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CURRENT MARKET TREND: Up 5/27/16 @ 2090
Stop-loss 2026






Tuesday, March 25, 2014

The Naysayer & The Envious - Emotions

Whenever a person is posting their personal trades other people will always step in to tell them why they are wrong. Some people do this because they are on the other side of the trade, and some do it just to do it, maybe due to envy. You'll never know the reason, but always know that there will ALWAYS be people judging you.

Emotional trading mostly occurs when a trade works against someone. In their mind they still see that the stock, index, commodity, etc. should be going up or down, so they jump even more into a trade.

When I see a trade coming to fruition I will generally research a trade for AT LEAST 4 hours before I set my trade PLAN. Without 4 hours of research I'm just guessing, and that's not how I play. After setting the original parameters of the trade, stop-loss and take profit levels, entry points (which I usually scale into positions) I then measure the risk/reward and see if it's even worth putting my capital at risk. I'm not going to lie, I love my money, so parting with it hurts.

Only after I've researched, initiated thought of the trade, identified the trade parameters, worked through the risk/reward ratio and consulted other related markets will I actually take a trade. Yes, it takes time, but it's my method.

There IS EMOTION in my trading. I do second guess myself, but I know my work and trading plan have identified my risk. I'm always nervous, anxious, excited, worried, etc about a trade, but when you set a plan you don't need to listen to those emotions. You just let your plan play out. 

When I get stopped out of a position, it is just that; a stop out and I'm out. I usually don't move my stops from my original trading plan because capping that risk was the reason I took the trade. I have in the past and it generally didn't work well, multiplying my losses. When I do get stopped I take a look at the trade again. I review my prior analysis, look at the trade setup and plan. I then look at all the information I have at the current time after the stop was triggered. I use all of this information to formulate a new trading plan, or...

I move on. I take that stock off my radar and move on. There are so many markets to trade that I should be able to find a cleaner setup on something. If I can't, I'll save my cash for another day. Capital PRESERVATION should be the number 1 trading rule in anyone's book.

The point of the story is I do feel emotions while I have a trade on. Whether it be doubt, overconfidence, worry, excitement, etc. You can have emotions and trade, but trading with emotions is different. If you can't look back on a failed trade and not feel bad because you did the work setting up a good trade, you shouldn't be trading. Some of my best trades have been losers.


6 comments:

  1. Hello James,

    Great post!.

    I see a bat on QQQ 5 minutes chart (left and right wings around 90.65), that will be complete with highs over this level (not necessarily ATH).
    Do you still expect the same top levels from below post? Or you Wave 5 count is not longer valid?
    http://unbiasedswingtrades.blogspot.com/2014/02/qqq-tracking-high.html

    Thanks,
    Lorenzo

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  2. Good post, James

    I believe it was Jesse Livermore who said, " Markets are never wrong, opinions often are". Even though we do our homework, we often end up on the wrong side of the market. The markets do NOT take in to account our opinion. You point of capital preservation is so true.

    Herm

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  3. Lorenzo, those targets are all valid still and the Q's are still dancing around that first FRZ.

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  4. Thanks James.

    I'm expecting a top on SPX between 1888-1895, let's see, price start to looks very tired already on the 70's.
    Lorenzo

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  5. Lorenzo - Look at the triangle on the transports, that should break upwards.

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