Understanding fear, overcoming greed and setting rules are one of the things that all traders need to master if they ever want to be profitable and called professional traders. Yes, that goes to you as well.
I am sure that by now, you have already heard that one of the most important things in trading is having a solid foundation, and by foundation I mean your trading system and your trading plan.
If you did not, well you will definitely hear about that in today's video and read it here.
Having a rule based system is probably one of the most important things when it comes to trading. I said it once, I said it twice, heck I said it so many times and I will definitely keep repeating it because introducing rules to my trading has drastically changed my trading for the better and I believe that if you are just willing to test me on that theory you will be forever grateful for this video.
What rule based approach to your trading does to your confidence, to your mind, your emotions is just incredible. Look, when you have a if then process (rule based approach) you are basically just acting like a "robot" in front of the charts, using your eyes to send signals to your brain that the visual interpretation from the market has met all of your rules and that now would be a good time to pull the trigger.
Excuse my geeky explanation but if you think about it, it is exactly like that. After having rules, the only reason why we sit in front of the charts is to see when will those rules be met and to pull the trigger.
See, what this approach to trading does to you is that even when you take a losing trade in the market, you will not be attached to it, because you will know that over the longer period of time that exact rule set that you have applied to the trade will be profitable.
Of course above is correct considering that you are trading a rule set that has showed profitable over your backtesting for a sample period of at least 100 trades. If that theory yield nice returns over the historic data, we trade it live.
If it would return negative results, then I hope you wouldn't consider trading it live.
Now take in example, a feelings based approach. Approach to trading where you take trades, set targets and stop loss price points based on your feelings.
Let us assume that at some point you took long position in the market thinking that market will trade higher from that point on. However, market reversed and hit your stop loss price.
Now, you have found your self in a position where you started doubting your self and thinking, why did I have that feeling, why did I took that trade ? Maybe I shouldn't have to. Maybe I should have wait for the some kind of confirmation from the market etc etc etc...
That is called doubt and it is the one of the main reasons 99% of traders fail....
For me not to ruin the video, ill have to end the article here and invite you to watch the video.
Hope you enjoyed the content. If you find it valuable, like it, share it, spread the word, and as always, if you have any questions, just comment bellow and Ill get back to you ASAP. I try to answer all of the comments.
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ABOUT RETAIL INVESTING & TRADING:
Retail Investing & Trading channel is the place to be if you ever wondered what a professional day trading really is and how a retail trader approaches the market every day. Its also the place where that same trader will be covering some of his other, different ideas about stock market, life, wealth creation and passive income. Hope you enjoy the content.
DISCLAIMER: I am not financial adviser of any kind. All of my videos are for educational purposes only and are not financial advise nor should you listen for what I am saying and blindly follow it. You should do your own research before taking any actions in terms of investing and trading. Obviously, investing and trading of any kind involves significant risk and may not be suitable for everybody. Your investments and trading actions or any actions of any sort are solely your responsibility. I am merely sharing my opinions on stocks and markets in general as I see it. It is imperative that you conduct your own research before taking any action whatsoever. My recommendations are not guarantee of any gains or losses on the investment.
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