Wrong thinking and trading losses.

Reggie

Well-Known Member
#1
Excerpt from The disciplined Trader by Mark Douglas
--------------------------------------------------

1. Refusing to define a loss.

2. Not exiting a losing trade, even after you acknowledge the trades potential is greatly diminished.

3. Getting locked into a specific opinion or belief about the market or stock direction.

4. Focusing on price and monetary value of a trade instead of the potential for the market to move based on its behavior and structure.

5. Revenge trading to take back from the market what you have lost.

6. Not reversing your position even when you clearly sense a change in the market direction.

7. Planning for a move or feel one building, but then finding yourself immobilized to execute the trade, thus denying yourself the opportunity to profit.

8. Not acting on your instincts or intuition.

9. Establishing a consistent pattern of trading success over a period of time, and then giving your winnings back to the market in one or two trades and
starting the cycle all over again.


*******


How to over come wrong thinking and trading patterns.
-----------------------------------------------------

1. Define and enter a stop loss at the time of entry.

2. Define a maximum amount of loss after which no matter what, you will exit the trade.

3. Be flexible and open to change your opinion on the market and stock direction.

4. Have a well defined system of trading and follow it.

5. After a loss or a trading setback, do not impulse trade. Study what went wrong. Also trade small position size or take a break from trading till feeling confident.

6. Accept that stock can change direction at any moment, and that all trades cannot be profitable. A successful trader has to keep losses small, and should not let a profitable trade turn into a loss.

7. To overcome uncertainty and to enter trade with confidence, It gets easier when a long or short entry is made and the stop loss is defined beforehand at the time of entry.

8. Successful trading involves the ability to pull the trigger. The confidence to pull the trigger come from trading with rules.

9. Discipline and risk management is a must to ensure that trading is consistently profitable, while at the same time not risking more when on a profitable run.

10. Finally, it is important to keep a record or a dairy of all the trades executed each day and to review the trigger points for the entry and exit and if they are as per the defined rules. Lessons learnt from wrong execution to be codified into rules.
 

angelnish

Active Member
#2
Excerpt from The disciplined Trader by Mark Douglas
--------------------------------------------------

1. Refusing to define a loss.

2. Not exiting a losing trade, even after you acknowledge the trades potential is greatly diminished.

3. Getting locked into a specific opinion or belief about the market or stock direction.

4. Focusing on price and monetary value of a trade instead of the potential for the market to move based on its behavior and structure.

5. Revenge trading to take back from the market what you have lost.

6. Not reversing your position even when you clearly sense a change in the market direction.

7. Planning for a move or feel one building, but then finding yourself immobilized to execute the trade, thus denying yourself the opportunity to profit.

8. Not acting on your instincts or intuition.

9. Establishing a consistent pattern of trading success over a period of time, and then giving your winnings back to the market in one or two trades and
starting the cycle all over again.


*******


How to over come wrong thinking and trading patterns.
-----------------------------------------------------

1. Define and enter a stop loss at the time of entry.

2. Define a maximum amount of loss after which no matter what, you will exit the trade.

3. Be flexible and open to change your opinion on the market and stock direction.

4. Have a well defined system of trading and follow it.

5. After a loss or a trading setback, do not impulse trade. Study what went wrong. Also trade small position size or take a break from trading till feeling confident.

6. Accept that stock can change direction at any moment, and that all trades cannot be profitable. A successful trader has to keep losses small, and should not let a profitable trade turn into a loss.

7. To overcome uncertainty and to enter trade with confidence, It gets easier when a long or short entry is made and the stop loss is defined beforehand at the time of entry.

8. Successful trading involves the ability to pull the trigger. The confidence to pull the trigger come from trading with rules.

9. Discipline and risk management is a must to ensure that trading is consistently profitable, while at the same time not risking more when on a profitable run.

10. Finally, it is important to keep a record or a dairy of all the trades executed each day and to review the trigger points for the entry and exit and if they are as per the defined rules. Lessons learnt from wrong execution to be codified into rules.
Very good points, great job dear:thumb:
 

SexyTrader

Well-Known Member
#3
These points are points of INSTINCTIVE trading :thumb: it royally helps than all the oscillators, signals and what not :p

Plus I believe all of this is common-sense too :)
 

Reggie

Well-Known Member
#5
The markets are dynamic and prices change with every tick. Hence it is important for a trader to have a set of well defined rules for entry and exit and the discipline to execute them.

It becomes easier to enter a trade without fear when the loss is defined at at an acceptable comfort level. Its always advisable to place a stop loss immediately with every long or short trade. If the trade is not going in your direction, take a small loss and exit the trade, else book profits without regret when the target is met. If the confidence in trade still exist, trail stop losses as required. This is ofcourse essence of being disciplined.

A trader needs to analyse his behaviour by taking a review of all trades undertaken by the end of day.

I am not aware of any web tool to manage behavior. Some traders uses systems which give entry and exit levels, which of course is another subject in itself.

Trust this is of help.
 

sridhga

Well-Known Member
#6
Is there a web tool available to help a trader manage behaviour and trade better?
Tool to manage behavior? I know of drugs and liquids that can control behavior:cheers: I did not know that software has so advanced that it can control human behavior. Are you the boss or technology is the boss;)?
 

jamit_05

Well-Known Member
#8
One point I found interesting due to the contradiction.

He tells a trader to rely on his intuition and instincts. And in the same breathe, he also tells him to have a well defined set of rules.

Almost as if he means that the traders intuition should, as a result of sufficient back-testing and trust building exercises, be well tuned to the system. Rarely, there would be any conflict. And if there is go with intuition. Don't trade with conflict.

Profound stuff.
 

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