Getting rich quick can only lead to a great deal of
anxiety and frustration if you don't have the skills to keep it.
You also need to understand that your rules will change as your understanding and insights evolve. Many people don't like to establish trading rules because they believe that once made, they can't be changed.
STEP ONE: STAYING FOCUSED ON WHAT YOU NEED TO LEARN
First and foremost, you may need to change your perspective or the focus of your trading. Until now your focus may have been to make money. If this is so, you will need to change your perspective to "What do I need to learn or how will I have to adapt myself to interact more successfully?"
There is a tremendous difference between focusing on money and focusing on using your trading as an exercise to identify what you need to learn.
Always keep in mind that each moment is a perfect reflection of your level of development. If you look at each moment that things don't turn out as you want or expect as a mistake, then you will usually cut yourself off from the insight about yourself contained within each moment. The reason why we will cut ourselves off from this information is because we typically associate mistakes with pain. We will instinctively avoid pain and in doing so also avoid what we need to know about ourselves to interact more effectively in similar circumstances in the future.
To evolve beyond pain and our fear of mistakes, our mistakes have to be resolved. This could be a big task and you may not want to tackle it at this time. So what you will need to do is build a corollary framework to place all of your trading experiences. This framework needs to be defined in such a way that all experiences are valid and have meaning, and, as such, mistakes don't exist—they just point the way.
Nothing's worse than missing a "perfect" opportunity. However, if you could have, you would have; it's that simple. The sooner you accept this, the sooner you will be able to take advantage of these missed opportunities instead of beating yourself up over them. Besides there really isn't anything to miss because the markets are in perpetual motion and will continue to be until everyone agrees on value. As long as the price keeps changing, there will always be another opportunity.
STEP TWO: DEALING WITH LOSSES
Trading Rule 1
Predefine what a loss is in every potential trade. By "predefine," I mean determine what the market has to look like or do, to tell you that the trade no longer represents an opportunity, at least not an opportunity in the time frame in which you trade.
When your beliefs about losses are restructured, the possibility of a losing trade will not create any threat of pain.
What needs to be done? Confront the possibility of being wrong and consequently not avoid the inevitability of taking a loss. So confronting and accepting the inevitability of a loss is a trading skill, certainly a skill learned the hard way for most, but nevertheless an essential component at the foundation of virtually everything you need to learn to become a successful trader.
Trading Rule 2
Execute your losing trades immediately upon perception that they exist.
When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with.
STEP THREE: BECOMING AN EXPERT AT JUST ONE MARKET BEHAVIOR
You need to start as small as possible and then gradually allow yourself to grow into greater and greater amounts of market information.
Nothing is more frustrating than to know what is going to happen next and not be able to do anything about it.
STEP FOUR: LEARNING HOW TO EXECUTE A TRADING SYSTEM FLAWLESSLY
To be able to execute your trading systems properly, you will need to incorporate two concepts into your mental framework—thinking in terms of probabilities and correlating the numbers or the mechanics of your system to the behavior. Unfortunately, the only way you can really learn these things is actually to experience them by executing your system. The problem is that rarely will the typical trader stay with his system beyond two or three losses in a row, and taking two or three losses in a row is a very common occurrence for most trading systems. This creates something of a paradox or Catch 22. How do you do it if you don't believe it, and you won't learn to believe it unless you do it long enough for it to become a part of your mental framework? This is where you employ mental discipline to make flawless execution a habit.
You also need to find a system that suits your unique tolerance for taking a loss. The amount of money you risk per trade should be an amount that you are completely comfortable with, at least at first. If you don't stay within this tolerance level, you will be, at the very least, uncomfortable, in which case to whatever degree you are uncomfortable, you shut down the learning process. When you are feeling pain, instead of being focused on what the market is teaching you about itself and yourself, you will be focused on information that will ease your pain. Which usually results in a painful lesson.
The more accepting you are of your mistakes, the easier it will be to make the next attempt.
You have to do it in spite of your resistance, and you have to do it long enough for the system to become a part of your mental framework. When that happens, you will have the force of habit working for you, and the struggle will cease. Just do the best you can and look for ways to improve your performance. Constantly keep in mind that what you are doing is more of an exercise in learning trading discipline and the skill of flawless execution, which in the long run is far more important than your immediate desire to make money. So keep your contract size light. You can always increase it later, when you have learned to trust yourself completely to always do what needs to be done without hesitation. Stay with the exercise until it becomes second nature or a part of who you are.
As you gain in your confidence, you will learn more and consequently learn how to make money as a trader. As you make money you will gain in your confidence. This positive cycle will expand your ability to be successful just as easily as a negative cycle will feed on itself to end in despair.
You also need to understand that your rules will change as your understanding and insights evolve. Many people don't like to establish trading rules because they believe that once made, they can't be changed.
STEP ONE: STAYING FOCUSED ON WHAT YOU NEED TO LEARN
First and foremost, you may need to change your perspective or the focus of your trading. Until now your focus may have been to make money. If this is so, you will need to change your perspective to "What do I need to learn or how will I have to adapt myself to interact more successfully?"
There is a tremendous difference between focusing on money and focusing on using your trading as an exercise to identify what you need to learn.
Always keep in mind that each moment is a perfect reflection of your level of development. If you look at each moment that things don't turn out as you want or expect as a mistake, then you will usually cut yourself off from the insight about yourself contained within each moment. The reason why we will cut ourselves off from this information is because we typically associate mistakes with pain. We will instinctively avoid pain and in doing so also avoid what we need to know about ourselves to interact more effectively in similar circumstances in the future.
To evolve beyond pain and our fear of mistakes, our mistakes have to be resolved. This could be a big task and you may not want to tackle it at this time. So what you will need to do is build a corollary framework to place all of your trading experiences. This framework needs to be defined in such a way that all experiences are valid and have meaning, and, as such, mistakes don't exist—they just point the way.
Nothing's worse than missing a "perfect" opportunity. However, if you could have, you would have; it's that simple. The sooner you accept this, the sooner you will be able to take advantage of these missed opportunities instead of beating yourself up over them. Besides there really isn't anything to miss because the markets are in perpetual motion and will continue to be until everyone agrees on value. As long as the price keeps changing, there will always be another opportunity.
STEP TWO: DEALING WITH LOSSES
Trading Rule 1
Predefine what a loss is in every potential trade. By "predefine," I mean determine what the market has to look like or do, to tell you that the trade no longer represents an opportunity, at least not an opportunity in the time frame in which you trade.
When your beliefs about losses are restructured, the possibility of a losing trade will not create any threat of pain.
What needs to be done? Confront the possibility of being wrong and consequently not avoid the inevitability of taking a loss. So confronting and accepting the inevitability of a loss is a trading skill, certainly a skill learned the hard way for most, but nevertheless an essential component at the foundation of virtually everything you need to learn to become a successful trader.
Trading Rule 2
Execute your losing trades immediately upon perception that they exist.
When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with.
STEP THREE: BECOMING AN EXPERT AT JUST ONE MARKET BEHAVIOR
You need to start as small as possible and then gradually allow yourself to grow into greater and greater amounts of market information.
Nothing is more frustrating than to know what is going to happen next and not be able to do anything about it.
STEP FOUR: LEARNING HOW TO EXECUTE A TRADING SYSTEM FLAWLESSLY
To be able to execute your trading systems properly, you will need to incorporate two concepts into your mental framework—thinking in terms of probabilities and correlating the numbers or the mechanics of your system to the behavior. Unfortunately, the only way you can really learn these things is actually to experience them by executing your system. The problem is that rarely will the typical trader stay with his system beyond two or three losses in a row, and taking two or three losses in a row is a very common occurrence for most trading systems. This creates something of a paradox or Catch 22. How do you do it if you don't believe it, and you won't learn to believe it unless you do it long enough for it to become a part of your mental framework? This is where you employ mental discipline to make flawless execution a habit.
You also need to find a system that suits your unique tolerance for taking a loss. The amount of money you risk per trade should be an amount that you are completely comfortable with, at least at first. If you don't stay within this tolerance level, you will be, at the very least, uncomfortable, in which case to whatever degree you are uncomfortable, you shut down the learning process. When you are feeling pain, instead of being focused on what the market is teaching you about itself and yourself, you will be focused on information that will ease your pain. Which usually results in a painful lesson.
The more accepting you are of your mistakes, the easier it will be to make the next attempt.
You have to do it in spite of your resistance, and you have to do it long enough for the system to become a part of your mental framework. When that happens, you will have the force of habit working for you, and the struggle will cease. Just do the best you can and look for ways to improve your performance. Constantly keep in mind that what you are doing is more of an exercise in learning trading discipline and the skill of flawless execution, which in the long run is far more important than your immediate desire to make money. So keep your contract size light. You can always increase it later, when you have learned to trust yourself completely to always do what needs to be done without hesitation. Stay with the exercise until it becomes second nature or a part of who you are.
As you gain in your confidence, you will learn more and consequently learn how to make money as a trader. As you make money you will gain in your confidence. This positive cycle will expand your ability to be successful just as easily as a negative cycle will feed on itself to end in despair.
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