A big part of being a successful trader is keeping your emotions out of the trade. As a special treat to our readers we asked Larry Levin to share a video on the subject.
Larry reveals techniques for traders like you to help you control your emotions and transform you into a disciplined, emotion-free trader. It is the most important concept you can learn in order to be a successful trader.
If you can master this skill, you can be very successful in this business. If we can't control the market and what it will do, then the only thing that will make us successful is if we can control ourselves. And that's easier said than done. But it is the reality of successful trading.
One of our most requested Guest Bloggers is Mark McRae, author of Traders Secret Code, and today I'd like you all to welcome him back! I've asked Mark to touch on a subject that most seasoned traders know, and rookie traders don't want to hear...most traders fail and a percentage of those failures turn into bankruptcy! Please read the article, comment to Mark or about the ideas, and check out Marks Traders Secret Code.
I was thinking about an article I read some time ago that 90% of traders who ever trade lose their account and that 10% actually go bankrupt. If the first number doesn't scare you then the second definitely should.
Why is it then that there is such a large number of traders failing? It is not because they are stupid; in fact most traders have an above average IQ and are above average in most categories such as education and income. So why do they fail?
Lack of trading education! ( INO TV will help solve this problem!)
By education I don't just mean learning how RSI works or drawing lines on a chart. I mean thoroughly educating yourself in all aspects of your chosen profession.
Educating yourself on the correct psychological approach to the market! Educating yourself in the correct risk management techniques relative to your account size. Educating yourself in the correct entry and exit methods for the trading style that suits you.
This, my friend, is where I hope to be of some help. I don't have all the answers nor do I profess to be some kind of guru but I will do my best to point you in the right direction.
With Crude taking a dive this week (our MarketClub Trade Triangles getting short at the PERFECT price) I wanted to bring in Jeremy Ascher from ChartWhiz.com to bring a little insight into what he's seeing in the energy markets as we've gotten a ton of emails regarding pulling profits and controlling losses. Please enjoy the post...and take a look at our most recent signals for Crude Oil (CL.V08) if you're a MarketClub member.
I’ve been analyzing and trading the energy markets for more than 10 years and I continue to see beginner traders make the mistakes over and over again. I know this because I made the same mistakes when I was a rookie trader. It goes something like this…you start the day with a good trade and lock in some nice profits. Then you make another and your having a pretty decent day, one in which you could easily call it a day. Let’s say for example you’re up $800 on the day. But then the greed kicks in and you want more. Ok, one more trade, let me hit that $1000 mark. Now you place a losing trade and you’re up only $600. Now you think to yourself “I should have just closed the books. Ok, let me try to make that $200 back and call it a day”. You lose again, up only $350 now. Now you’ve turned a triple into a single. Now you’re angry. That’s it, it’s all or nothing. I have $350 to risk and I’m done. This is where it gets ugly, usually turning an $800 winning day into an $800 loser, a $1600 swing.
Sound familiar? You bet it does.
Why does this happen? The answer is simple-you are not master of your domain. In other words it’s a lack of discipline. Without discipline it will be very difficult to become a successful trader. So I’ve come up with a few simple “post it” notes that should help you overcome this hurdle. I have these notes posted to my monitor in big letters to keep a constant reminder. Here they are:
1. Trade the numbers, not opinion. Before you trade you should always do your homework. I analyze the charts to derive support and resistance numbers. These are the only areas that I am willing to place trades. Anything else to me is gambling. If you have support you are buying against, you trade that number until the market tells you otherwise.
2. Patience. It is extremely important to have patience when trading. Use your support and resistance as guide lines. Do not chase the market and force trades; let the market come to you.
3. No Emotion. It is virtually impossible to not have any emotion when trading, but it can be reduced drastically. To do this, trade with a systematic approach. Determine a comfortable risk threshold to use on every trade. If you’re wrong and get stopped out, wait for the next trade with the same risk parameters. Trading a system day in and day out will help keep you off the emotional rollercoaster that so many of us experience.
These may sound too simple and basic to work, but sometimes it’s the simple things that work best. And believe me, these do. After all, not trading your numbers will lead to impatience which will lead to emotional trading. And that my friends, is a recipe for disaster. So get out your sticky notes, write these down, and stick them on your monitor and become master of your domain today.
Well, I have to say that emotions always lose out to a solid game plan when it comes to the markets. Here's a recent example; we received a buy signal for gold (XAUUSDO) at $905 basis spot on May 19th. The gold market ran up and reached an intra-day high of $935.30 before it subsequently collapsed. I'm sure many traders held on thinking that the sharp pullback was just a pullback and that gold would soon regain its footing and once again go higher. Why subject yourself to that kind guessing and emotional type trading when there's a better way? Using the MarketClub's non-emotional "Trade Triangle" technology we were able to exit the market with a small profit of $10.25 an ounce and rest on the sidelines as gold collapsed. There's really no room for emotion in the market place. This is one of the greatest downfalls of most traders. You need to go into the market with a solid game plan, this could be in the form of MarketClub's "Trade Triangles" or it could be another form of discipline, but having a solid game plan does give you a reference point to work from. When you are making trading decisions about the market while it is still trading is generally not a good idea. Here's a recent trading recap:
Gold (XAUUSDO): We are out of the gold buy trade from $905 on 5/19 to 5/27 at $915.25 for a profit of $10.25. We are resting on the sidelines based on "Trade Triangle" technology. See video.
Crude Oil (CL.N08): We exited our long July position from $125.63 purchased on 5/15 at 126.90 on 5/28 (original signal $128.69) for a gain of $1.27. We are out of this market and on the sidelines based on our "Trade Triangle" technology. See video.
Whether the "Trade Triangles" turned out to be correct or incorrect, they do provide you with discipline and a reference point that you can hang your hat on. "Trade Triangles" are consistent and not a willy-nilly approach to the market. Using MarketClub's "Trade Triangles" gives you confidence as they represent a defined, measured approach that if followed consistently will make you money in the long run.