Before the trade....
- Thread starter the tape
- Start date
These things are very nature of Human Beings which though could be restricted but its very very difficult to erase them. I have been trading now for more than 4 yrs. and my best trades have been those where both and hope have been put onto a bin. Yes I do loose even when trading without emotions but then I can bear the loss by saying " These are markets, I cannot win every time".
But I must admit that sometimes I do enter or exit on my hunches and end up loosing money mostly, so the punishment involving money is enough to make me more cautious next time.
Anyways there are some methods that I have used over years to reduce Human emotions as much as possible from my trading. It may help you somewhere or atleast provoke a new thought. Here we go ;-
1. I have a diary with me where I have written commonest mistakes that I usually make like Getting impatient, moving stops before getting confirmation, Not waiting to book my profits at the hitting of Trailing stoploss, etc, etc.
Now every time I end a trade I will note that how many mistakes I made. Then at the end of month I will count the mistakes. Now let me tell you this counting itself is a great exercise, this will make you feel ashamed and might actually help you. My aim is to decrease the mistakes every month
2. I have been able to get the most profit out of my positional trades when I am not watching the quotes all day long. Yes it really helps not to watch ticker all day. You will end up thinking all the stupid things like " I think we will have correction here, I will try to get in at lower prices", " I think market is going to hit stops, I should take as much profits as I have got" , etc, etc.
Simple solution is dont watch the Ticker just keep on updating stoplosses as the prices move in your favour by looking at charts and dont try anything else just have some snacks and chill. Believe me after some days your charts will start talking to you, yes they do.
3. Dont enter with too large a position, start very light and then add gradually only if prices move in your favour. This will do 2 things , firstly Fear is eliminated as the loss even if taken is very small and you would not mind taking it , secondly greed would also be taken care of as the initial position is very small and you would not like to run with small profits.
4. Enter 3 or 4 stocks at a time and add only to those which are behaving well. E.g You entered 4 stocks simultaneously out of which 2 are showing you profits and 2 are showing loss after 3 days, take your money out of 2 losers and put it in winners, you will see how profitable this slight change will make plus you will not be carrying stress of holding loosing positions.
5. We all go through good and bad phases during our trading career, dont think that bad times can be avoided but yes you can make them less painful. I use a variable Money Management strategy. Say if I usually risk 2.5% on my trade, I will keep on reducing 0.1% risk everytime I have a loosing trade, if I reach 1% level I will take a break for month. This will keep you out of bad months when markets themselves might be turning choppy.
There are many more things that I practice myself, will come up with them later
Happy Trading
But I must admit that sometimes I do enter or exit on my hunches and end up loosing money mostly, so the punishment involving money is enough to make me more cautious next time.
Anyways there are some methods that I have used over years to reduce Human emotions as much as possible from my trading. It may help you somewhere or atleast provoke a new thought. Here we go ;-
1. I have a diary with me where I have written commonest mistakes that I usually make like Getting impatient, moving stops before getting confirmation, Not waiting to book my profits at the hitting of Trailing stoploss, etc, etc.
Now every time I end a trade I will note that how many mistakes I made. Then at the end of month I will count the mistakes. Now let me tell you this counting itself is a great exercise, this will make you feel ashamed and might actually help you. My aim is to decrease the mistakes every month
2. I have been able to get the most profit out of my positional trades when I am not watching the quotes all day long. Yes it really helps not to watch ticker all day. You will end up thinking all the stupid things like " I think we will have correction here, I will try to get in at lower prices", " I think market is going to hit stops, I should take as much profits as I have got" , etc, etc.
Simple solution is dont watch the Ticker just keep on updating stoplosses as the prices move in your favour by looking at charts and dont try anything else just have some snacks and chill. Believe me after some days your charts will start talking to you, yes they do.
3. Dont enter with too large a position, start very light and then add gradually only if prices move in your favour. This will do 2 things , firstly Fear is eliminated as the loss even if taken is very small and you would not mind taking it , secondly greed would also be taken care of as the initial position is very small and you would not like to run with small profits.
4. Enter 3 or 4 stocks at a time and add only to those which are behaving well. E.g You entered 4 stocks simultaneously out of which 2 are showing you profits and 2 are showing loss after 3 days, take your money out of 2 losers and put it in winners, you will see how profitable this slight change will make plus you will not be carrying stress of holding loosing positions.
5. We all go through good and bad phases during our trading career, dont think that bad times can be avoided but yes you can make them less painful. I use a variable Money Management strategy. Say if I usually risk 2.5% on my trade, I will keep on reducing 0.1% risk everytime I have a loosing trade, if I reach 1% level I will take a break for month. This will keep you out of bad months when markets themselves might be turning choppy.
There are many more things that I practice myself, will come up with them later
Happy Trading
Very practical limitation Praveen and there is solution for this too.. Just got to work harder and set the priorities right. For small accounts, my approach will be -
1) First priority is to protect the account while trading. Be ruthless with Stoploss. Start accepting small losses. Losing trade does not make you a looser. But if trader doesn't learn from loosing trade then there is big problem with individual.
If it works, then place stop order before the entry order.. or do whatever works for you.
2) Second is to start accumulating reasonable profits and build account base. Start putting target order at reasonable distance.. And book profit consistently. Most of one day matches are won or lost based on amount of singles and doubles collected consistently. Batsman can't expect to hit 6 on each ball but they keep stealing singles and doubles consistently. You got to keep the profit counter ticking while controlling the loss.
You might miss few big runner but learn to accept that. Improve by identifying when to let the winner run and when to take book profit.
3) Learn when to be in the market and when to stand on the sideline. Be selective in picking up trades as per your back tested strategy. Market does not give opportunity all the time for all strategies. So it is more important to know when our strategy will not work and avoid trading in those situation.. (eg - trend following strategy give poor result in range bound market.. But strategy based on bounce from support/resistance
Level will work well in the range)
4) All comes down to your strategy, your game plan to play in the market. And sticking to that.. If enough back testing is done, you will have the confidence in your strategy, and your result of back testing has proven u that it will work.. Then it will take care of fear aspect. Most of the traders don't rough idea about situation in which they will take the trade.. But hesitate in pulling the trigger because they doubt if it will work or not. Once in the trade, they keep changing the mind about exits.. And thats when they end up taking wrong action..
But when they have tested their rules, saw it working on the past data.. Then they are lot more confident. Back testing is hardwork.. But it is the price one pays to gain that confidence in trading.
Having right strategy with +ive expectancy is the key. If it is not there, then please don't risk the money. Small accounts / scared money are the first that leaves the market.
But big accounts were also small once upon a time.
Easier said then done, dear. But no one says that trading profession is easy. It can be simple but certainly not easy. Lot tougher then what I thought before entering this field.
I know there is lot of Gyan in my reply. Hope it gives atleast few pointers..
Happy Trading
1) First priority is to protect the account while trading. Be ruthless with Stoploss. Start accepting small losses. Losing trade does not make you a looser. But if trader doesn't learn from loosing trade then there is big problem with individual.
If it works, then place stop order before the entry order.. or do whatever works for you.
2) Second is to start accumulating reasonable profits and build account base. Start putting target order at reasonable distance.. And book profit consistently. Most of one day matches are won or lost based on amount of singles and doubles collected consistently. Batsman can't expect to hit 6 on each ball but they keep stealing singles and doubles consistently. You got to keep the profit counter ticking while controlling the loss.
You might miss few big runner but learn to accept that. Improve by identifying when to let the winner run and when to take book profit.
3) Learn when to be in the market and when to stand on the sideline. Be selective in picking up trades as per your back tested strategy. Market does not give opportunity all the time for all strategies. So it is more important to know when our strategy will not work and avoid trading in those situation.. (eg - trend following strategy give poor result in range bound market.. But strategy based on bounce from support/resistance
Level will work well in the range)
4) All comes down to your strategy, your game plan to play in the market. And sticking to that.. If enough back testing is done, you will have the confidence in your strategy, and your result of back testing has proven u that it will work.. Then it will take care of fear aspect. Most of the traders don't rough idea about situation in which they will take the trade.. But hesitate in pulling the trigger because they doubt if it will work or not. Once in the trade, they keep changing the mind about exits.. And thats when they end up taking wrong action..
But when they have tested their rules, saw it working on the past data.. Then they are lot more confident. Back testing is hardwork.. But it is the price one pays to gain that confidence in trading.
Having right strategy with +ive expectancy is the key. If it is not there, then please don't risk the money. Small accounts / scared money are the first that leaves the market.
But big accounts were also small once upon a time.
Easier said then done, dear. But no one says that trading profession is easy. It can be simple but certainly not easy. Lot tougher then what I thought before entering this field.
I know there is lot of Gyan in my reply. Hope it gives atleast few pointers..
Happy Trading
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