Continued progress this week with regards to noticing what’s going on.
Much to my consternation (and further confirming my ‘newbie’ status) it’s clear that there’s at least 10 different questions you need to ask yourself before placing a trade… This isn’t an exhaustive list and I’m writing this off the cuff Saturday a.m. on not enough sleep so it will contain errors.
- Macro environment – What’s the market focussed on? Bullish/Bearish? Risk on/off?
- News events impacting or imminent?
- Entry signal valid
- Target price risk/reward
- Correlation to other indexes for confirmation
- Support/Resistance in play?
- Time of day factors
- Previous days high/low prices in relation to the current price
- Avoid getting into a retracement that’s about to reverse
- Looking for a low risk point to get into an existing move
- Position size
For anyone who is already trading successfully this isn’t going to be revelatory but for new traders this may come as something of a shock. You need to create a composite view of the world at the point where you’re considering placing a trade. From all this you may come up with an idea to trade. If it looks as though your idea is going to come off then you need to place the bloody trade… After that you need to manage the trade – to a bunch of entirely different rules that I’ve hardly begun to figure out.
This is the point at which I’ve discovered a psychological issue driven by 9 months of not having any clue what I’m doing. Nine months of failure means essentially I’m now very risk averse because previously if I didn’t want to lose money trading (as I had no clue) then the simplest thing to do would be not to trade.
I’ve managed (through continued failure) to teach myself to expect a negative outcome to placing a trade. Obviously this is not a good thing and something I will be unlearning over the next few weeks. Happily I picked up an excellent book by Mark Douglas which addresses this and other issues called ‘The Disciplined Trader’.
So because of this factor I had a pretty frustrating week where I saw some great setups but failed to take them… Still, at least the problem is in my head and not with the approach I’m learning. Newbies have two problems to overcome… The bit between their ears and not knowing that they don’t have a clue about the technical side of trading.
Technical side – check (or getting there, need more practice) 😉
Mental side – needs work
Overall? About 50% there? Onwards!!