So are you one of those people that see the world through rose-tinted glasses? Do you believe in the power of positive thinking? Or do you follow that old saying of Murphy’s Law, “whatever can go wrong will go wrong”?
The fact is that whilst being optimistic, preparing to win and believing all will go your way is a good approach to take to set yourself up with a positive attitude, it is not ideal as preparation for trading. Why not? Well if you believe that all will go your way then you find yourself unprepared for what then might occur. It doesn’t then take much for this to spiral into negative results for your trading results. It’s all in the balance between realism and optimism.
This not only relates to those things you plan for when you do a detailed trading plan but covers all the surrounding environment and activities to your trading life. Things such as losing your internet connection either on a frequent basis during every trading day, or during a major market shift. Or your computer breaks down or freezes long enough to prevent you responding to the markets at critical moments of your plans.
Or even the mood in which you wake up or emotional state that you are in can affect your ability to trade clearly, effectively, decisively. Stress and distractions can cause you to make very basic, simple or small errors all of which can cause significant issues in the longer term. Tiredness especially is something that can trigger all sorts of events that can bring about negative results, from being clumsy to lack of concentration.
So what can you do to ensure that you’re not unprepared for such things without leading to a negative approach to your trading? After all, successful trading does require a level of positive thinking that you can turn a profit.
Well the first and most obvious thing is to plan for all eventualities. Have a backup plan for those adverse events that can occur and knock our trade out of the zone or our trading day out of action. Remembering that trading is all about setting yourself up for good trading opportunities and being ready to respond to the markets as they shift and it becomes self evident that you need to plan for the unwanted events as much as for the hoped for ones.
For market activities, there are simple elements to add into your plan that give you an exit strategy in the event of an adverse event. Put them in place. Anticipate everything so you don’t get thrown off balance when something happens and so then fail to react fast enough to close out a position or profit take at the best moment.
In addition, the need to be realistic for each and every trade is key as it is essential to remember that ‘success’ as a trader is not the profitable execution of every trade but is based on percentages of positive outcomes. Being realistic in expectations means that if the tide turns against you, you won’t be frozen by disappointment or disbelief but will know what actions to take and move on.
If you have established a good planning process and established a process ready to anticipate what the market throws at you then you are in the best position to know that it is best to expect to make a loss. Indeed you should expect to lose on a large of your trades, though constantly seek to find the best trading opportunity possible. Only then will you be mentally prepared for each loss and able to move on to the next one.
With regards to life events and personal preparedness for trading there are things that you can do to minimise your risks and put yourself in the best place to deal with all that life throws at you without too adversely affecting your trading. Simple examples include getting too little sleep which can cause you to be grumpy and clumsy in the morning, so ensure you get enough sleep. Or if you have to have a late night, then go to bed knowing you won’t be trading early in the morning. Equally recognise that tiredness can lead to clouded thinking, and heightened emotional responses to events. So if you know that you tend to start getting tired at certain parts of the day, or after so many days of trading etc then plan to take rest time to recuperate. You may feel that in the process you are losing potential for profit, the fact is that you are reducing your risk of losses.
Finally for those annoying events such as computer and internet failures, consider what backup plans you can have in place. Maybe have a backup computer in the house ready to go if needed, ensure that all files are backed up onto an external backup hard drive or into an online storage facility on a daily basis, maybe even a few times a day if you are a day trader. I certainly do this by simply having two other laptops ready to replace my desktop system in event of such occurences.
Make it a very quick and simple process to establish yourself on a different computer if need be and you’ll find the setback of the computer blowing up is far less than if you hadn’t taken the ‘negative’ approach and prepared for such an event. Losing internet connection on a regular basis is a hard one to work around but if it follows a pattern, then map this pattern into your daily schedule.
The issue of course is if being off line exposes you to greater risk as it prevents you being able to see let alone respond to a market shift. There are in fact a few backup options, such as having a mobile application for trading with a separate internet connection and methodology, or knowing what local facilities exist, such as a library, that tend to have a more stable connection and relocating there temporarily or even establishing a network of colleagues who can rely on each other to aid in such circumstances by providing eyes to the markets while you wait for the internet connection to re-establish itself. I use cell phone tethering in these cases so I know I always have some form of online connection.
Being unprepared is to be living your trading life in an unrealistic world and setting yourself for greater failure. Anticipate, plan, know that adverse events happen and you’ll be in the best position to weather whatever gets thrown at you each day and keep moving forward. Some might see such an approach as overly pessimistic but the fact is that it is nothing to do with being negative but all about not being caught out and unprepared.
by Terry Tran
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