It’s all about how you respond.
It’s ultimately not about what happens, it’s about how you respond to what happens that makes the defining difference. My son plays competitive tennis and what happens on the tennis court to many players often happens in the trading room for many traders. On occasions, I have seen him hit a couple of poor shots and get down on himself with negative self-talk between points. This negative self-talk that started from one or two simple errors impacts the next two or three points and before you know it the negative self-talk has spiraled into losing the game, set and the match.
A similar thing often happens to traders after one or two losing trades. There is the obvious initial disappointment but what follows is the defining difference between success and failure in my opinion. How you respond over the course of the next 2 or 3 trades can often make or break a trading account. If you increase your stake, move to another strategy, skip trades that meet the criteria and generally behave in a haphazard approach because of your disappointment then you are only likely to reduce the chances of success and drain your account even further.
Over the course of the past month as I’ve conducted a number of Master Classes and I have reminded traders of these 3 things.
- Have a simple edge you understand and can follow.
- Apply solid risk and reward to your edge.
- Replicate the process.
This is a simple recipe for success that can deliver great profits over time but there is one reason why many can’t follow this simple process. It’s because in trading the edge appears randomly and you do not know which times it will deliver you profit and which times it won’t. Over a series of trades, it works well but the randomness is what creates the emotion in you as a trader and it’s also the lack of control that sees traders try and make a simple process better by adjusting stop loss and profit targets. They mess with the process and when they have a couple of “random” losing trades how they react becomes crucial. Remind yourself that if you have one or two losing trades how you react over the next 6 trades is going to be critical to your success. Switching edges won’t likely help, what will help is focusing on replicating the process of the edge you know works over time.
One trade at a time. Go get ’em!
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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