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Thread: Wrong thinking and trading losses.

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  1. #1
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    Wrong thinking and trading losses.

    Excerpt from The disciplined Trader by Mark Douglas
    --------------------------------------------------

    1. Refusing to define a loss.

    2. Not exiting a losing trade, even after you acknowledge the trade’s potential is greatly diminished.

    3. Getting locked into a specific opinion or belief about the market or stock direction.

    4. Focusing on price and monetary value of a trade instead of the potential for the market to move based on its behavior and structure.

    5. Revenge trading to take back from the market what you have lost.

    6. Not reversing your position even when you clearly sense a change in the market direction.

    7. Planning for a move or feel one building, but then finding yourself immobilized to execute the trade, thus denying yourself the opportunity to profit.

    8. Not acting on your instincts or intuition.

    9. Establishing a consistent pattern of trading success over a period of time, and then giving your winnings back to the market in one or two trades and
    starting the cycle all over again.


    *******


    How to over come wrong thinking and trading patterns.
    -----------------------------------------------------

    1. Define and enter a stop loss at the time of entry.

    2. Define a maximum amount of loss after which no matter what, you will exit the trade.

    3. Be flexible and open to change your opinion on the market and stock direction.

    4. Have a well defined system of trading and follow it.

    5. After a loss or a trading setback, do not impulse trade. Study what went wrong. Also trade small position size or take a break from trading till feeling confident.

    6. Accept that stock can change direction at any moment, and that all trades cannot be profitable. A successful trader has to keep losses small, and should not let a profitable trade turn into a loss.

    7. To overcome uncertainty and to enter trade with confidence, It gets easier when a long or short entry is made and the stop loss is defined beforehand at the time of entry.

    8. Successful trading involves the ability to pull the trigger. The confidence to pull the trigger come from trading with rules.

    9. Discipline and risk management is a must to ensure that trading is consistently profitable, while at the same time not risking more when on a profitable run.

    10. Finally, it is important to keep a record or a dairy of all the trades executed each day and to review the trigger points for the entry and exit and if they are as per the defined rules. Lessons learnt from wrong execution to be codified into rules.
    __________________
    Trade with an edge. Be Disciplined. Manage Risk.


  2. The Following 2 Users Say Thank You to angelnish For This Useful Post:

    Korg (11-20-2012), theMoney (10-22-2012)

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