Lessons from the Pros


Are You OK with Your Trading Strategies?

Those of you that have been trading for an extended period of time can attest to the fact that trading will test your patience, nerves and frustration levels like nothing you’ve ever experienced. This is because the markets are always in motion and this, in turn, leads to constant uncertainty. Since the human mind is not programmed to think in these terms, for many traders this is a major cause of stress, especially for those that haven’t learned how to re-program their mind to deal with the vagaries of the market place.  Consequently, a trader has to come up with the proper trading strategies to deal with these issues and be profitable.

So what’s the best antidote for this malady? There are actually several.  The first one is to have a very straight forward process that is repeatable. By definition, a process has to have a consistent and detailed set of rules. If a trader has this he can then be accountable and take responsibility for every decision that he makes.  The alternative to not having a trading strategy is that all his decisions will be driven by all of the emotions that come with putting money at risk.

The second, and probably most important antidote to deal with this malady, and subsequently being profitable is having the correct mindset.  Once the rules are in place, a trader must make decisions based on his method. The mindset comes when a trader begins to take full responsibility and is accepting of the outcome once the decision is made.  In other words, once action is taken a trader must be perfectly OK with the end result.

As an example of trading strategies, let me show you with a real trade that I took what this looks like. The trade was in the 30 year bonds. As you can see by the picture the entry stop and target were predetermined before the trade was placed.

trading strategies

The way this trade was setup there were only three possible outcomes.  The first would have been a loss of approximately $156.25 plus commission and possible slippage per contract, which I was OK with because it fit the percentage loss allowable in my risk management rules.  The second outcome would have been a scratch (breakeven) trade because my rules allow for me to adjust my stop to entry once the profit exceeds the risk by two times the amount, and I’m OK with that.  And finally, the profit target is achieved, which is what occurred here.  Now if you’ll notice, after the profit target was achieved, Bonds continued to decline quite a bit actually.  So what if I wasn’t OK taking profits when I did?  Would I have been frustrated (kicking myself) that I left money on the table? Would I chase price lower or lose out on another opportunity because I became emotional about what happened in this trade?

You see that being OK is a good mindset to have. Is it easy? Of course not. That’s what’s so great about what we teach here at Online Trading Academy.  That is, the Set-and-Forget strategy of finding quality levels and letting the percentages work over large sample sizes. So on your next series of trades, ask yourself if you’re OK with the final result. If you’re not, then you either don’t have a method you believe in, don’t trust yourself to make the right decisions, or you’re are not willing to take responsibility for your actions. And that is not how you will become profitable. Thankfully there’s help available, but only if you take action.

So until next time, I hope everyone has a great week of trading profits.


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.