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were not in the trade, then you can only blame yourself. Likewise, if you consistently enter the trade (upholding your virtues), and you consistently lose, then you will need to determine if your beliefs for getting long are valid. Again this demands adherence to your virtues. It takes a person of strong virtues, with empowering beliefs, to accept that a laboriously devised methodology doesn't perform as expected. |
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You could have the best rules in the world for getting long, yet the market is starting to turn down and your methodology has not picked up on that fact yet, creating a loss. Consequently there is a fine line between knowing that your methodology is valid, that the market itself is beginning to change, and knowing that your methodology needs to be changed. The more trades that are executed using your methodology, the better you can determine its validity. Just as the RSI needs at least 100 "events" to become valid, so too does your methodology. |
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When you take the time to write down your rules, beliefs, methodology, and risk management rules about the market, you are transforming your mental reality to a physical reality. No longer will you be able to fudge the numbers, or avoid accepting responsibility. No longer will you be able to "cheat" at trading. All beginning traders want to start trading as soon as they realize the tremendous sums of money that they could have realized if only they had been in the big move that just happened. Hindsight is always 20/20. Novice traders do not have their own rules. Consequently they will start trading on the basis of something they read, heard, or learned in a training book or seminar. The rules they are using are the rules that another trader might use successfully. However, they have not taken the time to validate and internalize the references of the other trader. Consequently they will not have the required beliefs to create consistent profits. |
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By writing down your beliefs about trading, you are forcing yourself to create a series of decisions about the market. You are deciding and committing yourself to how you will perceive the market. By deciding how you will see the market, you are establishing a baseline reference that will prevent you from entering into trades that fail to meet the criteria you have established. Taking the time to write down exactly how you will trade will force you to commit to the trade and see the market in that particular manner. Your trading ability will then keep improving because your virtues will demand that as your perceptions and abilities improve, your written plan of attack will also evolve. |
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When you sit down to write out your overall methodology, you will begin to internalize those rules and perceptions into your belief structure. This will require you to have faith that your beliefs about the market are |
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