Day Trading & Forex Forum

2. Patience

Most traders get an uneasy feeling when watching the tick by tick action and a move happens that are not participating in. Learn to be patient, and know that the markets are in perpetual transmutation, or they are always moving. The challenge IS NOT to learn what all these indicators and potential patterns mean or to find out the dying question instilled in all humans as to cause and effect: WHY?

The biggest challenge most traders face is in limiting the Focus of your education to that which comes the most naturally to you. The one, or maybe two “set ups” that you seem to be able to identify with on an emotional level. That is the paradigm of patience, and we all started there. Some never escape this level, but all should learn. Yes, we “absorb” other information by attrition, but to focus on your starting operational procedures is paramount.

The first step to a Paradigm shift is to treat trading as a business. Write out the one or two set ups that you look for, and the appropriate actions you are to take when they present themselves in Real time. Be thorough and the more detailed the better. Once defined, your task is to simply be patient until they present themselves, focusing on nothing but your plan.

3. Discipline

Using patience, we now have taken the time and defined the exact set of circumstances that we seek in real time, and the accompanying appropriate actions that follow when these circumstances present themselves. As difficult and uneasy as it may seem, your written out and well defined trading plan should be the ONLY FOCAL POINT throughout the trading day, not the tick by tick action. You can quit staring aimlessly at indicators, trying to decipher hidden divergences. You now have very clear “rules of engagement” with clearly defined entry and exit strategies.

Combining patience and discipline, your Operating plan needs to be traded for a period of time. This means that we need to trade our plans exclusively for a set period of time to form the confidence to NOT KEEP LOOKING for the next “strategy”. This takes an enormous amount of discipline, and is probably the point at which most traders fail. Many traders make this business way too complicated because they lack discipline.

4. Money Management

Finally, the most important aspect to a paradigm change is money management. Consider you trading business as having only one inventory item: Your Trading Capital.

Do you want to offer it on sale for a discount each and every day? Mark it down unnecessarily? I do not think that most of us would willingly exchange a dollar for .75 cents. Why continue to trade without proper risk-to-reward ratios? One of the most important numbers to calculate is your closed trade risk reward ratio. Are you risking $1.00 to make .50 cents? Ouch! That will hurt over time. Yes the market will reward that type of trading in short spurts, but over time we must succumb to the forces of nature and the economic laws of diminishing returns among others. Eliminate that cycle with a disciplined money management program, and use stops that are reasonable and based on market structure, not monetary amounts. If the most “reasonable” stop is too far out of reach, or is too “wide” for your trading plan, then that is most likely a trade that needs to be passed on, regardless of the outcome.

In closing, I urge each and every one of you start the process of ridding your thoughts of the “balance sheet” mentality that simply fuels this zero minus sum industry known as trading, and put a little business structure in the forefront for a while. I like to measure my results, not in dollars, but in my ability to consistently trade my plan, which, over time, gets me the dollar amounts I desire.