You have to believe in your plan.

January 27th, 2012, 02:19 PM

When I trade I direct all my effort toward being present on the hard right edge. I reduce my thoughts to just a few questions: what is price doing, where did it come from, and where can it go. In the immediate tick of the bar, price is either going up or down. It may have come from below its current position and I look for a support area that may have been created as a result of this movement. I ask myself, where can it go if it moved to a commitment point. There is my target, and then I ask myself where is my risk. Support and resistance can be substituted for risk and reward in some cases, and commitment points can be defined as a failed support or resistance. Targets can be defined as the next support or resistance. You could even define it as a fib retracement, it that is what you believe in. So, herein is the secret to how I trade. I believe what price is telling me. Yes, even when it fools me and lies, I still believe what it is doing. Why? Because I do not have the answer. No matter how many times I get fooled or lied to, I know price is the only one that has the answer and eventually it will stop lying and fooling around. When it does I want to be ready to know its commitment point and take advantage of its movement beyond this point. If my strategy says the statistical probability of price repeating itself in the same pattern is high, then I trade that probability. If my strategy provides me 5 signals, then I am obligated to trade those 5 signals. If I hesitate, then it is because I failed to believe or fell into thinking that I know better what price is going to do then it does.
Belief is the first step toward following your discretionary trade plan and becoming more mechanical with your trading. Clearly defined entry and exit rules, clearly defined money management rules (the rules that define when a trade has failed) and clearly defined risk reward rules. Flexibility is another important aspect in order to be able to trade confidently. Thinking on your feet about what price is doing will also tell you when price is undecided, and being flexible enough to shift your direction according to what price is telling you is important.

January 27th, 2012, 07:12 PM

Believing in your plan is critical. Assume you have before you a single upward bar. If you had only this to base your trade on, which way would you enter? Conversely if you only had a single down bar before you, which way would you enter? I hope your answer is up on the up bar and down on the down bar. Sure that might seem like a silly thing to illustrate, but did you find that easy to answer? Do you truly believe that it is/was the correct answer? Trading is not rocket science – trading is simple. Sticking to your plan, that is what makes it difficult - the human factor. See Long, go long, see short go short, what’s hard about that? (big grin) It’s about learning to see and read the direction, momentum and potential support and resistance (demand and supply) locations instantly as they form and project on that hard right edge of nothingness. It’s about summarizing all the available information down to upward or downward - then with confidence in your plan and read - take the trade. Practice reading for a while, then simm it for a while, then and only then go live. Treat it all as if it is live. Only you will know when you’re ready to progress, only you will know when you’re doing it right.

You have to believe in your plan.

Discussion in Psychology and Money Management

You have to believe in your plan.