Outguessing the Markets

What goes through your mind when you are looking for an entry in the markets? The biggest problem for most traders is that they look at it from so many different angles that they talk themselves into a trade or they talk themselves out of a trade because they are not focused on their pre-determined rules. The reasons for this are:

* They have studied too many strategies and see opportunity or loss in many scenarios in their mind

* They want to be creative, an active part of the process to make it interesting and or exciting

* They took a similar trade that made them a profit even though they were not following their rules

* They want to be involved in a trade even though there are no opportunities because they do not want to be bored

* They feel guilty if they are not trading because of their work ethic that they should be doing something

* They do not want their strategy to be their authority even though they were the authority over that strategy

* They feel that they know better than the strategy that they created

* They want to be intuitive, to go with the flow, like Master Traders

The bottom line for being a consistent trader and making consistent profits is that you follow predetermined rules and not try to outguess what the markets are giving you within the parameters of your strategy.

The good old days

Al was a top trader with a strategy that worked for him for years. He relied on the intuitive part of himself to continue to provide him with the lifestyle he had become accustomed to enjoying.

Al went through a series of losses that changed everything. First he lost his best friend and mentor who happened to also be his father. He started drinking and taking drugs. His depression made him impossible to live with, which resulted in his wife and child moving out. Of course, this affected his trading, so he stopped for a year to travel around the world. He met a young lady who brought him back to himself and life.

When Al started to trade again, he found that his strategy did not produce the same results, and he could no longer rely on his intuition. This is when he called me. I recommended that he go back to basics and work with a trading mentor. The mentor called me up and said, “This guy needs some head work.” When Al called me again, he went through a story that led to this piece. He said that while the new strategy tested out great in simulation, part of him was still clinging to the old strategy. He resented the new strategy because it was not the one that his father had taught him. The thing that bothered him the most was that he felt that he was not a real trader unless he used his intuitive abilities.

Al and I worked privately on overcoming the losses in his life. I promised him that if he followed the rules of his strategy for three months, his intuitive ability would come back to enhance his ability to see opportunity. He did and is now earning more profits than he did with his old strategy.

Conclusion

Focus for opportunity must come from a predetermined entry and exit strategy that has been tested. Once a trader has been consistent in earning profits, expansion in looking at other strategies or adding an intuitive filter can be considered.

Adrienne Toghraie coaches traders and investors to their next level of success by helping them overcome their self-imposed limitations. She has been a keynote speaker since 1989, author of 13 books, and owner of TradingOnTarget.com.