Looking at the bigger picture.
Posted 06-28-2010 at 12:19 AM by Jay McKean
Looking at the bigger picture
The lack of volatility in the GBPUSD currency session from the beginning of this year has got me thinking of this article’s topic. To become a professional trader looking at the bigger picture and not getting emotionally involved in the day to day fluctuations of the markets is critical.
A common mistake for new traders is to get emotionally attached to individual trades or a small series of trades. When on a winning run they feel like the can do no wrong. This can breed complacency, taking extra risk and overconfidence. Like wise a losing run can damage the confidence of the trader causing anxiety, failure to trigger on valid setups and diverting from the trading plan.
Statistics from brokers provide overwhelming evidence that most traders learn the hard way about accepting losing runs. Bad habits such as revenge trading and developing gambling habits are introduced. These traders end up losing all their money before they realise the importance of learning to accepting losses. Professional traders confront the possibility of being wrong, and thus, when it is time to take a loss, do so without hesitation. A losing trade is not a reflection on you as a person. You are not the losing trade or the winning trade. Day to day winners or losses is just a by-product of the business of trading.
Accepting losses as by-products of the business is critical to your long-term success as a profitable trader. The most successful traders in the world take losses everyday that most people could not comprehend. They don’t think it is a reflection of them. It is just part of trading, and the sooner they exit the losing trades, the faster they can look for the next opportunity to find a winning trade.
Mark Douglas, author of The disciplined Trader states, “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 you with. There will be no threat of allowing yourself the possibility of disaster. If you find yourself considering, weighing, or judging, then you are either not predefining what a loss is or you are not executing them immediately upon perception, in which case, if you don’t and it turns out to be profitable, you are reinforcing an inappropriate behaviour that will inevitably lead to disaster. Or, if you don’t and the loss worsens, you will create a negative cycle of pain, that once started will be difficult to stop.”
Developing the winner’s mindset is achieved through looking at trading as a pure probability game. Through back testing and forward testing a rock solid methodology provides an edge on the market. Micro results are random but macro results are predictable. It is critical to think from a macro level (200+) when evaluating your performance. We can’t control what the market will do so the only thing that will make us successful is if we control ourselves. Our success judged daily is the discipline of executing your thoroughly researched trade plan. Trade the plan with confidence and the plan will reward you in the long term. It is inevitable the minute you stop taking the setups the next winning streak will occur.
Successful trading is a three step process:
1. Psychology
2. Risk Management
3. Robust method
If you would like to enquire about any or all of the three steps to success please email Jay@globalmarkettrader.co m and I will happily discuss getting you back on track or fine tune your current skills.
Jay McKean
Coach, mentor and moderator
Global Market Trader
Jay@globalmarkettrader.co m
The lack of volatility in the GBPUSD currency session from the beginning of this year has got me thinking of this article’s topic. To become a professional trader looking at the bigger picture and not getting emotionally involved in the day to day fluctuations of the markets is critical.
A common mistake for new traders is to get emotionally attached to individual trades or a small series of trades. When on a winning run they feel like the can do no wrong. This can breed complacency, taking extra risk and overconfidence. Like wise a losing run can damage the confidence of the trader causing anxiety, failure to trigger on valid setups and diverting from the trading plan.
Statistics from brokers provide overwhelming evidence that most traders learn the hard way about accepting losing runs. Bad habits such as revenge trading and developing gambling habits are introduced. These traders end up losing all their money before they realise the importance of learning to accepting losses. Professional traders confront the possibility of being wrong, and thus, when it is time to take a loss, do so without hesitation. A losing trade is not a reflection on you as a person. You are not the losing trade or the winning trade. Day to day winners or losses is just a by-product of the business of trading.
Accepting losses as by-products of the business is critical to your long-term success as a profitable trader. The most successful traders in the world take losses everyday that most people could not comprehend. They don’t think it is a reflection of them. It is just part of trading, and the sooner they exit the losing trades, the faster they can look for the next opportunity to find a winning trade.
Mark Douglas, author of The disciplined Trader states, “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 you with. There will be no threat of allowing yourself the possibility of disaster. If you find yourself considering, weighing, or judging, then you are either not predefining what a loss is or you are not executing them immediately upon perception, in which case, if you don’t and it turns out to be profitable, you are reinforcing an inappropriate behaviour that will inevitably lead to disaster. Or, if you don’t and the loss worsens, you will create a negative cycle of pain, that once started will be difficult to stop.”
Developing the winner’s mindset is achieved through looking at trading as a pure probability game. Through back testing and forward testing a rock solid methodology provides an edge on the market. Micro results are random but macro results are predictable. It is critical to think from a macro level (200+) when evaluating your performance. We can’t control what the market will do so the only thing that will make us successful is if we control ourselves. Our success judged daily is the discipline of executing your thoroughly researched trade plan. Trade the plan with confidence and the plan will reward you in the long term. It is inevitable the minute you stop taking the setups the next winning streak will occur.
Successful trading is a three step process:
1. Psychology
2. Risk Management
3. Robust method
If you would like to enquire about any or all of the three steps to success please email Jay@globalmarkettrader.co m and I will happily discuss getting you back on track or fine tune your current skills.
Jay McKean
Coach, mentor and moderator
Global Market Trader
Jay@globalmarkettrader.co m
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