After an overwhelming (by the standards of this blog!) response, it seems that there is a lot of interest out there for a series of posts on trading.
I can’t promise exactly when they’ll be delivered, since it largely depends on my mood – if I’ve had a good day, I feel like king of the world, ready to impart some knowledge. If I’ve had a bad day, all I want to do is go and seethe quietly in a corner, berating myself for my own idiocy. I’ve actually slapped myself in the face a few times for making bad decisions. I also need to ensure things are laid out in a clear, concise manner, since I don’t want to put up some aimless, confusing posts.
You’ve got to remember, your worst enemy in trading is your own brain. You will be controlled by the two most prominent emotions when facing the markets, fear and greed. Fear will make you avoid hitting the button on a trade which then turns into a massive winner. Fear will also make you bottle out of a trade too soon, which has a long way left to run. Greed will make you go in on bad trades, without waiting for a proper setup, which quickly go against you. Greed will make you keep moving your stops further and further out, thinking “it’s going to turn any time, if I just keep moving my stop, it will turn”. And then it doesn’t, and you wipe your account out with a single shitty trade.
Before anything else, you have to get your brain in order. If you are a compulsive gambler, or you’re generally a nervous wreck, then sorry – trading isn’t for you right now. Go away and work on your issues, and come back when you’re a little more together. If you put someone with personality issues in front of the markets with a pile of money to burn, then you probably don’t need me to tell you what’s going to happen.
I can give you all the technical knowledge in the world, but it won’t mean anything if you can’t trust yourself to apply it. I’m still battling my own brain at this point, and I’m slowly managing to get my more reckless impulses under control. My main problem is actually overconfidence, backing my own (sometimes flawed) judgement far too strongly.
I’ve had to set up a huge warning screen that flashes up when I’m about to place an order, with a list of rules on it. If the bet doesn’t satisfy the rules, I don’t go in. I read once of a trader who every time he broke one of his rules, went and jumped in the swimming pool out the back of his house. He quickly conditioned himself out of the habit!
Ok, that’s enough rambling for now. The topics I will be addressing (at present, this might change) will be: (edit – already thought of a couple more things)
- Supply & Demand
- How to Identify Levels of Supply & Demand on Charts
- Price Action
- What Type of Trader Are You?
- Putting It Together – Spotting Entry Points, Setting Reasonable Targets
- How to Keep Yourself In a Trade
- Economic Events
- Money Management – How to Protect Your Capital