Well, It’s Sunday and time for my Rant.<\/p>\n
I just came back from a mini 4 day vacation to the Florida West coast in Anna Maria Island \/ Holmes Beach. It’s wonderful over there. I had time to do lots of sleeping and to let the Sea Breeze waft through my brain….it does a body good. I was about to start my Rant but decided to check my email and there from the Elliott Wave Club was a free download of a “Complimentary 32-page Trading eBook from EWI’s Jeffrey Kennedy”. Well though I used and respect the Elliott Wave, I no longer use it and more over I don’t know who Jeffrey Kennedy is. Never the less “free” is still a powerful word. So I pulled down the 32 pager and began to read\u00a0 because anything on Market Psychology now gets my attention. (In my opinion charting and all that technical stuff should come after Market Psychology but yes, I know, it’s not as sexy and would not sell). Anyway, as it turns out, Jeffery spoke exactly about what I had on my mind. There are no coincidences (this I believe). I’ve gone over it before but he puts it together very well so here is an excerpt from Jeffery Kennedy:<\/p>\n
I. How To Make Yourself a Better Trader <\/strong><\/p>\n From The Trader\u2019s Classroom Collection: Volume 1<\/em><\/p>\n \u00a0Define Yourself: What Kind of Trader Are You? <\/strong><\/p>\n \u00a0As a trader, it is imperative that you define your approach to the markets. For instance, do you follow the trend or do you like to play breakouts? Are you a commodity trader or an index trader at heart? What\u2019s your trading time frame, five minutes or five weeks? Moreover, how do you analyze markets, fundamentally or technically? Do you prefer using a black box type trading system or making your own calls?<\/p>\n My trading style is to trade with the trend. Specifically, I like to buy pullbacks in uptrends and sell bounces in downtrends. My markets are commodities, and my time frame is three to five days. If I catch a trade that has some legs to it, and it lasts a little longer, that\u2019s fine with me. Bottom line, though, I\u2019m a take-the-money-and- run kind of guy. This is who I am as a trader.<\/p>\n \u00a0In addition to the Wave Principle. I include basic chart reading and bar patterns in my analysis. While I do use a few select technical studies in arriving at my decisions. I have always believed that \u201cprice\u201d is the ultimate indicator and that everything else is secondary.<\/p>\n \u00a0Remember, success in trading comes from the consistent application of a proven methodology. If you don\u2019t define your methodology, then your trading style could change with each new issue of Stocks and Commodities magazine. Trying a variety of analytical techniques rather than consistently following one is a problem for traders, and it\u2019s also a great way to lose your trading account.<\/p>\n [September 2004]<\/p>\n \u00a0Why Emotional Discipline is Key to Success <\/strong><\/p>\n \u00a0<\/strong>To be a consistently successful trader, the most important trait to learn is emotional discipline. I discovered this lesson the hard way trading full-time a few years ago. I remember one day in particular. My analysis told me the NASDAQ was going to start a sizable third wave rally between 10:00-10:30 the next day … and it did. When I reviewed my trade log later. I saw that several of my positions were profitable, yet I exited each of them at a loss. My analysis was perfect \u2014 it was like having tomorrow\u2019s newspaper today. Unfortunately. I wanted to hit a home run, so I missed hitting singles and doubles.<\/p>\n \u00a0I now call this emotional pitfall the \u201cLottery Syndrome.\u201d People buy lottery tickets to win a jackpot, not five or ten dollars. It is easy to pass up a small profit in hopes of scoring a larger one. Problem is, home runs are rare. My goal now is to hit for singles and doubles, so I don\u2019t let my profits slip away.<\/p>\n \u00a0Since learning that lesson. I\u2019ve identified other emotional pitfalls that I would like to share. See if any of these descriptions sound familiar.<\/p>\n \u00a01. Inability to Admit Failure<\/strong><\/p>\n Have you ever held on to a losing position, because you \u201cfelt\u201d that the market was going to come back in your favor? This behavior is the \u201cInability to Admit Failure.\u201d No one likes being wrong, and for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I now know that being wrong is much less expensive than being hopeful.<\/p>\n \u00a02. Fear of Missing the Party<\/strong><\/p>\n \u00a0Another emotional pitfall that was especially tough to overcome is what I call the \u201cFear of Missing the Party.\u201d This one is responsible for more losing trades than any other. Besides encouraging overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?<\/p>\n The solution is to use a time filter, which is a fancy way of saying, wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. Anyway, I would much rather miss an opportunity then suffer a loss, because there will always be another opportunity.<\/p>\n \u00a0This emotional pitfall has yet another symptom that tons of people fall victim to – chasing one seemingly hot market after another. For instance, because metals have been moving the past few years, everyone wants to buy Gold and Silver. Of course, the worst time to get into a market is usually when everyone is talking about it. To avoid buying tops and selling bottoms, I have found that it\u2019s best to look for a potential trade where (and when) no one else is paying attention.<\/p>\n \u00a03. Systems Junkie<\/strong><\/p>\n \u00a0<\/strong>My own biggest, baddest emotional monster was being the “Systems Junkie.\u201d Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked. I even went as far as becoming a professional analyst \u2014 guaranteed success, or so I thought. Well, it didn\u2019t guarantee anything really. Analysis and trading are two separate skills; one is a skill of observation, the other is a skill of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500.<\/p>\n \u00a0I am not a psychologist or an expert in the psychology of trading. These lessons are just a few I’ve learned along the way … at quite a cost most times. But if you are serious about trading, I strongly recommend that you spend as much time examining your emotions while you are in a trade as you do your charts before you place one. What you discover may surprise you.<\/p>\n \u00a0Recommended reading: The Disciplined Trader and Trading In The Zone by Mark Douglas<\/p>\n [February 2004] Jeffrey Kennedy<\/p>\n So there it is. There are parts that really hit home for me. The part about being a systems junkie…I did that. The part about missing the party… I’m working on this. In fact, recently I have been particularly focused on this because when you look for Opportunities on the 30 sec TF there is very little time for reflection…you have to be quick …LOL. I have limited my holding onto a losing position by automatically including a stop and the SL is equal to my 2% risk so I am hard pressed to increase the risk. (I’m not saying that it has never happened now…lol) I think that all the emotional, Market Psychology boils down to two things Pride and Vanity. They have no place in the Market. Pride is the emotion that gets you into a Market position because you “know” where is it going. Vanity is the emotion that keeps you there because you “know” it is coming back (even though the Market is screaming that you are wrong). Pride and Vanity; watch for them. Get a big stick and beat them into submission. Selah.<\/p>\n","protected":false},"excerpt":{"rendered":" Well, It’s Sunday and time for my Rant. I just came back from a mini 4 day vacation to the Florida West coast in Anna Maria Island \/ Holmes Beach. It’s wonderful over there. I had time to do lots of sleeping and to let the Sea Breeze waft through my brain….it does a body […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/posts\/113"}],"collection":[{"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=113"}],"version-history":[{"count":1,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/posts\/113\/revisions"}],"predecessor-version":[{"id":114,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=\/wp\/v2\/posts\/113\/revisions\/114"}],"wp:attachment":[{"href":"http:\/\/www.fxepic.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=113"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.fxepic.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}