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Albert Einstein’s famous quote:” Insanity is doing the same over and over again and expecting a different result”, a trite statement with a profound aftertaste. Now I want you to think of your trades. Does this quote apply to your results? I know it applies to mine. My capital has succumbed to the virtue of Einstein’s quote many times, and thankfully with the fortune of hindsight and the humility I have been able to recoup the losses with unstable resource of discipline.
Technology has advanced quite rapidly, and with superior technology like the one harnessed by eSignal we can achieve greater results. However, the availability of the technology is secondary to how we use it. I have met many traders over the years who place the blame on everything and everyone else but themselves. When I accepted the fact that loss is a component of the market, I stopped blaming the markets and began blaming myself. I improved my trading results drastically by “planning the trade, trading the plan and sticking to the plan.” Let’s break that statement down:
Planning The Trade:
We can never plan the outcome of the trade (if you can please email me ASAP). However, through scanning and analysis we can plan our entry, stop and target.
- Entry – Stop = Risk
- Entry – Target= Reward
After evaluating the risk reward and its ratio, we decide if the trade is worth taking. At this time we have determined the risk and accepted it, this will help us control the internal fear factor. If you are not comfortable with the risk, don’t enter. Predetermining the reward is a concept neither understood nor accepted by many. The famous question is, “How can you predetermine the reward? How do you know where the stock will go, why don’t you just let it ride.” If you use technical analysis and understand the concept, theory and self-fulfilling prophecy of support and resistance, you will understand.
Trading The Plan:
This requires reliable and real-time quotes (eSignal 7.5), a direct access trading platform, an education in the difference between passive and active trading and a great deal of focus. I have often missed my entry and reevaluated the setup. Sun-Tzu (Art of War) said, “Every battle is won before it is fought”. It really reduces the tension and stress that comes along with uncertainty.
Trading with a plan, when done properly is very boring. When I embraced this discipline several years ago , my ticket counts (commissions) and blood pressure dropped and my confidence and Sharpe ratio increased.
By trading the plan you’re not chasing the market, instead the market comes to you. We can’t predict the outcome of the trade, but we can predetermine and follow the plan we have set forth for handling the outcome of the trade.
If you don’t have predetermined entry and exit points you are gambling, it’s just that simple. Give this a chance. Planning the trade and trading the plan will not only improve your results, it will also help you develop and strengthen your “trader’s instinct”.
Sticking To The Plan:
Ah yes, discipline. That seems to be the toughest part. The definition of discipline is the fortitude to stay the course. It can be a challenge to maintain your fortitude if you do not know what the course is, that’s where the plan comes in. The plan is your course, it is a set of directions that we have predetermined before we began our journey. I know I’m in a losing trade the instant I see “filled”, the hairs on the back of my neck stand up and I overtaken by fear and stupidity. If I’m careless enough to stay in the trade, the results almost always take money out of my account, and I have no one else to blame but myself.
Lack of discipline and a plan are usually the causes of a trader’s demise. Whether you’re a beginner or a veteran, stop and take a long and hard look at your trading. Do you have a plan? If you don’t or your not terribly excited about your plan, spend more time refining it, it will be well worth the time invested. May the trend be with you!
Technology has advanced quite rapidly, and with superior technology like the one harnessed by eSignal we can achieve greater results. However, the availability of the technology is secondary to how we use it. I have met many traders over the years who place the blame on everything and everyone else but themselves. When I accepted the fact that loss is a component of the market, I stopped blaming the markets and began blaming myself. I improved my trading results drastically by “planning the trade, trading the plan and sticking to the plan.” Let’s break that statement down:
Planning The Trade:
We can never plan the outcome of the trade (if you can please email me ASAP). However, through scanning and analysis we can plan our entry, stop and target.
- Entry – Stop = Risk
- Entry – Target= Reward
After evaluating the risk reward and its ratio, we decide if the trade is worth taking. At this time we have determined the risk and accepted it, this will help us control the internal fear factor. If you are not comfortable with the risk, don’t enter. Predetermining the reward is a concept neither understood nor accepted by many. The famous question is, “How can you predetermine the reward? How do you know where the stock will go, why don’t you just let it ride.” If you use technical analysis and understand the concept, theory and self-fulfilling prophecy of support and resistance, you will understand.
Trading The Plan:
This requires reliable and real-time quotes (eSignal 7.5), a direct access trading platform, an education in the difference between passive and active trading and a great deal of focus. I have often missed my entry and reevaluated the setup. Sun-Tzu (Art of War) said, “Every battle is won before it is fought”. It really reduces the tension and stress that comes along with uncertainty.
Trading with a plan, when done properly is very boring. When I embraced this discipline several years ago , my ticket counts (commissions) and blood pressure dropped and my confidence and Sharpe ratio increased.
By trading the plan you’re not chasing the market, instead the market comes to you. We can’t predict the outcome of the trade, but we can predetermine and follow the plan we have set forth for handling the outcome of the trade.
If you don’t have predetermined entry and exit points you are gambling, it’s just that simple. Give this a chance. Planning the trade and trading the plan will not only improve your results, it will also help you develop and strengthen your “trader’s instinct”.
Sticking To The Plan:
Ah yes, discipline. That seems to be the toughest part. The definition of discipline is the fortitude to stay the course. It can be a challenge to maintain your fortitude if you do not know what the course is, that’s where the plan comes in. The plan is your course, it is a set of directions that we have predetermined before we began our journey. I know I’m in a losing trade the instant I see “filled”, the hairs on the back of my neck stand up and I overtaken by fear and stupidity. If I’m careless enough to stay in the trade, the results almost always take money out of my account, and I have no one else to blame but myself.
Lack of discipline and a plan are usually the causes of a trader’s demise. Whether you’re a beginner or a veteran, stop and take a long and hard look at your trading. Do you have a plan? If you don’t or your not terribly excited about your plan, spend more time refining it, it will be well worth the time invested. May the trend be with you!
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