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Perhaps managing emotions is a more practical objective than detaching
emotions. If fear grips you at the very thought of pulling the trigger,
scale trades down in size until the consequence of loss will have
nominal financial impact. If you are unable to exit losing trades when
you should, force yourself to place stops in the market immediately when
you get your fill. If you are unable to scratch trades which are going
nowhere, start scratching any trade without a profit in 4 bars (unless
you have been stopped out). If you trade from the hip, force yourself to
use a written plan. If you are unable to take profits when you should,
make a habit of taking some profits any time your profits are twice your
initial risk. Actually, most successful traders routinely employ most or
all of these techniques.
These of course apply to discretionary trading ... those who trade a
system should just execute. There is simply no substitute for learning
to trade and managing the psychological factors by doing it day in and
day out putting on and taking off hundreds and hundreds of trades. Paper
trading may help one refine a system but it does nothing for learning to
handle the psychological aspects. The problem for most newbie traders it
that they don't prepare themselves for hundreds of losing trades and
wipe out financially or psychologically long before they've learned the
game. This is why the first rules of trading are to trade small (risk no
more than 2-3% of account size), rigorously control losses, and scratch
the wanderers. Even experienced traders (and good systems) have bad runs
... I had a losing run of 14 trades, however the total drawdown for all
14 was less than 2% of account size so I was able to get through it with
little more than temporary damage to my ego.
Earl
----- Original Message -----
From: "Jonathan s Dempster" <jd@xxxxxxxxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, July 12, 2000 3:40 AM
Subject: [RT] Re: Trend Reflections Trading System/psychology.
> i personally used to think that if i knew another persons system then
i'd
> simply be able to follow that and extract cash from the markets. and
yes
> while the basic concepts of another persons system maybe helpful its
your
> OWN prsychological interaction with the system that will govern
success or
> not. I guess this is the aspect of trading which can take years of
> learning. Knowing who you are, how you react, why you react.
> It's lead me to the realisation that ultimately you need to be
detached
> from your emotions as best you can. Ive traded last year and sensed
how i
> was behaving, aggitated, sweats, increased heart rates, feelings of
dread,
> feelings of jubilation.. gripped by my own emotion.... no wonder i
didn't
> succeed.
>
> But for me i see that as part of the learning process, its focused me
into
> looking into my own psychology and asking a few questions. I'm still
> fascinated with the whole aspect of trading and continue to plod
away in
> the background with my own education, assmembling a system to fit in
with my
> own make up and expanding my overall awareness of my actions.
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