I have been trading, or what I thought was trading for close to 3 months now and up until this point I thought I was really learning how to be a better trader. I was sadly mistaken, now I am not defining my ability to trade by my gains/losses but simply by my emotions and lack of discipline.
My strategy started to work for me early and from there I thought I was doing the right thing and that was simply getting in and out of my trade with gains. I rarely had a set price or channel to exit my trade but I thought since my rule of not being greedy was good enough I decided to stick with it. I even passed my own test of patience as far as remaining calm when the move went against me without giving a strong sell indication and I was really thinking that I was getting better. Now everything is all well and good when you are up, but what happens when the trade goes against you and you do not have a plan?
I first learned that it is more important to have an exit strategy/plan when I watched my weekly gains decrease in one day; I also got greedy and did not get out with gains so I broke my rule. So then you start to think, “okay that will not happen again, I learned my lesson.” But as I later discovered, having a plan means nothing if you do not have the discipline to stick to that plan. I then watched another unnecessary big loss because I did not get out when I said I would.
I took a week off to work on my discipline in life, I looked around and noticed that lack of discipline is something that I need to work on overall and I did that first. I then realized what else was killing me and that was my ego. With that said I incorporated a new rule to my list and that is “it is okay to not know”.
Now it may even be better to admit you do not know, why because trading enhances your emotions to a higher level than anything in my opinion. And your ego will tell you what you think you want to hear. If you “know” the trade is going one way then you are less likely to get out when you get your sell signal. You will slowly watch the trade go against you because you are now trading your ego and not the stock and that will kill you.
Next week I hope to make my first real trade and apply what I have learned by not trading this week. The same should be done even when you have a good streak going, just sit back and evaluate your strategy. I used to think I was anxious for the bell to ring in fear of taking a loss. I now see I was simply afraid thatI would not exercise my discipline and take a bigger loss than I was suppose to.
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