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Dont Discuss the Markets with Friends

аYour opinions are not important to friends and their opinions are not important to you. In stating your opinions, you will reinforce them to yourself, and you will be inclined to hold on to them in spite of what your system may say.

Begin with Sufficient Capital, Trade Small Positions, and Diversify Your Trading. Attempt to spread your risk over several different markets. Avoid the lure of large positions. The need to trade large positions essentially stems from ego and feelings of inadequacy. Many people need to compensate for negative self-concepts by asserting their power in the markets. They attempt to prove their machismo by being aggressive, trading large positions, taking chances, and asserting their independence. You will be much better off beginning as a small fish in a big pond who seeks small, reliable market moves as opposed to large, unreliable moves. Size creates problems. It's not the size of your position that's important, but how you trade your position that will make you a winner or a loser. Once you have learned how to trade, you can tackle the problems that come with large positions.

Change Your Perception of the Market. That's easier said than done! All organisms are captives of their perceptions. If you see the market as an adversary, you will approach it as a soldier approaches combat. If, however, you perceive the market as a vehicle that you must learn to operate, you will learn how to operate it to your advantage. Your attitude about the market will shape the way you trade. It is far easier to go with the flow of the market than it is to fight the trend.

Do Your Homework. If you have settled on a particular trading system or method, you must be strictly dedicated to it. If you do not keep your work up to date, you will miss most market moves.

Be Prepared for Numerous Consecutive Losses.а One of the

most frustrating, anxiety-provoking things a trader can experience is a string of numerous consecutive losses. These are the most difficult times for futures traders. They cause errors, inconsistency, lack of discipline, and the search for new systems. If you are prepared for the worst before it happens, you will be able to cope with it when it actually does happen. And, believe me, it will!

Summary

The study of human emotion provides us with the big picture of trading. If we can identify where human emotion is taking the rest of the trading community without becoming influenced by it, we will know that the markets will soon be moving in the opposite direction and profit by that knowledge. This distance from the emotions of others, however, requires us to be able to distance ourselves from our own emotions.

Following our rational thoughts means fighting the powerful current going in the opposite direction. This constant internal battle requires enormous energy and commitment. Nevertheless, the destination for the battle-scarred trader who is willing to engage in this effort is the land of successful trading. Given the emotions that run rampant in day trading, my rules are very important.

Additionally, there are, to be sure, many more rules that apply to successful day trading. Some of the ones included in this chapter may not be universally applicable, and some rules that are needed for individual traders may not have been included. For that reason, you would benefit immensely from a formulation of your own trading rules because you, alone, are the best judge of what you need. To do this, however, you must first become totally aware of your needs, assets, liabilities, skills, and goals. In the meantime, study the ones I have included and see how they fit.