I have been on a bit of a hot streak lately. I’ve been trading from a very focused mindset and looking for a couple of specific types of setups.
…an alert came through from a service I’ve been a subscriber of for a long time. Somehow, all logic went out the window, and I abandoned the plan in favor of some impulsive trading. Big mistake.
What had been a solid mindset, trading according to a very specific plan, with specific risk and position sizing, on paper no less, turned into a free-for-all that was more akin to the wild west of trading. It was pretty sad really how quickly I fell apart. Not only did I deviate from the plan that was working so well, I broke my month-long May rule of paper trading only. I put real money on the line to blindly follow a “guru”.
Needless to say, the next few minutes resulted in a nice quick loss that was over 5x the size of my average loss all month, followed by a couple of hours trying to make it back. We all know how well that mindset goes. Fortunately, I took 2 more trades, one flat, and one that covered the amount lost, and walked away with a very valuable lesson:
STICK TO THE PLAN!
I have to remind myself every day that the market is always right, and it always wants to take my hard earned money from me. The moment I think I’m smarter than the market, is the moment I’m headed for a nice big loss chalked up in my corner.
You need to come to the market with a plan. Predetermine what types of setups you’re looking for, what your max risk on any one trade is, what your target exit points are on a trade, and what your goals are for the day. Then stick to the plan. Don’t let an alert from a guru, a Twitter message from someone you’re following, a message board or chat room, or any number of other data avenues tempt you to deviate from the plan.
It’s not always easy, but at the end of the day, I’d rather make or lose money based on my plan and my plays than I would being a sheep simply following what some other trader says I should do.