Has this ever happened to you? Upon perusing the broad markets and subsequent time frames you draw the levels in the chart that you feel are most significant. Then, after researching a few other mechanical aspects of this trading day like upcoming news, you formulate a plan whereupon you fully intend and expect that you will trade that plan, follow all of your rules and keep all of your commitments. You enter the trade which happens to be a YM E-mini demand zone trade in which the price action was trending up in a long and medium time frame. You place a limit order after waiting for a pull-back. A few minutes later the price action has begun to “breathe” meaning that it is fluctuating, like any self-respecting price action is going to do. As it meanders along it takes a sharp dive and stops just before taking you out. After grabbing your chest and wiping the sweat bullets from your forehead you take a deep breath and “hope” that it doesn’t do that again. But, apparently the market is not listening to you and in a few moments it again nose dives toward your stop. You think to yourself; “Oh no, you’re not going to ruin this profit.” (Because of course you “know” that it’s going to go up), so you do what you’ve practiced over and over; you move the stop. Yep, that’s right; you violate that rule about allowing your stops to protect you. Darn it! It continues, the price action falls again, and again you move the stop as you start to hyperventilate.
When all is done you have increased your risk substantially and in one final gasp before this trade keels over, the price action dips once more with the kiss of death and takes you out. You feel horrible, headachy, your stomach is upset and you can’t stop thinking about it. You lost a nice piece of change that represented a whopping 8% of your capital in that trade, not-to-mention that you violated a rule and you didn’t keep your promise that you “would not” do this again. After the trading day is over you can’t get this trade out of your mind. Fast forward to the next trading day and you’re still kvetching. You’re angry, frustrated, frazzled and fragmented. Through the red that you see covering everything, you notice another demand zone from which a blast-off candle is rising like the Space Shuttle Challenger and you think; “Ahh, I’ll take this trade and get my money back. The fact that in order to jump in on this trade would mean that you are chasing completely goes by you. But, you think, ah, what the heck, this “revenge” feels good. So, you enter and the price action again goes south, taking you with it and before you know it you’ve lost again. Now you’re fit to be tied, mad as heck and you feel like smashing something.
This scenario plays out over and over again every trading day. People are getting results that they don’t want even though they continue to do the same thing; that is, they come to a choice point in the road and rather than go to the right where they will keep their A-Game at the platform, they choose to go left, and fall off the trade cliff with a crash and burn loss. As we think about it, what results should you get in a trade? Well, given this set of circumstances, you should get “exactly” the results that you did get. In other words, you planned, implemented and executed the trade (or not) in just the right way to go down in flames. What happened in this instance, in other words the consequences that took place, is the reality and we can’t change that. Let’s look at it another way. What if I asked you; “How much should you weigh?” No doubt some of you would say things like 10 or 20 pounds lighter, or maybe 15 pounds heavier! But, you went to the gym or exercised just the right amount (or not), you vegged on the couch watching TV, and you ate just the right amount of cakes, candy and cookies to weigh exactly the amount that you do based upon the conditions and circumstances in your life. How do you know that you weigh the exact amount that you should? Because you do! How do you know you’re getting the exact results in your trading that you should be getting? Because you do! It’s called resonating with reality. Once an event has transpired, there is nothing that can be done to change what happened. It has become history. So many traders worry, ruminate, consternate about all the things in their trades over and over again and it ends up bleeding over into the next trade robbing them of precious attention and resources.
So, what is recommended in instances like the above? Well, quite simply you’ll want to “accept” the reality of what you have, or have not done to reap the result that you got. Then, you “learn” all that you can from that trade. You go over the mechanical data that went into the trade, you evaluate what you were telling yourself, what you were believing, and what you were feeling that drove what you did that lead to those consequences. Then, you “move on.” At this point there is no need to continue to run it through your mind. When you get ready to take another trade you’ll want all of your internal and external resources to be online. You need 100% of your attention and focus when you are making a trade and any residual negative or positive distractions will syphon off that valuable attention. You must accept what is, learn from it and move on in order to optimize your resources and be fully present for the next opportunity. This is what we teach in the “Mastering the Mental Game” Online and On-location courses that are designed to support you in holding yourself accountable and making the changes necessary in order to be a consistently successful trader. Ask your Online Trading Academy representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.
Dr. Woody Johnson