Who Break's The Rules Most Often?
Many intuitive dealers can visualize market tops and bottoms before they occur. These Traders are the ones to likely be found breaking the rules of moving stop losses. These traders enter to early on these trades,and suffer losses before eventually getting on the right side. They believe in their idea is so strong that they get stuck and keep executing from that side, when that happens these traders can lose a significant amount of equity. So much that when the trade does come, its really only an opportunity to get back to flat.(On par)
These traders know that a bull market can stop being a bull market long before prices stop moving higher, and conversely a bear market can stop being a bear market long before prices stop moving down, this is what these traders are recognizing. They are looking ahead and can see the far greater potency on the other side of the market. They know the turn is coming, and start to think beforehand about the huge profit capability. This is the beginning of the problem. This goes back to the old directive don’t endeavor to pick tops and bottoms. With that stated we all know that a market must peek and bottom, the lowest risk and highest profit potential or at these terms. Identifying these turns is a completely separate issue. One way is looking for key reversals. A Key Reversal is after the market has tested a new or old high or new or old low. A key reversal is a bar that equals or surpasses a high only to close lower than the open.
That is what I call a key reversal downside. A key reversal up side is a bar that tests a new or old low, is either equal or surpasses it only to close higher than the open. The problem is not identifying the turns, the hitch is being prematurely.
The psychology behind becoming a first-rate trader is the issue of non-attachment. Many traders that blow out and never developed this all key talent, and it’s a disgrace because they were good. They have a strong understanding of the market they trade, feel very certain their approach, and grasp they cannot profit unless they execute a trade. They then talk themselves into a trade with the “time is now” tone. It is because they have a vested much in forming their conclusions, they place a strong belief attachment to the price that they execute at.
When traders do this to themselves( attachment to a particular price point.) it begins a damaging thought process that makes a trader assume something is incorrect if prices do not react favorably in a reasonable amount of time. That time frame is another tough parameter that the traitor makes up his own judgement. Instead of being open and loose the trader starts to become tight and shut. He starts to feel stuck and gives himself very few choices. This is the commencement of a possible meltdown in the traders account. He will uniformly keep trading the same way until it’s too late. The trader should have the mindset, if the price they selected is not at the turn of the flow than this trade will not work from that price and time in the market.
He should comprehend it might ultimately work, and the time might be sooner rather than later but in the meantime the market is not wrong.
The market possibility that he has, might be the exact future that the market has in store; however not at this particular time or price relationship, and he is on the losing side and should step away. Your beliefs have zero to do with what the market is doing.
By accepting the earliest loss you can cut your beliefs from the equation. You will be able to think and formulate improve again. When you accept the loss you will understand the glitch is not amongst the market. The problem is within your deal speculation. It will burn you, but better to be pissed then hung.
You must develop the ability to be uncommitted. Court your positions don’t wed them. No one trader can call the exact time and price of a turn, when unreservedly looking for them. They will come when the trader is not attached and is loose in his thinking, not rigid. When you do proper planning stay non attached you’ll be able to reenter at a more advantageous price location. You must realize that you will have more awry entries over correct entries over time. Being emotionally attached and strongly attached to any one price area, or anyone trade could be the end of your trading account. As a matter of fact I have seen this happen with some great traders, they got emotionally stuck and as soon as they lost a important amount of their account they liquidated, only to have the market turn once they did. So don’t argue with the market, let it reply to you and be bold decent to listen. Be willing to take a new fresh look at it.
Your first loss is your best loss because it tells you something very authoritative. A loss tells us that we are on the wrong side of the Market Flow. It also give us other choices.
1. Get on the right side of the Market ;
2. If you are on the wrong side, get out.
Ignoring, blaming, justifying, getting angry does not preclude losing more or stopping another loss. The only thing that prevents that is finding out where your hypothesis is flawed. If you have done a good job in your outlook, you must also have a reasonable amount of willingness to admit you may be early, or your hypothesis is completely incorrect.
Suppose you are 100% correct but 3 months early. You will burn through a lot of capital by ignoring the example of the foremost loss. What if you are completely awry? Then you run the jeopardy of downfall.
If you can frankly say that you don t care what happens on one trade, you are a lot closer to getting enhanced as a trader. All great traders know that trading is a procedure, a sequence of events. Not one event where they risk it as all or nothing.
Remain completely unattached.