From the onset, let me admit that e-mini trading requires a broad and varied skill set; therefore, identifying a single attribute that is the prime contributor for success in trading paints a wide swath.
Having watched a large sample of traders my trading career, I think there is a single variable that plays a major role in determining the new e-mini traders level of success: Emotions.
Let me assure you that this will not be another in a long list of articles that tells you that you have to learn to trade without emotion.
As human beings, we are prone to be emotional in stressful situations, or at the very least, we have emotional thinking and impulses that may or may not play a role in our trade decision process.
But trade without emotions? It is my belief that emotions are a natural part of our thinking and blocking out emotions and impulses is a ridiculous suggestion, at best.
On the other hand, we don't want to make decisions on emotional impulses; yet we still have to make trading decisions (even with these troublesome emotional thoughts bouncing about our cranium.
) Some situations that create potentially dangerous emotional trading related trading issues, such as: - You, as an e-mini trader, are having a period of successive losing trades.
You would like to get your account back to breakeven for the day.
- You are having a day where the trades you have chosen have been particularly successful, and you become convinced you are on a " hot streak.
" You may be tempted to trade more contracts or increase your normal risk level based on your "hot streak.
" - The market is trading in a very narrow range and none of your normal set-ups are prevalent.
Instead of sitting on your hands, you consider trying to "manufacture" a trade with the existing substandard price action.
- You start your trading day after a heated argument with your wife.
The argument left you feeling angry and resentful.
You are agitated and getting ready for a day of trading in what is shaping up to be a volatile trading day.
These are just four possible dangerous situations that have nothing to do with how well you can execute a trade; how competent you may be at recognizing profitable set-ups.
No, your technical skill set will not be challenged during potentially difficult emotional or psychological times.
Where does that leave us in the emotions vs.
competent trading dilemma? There is one particular book I would recommend, "Trading in the Zone," by Mark Douglas.
For me, emotions and trading were a real problem.
Like most traders, I am competitive and don't like losing.
Let me make one important point: When you are having a tough day trading, the Hail Mary pass is a bad idea.
In other words, don't alter the way you trade in order to get back to a reasonable loss/gain total for the day.
You cannot attempt a Hail Mary pass in the trading world, as low probability trades (when you are already losing money for the day) can turn a bad day into a disastrous day.
For me, I never could learn to trade without emotions, and I seriously doubt many traders can block out their emotions when trading.
It's exciting.
Or depressing...
For me the problem was one of how to handle the emotions I experienced, not block them out and try to trade like a robot.
I had to learn that when I was frustrated, or angry, or aggravated, or euphoric those emotions could have no bearing on my trading decisions.
It's okay to have emotions (I don't think you have a choice), but acting on those emotions, or not acting on those emotions, is the skill I had to overcome.
I think one of the toughest aspects of this particular skill is admitting that emotions have played a role in your trading decision making process.
Of course, once you have made this realization you must come up with an action plan to correct your problem.
Some possible solutions may be: - Work on a trading simulator and identifying specific situations when emotions have been a detriment.
For example, start the day -$1000 and execute your normal trading plan without becoming obsessed with getting back to even.
- Any trade you are considering taking on an impulse, or a "gut-feeling," should be a no-go.
Unless you can justify yourself with sound, non-emotional rationale; the trade should be a no go.
- Ultimately, this emotions/trading dilemma has to do with executing your trading plan and methodology regardless of what happened on the previous trade, what happened yesterday, what is being reported on the news, the economy.
It is just you, your chart, and your skill set.
I am quick to point out that a great deal has been written about this topic, though most e-mini traders I associate with are loathe to discuss their emotions.
Is it a man thing? A pride problem? An ego issue? For whatever reason, emotions have always been and will continue to be a problem when trading.
Are they an issue in your trading? Do you take trades on a whim? Gut feeling decisions, impulsive decisions, common sense, revenge trades, and a slew of other emotion-related e-mini trading issues are your enemy, and in my experience some individuals have a difficult time with structured trading.
In all the above cases, it is normal to have those feelings, but to take a trade you have to the criteria for your trading system in place and agreeing on a potential trade.
In summary, we have talked about the potential pitfalls and the realization that emotional issues can have a profound effect on your trading results.
Stick to your plan, and anytime you are sure you know what the market is going to do, shut the computer off, your emotions have taken control.
Having watched a large sample of traders my trading career, I think there is a single variable that plays a major role in determining the new e-mini traders level of success: Emotions.
Let me assure you that this will not be another in a long list of articles that tells you that you have to learn to trade without emotion.
As human beings, we are prone to be emotional in stressful situations, or at the very least, we have emotional thinking and impulses that may or may not play a role in our trade decision process.
But trade without emotions? It is my belief that emotions are a natural part of our thinking and blocking out emotions and impulses is a ridiculous suggestion, at best.
On the other hand, we don't want to make decisions on emotional impulses; yet we still have to make trading decisions (even with these troublesome emotional thoughts bouncing about our cranium.
) Some situations that create potentially dangerous emotional trading related trading issues, such as: - You, as an e-mini trader, are having a period of successive losing trades.
You would like to get your account back to breakeven for the day.
- You are having a day where the trades you have chosen have been particularly successful, and you become convinced you are on a " hot streak.
" You may be tempted to trade more contracts or increase your normal risk level based on your "hot streak.
" - The market is trading in a very narrow range and none of your normal set-ups are prevalent.
Instead of sitting on your hands, you consider trying to "manufacture" a trade with the existing substandard price action.
- You start your trading day after a heated argument with your wife.
The argument left you feeling angry and resentful.
You are agitated and getting ready for a day of trading in what is shaping up to be a volatile trading day.
These are just four possible dangerous situations that have nothing to do with how well you can execute a trade; how competent you may be at recognizing profitable set-ups.
No, your technical skill set will not be challenged during potentially difficult emotional or psychological times.
Where does that leave us in the emotions vs.
competent trading dilemma? There is one particular book I would recommend, "Trading in the Zone," by Mark Douglas.
For me, emotions and trading were a real problem.
Like most traders, I am competitive and don't like losing.
Let me make one important point: When you are having a tough day trading, the Hail Mary pass is a bad idea.
In other words, don't alter the way you trade in order to get back to a reasonable loss/gain total for the day.
You cannot attempt a Hail Mary pass in the trading world, as low probability trades (when you are already losing money for the day) can turn a bad day into a disastrous day.
For me, I never could learn to trade without emotions, and I seriously doubt many traders can block out their emotions when trading.
It's exciting.
Or depressing...
For me the problem was one of how to handle the emotions I experienced, not block them out and try to trade like a robot.
I had to learn that when I was frustrated, or angry, or aggravated, or euphoric those emotions could have no bearing on my trading decisions.
It's okay to have emotions (I don't think you have a choice), but acting on those emotions, or not acting on those emotions, is the skill I had to overcome.
I think one of the toughest aspects of this particular skill is admitting that emotions have played a role in your trading decision making process.
Of course, once you have made this realization you must come up with an action plan to correct your problem.
Some possible solutions may be: - Work on a trading simulator and identifying specific situations when emotions have been a detriment.
For example, start the day -$1000 and execute your normal trading plan without becoming obsessed with getting back to even.
- Any trade you are considering taking on an impulse, or a "gut-feeling," should be a no-go.
Unless you can justify yourself with sound, non-emotional rationale; the trade should be a no go.
- Ultimately, this emotions/trading dilemma has to do with executing your trading plan and methodology regardless of what happened on the previous trade, what happened yesterday, what is being reported on the news, the economy.
It is just you, your chart, and your skill set.
I am quick to point out that a great deal has been written about this topic, though most e-mini traders I associate with are loathe to discuss their emotions.
Is it a man thing? A pride problem? An ego issue? For whatever reason, emotions have always been and will continue to be a problem when trading.
Are they an issue in your trading? Do you take trades on a whim? Gut feeling decisions, impulsive decisions, common sense, revenge trades, and a slew of other emotion-related e-mini trading issues are your enemy, and in my experience some individuals have a difficult time with structured trading.
In all the above cases, it is normal to have those feelings, but to take a trade you have to the criteria for your trading system in place and agreeing on a potential trade.
In summary, we have talked about the potential pitfalls and the realization that emotional issues can have a profound effect on your trading results.
Stick to your plan, and anytime you are sure you know what the market is going to do, shut the computer off, your emotions have taken control.
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