ignore your trading goal
Post on 18-Jul-2015
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Ignore Your Trading Goal http://www.netpicks.com/ignore-trading-goal/
In the trading world, it's usually not the actual activity of placing a trade that is the
problem. That's the easy part.
The hard part is when you are on the path to placing trades that have an
actual edge and you can do it consistently keeping in mind risk parameters and in line with your
ultimate trading goal.
Every day, someone new to this business opens up a trading account and begins the long and slow path to
profits.
Perhaps they've had coaching, bought a trading system or had some other type of exposure to this business.
They envision the success their "mentor", trading forum participants, Instagram user, and anybody else that places a trade has had and they seek
to emulate.
It seems easy. Many people have told them that trading is "easy" and may have shown them the results of their
trading success.
If you were to scan Twitter or Instagram, there is no shortage of
those claiming thousands of dollars per day in winnings. There's no
shortage of those posting trips, cars, dinners, and anything else that shows the world the success they have had.
Armed with that vision, new traders trot down the path and every turn offers them a different challenge such as: Stopped out right after trade entry/revenge trades Risked too much on the loser Risked too little on the winner
This is not the results they have pictured vividly in their minds. The
actual reality of the goal looks nothing like what drove them to attempt the
challenge in the first place.
I recently read a great blog post by James Clear that had prompted me to write this
blog post in relation to trading.
It's not a new topic for me but it never gets old!
http://jamesclear.com/treasure-hunt
James says to "set your compass and start walking" towards your treasure. Commit to the goal and then "release
the desire to achieve a particular outcome and focus instead on the slow
march forward".
Let's be honest with ourselves…most people never actually commit to much in their lives. In terms of trading, what
does that mean?
It means seeing your "treasure" as a consistently profitable trader and then to tackle each problem/celebrate each
success that you find on the path.
Let's assume you have purchased a trading system and after studying the material, you put it into practice. Your path may include back testing, forward
testing, and learning to execute without hesitation. During your
travels on the road to consistently profitable, you encounter:
1. Revenge trading. After taking a loss in the random series of
wins/losses, you toss the rules out the window and jump into a big green
candle. Your "treasure" remains the same however you seek out ways you
may eliminate this type of rule breaking.
Perhaps after a series of day-trading losses, you get away from your trading
desk and head outside. You do anything to interrupt your current state.the one that prompts you to
revenge trade.
2. Twist on your trading method. You've been reading trading forums
(never a good idea) and have seen the "power" of using X moving average for
confirmation of a move.
The moment you use this average, you are no longer trading the system
you have tested and proven to yourself actually has an edge.
You remind yourself that there is no secret in trading and that you have done some in depth work on your
trading system and the numbers show it's a good system. You commit to
staying away from forums and remove yourself from the mailing lists of the
obvious marketers.
3. You ignored risk parameters. During a string of wins, you decided to increase your risk % but the next trade was a loser. You erased some healthy profits from previous winners because you forgot there is no guarantee that
the next trade will be a winner.
Realizing risk controls are paramount to ensure you stay solvent enough to reach your goal, you recommit to a
steady risk % regardless of your thoughts, win streak, losing streak, or
simply greed.
Think of "consistently profitable" as the goal and then figure out the exact
steps you need to get you there.
Do you just need a trading system or is more in-depth trade coaching and
education the better route for you?
There is no one size fits all standard but everyone can benefit from a
complete understanding of:
Method: Whatever your trading method is, you have to know it inside and out and be able to execute "on
demand". You have to test it until you have proven it has an edge and that you have enough faith in the system
that you don't second guess.
Psychology: There are some issues that we all have faced and some can still be challenging. There are some important biases that you should be
aware of (especially when system testing) so it does help to have the ear of experienced traders that can help
you adjust to these realities.
Risk: Without an understanding of risk and implementation of risk
management, trading success will remain out of reach. Risk does not just
mean percent risked on a trade as there are risk such as execution and gap risk you should be familiar with.
In the end, it's about choosing the outcome you desire and then setting yourself on the path that can lead to
that outcome. Driving a car to a destination is never a straight line but when you commit to the destination, you trust the route you have laid out
regardless of the turns you must make.
You travel the route, adjust, travel, adjust in a continual cycle and then,
without realizing it, you have arrived.
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