3 Focal Points to Manage Emotions
1. Earlier this week, we discussed how key the concept of uncertainty is to our trading success . This belief that anything can happen at any time should allow us to be flexible on a mental level so that we’re willing to exit a trade with mounting evidence. From the start of your trading career, you should be able to avoid holding onto to any ‘Enron trades’ that can wipe a trading career off the map because you’re looking for new data that causes you to exit the trade."
2. Trade size is something that is more paramount to overall trading success than many new traders realize. Most new traders will run out to find and buy the hottest system on the market, which was likely optimized and back tested in market conditions that aren’t present and won’t perform close to their intended results. Here is a quote from a famous trader, Larry Williams that many admire after his great trading book, How I Made One Million Dollars…Last Year…Trading Commodities, hit the shelves in 1979 that discusses trade size:
“Thus, what we need to do is under-bet our system or approach. Do not put as much money behind the system as the numbers from the past suggest you can. For most of us a 5% risk factor is all that’s needed to do rather well in this business…Under-trade, under-bet and you will be overwhelmed with your results...”
-Larry R. Williams
3. Lastly, a focus on exiting strategies over entries will give you a healthier view of the market. Many traders use candlesticks or an overbought / oversold reading on the Relative Strength Index (RSI) to get out of a move. The key point is that when traders focus only on the entry, they’re often likely to hold onto a losing trade until it breaks even and that is often the death-nail of a trader’s career that we heartily recommend you to avoid.
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1. Earlier this week, we discussed how key the concept of uncertainty is to our trading success . This belief that anything can happen at any time should allow us to be flexible on a mental level so that we’re willing to exit a trade with mounting evidence. From the start of your trading career, you should be able to avoid holding onto to any ‘Enron trades’ that can wipe a trading career off the map because you’re looking for new data that causes you to exit the trade."
2. Trade size is something that is more paramount to overall trading success than many new traders realize. Most new traders will run out to find and buy the hottest system on the market, which was likely optimized and back tested in market conditions that aren’t present and won’t perform close to their intended results. Here is a quote from a famous trader, Larry Williams that many admire after his great trading book, How I Made One Million Dollars…Last Year…Trading Commodities, hit the shelves in 1979 that discusses trade size:
“Thus, what we need to do is under-bet our system or approach. Do not put as much money behind the system as the numbers from the past suggest you can. For most of us a 5% risk factor is all that’s needed to do rather well in this business…Under-trade, under-bet and you will be overwhelmed with your results...”
-Larry R. Williams
3. Lastly, a focus on exiting strategies over entries will give you a healthier view of the market. Many traders use candlesticks or an overbought / oversold reading on the Relative Strength Index (RSI) to get out of a move. The key point is that when traders focus only on the entry, they’re often likely to hold onto a losing trade until it breaks even and that is often the death-nail of a trader’s career that we heartily recommend you to avoid.
Read full articles
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