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!



2 comments:

Trader said...

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

D TradeIdeas said...

Of course!