subject: Trade Not Bear Thinking About [print this page] Trade Not Bear Thinking About
Traders are various people with innumerable thoughts. The strategies of trade obviously cannot and never be unique. That is the most interesting suspense of trading success. It is the feeling of excitement or nervousness which you have when you are waiting for something to happen and are uncertain about what it is going to be. The result is the actual drama that separates between "success" and "failure" of your trading plan. A man with solid emotional content will always work out on a strategy and it can be duplicated by another man with the same frame of mind. Whereas another man with weak emotional frame of mind cannot duplicate the system, howsoever good the trading plan may be. There is nothing wrong with the trading plan, it is the emotional imbalance that makes the difference between these two people.
How do we overcome this emotional imbalance? Just like the computer program, predetermine the profit and loss at the most realistic levels that it act as a good equilibrium. Never count the sum of profit trades or loss trades which is not going to help your trading plan. Always bear in mind, the percentage of loss and profit. To trade with the most simplest of simple methods will always be remembered and executed. Always trade with simplicity. Never ever complicate silly things with too many indicators or signals.
The price action in itself is the best indicator and you need no other indicator than this. Take out a pencil and paper, try to write out in big bold letters the price variation in the last five candles. Divide it by half exactly which is your Stop Loss. Calculate the Risk to Reward Ratio as 1:1.3. You follow only this and nothing else. See whether the price variation is agreeing to your Money Management principles, I think it should on all time frames.
Illustration:
Time Frame 1 Hour
Price Variation in last 5 Candles 120 Pips
Stop Loss Price Variation * 1/2 60 Pips
Profit @ 1.3 times of 60 Pips 78 Pips
The stop loss is 60 pips and take profit is 78 pips on a one hour time frame. You must be thoroughly prepared to take 4 or 5 continuous loss trades and never terminate the trade on other calculations or prematurely using emotional methods. This system works very fine and it is not necessary that the 1 Hour time frame will have a price action of 120 pips. Some currencies may have only 40 Pips, so make the math accordingly. Always put the profit and loss alongwith the initial order.
Give a break of5 hours after closing of every trade, be it profit or loss. This is very important.
Trade for 10 days using the above method in a demo account, ask yourself a question whether your emotion and mind set is adaptable to this trade pattern, and then use it appropriately.
Disclaimer:
Trading Currencies and Stocks and Derivates carry considerable amount of risk and author does not take any responsibility on the consequences of any action taken based on this article. Consult your investment expert for professional advice.
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