S&C Magazine Current Contents Q & A Aspects Of Trading HAVING A “FEELING”
HAVING A “FEELING”
- Details
- Parent Category: Q & A
- Category: Aspects Of Trading
- Written by Don Bright
I have a question for you about psychology. You have in the past referred to the psychological aspects of trading as being the most important part. Are you saying that all traders should become fully automated to guard against their own mental pitfalls? I often catch myself violating my own rules, even when I have a program to follow. Any suggestions?
— Jim Wells
Yes! Remember, “psychology” refers to everything you do, all day long. I’ve seen many traders simply turn off their programs when they had a “feeling.” I am a big fan of automation, all the more tools for traders, but I don’t necessarily encourage a hands-off approach, either.
There are so many factors to consider with each order entry, it makes sense to keep your eye on these factors and make some adjustments when necessary. But some basics apply. I’m going to share a few things I’ve heard from Cash Coyne, who has been a Bright trader, manager, and instructor for 15 years (and incidentally, that is his real name):
Time to pay attention! The right mindset will make you or break you as a trader:
10 CLASSIC RULES OF TRADING (11 FOR PROPRIETARY TRADERS)
- Let your winners run, cut your losers short.
- Don’t add to losing positions.
- Don’t fight the trend.
- Buy strength and sell weakness.
- Trade a style that suits your personality.
- Plan your trade and trade your plan.
- When the reason for entering a trade is no longer valid, get out.
- Keep a trade diary and review it daily, weekly, and monthly.
- Don’t chase a trade. Another one will be coming along soon enough.
- Be patient and wait for good trades.
- And for proprietary traders: Use your leverage wisely.
And here are my personal favorites. Read these, and tell me you haven’t said many of them to yourself over the years. Thanks to Jeff Foxworthy and again to Cash Coyne:
YOU MIGHT BE A LOSING TRADER IF YOU FIND YOURSELF SAYING:
- “It shouldn’t have gone against me like that!”
- “I couldn’t get out.”
- “I was planning to get out when I had a profit.”
- “I was hoping it went my way.”
- “But they have good news out.”
- “I’ve been meaning to write down my trading plan.”
- “I’m going to start logging my trades.”
- “Oh, I didn’t hear that news.”
- “I guess I just got stupid.”
And in all seriousness, develop enough confidence in yourself to trust your decisions and alter your thinking when you need to. Over the years I have been involved in some serious negotiations, both business and personal. Whenever I catch myself either getting mad or overreacting, I try to postpone the decision at least overnight. If you’re going to change your entire approach to the markets, then give yourself some time to do it right. If you’re changing your trading plan, try to keep the good stuff and just modify the things that don’t seem to be working. Remember the market is fluid, as your mindset should be — always adapt and modify as needed.
