Day Trading Emotions

Mastering Day Trading Emotions Part 2

A little late in my follow up posting here but let me get right into it.

Mastering day trading emotions is probably one of the hardest aspects of trading. You need your full attentive active mind to be alert and in sync to the engine that drives your trading method. I last stated that you need a clear trading method and a trading plan to go with that method. The two are not the same and are very different, but you need both of them. The last thing you need the mind that drives both the method and the plan. In total you need three things in harmony to make any trading venture work long term. If you are missing any one of them, you will struggle more than you need to.

A trading method is the exact way you look to put on a trade and the way you take that trade off. It is the engine that drive the car, but the engine alone will not propel you down the freeway going 65 mph. You then need the frame of the car to hold you and the engine in place so it can do its work, and that is your personal trading plan. A personal trading plan is different for most traders as it is personal to you. Not every trader has the same objectives and that is why it needs to be personal to you.

Day Trading

Let me give you a few examples; What time of session will you trade, start and stop times or how much time will you allocate. Do you have a dollar target for the session or will you allow yourself to let the market determine what is available. How may trades per session will be ideal for and will you put a number limit to how many trades you take. How much of a loss are you willing to take before you stop trading in any one session. You may elect to trade until your fist loss and stop. If its your first trade, so be it. If you string 4 trades in a row, your plan can allow you to stop at any time or stop with your first small loss. You could state that you can add on to a wining trade in progress but not allow that trade to become a net loss and that will allow you to trade again, until your first net loss or any stopping at any time on top.

Above are all examples of what a personal trading plan is.  It needs to well thought out and written. It is not something I believe you could do in one day. I think a trader should take several days and think about all the different things that have come up before where a plan like this could have helped. It is not likely that could be done in one day. It takes work but it is absolutely what is needed to bring stability to your trading. Without it, is like driving in downtown San Francisco with no map or G.P.S. trying to find your destination.

The examples listed are just that, examples to try and give you good idea that this is different than your trading method itself which has everything to do with what drives price and the structure of price that comes together in what makes up a good method trade for you. Exits are just as important as entries so always remember that as well when it comes to method.

Lastly, the third thing needed is “the mind” to drive the engine and car itself. So it is method, plan and mind, these are the three things that are essential.

Now that you have a complete blue print on what it takes to be successful, you can move into the application of these things and that is where the mind comes into play. The mind is the active agent that lets the engine and car do its work. If it is all in its proper order, it takes little effort to propel the car because you know where you want to go and you follow the mapping system built into the car itself as you were the one who programed it to take you where you want to go.

In practical terms what does that look like. Well, let me say this, once you know that the engine works and you know the car frame in its wheels will hold your weight, you don’t want the continued focus to be on those two things but you want your focus now to be on arriving to your destination and seeing that come about. That means you don’t want your energy to be caught up in if the engine will do its job and will the car frame hold you, that much is already a given. Your energy again is directed in seeing the ‘end goal’ completed, which is your trades hitting their targets.

If you spend more time visualizing yourself doing the right thing as your method and plan call for, you will see better results. This is using your mind to recall past trades that were done right and focusing on the emotions of control when you traded them right. Feeling the trade and positive emotions and seeing yourself doing it right. Do this as a warm up exercise before the session to get your mind in a winning state, where you bring up the emotions you want, calm, controlled, patient, without anxiety, willing to wait as long as you have to until you see what you already know will produce and being at peace with that.

Seeing yourself following your personal trading plan in advance. When you actually get to that part of the session that now demands you to make a decision, you are already programed to do the right thing. It could be a little struggle for you at first, but you can now much more easily default to the part that is re-programmed towards your best interest.

Visualizing your success and seeing yourself following through again and again takes work, but it is the biggest return for time invested if you want to improve.

I should end it here for now, but this is great stuff if you take it in and apply it. I can say a lot more and give much more detail and examples, let me just say, in my next posting I will pick it up from here and continue.  I will also circle back around and talk about the 4 trading sins that can ensnare us and hold us back if we let it as I mentioned in my last post.

You are all welcome to comment and leave me a message on your thoughts or even if you have questions. I can build that into my next posting as well, so feel free.

Best trading to you all.