My aim this week is to focus on staying in trades and only exiting when my “rules” are met. I will continue to strive to only enter high probability set-ups, but the skills I am working on developing here is in the arena of exiting trades. To use a sports metaphor:
1) Place foot right behind free throw shooting line.
2) Don’t worry about the score of the game.
3) Take a deep breath – clear my mind of boredom, fear, anxiety and impatience.
4) Bounce the ball twice.
5) Bend my knees.
6) Jump slightly not leaving ground.
7) Release off tips of my fingers.
8) The results are the results: I followed my shooting routine – that’s the success.
9) Repeat.
My main problem right now is that I leave trades – simulated at this point – just to put myself at ease. I get fearful of losing the initial capital or the profits gained so far, or just become bored or inpatient in a trade that slows down but hasn’t by any means reversed direction.
Below is a chart giving me a mechanical path to exit my paper trades. I made them more simple than I will likely follow when I start trading with real money in April, but I wanted to leave out all discretionary decisions. For example, the .10 stop loss is just a random round number to set this as. Since most of my trades are based off stocks bouncing off resistance or support, or crossing $1.00 or $.50 price thresholds. Likely, I will place my stop loss orders beyond these marks – but this requires some discretionary decisions that I want to eliminate such steps in this exercise. I’m printing up this chart below and putting it up above my monitor.
Another great post from Dr. Brett on this subject of Turning Trading Rules and Plans Into Commitments.
