The Monster In Your Brain That Will Eat Your Trading Accounts
Have you ever wondered why some traders put in 80 hour weeks
? I know many people who do this - and have made millions as traders by doing so. These hugely smart people with years of experience spend nearly all their waking hours looking at the market.But trading isn't really all that hard and it doesn't have to take watching the markets 24/7. You spot an opportunity, make a trading plan for the opportunity, make the trade, and wait. It's not really that hard.
So why do they do this? Why do they spend so much time looking at the markets? I know the reason why (because I used to be one of them). I used to spend all of my waking hours staring at the markets.
"The Monster" The reason some traders spend this much time is simple. They want to avoid what I call "The Monster". This "Monster" is a "thought" and there is one thought you absolutely must avoid to be a successful trader.
Here is "The Thought: "I should have done something different with this trade instead of what I did."
If you ever find yourself thinking "I should have done something else instead of what I did" about a trade, you are likely to not do well trading.
Second guessing your actions after a "bad trade" leads to making poor decisions right in the middle of the next trade - changing your mind on a whim.
You can see where this will lead - to a series of nearly random trading decisions, probably without much regard to the risk involved. It's path to losing lots of money really fast.
"The Thought" is particularly dangerous when you are a new trader, because new traders don't know enough to tell if they are making good decision or a bad decision.
A good plan for a trade means you have pre-planned actions in place for almost any situation that could happen. So if you are thinking "I should have done something different", it means you don't think your plan is all that good in the first place.
This isn't to say the market can't change, or you won't find out new information. Also, you might need to change a trade for many reasons. This happens. And many good traders do change their mind on trades during the trade.
It's just that for these good traders, changing their mind is part of their original plan. They had planned to make a new decision once specific new information became available.
Make the Best Decision Possible with the Information You Know Now It is crucial to know you are making the best decision possible at the time with the information you have available to you. That's one of the reasons I like investing - the decisions are already made. You know when to get in, how to get out, how much to risk - it's all planned in advance. It's easy to do the right thing when you know exactly what you need to do.
And this is why some traders spend 80 hours a week on their trading. They want to be sure they know everything possible about a particular trade before making the trade.They want to avoid thinking "The Thought" and it's worth spending 80 hours a week to avoid it.
With most trading, however, you can develop a system for your trading where all of these decisions are made before you make the trade, so you don't need to spend 80 hours a week staring at a computer screen.
Instead, you spend 15 minutes a day putting in your orders, because you've already made the decisions for nearly every situation that might come your way.
So to be 100% clear, you need to avoid "The Thought" at all costs. And the only way I know to avoid The Thought is to be prepared. This is what investing does - it prepares you for nearly every market situation you might encounter. It's like working 80 hours a week in just 15 minutes day.
And you just might make a boatload of money while doing it.
Copyright (c) 2012 Trend Following 101
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