people don’t make money trading, today I’ll highlight one of them… quite simply I consider it,

Not internalizing the basic rules

First off, let me tell you what the basic rules are:

1. Let your profits run.
2. Cut your losses short.

You may have heard of these rules before… you may even be tired of hearing them. But it’s one thing to intellectually know these rules, it’s another thing to understand them at a gut level.

For me, day trading really put these rules into focus because I found that by trading short-term every day I had at least a couple dozen trading opportunities and I quickly learned that if one wasn’t good I should get out of that trade immediately and start looking for a better one. This fast paced environment forced me to never fall in love with a trade.

When you are position trading, or possibly even swing trading, you may not have as many opportunities compressed into such a short time frame.

That’s why I usually advise new traders to really get their feet wet by paper trading on a very short-term basis. Because even though you may not intend to trade short term what you really are trying to do is internalize the importance of letting your profits run and cutting your losses, and nothing does that as well as actually experiencing it for yourself.

A lot of people are missing the point in paper trading. I think most people focus on the mechanics of trading, specifically how their entries are triggered, how their exits are triggered, and figure that paper trading is solely for the reason of insuring the strategy works, and insuring that they can trade the strategy.

While do I agree that is important I believe it’s even more important to use that avenue to develop a gut grasp of letting your profits run and cutting your losses short, because once you truly absorb that point, then your trading will follow from that principle and your strategy will be a secondary factor.

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This is a common question that I get and it’s a very tough one to answer because in my personal experience, just about any trading system has something to glean from it.

That’s right… I truly believe you can learn something from both good and bad trading systems…

I know that might sound a little bit strange but if you really think about it, a good trading system will give you ideas you can use and a bad trading system will give you ideas of what not to do… and taking it a step further many times you may actually be able to turn it around and transform a “bad idea” into a good one by looking at it from the opposite side.

But what makes a good or bad idea?

I think a trading strategy is really a personalized concept… a strategy that person A can apply, may be a strategy that person B cannot apply. And person B will look at the strategy and say it’s a bad one, whereas person A will look at it and say it’s a good one.

That’s one of the filters you have to overcome, Strategies are not inherently good or bad. (Unless by design they cannot be profitable in the long run.)

The key is to either:

Match your trading strategy to your personal makeup.
Or
Massage your personal makeup to match your strategy.

Both approaches take time - but the effort is worth it.

Continued Success!
Ray

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(This is the second part of the previous article on trading & discipline…)

When I started trading the concept of discipline was always a key element in many of the books and courses that I came across.

What strikes me about discipline is the fact that its often referred to as something that has to be forced or its something unnatural. I consider that quite interesting because, if you really think about it there’s a reason why getting yourself to do something that is unnatural is uncomfortable…

You’re trying to protect yourself

That’s the long and short of it. Your subconscious is alerting you to a potential danger via your feelings.

That’s why I don’t believe you should try and force yourself do things that feel unnatural, but instead look into how to resolve that unnatural feeling… and that’s really the secret.

Trying to overcome your subconscious with sheer willpower is next to impossible. That’s why if you’ve ever been on a diet or know someone who’s been on a diet, you’d know that trying to force yourself to do something often ends up in failure.

In other words if your strategy is designed to take quick small losses, but you can’t seem to get yourself to actually execute it, you have to get into the reason behind why you aren’t able to execute as per your plan. Only by getting behind the source of your actions will you be able to “reprogram” your responses, and naturally do what you want to do.

While there are many psychological tools and techniques available, one of the best I’ve found and personally continue to use is called Cybernetic Transposition. The amazing thing is its not even geared to trading but is an overall technique for achieving just about anything.

Click here if you’d like to learn more about it.

Ray

P.S. When you get to the website, don’t be turned off by the title of the book… its VERY over the top, but the content is top notch.

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Do you trade with a specific daily plan or do you emotionally trade? Traders that experience the most success have specific fundamental disciplines that they follow each and every day. If you want to achieve results that are comparable to the best traders out there, follow these specific steps:

Trade with a Plan not on Emotion

A classic trading mistake is to make trading decisions based on emotion, causing you to buy or sell at the wrong times. Trading is considered an aggressive investment strategy but to mitigate some of this risk, outline your ideal trading choices and then implement those choices consistently to achieve the best overall results.

Use Trading Tools

To become a superior trader, you will need to leverage trading tools. With technology constantly expanding, there are a variety of tools that will help you achieve revenues within your daily trading. Some ideas to help you trade are:

• Gaining access to your investment company’s trading.
• Review financial daily news with both online and print subscriptions.
• Use trading software for technical analysis of securities. Trading software can also help you to manage trends in the market and trends within your portfolio.

Use Stop Losses

In trading, stop losses can be a powerful trading discipline to leverage. The concept uses trading tools to limit your loses either on a specific day or with a specific security. If you are trading on margin, stop losses are even more important to leverage to help manage your trading risks. Overall, this is another tool in your arsenal of tools designed to help you experience more trading success.

Top traders leverage a variety of tools to achieve their successes, treating trading as if it is a full time job. No matter which combination of trading tools you personally leverage, the most important thing is to establish a discipline that you consistently implement in order to achieve your overall desired results.

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