I've been trading for a while now, today, my left brain has been very kind
and started talking to me. I thought it will be good to put this into
writing (especially on a public forum), so that I can review it later and
check my progress. Here it goes...
Emotion on Trading
=================
The emotion of winning and losing is an unexplainable feeling. It cannot be
qualified or quantified by any known measurements. It's like a
roller-coaster ride, with the duration being multiplied a hundred folds,
depending on one's trading style and time-frame. For me, being a mid-term
trader (defined to be in a trade within a day to multi-days or even weeks),
the UPs and DOWNs during the duration of the trade is like a carbon-copy of
the chart. In a Long position, the upward sloping chart gives me a
satisfactory, rewarding feeling. While the downward sloping chart gives me
a 'make mistake' or 'should have taken profit' feel. I suppose these are
very common emotional feel that every trader needs to go through. In
particular to my trading style, in which I seldom put in a take profit limit
order. Usually, I will let my trade run (with 0.5% to 1% SL set), the trade
will be manually closed upon seeing a reversal in trend. If the trade moved
along nicely, I will also manually set the SL to breakeven to protect
capital loss in case there is a sudden reversal.
I suppose the objective is not to be totally emotionless before or even
during the trade, but being how to manage the emotion along the way.
On placing a trade
================
Firstly, have a plan. This should be a combination of trading strategy with
money management throw into one. Once the particular setup appears, put on
the trade. Remember, there is no such thing as 100% winning trade, for in
the business of trading, it's the probability that counts. Knowing that
over a long period of time, if the system has a positive edge, we will end
up being a winner. Depending on one's MM concept, a SL target of 1% to 2%
(of account balance) should be set per trade.
Temptation to over trade is always there, especially after a series of
missed or losing trades. This is something that needs to be overcome, no
matter what ! At this point, I will tell myself that the market is always
there for me to trade, no point going into the market without a clear mind.
In addition, never never look for a reason or excuse to trade. For
regardless the outcome, whether it is a winning or losing trade, I'll end up
being the loser. It's the loss of being discipline and the determination
and power to overcome the urge of over-trading.
In the trade
===========
Personally, I feel this is hardest part. And having an impatient
characteristic doesn't help either. In particular to my trading style as
explained earlier, I only set SL and leave the TP to be manually closed.
Which means monitoring of the trade is very important, if I want to maximise
profit. This again tends to bring in the emotional part of me. The bad
feeling of seeing a profitable trade turns into breakeven or even losses.
What worst is that upon hitting SL, it turns around and become a profitable
trade. In these kind of situations, I normally asked myself whether the
selection SL point is correct, and putting the trade at BE is the right
move. To date, I got no good answer. The feeling of being wrong cannot be
denied.
I find the exact timing to review the trade become an important factor too.
If it happens that I'm looking at the chart during a Long trade, and that
the chart is currently making a new high, but looks bearish in the hourly
chart. I might close half the position, and let the other half remain in the
trade. But, if I only look at the chart few hours later, the chance of
taking half profit is not even there. Is there a way to solve this ? By
setting TP limit order ? Again, this needs to be improved.
At this point, I do not have a good exit strategy. This needs to be
enhanced.
Closing of trade
==============
The emotion of closing trades is about the same as riding the trade. With
my current style of trading, having a chance to manually close trade means
I'm in the positive territory. The 'greed' will always slip in at this
time, telling me to wait for a better, bigger profit. The discipline of
closing a profitable trade needs to be improved. While it's easy to say
just take the money off the table, the thoughts of letting go a potentially
bigger fish is a killer. For this aspect, I must develop a proper way to
close the trade.
What's next ?
============
1) Develop a better exit strategy.
2) Convince myself not to over-trade
That's for now.
and started talking to me. I thought it will be good to put this into
writing (especially on a public forum), so that I can review it later and
check my progress. Here it goes...
Emotion on Trading
=================
The emotion of winning and losing is an unexplainable feeling. It cannot be
qualified or quantified by any known measurements. It's like a
roller-coaster ride, with the duration being multiplied a hundred folds,
depending on one's trading style and time-frame. For me, being a mid-term
trader (defined to be in a trade within a day to multi-days or even weeks),
the UPs and DOWNs during the duration of the trade is like a carbon-copy of
the chart. In a Long position, the upward sloping chart gives me a
satisfactory, rewarding feeling. While the downward sloping chart gives me
a 'make mistake' or 'should have taken profit' feel. I suppose these are
very common emotional feel that every trader needs to go through. In
particular to my trading style, in which I seldom put in a take profit limit
order. Usually, I will let my trade run (with 0.5% to 1% SL set), the trade
will be manually closed upon seeing a reversal in trend. If the trade moved
along nicely, I will also manually set the SL to breakeven to protect
capital loss in case there is a sudden reversal.
I suppose the objective is not to be totally emotionless before or even
during the trade, but being how to manage the emotion along the way.
On placing a trade
================
Firstly, have a plan. This should be a combination of trading strategy with
money management throw into one. Once the particular setup appears, put on
the trade. Remember, there is no such thing as 100% winning trade, for in
the business of trading, it's the probability that counts. Knowing that
over a long period of time, if the system has a positive edge, we will end
up being a winner. Depending on one's MM concept, a SL target of 1% to 2%
(of account balance) should be set per trade.
Temptation to over trade is always there, especially after a series of
missed or losing trades. This is something that needs to be overcome, no
matter what ! At this point, I will tell myself that the market is always
there for me to trade, no point going into the market without a clear mind.
In addition, never never look for a reason or excuse to trade. For
regardless the outcome, whether it is a winning or losing trade, I'll end up
being the loser. It's the loss of being discipline and the determination
and power to overcome the urge of over-trading.
In the trade
===========
Personally, I feel this is hardest part. And having an impatient
characteristic doesn't help either. In particular to my trading style as
explained earlier, I only set SL and leave the TP to be manually closed.
Which means monitoring of the trade is very important, if I want to maximise
profit. This again tends to bring in the emotional part of me. The bad
feeling of seeing a profitable trade turns into breakeven or even losses.
What worst is that upon hitting SL, it turns around and become a profitable
trade. In these kind of situations, I normally asked myself whether the
selection SL point is correct, and putting the trade at BE is the right
move. To date, I got no good answer. The feeling of being wrong cannot be
denied.
I find the exact timing to review the trade become an important factor too.
If it happens that I'm looking at the chart during a Long trade, and that
the chart is currently making a new high, but looks bearish in the hourly
chart. I might close half the position, and let the other half remain in the
trade. But, if I only look at the chart few hours later, the chance of
taking half profit is not even there. Is there a way to solve this ? By
setting TP limit order ? Again, this needs to be improved.
At this point, I do not have a good exit strategy. This needs to be
enhanced.
Closing of trade
==============
The emotion of closing trades is about the same as riding the trade. With
my current style of trading, having a chance to manually close trade means
I'm in the positive territory. The 'greed' will always slip in at this
time, telling me to wait for a better, bigger profit. The discipline of
closing a profitable trade needs to be improved. While it's easy to say
just take the money off the table, the thoughts of letting go a potentially
bigger fish is a killer. For this aspect, I must develop a proper way to
close the trade.
What's next ?
============
1) Develop a better exit strategy.
2) Convince myself not to over-trade
That's for now.
