Daytrading Tips

Mind & Money

Trade Execution

Whether you can execute your trades is related to the amount of fear, or lack of fear, you generate at the time. Fear is always the result of your beliefs and experiences about the threatening nature of the market. What threats do the markets pose? None - if you have the confidence and you trust yourself to act appropriately under any given set of circumstances.

What you actually fear is not the markets, but rather your inability to act in the appropriate manner when you need to, without hesitation.

In your dealings with the markets, you had to learn what to fear. What you learned to fear was a result of whatever you did that caused you to experience pain. Your pain was caused by your not knowing what to do next that gave you a result you neither expected nor intended. In the market, you are free or not to act.

The markets cannot do anything to you that you don't allow, even if it is out of ignorance or a sense of powerlessness.

One effective way to minimize this fear and, in some cases, neutralize it, is to change your perception of the entire event. The single greatest fear producer is a loss. You enter a trade, you find yourself to be on the wrong side. What do you do?

If you are like the majority of losing traders, you will wish, hope and pray that the trade will turn around, waiting one more tick, one more tick, while the loss continues to mount against you. In reality you are doing nothing.

Act fast to get out of a losing position. Keep your losses to a minimum. If you act immediately, once your criteria for a losing trade has been met, your losses will be minimized and that trade has been executed to the best of your ability.

Our Daytrader's Bulletin Bookstore - Books for Traders describes several good resources for the study of trading psychology.

Winning Mental States

Daily self assessment is important for learning how to manage your emotional state. Early each morning, take a few moments to determine how you are feeling. Ask yourself a few questions such as: Am I rested? Did I sleep well last night? How am I feeling right now? Am I carrying any unresolved grievances with me today?

Pay attention to your answers and work on solving any issues that may be keeping you from a peak mental state. What is a peak mental state? It is when you are fully rested, well fed, happy, content, alert and ready for any and all challenges that come your way. You feel in control and in power, which is the optimal mental state for effective trading.

Changing Your Mental State at a Moment's Notice

To do this effectively you should be in a quiet place, with no distractions. If possible, close your eyes and think through your life to a time and place where you were completely content. You may have to go back quite a while, but what is important is to re-experience the way you felt at that time.

When you remember a time or event, think about it in as specific a manner as you are able. What did it smell like? What did things look like? Were there any noises? What did things feel like?

Every detail you can remember is important. Spend just a few moments remembering that time and then choose a phrase or one-word memory cue, such as "Golden" (the color of her hair), or "berries" (a time as a child you sat in the sun eating wild blueberries with your dad). The word or phrase is not important.

What is important is that when you find yourself in a losing battle with your emotions, your heart is racing, your pulse is pounding, you are about ready to implode, say your keyword silently and repeatedly until you find yourself back inside that memory.

By doing this you are choosing to change your mental state. With practice, you should feel noticeably calmer within seconds. To effectively use this technique, let go of your current frustration and allow yourself to sink fully into the memory.

If fear is interrupting your ability to make effective decisions, replace that fearful state with a resourceful one. In this instance choose a memory when you felt centered and in control. That great golf shot, the perfect sailing day. Think back to a time you felt on top of the world.

This time your anchor should be a physical cue, such as snapping your fingers or touching that favorite paper weight. The physical cue is used to interrupt your current emotional state.

Continue to practice using your anchors until they become second nature and you can enter these more resourceful states easily.