The Steps to Success

You need to understand that your rules will changes as your understanding and insight evolves.

Step I : Staying Focused On What You Need To Learn

• Stay focused on mastering the steps to achieve your goal and not the end result, knowing that end result, i.e. money, will be a by product of what you know and how will you act on what you know.
• To evolve beyond pain and our fear of mistakes, our mistakes have to be resolved. Build a corollary frame work from all your trading experience. All experiences are valid and have meaning, and as such, mistakes don't exists - they just point the way!!!
• "Missed Opportunities" - don't exist - its just in your mind !! Its possible to miss anything ! Missed opportunities are trades that would have always turned out perfectly because they only occurred in our minds, where we can make anything be as we want it to be. Of course, we would have responded exactly as the conflictions warranted without a flaw. The problem is we didn't do it, and the resulting sense of loss we feel is difficult to reconcile. Therefore, these missed opportunity trades have the potential to cause more anxiety and stress than the trades we actually do take that turn out to be losers.
• Nothing's worse than missing a "perfect" opportunity. However, if you could have, you would have; its that simple. The sooner you accept this, the sooner you will be able to take advantage of these missed opportunities instead of beating yourself up over them. Besides there really isn't anything you miss because the markets are in perpetual motion and will continue to be until everyone agrees on value. As long as price keeps changing, there will always be another opportunity.
• When you start trading from the perspective that mistakes don't exist, you will be amazed at the sense of freedom you will feel to grow by accepting your results as a reflection of who you are in that moment, which then allows you to determine what you need to learn to do better.

Step II : Dealing With Losses

Confronting and accepting the inevitability of a loss is a trading skill.

Two mental components at work to help you acquire these skills.

• "your understanding" - what it is so essential to confront the possibility of a loss - if you don't, you generate a fear - and end up creating the very experience that you are trying to avoid !
• "your willingness" - to change definitions of what it means to lose.
  LOSSES DOES NOT DIMINISH ME AS A PERSON.
  The sooner you realize it, the easier it will be to identify and execute a losing trade. By making that an automatic function of your trading strategy, you make yourself psychologically available to take the advantage of next opportunity, even if that opportunity is in the same direction of the losing trade you just got out of.

Rule 2 - execute your losing trades immediately upon perception that they exists.

The next error after letting a loss get out of hand is usually not taking the next opportunity, which invariably is always a winning trade.
FEAR IS THE ONLY THING WHICH KEEPS US FROM LEARNING ANYTHING NEW.
By predefining and cutting your losses short, you are making yourself available to learn the best possible way to let your profits grow.

Step III : Becoming An Expert At Just One Market Behavior

• Learn to FOCUS on ONE market behavior.
• Choose one simple trading system that identifies a pattern, preferably one that is mechanical, instead of mathematical, so that you will be working with a visual representation of the market behavior. Your objective is to understand completely every aspect of the system - all the relationships between the components - and its potential to produce profitable trades. In the meantime, its important to avoid all other possibilities and information.
• Just focus on ONE combination - consequently, you will be letting all other opportunities go by (remember, there is no such thing as missed opportunity)
• Starting small and gradually working into other combinations is a real exercise in discipline that has couple of important psychological benefits.
  • Building a base of confidence as you learn
  • By passing up opportunities that you are not an expert yet, you will be releasing yourself from any compelling desire to trade.
• Plan your development to do least amount of damage to yourself.
• Perception and Execution are separate skills !!!
• They can and do work in tandem, if there are no mental components blocking execution.
• The object of this exercise - to learn how to become healthy and stay healthy, while you are doing it.
• just scale back to one or two trading markets
• Don't expand until you thoroughly understand the market characteristics.

Step IV : Learning How To Execute A Trading System Flawlessly

• Proper execution of trade - most fundamental component - most difficult to learn.
• Trading system define market behavior in limited ways whereas the market can behave in infinite combinations of ways.
• Technical trading systems are not designed to be outguessed.
• With trading, future is not random, unlike gambling.
• Prices, outcome, opportunities are created by the traders acting on their beliefs and expectations of the future.
• Think in terms of probabilities.
  Correlate the numbers or the mechanics of your system to the behavior.
• Employ mental discipline to make flawless execution a habit.

• To learn trading discipline.
• To learn skill of flawless execution.

Step V : Learning to Think In Probabilities

• Once you've acquired discipline necessary to interact with the trading environment, you can start to use your reasoning and intuitive powers to determine what the market is likely to do next.
• Identify the group that is demonstrating the greatest probability of moving the market and you will want to trade with that group.
• Determine the prevailing beliefs expressed in the market and how these beliefs can affect price movement.
• It requires a detached objective perspective - you watch and listen to what the market is telling you INSTEAD of being focused on what the market is doing to you personally.
• Let the market define itself and then apply whatever criteria you use to define an opportunity.
• Identify your significant reference point and place your order on either side of the point. Then wait for the market to do whatever its going to do.
• Try putting you orders in the market in advance of whatever your perceive as having a heighest probability of occurrence based on existing market condition.
• By putting in advance orders, you will let the market work for you ! It will also help to keep you from having an opinion.
• Learn to observe the market as if you were not in a position - this will free you to take whatever action is appropriate for the situation instead of hesitating, hoping, wishing that the market will make you right !!!
• The market doesn't make you right, you make yourself right.

Step IV : Learning to be Objective

Release yourself from "demand-backed expectations" and make "uncommitted assessments of the probabilities".

• You have no commitment to any particular outcome.
• You just observe what is happening in each moment as an indication of what will probably happen next.

• You feel no pressure to do anything
• You have no feeling of fear
• You feel no sense of rejection
• There is no right or wrong
• You recognize that this is what the market is telling me, this is what I do.
• You can observe the market from perspective as if you were not in a position, even when you are.
• You are not focused on money but on the structure of the market

To stay objective, anticipate as many possibilities as you can, and how probable each of these possibilities are. Then decide in advance what you are going to do in each situation. If none of your scenarios is working out as you anticipated, then get out ! Release yourself from the need to be right !

Step VII : Learning to Monitor Yourself

This page hosted by Get your own Free Home Page