Monday, July 21, 2014

15 thoughts to help you

  1. You don't have a crystal ball, and therefore accept you cannot predict a non-existent future. All you can do is can place your bets, control your risk, and then sit back and watch what happens.
  2. Price can only do one of three things: go up, go down, or go sideways. Ultimately, it is only when price moves that a profit or loss is generated. Therefore, as a trend follower it makes sense to focus your attention on price.
  3. Accept that you can only control the things you can control - namely when to enter or exit a trade, which markets to trade, how much equity to risk etc. All these elements should be part of your trading plan. Your entry parameters should be designed to identify when a trend may start developing, and your exit parameters when a trend has finished.
  4. Equally, accept that once you are in a trade you are no longer in control. You cannot control the market - to make money you have to let the trades play themselves out.
  5. Acknowledge that you can lose money even when all your criteria are met. You need to accept that you are playing an odds game, and there are no "can't lose" trades out there.
  6. Being very conservative in the amount of equity you risk on each position means that you can have an emotional indifference towards each individual profit or loss generated.
  7. You MUST take full responsibility for your trading decisions, and adherence to your system rules.
  8. If things go against you do not blame anyone else, or any other external factor. You make all your trading decisions off your own back.
  9. Accept that luck (good or bad) may play a part on any one individual trade, however over the long run luck plays no part in your success or failure.
  10. Using a system with positive expectancy, allied to good risk control, and having control over your emotions will mean that, in the long term you will make money. However, there is a complete randomness about which trade will produce a profit or a loss. All you do is look for a set up which matches your own criteria, and then open the trade once the desired entry price level is reached.
  11. Once in a trade, your only concern is controlling your open risk, by cutting losses aggressively, By the same token, you need to let profits run. Providing the trend is still intact, then you should remain in the trade. Correct placing of your stops will keep the trade open until that happens.
  12. If done properly, trend following can take up very little of your normal day. Other than placing orders to open new trades, or to update stops on existing positions, there is very little to do in market hours. The process of identifying potential new setups can be done when the markets are closed, in the evening or at weekends.
  13. You only ever get taken out of a trade when price breaches your stop level. Do not close a position simply because price has moved a reasonable amount in your favour. Do not fear an open profit evaporating.
  14. Once a trade is closed, review the trade. Did you enter when you should have done? Was your initial stop correctly placed, and consequently were your position size and equity risk correct as per your trading plan? Was the trailing stop placed properly? If you can answer yes to all these questions, then it was a good trade, irrespective of whether you ended up with a profit or a loss.
  15. You know that, if you have a high level of trading efficiency, then it proves you are able to follow your trading rules, both emotionally and operationally. If the system you are using is proven to have a positive expectancy, then you will make money.

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