6 WAYS TO TRANSFORM YOUR TRADING EXPERIENCES
In Quantum science, Dark matter, by definition, is unseen, and almost impossible to detect, but its existence is implied by its measurable impacts on visible matter. I like to think of all those little things I don’t see, that effect my trading negatively, as my personal dark matter. The experiences that every seasoned trader has as they learn to trade are universal, they only differ in their individual intensities; Risking too much, chasing trades, greed, punishment, glass ceilings, elation, depression, loss, shock, bulletproof- do these sound familiar?
The truth is, trading successfully is a learnable skill. It really is. However, there are key areas where we all need to be vigilant and forever focusing on improving. Depending on who you are, some of these areas will be easier than others. Below are all the key areas I feel are of primary importance to get right first, in order to change your subsequent trades:
1. Turn your Faith into Belief
This is a combination of several tricks. Understand what conditions your strategy needs in order to succeed first, and then back test this, even manually, in order to watch how it unfolds under those conditions, and in order to prove to yourself that it works- build up a belief by learning that your strategy will succeed if entered under the correct conditions, managed properly, and applied consistently. People have behavioural patterns, don’t they? And trading is really just people, in fact, crowds following each other, right? So, it follows that trading is maybe not as random as it seems- all we do is study and learn those crowd behavioural patterns.
2. Know Thyself
Know YOUR dark matter- what is your relationship with money? I had an unconscious i.e. hidden from my conscious, belief that I would never really make big money- this translated in so many small ways into self-sabotage, not even just in my trading, but in my career selection, lack of money management, and even how much I valued my services and skills. Once I discovered and conquered this, my BELIEF of how much I could earn has changed, and it changed my life in all other areas- it added to my self-confidence.
3. Trade what you see
It is my personal experience and belief that technical analysis is the only way to trade. It is cold, and calculating, and therefore lends itself to trading perfectly and unemotionally, wouldn’t you agree? Fundamental analysis has one fatal flaw- it depends on data collected within a multi-complex financial ecosystem, that is ever-changing, and which produces compounded effects and results. The exact outer-limits of this ecosystem cannot truly be defined, that is, we do not know what we don’t know. What data is missing, that we aren’t aware of? And even if we have it, how do we put it all together correctly?
Instead, let items such as the news go, and replace it with FAITH in the fact that the charts will show you the way, even if you don’t like it. With time, and effort to learn to read and understand what a chart is telling you, your faith will turn to BELIEF. Understand this- the chart is desperately trying to tell you, with every bar, what its intention is and where it is going- the question is, are you listening? Master the skill of technical analysis.
4. Control your risk
We cannot control many things in life, except our risk per trade. So, control it. If you’re nervous, risk less. 1% is considered universally acceptable, and 3% is considered the most aggressive. But, nothing stops you from risking less than 1%. On two of the funds I trade, my average risk per trade is between 0.2 and 0.5% per trade, so that my total risk in open trades doesn’t not exceed 2.5% at any one time. (NB. Have you ever doubled your risk on your next trade, in order to make up for a recent loss? Yeah, don’t do that anymore. Ever again).
5. Protect what you have
Understand this- the stop-loss’s sole purpose for existence is to limit losses to your account. It lives to protect what you already have in the account, so use it to protect what have. Place your stop on the chart where it makes the most sense, in accordance with your proven strategy, not where you would like it to be.
6. Take the money – T.T.M
It isn’t profit until you bank it. How often do you have to watch a trade of yours go into profit, while you do nothing except bathe in the glory of your newfound wealth and how you’re going to spend it (which you haven’t banked yet, by the way), only to watch it get stopped out and your account to take a step backwards instead of forwards??! As a rule of thumb, once you are up more than 0.5% in profit, you need to be vigilant and thinking about that trade. If you have the option of a take-profit solution in your strategy, then you should definitely be considering taking some profit after 0.5% under today’s conditions. Almost certainly after 1%, and definitely after 2%. If you do this, you will see your account grow, and move forwards instead of backwards, and then, imagine how you will feel in the future, compared to the way you feel now when you don’t bank profits?