Guest Post by Norman Hallett, CEO of Subconscious Training Corporation
A group of 1000 traders were recently asked, "What is the single most important mental/emotional concern you have that is preventing you from being the most successful trader you can be?"
The second most frequent response was the fear of blowing out their account. (For the record the first was fear of "pulling the trigger".)
Why all this fear?
The answer is multi-fold, but one of the main causes is likely that we are overtrading or trading too much before we are ready... what I call trading at the wrong "pace".
The more you put at risk, the higher level, or "pace" you are trading at.
When you first start out as a trader, you begin by paper-trading. You put no money at risk and you practice executing your trades the way your trading plan commands that you do. / No stress, no emotions/... there's no money or ego at stake. Your (phantom) "equity" seems to rise with ease.
You're chomping at the bit to up the pace. You're ready to trade with "real" money.
You begin to trade the minimum number of contracts to effectively run your trading plan. For the first time you are now dealing with your emotions and notice that they are causing you to stray from your trading plan.
You recognize that emotions play a big part in your ability to trade successfully and you take the steps necessary to get back to trading with ice-in-the-veins confidence.
When you experience the degree of success you are looking for, you feel you are now ready to step up the pace of your trading again... to the level that you always wanted to trade at. Full speed!
Your first trade in the big-time went well. Wow!... this is great! But then it happens... an unexpected move against you. And it's a big one. You never knew your emotions could be so debilitating!
Thoughts are racing through your head and you're tempted... I mean REALLY tempted... to pull your protective stops because you want the market to rebound and get you out of trouble.
And right before you click the mouse to lift your stop, you screech to a halt. "You MUST follow your trading plan", the voice in your head insists. You comply. You're stopped out and market continues to a free-fall.
You've lost money today... a bit more than you would have liked to, but you're proud of yourself and you actually feel pretty good.
Over the next few weeks and months you think back to that day... the day you could have blown out your account... and know that the profit you see now in your account would not be there if you were not ready, MENTALLY and EMOTIONALLY to trade at a full-out pace.
Now this little story is an ideal scenario. It happens to about 2% of real-world traders.
The fact is that most traders up the pace too quickly. They make 30% in their papertrading account in a month and kick themselves for not having the guts to use real money.
"Look at all the money I've left on the table," they cry.
So they move to level 2 (not the minimum number of contract to run their trading plan). The result:
Too much emotion, too soon. Losses result.
I could go on with examples of moving up your pace too quickly and not being emotionally prepared to handle it... but I won't.
I'll just let YOU think back to what got you where you are today and let THAT be your best example.
But don't beat yourself up... just scale back... now.
Then "train your emotions" to fit your trading pace and you too... YES, YOU TOO... can be in the trading elite.
It's not rocket science. It's including the development of your mind in development of your trading plan.
Norman Hallett, CEO
Subconscious Training Corporation
Makers of TradingMind Software
Normal Hallett will be speaking at the Orlando 2008 Investors' Super Conference. Read more about the event here.