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Traders "Pro Active" and "Ray Active" – A Story!

Traders "Pro Active" and "Ray Active" – A Story!
Pro Active and Ray Active are both wannabe traders, but their approach to trading is quite different. Ray is consumed with trading for profits. He imagines himself achieving great wealth, and thinks that when he amasses the riches he is after, he'll finally get the respect and recognition he always wanted from his wife, family and friends. He thinks, "If I can only make it as a trader, I can show ...
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Pulling the Trigger

Pulling the Trigger
"Sometimes I absolutely dread sitting down to trade. I have had so many bad experiences that I'm not sure I can pull the trigger. Anything I can do about it?"    What happens to us as we trade colors the way we see things in the market and influences the way we approach them. We take a big hit in a particular market and we decide never to trade there again. Or, when we have a great ...
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Pride Goes Before a Fall

Pride Goes Before a Fall
Next to lack of discipline, I find that pride has resulted in the destruction of many traders. Pride is a powerful emotion. Pride is what we feel when we've made a great trade or done something that makes us look good in the eyes of others. Trading is a tough business. Few traders succeed at it, so when you are doing well, you feel proud. But watch out! There come a time when pride can overpower y...
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Mounting Losses

Mounting Losses
There are at least three things you can do to avoid mounting losses: 1. Write off a relatively small loss 2. Admit your mistakes 3. Don't let the desire to protect your reputation interfere making logical trading decisions. The three are common human shortcomings, and you need to be aware of them. None of us are immune and if you are not aware of these weaknesses you will not be able to keep them ...
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Why do some traders make money with seemingly effortless confidence while others sweat bullets every time they act?

Why do some traders make money with seemingly effortless confidence while others sweat bullets every time they act?
We sometimes delude ourselves into thinking that the most successful traders somehow were somehow born different from the rest of us. We imagine they were born to win no matter what they did. But if that were true, you would also have to believe that those who succeed tend to do so because of their genes, social background, or luck, and not because they pursued success with more diligence, patienc...
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What should I do after closing out a trade?

What should I do after closing out a trade?
You must be disciplined in following the plan of your trade religiously. Once you have closed your position, you should record everything about the trade. Write down where you wanted to enter the trade, what you expected out of the trade, and what you actually did get out of the trade. Make sure to include notes that will help you learn from the trade, reasoning what actually took place once you e...
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Keeping a trading journal

Keeping a trading journal
I keep one of sorts, it is part of my monthly homework. The journal is very basic and includes what trades I made during the day and my reasons for getting into the trade. My journal has changed a bit over time since my reasons for entering a trade now are pretty consistent. I think there are three reasons for keeping a journal. One reason is to have a manual backup in case there's a system or sof...
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The "Now Trap"

The "Now Trap"
There is a great attraction in all aspects of the modern age to immediacy. Likewise, most of the trouble in trading occurs through this love affair with the "now," with impatience, and with trying to hurry up the trading game. Traders want to make money in the markets now, today, and not tomorrow or next week. We love the Now. We are devoted to it and give it much weight. This problem may be espec...
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I just wiped out for the second time. Am I some kind of trading freak?

I just wiped out for the second time.  Am I some kind of trading freak?
Most successful traders failed at some point in their careers and wiped out their account. Many traders lose because they do not understand the nature of the decision-making process, which should be based on rational price action analysis versus emotional, irrational reactions to price action. A reason should be required for each market action taken. When fear exits a trade, it is more difficult t...
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Being in a positive state of mind

Being in a positive state of mind
Being in a good mood won't necessarily make you a winner, but being in a bad mood will almost assuredly make you a loser. Starting since time began, the number of people who have won large sums of money through trading while feeling depressed, irritable, or angry could probably be counted on the fingers of one hand! In short, try to trade when you are in a good mood. Restrict yourself to times whe...
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Patience as a Central Pillar of Your Strategy

Patience as a Central Pillar of Your Strategy
Think of patience as a primary part of your trading strategy. Don't assign it a secondary or lesser role, elevate it on the list of what you consider important. And don't be put off by it when it doesn't seem to be working — it's working. Don't start feeling self-righteous about not trading, as if now it owes you (because you have been so disciplined and patient). This is a trap. Don't start to fe...
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Achieving Self-Esteem

Achieving Self-Esteem
The single most important component of the personality related to personal achievement is self-esteem. Self-esteem is simply how much an individual likes himself and correlates to high achievement on a one-to-one basis. The more an individual likes himself the higher levels of performance he can achieve in any area of his life. Traders should always have at least one physical or mental activity ev...
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Emotional Extremes

Emotional Extremes
Many beginning traders undergo emotional extremes, feeling sheer ecstasy after a win, but crushing disappointment after a loss. However, as a mature trader, you grow to realize the folly of allowing the natural ups and downs of trading to impact your emotions. Although as a winning professional trader you may stay calm and relaxed even after a series of losses, remaining rational and composed can ...
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Admit when you are wrong

Admit when you are wrong
Recently I heard another tale of woe involving the failure to admit being wrong. This man followed a familiar path. As a day trader in the E-mini S&P 500, he first contacted me to tell me that he was unhappy with the data he was receiving. He wanted to know if I could recommend a good trading program for him. I mentioned a couple of them to him and he decided on one. Another interval of time w...
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Overtrading

Overtrading
Overtrading is putting on trades unnecessarily, arbitrarily, and without a specific trading plan. Overtrading can also be trading with more risk than you can afford, and trading more contracts than you can effectively manage physically, mentally, and emotionally. Mistake #1: Assuming a real trader trades all day. Mistake #2: Trading for excitement. Mistake #3: Trading because you are frustrated. M...
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Some things that keep traders from “making it”

Some things that keep traders from “making it”
Three psychological traits prevent traders from becoming consistently successful, fear, anger and guilt. Fear blocks the trade decision making process due to worry about negative events that may or may not occur in the future. Guilt blocks the trade decision making process with unresolved concern about something that happened in the past. Anger is an emotional response to guilt, fear, the indecisi...
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Developing a Trading Style

Developing a Trading Style
Master Traders develop a style that is a reflection of their education and character. Most individual trading styles are either positional or combinational and, rarely, a synthesis of both. However, there are other styles.  Positional traders take x amount of positions within a specific price area where the market is thought to be favorable to their trading strategy. This may occur on short t...
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What kinds of emotions go with winning and losing?

What kinds of emotions go with winning and losing?
Once a trade is entered, there are two possible outcomes: Win or lose. Between the two is the breakeven point, and because it is in-between, it’s psychologically significant. Losing is involved with fear and hope. Winning is involved with greed. When on the losing side of a trade, the breakeven point is a place that inspires hope. Being human we have a natural tendency to avoid risk and loss. When...
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How do you go about making trading decisions?

How do you go about making trading decisions?
Careful analysis of all possible alternatives and all possible consequences of your trading decisions is the first step in good decision-making. Make every attempt to avoid impulsive trading decisions, invariably these lead to taking unnecessary risks. Strive to have a clearly defined trading plan, but keep it as simple as possible. Chart the equity of your trading method so that you can quickly k...
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Is it really possible to be consistently profitable?

Is it really possible to be consistently profitable?
When you are in a slump and feeling frustrated and disappointed, you tend to think, "I'll never be profitable, and there is nothing I can do about it." The consequences of such reasoning are that you'll never feel like putting on a trade ever again. It is better to think, "Profitable trading is almost impossible, but I can learn how the markets work, develop the necessary skills, and eventually ac...
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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.