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valid. Without exception successful traders research, back-test, and then test in real time a new concept or belief before they include that particular belief in their written trading methodology. As you decide exactly how you will trade, you will have to determine the validity of a particular approach. In other words, if you read in a magazine that a particular indicator works with unbelievable success, then before your unconscious mind will accept its validity you will need to convince yourself of the validity of the author, the indicator, and the underlying beliefs that created the indicator. |
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There are five decisions that will either enhance or diminish your ability as a trader: |
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1. Your decision on what market behavior to focus on. |
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2. Your decision on what this behavior means to you. |
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3. Your decision about what to do to profit accordingly. |
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4. Your decision on what virtues to strengthen, and their related beliefs. |
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5. Your decision on what vices you will starve, and their related beliefs. |
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The vast majority of novice traders have never decided on anything other than that they want to trade, because they want to make huge profits. They have not taken the time to seriously contemplate the intellectual rigors demanded to trade. |
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To become a great trader, you must make sure that you learn from every trading experience. I know of no faster way to learn from your experiences than by making a real commitment on how you will trade. To maximize your ability to learn from each trading experience, you must make a commitment to write down in a trading journal every reason you entered a trade, moved a stop, and exited a trade. In addition to writing down your reasons, you must write down the emotions that you are experiencing while contemplating the trade. It is also helpful to write down how you physically are feeling. What you will discover is that your profitability is directly correlated to your methodology (naturally), emotional state, and physical state. Isn't that what controls your perception? |
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After recording your thoughts, reasons, physical well-being, and emotional state in a journal, you must review your log at least weekly. What you will realize is that the profits you earned, or the losses you also earned, are directly correlated to your overall well-being. It is virtually impossible to trade even a totally mechanical system if you are experiencing intense physical or emotional pain. In other words, even though you might have developed a trading methodology that is 100 percent mechanical, if you are in a state of intense pain, you will do something that will cause you to lose money, such as placing the order or the stop incorrectly. |
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