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THE PSYCHOLOGICAL SIDE OF TRADING VERSUS THE PHYSICAL SIDE
I always like to say, this trading game we play is just as much psychological as it is physical. Stringing together winning days, weeks and months keeps you psychologically in the game. The money adds up quickly. You are seeing the market so well because you are in the right frame of mind. You do not overtrade on a Friday, because you are having a good week and you do not want to give any back. You do not overtrade in the last week of the month, because it has been another profitable month and you want to keep it.
NEVER EVER UNDERESTIMATE THE POWER OF THE BEAR
The bear can undo years of hard work in a matter of months. The bear can undo months of hard work in a matter of weeks. The bear can undo weeks of hard work in a matter of days. In 2002 the DJIA traded at 7,200. Five years later in 2007, the DJIA traded to a high of 14,200. In sixteen months the DJIA traded as low as 6,470.
MAKING MONEY IS THE EASY PART…KEEPING IT IS THE GAME
I watched a 30-year market veteran make an absolute killing buying the Soybeans in the summer of 2012. I’d never seen a person make that kind of money in a summer. By September this traders EGO was so big, he was trading every product possible using every trading instrument imaginable. By the end of October, he not only lost all the money he made over the summer, he lost even more. Why this trader did not walk away and KEEP some of his profits, I do not know. We all know how to make money. The best traders know how to keep it.
RESPECT MR. MARKET FOR WHAT IT IS…THE GREATEST TEACHER EVER
The best traders respect Mr. Market for what it is…the greatest teacher ever. When you lose respect for Mr. Market you lose your money.
ALWAYS LISTEN TO YOUR “GUT INSTINCT.”
Mr. Market may be the greatest teacher, but the 2nd greatest teacher is your own “Gut Instinct.” I don’t care if you are trading or interviewing someone for a job; if that inner voice is telling you something is not right, it is probably correct. You will never go broke by not trading because it didn’t feel right.
QUIT BLAMING OTHERS FOR YOUR LOSSES…IT IS NO ONE’S FAULT BUT YOUR OWN
If I lose money it is not Bernanke’s fault. It is not Obama’s fault. It is not the Republican’s fault or the Greek’s fault. None of them make the trades for me. I am the one who does the trading. If I lose money it is no one’s fault but my own. My biggest problem has always been the 5-inch gap between my ears.
YOU DO NOT SELL NEW CONTRACT HIGHS, YOU BUY THEM
There is a reason a market trades to new contract highs. Picking a top is a disaster waiting to happen. You only sell new contract highs when you are taking profits on your long position.
FRIDAY IS A SINGLES ONLY DAY
I cannot stress enough the importance of SINGLES ONLY FRIDAYS. This is an add-on day. You are only looking to make a little bit more, finish the week on a high note and quit trading early.
COUNTER-TREND TUESDAY
In a market with an established trend, Tuesday does tend to be a reversal/correction day. Correction days are the most difficult trading days on the books. One is forever buying the highs and selling the lows, looking for a move that never materializes.
IT IS NOT A PROFIT UNTIL YOU TAKE IT
No matter how much of a profit you have in a trade, until you cash in your chips your profit is still at risk. Take the money and move on to your next trade.