Lessons from the Pros


Relax, There’s Always Another Trade

I’ve written about some of the challenges faced by new traders in the last few articles that were published. Patience and changing belief systems were the last two themes. In this article we’ll tackle the subject of emotions. Before you think to yourself, “Oh, not another article about fear and greed,” let me assure you that these subjects will not be discussed in this article. Instead, we’re going to go into the emotions of anger and self- doubt (which is not an emotion in itself) but leads to anxiety, depression and other negative emotions that can be devastating to a would-be trader.

Free WorkshopI was in our Irvine campus with a student recently who related to me how she would become angry when she would find a really good setup but then hesitate in putting in the orders. Invariably, those trades she didn’t take would work. Seeing these trades work would increase her anxiety to the point that she had to put on a new trade, no matter what. As you might imagine, the trades she took in this state of emotional duress rarely worked. After taking several losses and watching her account slowly dwindle, she started becoming depressed and then became stricken with self-doubt.

I suggested that she start monitoring how she felt when this occurred again. If she missed a trade and became angry or anxiety ridden I recommended she build a rule in her trade plan that would get her to get up and leave her trading office for at least 15 minutes, or until her head was clear, whichever came first.

I also got her to think about the fact the trading is not just about one or two trades but many trades; so she didn’t have to be stressed over missing one trade. She needed to stay available (mentally) for when the next opportunity presented itself.

I heard from here recently and she thanked me for the suggestions as they have helped her deal with some of her issues.

To continue with this theme, one particular day in class last week the Equity Futures were not providing a lot of quality opportunities. The markets were very choppy and trading in very tight ranges. I ended the trading and analysis session as I noticed many students were starting to force low quality trades. I told them that the markets would probably expand their ranges later in the day and we could look at them towards the close of the trading session.

The E-mini Nasdaq contract in particular had a high quality supply zone that was in proximity; however, as we can see in the chart below, the morning session was very choppy.

NQ chop 2-4-2015

The second chart displays the aforementioned Supply zone.

NQ quality supply  1-4-2015

Half an hour before the closing bell the E-mini Nasdaq rallied nicely into the supply and, uncannily, that’s when negative news from Greece hit the tape. This news caused all the equity markets to selloff (chart below).

NQ result 1-20-2015

Incidentally, this level was on the Mastermind grid so I’m sure many students participated in this trade.

What I’m trying to convey here is that there’s no point in going through any consternation because a trade is missed. There’s always another opportunity around the corner, you just have to be mentally prepared and have the patience to wait for it. That requires always staying positive and in the moment. Next time you feel anxiety creeping into your trading because you didn’t catch a trade just think to yourself, “Relax, there’s always another trade,” and your results should improve.

Until next time, I hope everyone has a great week.

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.

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