If you ever feel shell shocked and dazed by the first few trades of the day, perhaps you should try some mental warm up exercises first to get your brain thinking at market speed before you even step out of bed.
The moment you wake up, keep still and keep your eyes closed. Now since you’re still in a relaxed mood with no issues intruding into your mind, it is easier to focus on some important trading issues.
Start with visualizing what your edge looks like, long and short. Form the chart images in your mind. See the red and green candles. See the volume bars. They may be ascending triangles breaking to new highs. They may be pull backs from new highs that give high probability entries. They may be a break down past intraday support levels. What ever are the patterns that give you your profitable trades, your edge, go through them slowly in your mind. Interact with the candles. See where your entry point would be. Note momentum moves and big candles. Imagine where a good place to take profit would be.
Now go through the same exercise visualizing some losing trades. Reverse the entries on all the profitable trades you just visualized. Notice how doing the wrong thing at the wrong time gets you into trouble quickly. Burn the images of what to do and what not to do into your mind. Get the trade signals right so when you see them you know it’s time to execute.
Next go through your trading plan. What steps do you take before, during and after a trade. In your mind, write them down in point form. For instance,
I confirm the markets are trending,
I enter the trade.
I set a stop.
I wait for an exit signal.
I manage my trade.
This will help cement them into your subconscious so that it becomes automatic after a while.
Next try some positive thought exercises. Try these affirmations or make some up to suit yourself better. Here’s an MP3 I recorded. http://www.badongo.com/file/16686985 You can load on your ipod and listen. Repeat the words yourself to ingrain them in your brain.
- I am a consistent trader.
- I have complete confidence in my abilities.
- I follow my trading plan.
- I know the markets today are capable of doing anything.
- I am prepared to trade what I see.
- I will have winning and losing trades today.
- I set stops immediately after I enter a trade.
- I will never add to a losing position.
- I have complete confidence in my abilities.
- I have supreme concentration.
- I will immerse myself into the market flow.
- I will take what the market offers up to me.
- I know what my trading edge looks like.
- I will not hesitate when my system gives me a signal.
- I have complete trust in probabilities.
- I will buy when my system signals me to buy.
- I will sell when my system tells me to sell.
- I will trade responsible size, never risking too much.
- I am moving closer to my goals everyday.
- I am a skillful trader but always striving to do better.
- I learn from my mistakes so I do not repeat them.
- I have complete confidence in my abilities.
- I am an excellent trader.
All of this will give you time to focus and concentrate on the images and actions that will present themselves during the course of the trading day. Knowing that you have seen your favoured chart formations and momentum situations beforehand can give you greater confidence in trading them the correct way in realtime.
Keeping your plan in the forefront of your mind will keep you on track so that you can minimize mistakes and keep emotions at bay. Your system tells you when to enter and exit. You are only there to pull the trigger.
Developing mental toughness so that you know what to do and are not lost on the fringes will pay you back in not just trading but throughout lifes challenges.
Sure it’s not easy but if you apply yourself and work hard at it, you will be pleased with the progress. Sure it’s not conventional but if it was so easy and normal to look at charts and predict the future, everyone would be a trader.
Anyone can become a successful trader. All it takes is a lot of work.
Always strive for a more and for better understanding of yourself as that is where the key to success lies.
** note when downloading the audio clip go to the page bottom. You may have to wait for 60 seconds. Let me know if there are any problems accessing it**
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8 comments:
I am grateful that you take time to write such reminders. This is an awesome set of tools to deal with emotional mistakes.
I think this is something I'll need to read over to remind myself. Patterns are something I'm still trying to gain a better mastery of, and my inexperience shows in my trades. For example, on Tuesday I bought RTK at 2.28, seeing the momentum and wanting to hold overnight for the continued push. Well Wednesday came, and RTK started out very volitile, moving around fast from 2.20 - 2.30. I got nervous, and sold at 2.29. A couple of minutes later RTK reached around 2.15, and I thought for a second that maybe that would be a good dip buying opportunity since there was still a lot of volume and the stock could easily be pushed higher, but I sat out. I then watched RTK reach 2.93, and I kicked myself for not buying the dip. I was able to later make some profit off of RTK's drop all afternoon, but the morning craziness is not something I've mastered yet.
Thanks for posts like this.
-AT
Great post.
Thank you for taking the time to put it together.
Will print it out and stick it on my wall to read everyday.
This is a very helpful post, I'm going to put a link on the side of my blog as a reminder to myself to read it often. Thanks!
Matty
Thanks for the comments guys. Just trying to offer up some thought provoking ideas. Your mind is a powerful weapon ready to help you conquer your dreams if you just learn to use it.
Hi Scott,
I have been learning a lot from you since late last month when I first discovered fearandgreed. I have read all your articles and have written my own notes about it. I'm trying to practice what I'm learning via paper trading. Doing it everyday for three weeks now. The first week was too hard, as the market seems moving too fast for my eyes. I was losing paper money most of the time. I am too slow and cannot decide what to do. If I’m winning the greed takes over and wanted more then the price reverses eventually taking all my gains and I’m there still can’t believe it happened so quick. Same thing when I’m losing, I can’t sell my mind is hoping for something and wishing that the price will come back. These feelings are exhausting physically and mentally. And I’m just paper trading!
The following week, I decided to relax and just watching the price and volume actions. Focusing and Observing. Paper trading a little bit. Visit your blog and read your articles again. Write more notes. Dissecting your trades/charts back and forth. In my mind I'm trying to relive those charts visualizing them. I'm trying to be there on that particular moment. Be able to understand what you have seen that compelled you to place your trades. And the same time your quick exit when things do not feel good.
Scott, thank you for opening your trading blog to all of us, it is an open book for everybody to learn from. A trader whose really serious to learn just need to invest time to study your system carefully. Read it over and over until you finally understand. Review your charts one by one and feel those trading moment.
After three weeks, I am beginning to understand price actions, seeing the market as it is without any preconceive notion. Just observing it, feeling it, not pressured or in a hurry. I have learned how to wait for a place where I can safely ride in and out. I'm beginning to understand your high probability system.
I know its still early and there's still a lot for me to learn but with a help through your blog I will succeed.
db- When you are just starting out it vital to find a trading style that is going to work for you. Your personality, pyche, time and money available.the way I do it works for me and had evolved into what it is.
whatever style you think fits you, keep in mind these thoughts;
- dont load yourself up with indicators. if there are green candles, a stock is rising, red candles means a stock is falling. what else do you need to know?
- trade the probability, not your expectations.
- repetition is the basis of all skills. watch , learn and practice.
- be true to your system and follow it without fail.
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