No matter how long you’ve been a trader, it’s easy to slip into bad habits. Among the worst habits for traders new and old is to be undisciplined.
Though there are many different trading philosophies, strategies and methodologies, all traders need to have a plan, and just as importantly, they need to follow it. It’s easy to forget the plan when you’re in the thick of it. But when you deviate from the plan, emotions can get in the way, clouding judgment and leading to bad decision making. It’s the age-old battle of the right brain versus the left brain.
The left brain is the mathematical, logical side. It’s the side of your brain that crunches the numbers in your analysis that lead up to a trade. It can methodically lay out the quantifiable steps that make sense to follow. And measure potential profits and losses and deduces ways to curtail losers and make the most out of your winners. The left brain is a trader’s friend.
The nemesis of the left brain, however, is the right brain–creative, qualitative and, oh yes, emotional. This side of your brain tries to wreak havoc on your trading every chance it gets. “Hey, maybe we can make a little more on this trade if we just hold it a little longer,” it may tell you. Or, “For God’s sake! I’ve got to get out right now. I just know it’s going lower, “it may say at other times. Knee-jerk reactions to fear and greed are all a product of the evil right brain sneaking into your trading trying to topple the even-keeled left-brain trading machine.
Don’t listen to it! When that right brain starts speaking up, play it some music, take it to a movie, a museum, maybe. But when it comes to quantitative trading decisions of picking your entrances and exits for a trade, leave it up to the professionals. Let that left side of the gray stuff do it’s thing. Keep it tight. Logically map out the smartest course, and follow it unwaveringly. Stick to the plan.
