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Focus on the Obvious

Humans have a tendency to forget the obvious. We often think that life is more complex than the issues right in front of us, and that obvious solutions offer little solace when trying to find solutions to seemingly insurmountable problems.

The markets are complex at times, but the psychology of the market is not. And the psychology of winning isn't all that complicated either. It is vital to accentuate the obvious. You may have heard it time and time again, but there are a few axioms of trading worth repeating: Trade with discipline, manage risk, and think of the big picture. Each of these seemingly obvious issues can powerfully influence your trading performance.

Trading with discipline means developing a detailed trading plan and following it. Obviously, if you don't have a plan, you'll trade by the seat of your pants and make errors. You'll enter too late or exit too early. You'll make impulsive moves that lose money. The disciplined trader is the winning trader. It's obvious, but many traders forget this simple fact of trading profitably. Similarly, many traders refuse to admit that there is an element of probability involved in trading success. Sometimes the odds work in your favor and sometimes they don't. If you manage risk, you'll be able to account for those times when the odds just are not working in your favor. If you don't manage risk, though, you won't be able to ride out the bad times. Again, it's obvious, but many traders wipe out their account balance because they risked too much on a few bad trades. Similarly, no single, isolated trade should be more important than any other trade. Don't elevate a single trade psychologically,

Don't under-emphasize the obvious. Accentuate it. Get a whiteboard and write down your favorite axioms of trading. Put the list in a prominent place to remind yourself throughout the day of what's important. It will keep you focused and make you a winner. 

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Saturday, 22 June 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.