Thought Process while in a trade

[wsam29]

This was one the main questions I had for Hubert Senters and John Carter when I went down there almost 1 year ago.

I asked HS specifically what he was thinking prior to a trade, while in a trade and after the trade.

HS said to me that he tricks his head into thinking he's gonna be right before entry. That did not work for me, I myself need to think in terms of am I willing to lose on this trade. I have a set amount in my head already. Each market is different.

When I am in a trade, I'll start looking for clues if the trade will work out or not. There is nothing specific other than the pace at which trades are happening and the relationship it has to price and TICKs and volume, in other words, tape reading. My exit orders are already placed so there is less to focus on other than moving up the stop when its time.

Some possible clues that the trade may not work out. TICKS go lower part of range, price does not, take a look at volume. When they don't confirm, its a "oh crap" this trade may not work out, but stranger things have happened so I don't mess with it, I just say to myself the stop order is in place and let it work.

If the clues show me this trade may indeed work out, then its time to move up the stop. Some possible clues include price and TICKS confirming their move, both are making highs or at least moving together in proportion. If the target gets hit, great, but I generally get a little anxious when the price trades near it. Why the limit may not get filled, then its decision time, get out or see if it will trade through your limit or risk it taking your stop out. There is no cut and dry method each time, you make your decision and live with it.

You need to accept the fact price may trade even further in your direction. Either have a scale out technique or just live with the fact price progressed WITHOUT you. We each come to terms with that at some point, its just a matter of when not how because everyone is different, but you need to come to terms with this possibility.

Now, the good part, post trade, win or lose. I think what I did right and wrong with the trade and take a break for about 10 minutes. After my 10 minute mental break, if it was a loser and I see a signal, the next thought is "Do I dig myself deeper in the hole?" If I accept the possibility of loss,then I enter the trade, if I don't at that moment, I pass up until I do accept the possibility of loss. If the prior trade was a winner, I ask myself the same quesiton.

Even if you have a mechanical exit, it all involves accepting the possibility of loss. Loss can be defined as a loss of one own's capital or loss of the daily profits accumulated from winning trades.

Now this is how you dig yourself into a deep hole, not accepting loss. That is how new traders blow their accounts in months or cut your account in half in a matter of days.

Understanding how you handle and deal with loss is more important in trading then entry set-ups, its just not as sexy when you think about it.

[drk1t]

Thought process? For me, I totally focus on the charts and numbers, bid/ask and the volumes of the bid/ask. There are only two things I can totally get focused on, the markets and chess, well maybe a pretty woman but that's another story. Anyway, I watch the charts, outside indicators (more charts) and when the setup looks right to me I'll enter the numbers and punch enter and then watch it, if things work out I hold until it looks like it's done, that might be minutes or most all day, towards the end of the day I decide how much to risk by holding overnight. Lots of variables and they are always changing, like in chess. Outside indicators, bid/ask, volumes, tend lines, support/resistance, breaking news, commission costs, partial fills, over head costs and lots more, all these factors fall into what my brain thinks is a buy, hold, sell at any given time. I don't think anyone would approve of my system but the bottom line is out performing the market and thus far I've been able to do that. It's all about risk and reward. When I think things look right I buy, when they no longer look right I sell. What am I thinking when I enter a trade? Usually that this stock looks like it ought to start moving up. When I sell, you guessed it, this stock ought to start going down, or &^%$ that didn't work out, better sell let it drop down more and maybe try it again in a while. I don't really think all that positive or negative about a position, it's just a position, it's what the stock does after I buy it, and then what I do with it as it makes it's move that matters.

[GCB]

While I'm in a trade hopefully I think about as little as possible. I have my stop, I have my first target. These are hard targets so there is really nothing to do but sit back and watch. Sometimes there is the potential for the market to shoot past my first target and giving me a few more ticks (or even points) so I will not enter a hard exit order. Then my thinking becomes a matter of watching how price moves up and past my target and watching closely for a pause in price movement at which time I will exit half. Then it becomes a matter of doing the same thing for the next target, at which time I will exit a quarter. The last quarter I hold with a loose trailing stop until it exit or EOD, or alternatively managing it with total discretion.

During this process my thoughts are often occupied with watching price and internals intensely, looking for signs of continuation or reversal. This is where I have to resist fretting and other detrimental emotions.