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The Journey Of A New Trader: Clashing Thoughts

When you are trading there will always be multiple feelings and thoughts going through your mind. Some will interfere with your trading and others will compliment your trading. I will share with you some thoughts that I have experienced and how you can control them so they are not detrimental to your trading.

 

In the case of being on a winning streak, where you have made a few good trades in a row, could lead to you developing an ego that takes over your thought processes. Let’s assume you have been following a strategy for a while and you are now comfortable with the system. You have made some profits and you are winning more than you are losing. The biggest mistake you can make is entering trades “just before it triggers”. This is you thinking you can make a few extra points by entering a few candles before a trigger because you think its heading there anyway. If the market does not give you the means to enter, you are entering because you think you know what you are doing and not because you actually know what you are doing. This is greed.

 

To fight your winning ego which we all get, you must practice being patient. Wait for real triggers and stay confident in the strategy. Always watch the market instead of your money. When you watch your money, you are being greedy because you want to see it grow. If you want to see growth look at your bank account at the end of the week rather. During trades you must maintain focus on the market so you can make better decisions. Decisions made when you look at your profits moving up and down during a trade, are decisions made based on greed and fear. You may think the strategy is failing but actually you are being impatient and you are not waiting for the market to move.

 

In trading, just about every trade will go negative before it goes positive and often it is negative longer than it is positive. This is why position size combined with a calculated stop loss is important. Your profit goal for any trade must always feel like it is worth the risk you are putting in. You cannot risk R100 to make R50. Try to always keep risk to reward as 1:1 and learn to hold winning trades. Take your small losses and ride the winners so they engulf your losses. Three to five small losing trades can be made back in one or two winning trades if you make the right decisions.

 

Here are examples of right decisions:

 

  • 1:1 stop loss ratio
  • Risking less than 2% of your account per trade
  • Staying in trades until hits stop or target
  • Self-awareness of why you entered the trade
  • Not entering if you are doubtful
  • Not entering if you feel overconfident
  • Entering at the bottom of down trends (low risk high reward)
  • Remaining confident in the strategy during losing trades
  • Choosing a time of the day to trade (Trading all day is tiring)
  • Rest days after bad days or really good days (Days where you are more profitable    than usual)
  • Stop trading when you reach daily or weekly targets (Prevents greedy trading)
  • Holding winning trades/exit losing trades

It is important to understand that holding losing trades feeds your ego because you are holding for the sole purpose of winning that trade so you can be right. If you are holding 100s of points to make 20 or 30 you are willing to risk your account just so you can be right and that is pure ego. Accepting losses saves capital.

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