to your entry
rules. A trade that’s opened in violation of your entry rules is a mistake –
whether it results in profits or loss.
Did I follow my trade management plan when the trade was open? If not,
why?
This is one of the reasons why many traders find trading
difficult: they’re unable to stick to their trading plans after they enter the
market. A swing trader opens a trade and quickly closes it after about a 10-pip
gain, for the fear of a price reversal. An intraday trader decides to run a
negative position for several more days with, the hope that the price could
turn in her/his favor. These attitudes are bad. You need to know that once you
enter the market – irrespective of how great your signal is – trading becomes
managerial. It’s your trade management and exit techniques that’ll ultimately
determine your long-term success, and this has nothing to do with your trading
accuracy. When you’ve open positions, never forget to stick to your breakeven
rule (if any), trailing stop rule (if any), trading duration rule and exit
rules. Anyone who constantly violates her/his trading management rules needs
psychological help.
What was my reaction after the trade was closed?
If you traded flawlessly, the outcome didn’t matter. Sane
traders gauge their success by how flawlessly they execute their trades, not by
how much they make or lose. If the AUDJPY moves significantly in your favor, it
makes little difference than when it moves significantly against you. A significant movement in the market is a
significant movement. If the AUDJPY moves significantly against you, it makes
little difference than when it moves significantly in your favor. An adverse
movement has negligible effect on good risk managers; whereas a favorable
movement has satisfactory effect on their portfolios. Traders occasionally
sustain negativity but they don’t want to take responsibility for that, they
think they’ve been treated unfairly when the markets simply move without having
anyone in mind. We must take responsibility when we make a profit and when we
make a loss.
Is there any way I can optimize my trading strategy?
Permanently victorious traders use conservative trading
methods for long-term objectives. It doesn’t matter whether the methods are
boring or not. Anyone looking for thrill may try sky-diving or bungee jumping.
The real trading breakthrough has to do with finding a good setup rule and
trading it constantly. A negative expectancy system needs improvement, but a
positive expectancy system doesn’t need that. This doesn’t mean that the
positive expectancy system can’t have losing streaks. During a losing streak
which may be normally protracted, it’s sad that an average trade abandons a
good system when it’s on the brink of a winning streak. The newly found system
can either start losing or winning right away; only to later begin to
experience an opposite streak. You oughtn’t to be discouraged even if you
strategy is no longer interesting. Stick to it as long as it helps you make
money. And don’t forget that it’s possible to keep your account safe no matter
what the market does.
Conclusion: It’s
imperative that you stick to your winning strategy – even if it’s no longer
interesting. Your trading strategy mayn’t be interesting, but keep on using it
as long as it helps you obtain average winners that are bigger than average
losers over a long period of time.
“Many people hold trading in the same regard as gambling
but it is an unfair comparison. Trading is not gambling unless you are trading
blindly, randomly, without adhering
to a trading plan and completely ignoring any risk
management.” – Stuart McPhee
Source: www.tallinex.com
Eye-opening trading lessons: Lessons from Expert Traders
No comments:
Post a Comment