Why?
Probability is the name of the game in trading, not luck, not intuition; no, it’s important to choose high probability trades on a consistent basis. One way to make high probability trades is to avoid trading against the trend. Another way to make high probability trades is to develop flawless technique and precise execution. Oddly enough, neither one of these criteria is particularly difficult to master, at least at the intellectual level. However, throughout the course of a trading session situations develop that can shape traders psychological market outlook and affect his view of the market.
For example, a trader may start the day with a succession of trades that don’t pan out and lose money. At this point, it’s not unusual for a trader to glance at his trading account balance and realize he’s lost a bit of money. The natural reaction to a losing trading session is to try and get your account balance back to where it was at the start of the day. There are two approaches a trader can choose at this point:
1. An experienced trader will stick with his original game plan and gradually trade his or her way back into profitability, if possible. Sometimes this is not possible, and a good trader realizes that every day is not a profitable day. That’s okay.
2. An inexperienced trader may increase the number of contracts he or she trades in order to trade his or her way back into profitability. Further, is not unusual for an inexperienced trader to take lower probability trades in hopes they “work out.” This approach to a tough day at the market is a recipe for disaster.
It’s important to maintain your trading technique and psychological approach to trading regardless of the outcome of your previous trades. It’s imperative to maintain laser sharp focus and not deviate from the methodology of your trading plan. On the other hand, a trader may be having a great trading day. There are also two approaches a trader can choose at this point:
1. An experienced trader will stick with his or her normal trading methodology and continue on the same path that has provided him with superior trading results for the day. Regardless of his or her account balance, an experienced trader does not deviate from his or her trading style. Great days are a luxury to be enjoyed.
2. And inexperience trader may feel that he or she is “on a roll” and take lower probability trades combined with higher contract numbers in the believe that whatever trade he or she takes is going to be profitable. I have seen this on numerous occasions.
The point I am trying to make is a simple one, stick with your trading methodology and psychological outlook on trading regardless of where you find your futures account balance. Trade the chart not your account balance and you will learn to have consistent results in your trading effort. These two factors are very common with a variety of traders, and I have observed them more than I care to discuss. And I can understand the emotion behind these two types of faulting trading technique as they are quite natural responses to finding yourself down in your account balance or way up in your account balance.
But your account balance is irrelevant to your trading. This is one of the most difficult concepts to teach novice traders because money is such a powerful influence in trading and our lives. But good traders look for good trades, and know the money will come if they make good trades on a consistent basis. In my personal trading, I turn the account balance portion of my chart off, and this helps me focus completely on the chart in front of me. It’s a simple concept, but can be very difficult to implement in your trading. After all, we are a society who judges success by money, not good trades. But the fact of the matter is more subtle; good trades make money and good trades are the result of great technique and judgment. Trade the chart in front of you not your futures account balance.
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About the Author:
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