Monday, September 29, 2008

Benefits from Unemotionally Trading Your Plan

There isn't much to add to this example of a trader's breakthrough in sticking to the trade plan. 

Too often and too easily a trader jumps in to change course and deviate from a pre-determined course of action within a trade - and the result is almost always suboptimal.  In fact one of the worst things that can happen to a trader is to have one successful outcome from changing a trade from the plan.  That sets up a bad behavior and strengthens the "flight" part of the "fight or flight" equation.

A Trading Journal Is Self-Diagnosis

Don't misunderstand me - I'm not advocating sticking with a losing trade.  Just be sure the loss you take is within the threshold for which you've planned. If a trader has a predetemined time in the trade and a stop loss to prevent a stock's freefall (in either direction), then let that trade run its course and live to call another play in the trading game.  

This doesn't mean that a plan must be adhered to in the face of consistent losses either.  Having a journal that records all measures of a trade makes such diagnosis possible.  In this case StockPunk learns to select a different criteria for setting a stop loss and is rewarded.

Here's an excerpt,
"Finally, I get a trade that works out the way I planned it. This trade came from a NR7 signal using Trade Ideas ... In the past I would have trailed my stops using the 20EMA (green line) as my threshold, so I probably would have sold at 20.70. Corey at Afraid to Trade (my mentor extraordinaire) challenged me to change the way I was setting my stops and determining my exits when I spoke to him last week. I owe him for the success of this trade."
Popularity of NR7

On another note it is interesting to see the NR7 alerts within Trade-Ideas used more and more as a signal for interesting moves.  

Here is WallStreetWarrior's recent trade using the alert.

We added this alert based on the feedback from TraderMike and I'm glad that we took his advice!


Trader said...

I'm glad you took my advice too! :-)

D TradeIdeas said...

Of course!