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Overcoming Emotions and Zen TradingOvercoming Emotions Most traders want to "overcome" their emotions. They view thoughts and emotions as the enemy which prevents them from succeeding in the market. This is a false perception. Yes emotions and thoughts can lead to actions in the market, but they are impossible to remove. So long as you are human you will have emotions and thoughts. There is an alternative to removing them, and that is to use them to your advantage in the market. By practicing mindfulness, which is awareness of thoughts, emotions, and perceptions, you can learn to recognize how these affect your trading performance. By recognizing and being aware of them, you have a chance to change the outcome. For instance if you consistently enter poor trades due to fear of missing out. When you become aware of this fear you can learn to stop yourself from entering and avoid the poor trades that hurt your performance. There is a direct correlation between how you feel about yourself or the market, and how you perform. If you are worried about money you will overly focus on risk or prices going against your position even if only slightly, and likely make a mistake by exiting too soon. Or you do not want to take the loss and will hold the trade too long, hoping the market will let you off the hook with a smaller loss. What is Zen Trading about? Zen trading is a mindset of flowing with the market without hesitation, being aware of and trading along side emotions, and making actions intuitively rather than forcefully. A Zen trader remains in a relaxed, effortless state of mind; without any internal struggle. He does not attach his self worth to his performance at any given time, and is unhindered by market outcomes. He acts on his edge when it is present without hesitating, and takes what the market gives him when it is time to do so. He trusts himself, his strategy, and the market to provide him with a consistent performance over time; whether or not he makes money on this trade, today, or this week. He is aware of the bigger picture; the Tao or life, and knows there is more to life than trading or money. Trading is not his life. It is simply something he does to earn a living, and he seeks to maintain a Zen spirit in his trading and actions in the market. *If you find this analysis helpful please like! Feel free to comment or ask questions.
by tradersmentality
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Lessons from an Experienced Trader Lessons from an experienced trader. Lesson 1. Never scalp. Although scalping seems to be the most profitable and best method in today's market, it is certainly not. Scalping is the hardest method to achieve a consistent performance. High frequency trading firms scalp, but they have many advantages over the retail trader including direct access to exchanges, highly developed algorithms with no emotions, and extremely low costs to name a few. When you are scalping you are competing against these firms or trying to manually do what they do with a computer. This above is only one problem. The bigger issue is the risk involved. When scalping, you must use a wide stop and be willing to scale in. One bad trade will erase 20 or more good trades. You must be extremely proficient at reading price charts, and be able to act without hesitation. This is virtually impossible for anyone who has not been trading for at least 3 years and has done extensive work on himself to develop the ability to flow with the market, constantly, without any internal conflict. And worst of all, scalping leads to bad habits. Once you get into the mindset of "get out quick" it is very hard to correct down the road. This makes swing trading more difficult later on after you realize it is a better method. Lesson 2. Swing Trade the best setups Swing trading is much more forgiving than scalping, offers a larger reward, and allows for a smaller risk (usually). This makes it much easier to make money long term. When swing trading you only have to win on around 40% of your trades to make a profit. If you can develop the patience to wait for strong setups, you can increase the winning percentage to anywhere from 50-70% and greatly increase your traders equation. A swing trading approach is also more forgiving when it comes to reading price charts. Some of those who discuss Price Action would lead you to believe you can predict what the markets are going to do next. This is simply not true, no matter how good you are at reading a chart. There is always a degree of randomness in the market, with any edge, any setup, or any context. When swing trading, you can afford to be wrong and make mistakes. So what setups should a swing trader take? Well, it depends if you want to always in trade or swing trade with signal bar stops. Either is fine, although an always in approach takes more practice and is harder to get right until you are good at reading charts. An always in trader has two choices. One to take every logical reversal (hardest to accomplish), and constantly reverse when necessary. Or two; wait for the always in direction to be clear and enter any in any fashion until the market flips. The second method is easier, although still tough, and slightly less profitable. An always in trader does not trade when prices are in a trading range. The reward is simply too low, and there are too many reversals to take and that fail, resulting in repeated losses and increased commission costs. What about a swing trader? A swing trader typically uses a signal bar stop, but can also use a swing stop to increase his probability. A swing trader does not have to take every trade he sees (unlike the first always in trader). In fact, it is best to wait for the best and clearest setups. What setups are these? High 2's, Low 2's (large) reversals and flags, Wedge reversals and flags, failed breakouts, and failed reversals. The first two are much easier to identify correctly for someone with less experience. The later two often trick newer traders, or fail once or twice before succeeding, making it a bit harder to get right. Lesson 3. Work on your self Like discussed before, most new traders and even those who have been around but haven't reached consistency believe that eventually you can read prices well enough to predict what will happen next. It does not matter how long you have traded, you will never predict the market. If it were possible to do so, the market would cease to exist! So instead of only focusing on reading charts and price action, you must work on your self. You must understand your strengths and weaknesses. You must be aware of your emotions and how they affect your performance. If you do not believe your emotions are directly related to your performance, you will not achieve consistency long term. We are all humans, a computer cannot do what I do. And you cannot remove emotions, no matter how hard you try to do so. So what is the alternative? Develop awareness of them, and use them to your advantage! It is as plain and simple as this. Trading requires you to understand your self, on a deep and internal level. You must be in tune with your self and the market. If you chose to ignore this fact, you may succeed temporarily, but it is only a matter of time before your performance diminishes. In order to make a lot of money, you must feel you deserve it. If you do not work on yourself, this simply will not happen. Does a professional athlete become a star by waiting around for his coach to tell him what to do? No. He dedicates himself in every possible way to his sport, including conditioning his mind to outperform his competition. Rather than waiting 2 or 3 years before realizing this, start working on your self from the very beginning. Not only will you become a better trader faster, you will become a better person; a better you.
AEducation
by tradersmentality
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