Conquering Threats

Anxious, frustrated and afraid, but thanks to all my teachers, never reluctant. Yes, I have to say that all of these feelings were surfacing whenever I was looking for a trade, waiting for a trade or was in the middle of a trade. But thanks to all my teachers, and not just the "pros" but many of my trader friends, I never felt reluctant. I feel that this is because I didn't make all the possible mistakes. So many times others have told me, "been there, done that..." Mistakes like exiting the trade too early, taking a trade because you just saw something, and entering the trade too soon were happening to me often. But, I never traded without the stop or with the thought to move my stop and wait for the market to move my way. By moving back to SIM account I finally realized all of my mistakes, because somehow I was totally not seeing them by trading live.

"The key to longevity is making those mistakes early in your development, before you have too much on the line."*

Perhaps if I had found all of those mistakes sooner, I could have shortened my path of learning just a bit. All my mistakes came down to one biggest problem I realized during SIM trading - Overtrading. I was leaving the trade that I didn't allow to hit my target, so I was trading brake outs, and it ended up to be a loser. Or I was taking a trade without good planning, without even checking my rules and setup, and repeating this over and over again. Each loss I kept trying to make back and trying again and again, with only more frustration and anger.

"In order for a market event to generate a negative emotional response, we have to view it as a threat."*

I am a day trader and my style might be different than yours, my dear reader. But by remembering my rules and plan I do save my time in trading and my money as well. What do I mean by that? Rules that govern when I can take a trade are the key information for me even at the moment when I’m looking for a trade. There are many times that the market is doing nothing and thanks to those days I can save my time and do many other things instead sitting and watching with no opportunity to trade. In the past I would click my mouse like crazy and end up with a big lose, now I accept days that I can use my time to save my money. Being a day trader set me up with a very limited type of trading based on my rules, and if there is no setup there is no trade. The best I thing I can do is to wait for a setup, and check it with my rules. Then, and only then, do I take the trade. With clear rules there is no way to view the market as a threat.

“Every time you experience a distinctly negative emotional reaction to a market event, consciously ask yourself, ‘How am I perceiving the current market as a threat?’”*

Reading the market during the day can lead to many thoughts. When it’s trading without me, I’m thinking I lost an opportunity. But on the other hand, since I don’t take this as a threat or dwell on it emotionally, I don’t care where the price is. I care only about seeing my setup and my way of participating in the market. Whatever the market is doing I’m doing my job. Being alert in front of the computer puts me into the zone of planning and drawing. As soon as I see a good opportunity I trade; as soon as I realize the market is not for my rules today I walk away from the screen. This way of thinking and planning puts me in a calm and relaxed mood for the day.

"When you think about your thinking by adopting the perspective of a self-observer, you no longer buy into negative thought patterns."*

There are many ways to read the market. I look for trades based on three types of technical measurements. If there is nothing to see I simply wait. Otherwise I become nervous about why there is nothing to trade. If there is a moment that the price is approaching my setup I simply wait for the price to give me a stop placement and an entry place. If this doesn't happen first then there is no trade for me. There are tons of moments during the seven hours of waiting for the trade that a trader can read the market as a threat, lose money or get nervous. During this time, while measuring and possibly trading I write a journal about anything that is happening and it helps me to either wait or act appropriately.

"Identify the perceived threat; turn the perceived threat into an opportunity: that is a two-step process that addresses the true cause of emotional reactions that distort trading decisions."*

*LESSON 13 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

What do you expect?

"To no small degree, our emotions are barometers of the degree to which we are meeting or falling short of our expectations."*

"A Good Day Is a Winning Day."*

I say: “A No Trade Day Is also a Good Day.” Not only profit days are good. There have been lots of great days in my trading career that were not green days. I’m happy and proud of myself at the end of the day if I go back and see that I followed my rules and plan. I’m very proud of myself when I see that I executed my trades based on my rules for the setup. The most important days are those when I follow my rules about risk management. And as weird as it may seem, equally important are the ones when I manage my risk poorly. Even though I always trade with a stop placement, I make mistakes and then I have a lot to learn from them. By setting a goal for each trading setup, for each day, week, I can tell if I did well and if that was a good day. Now I've had enough experience to expect days when I’ll know not to trade.  I know to follow setup with my rules in order to have losing days as little as possible. So I know that not all Good Days have to be Winning Days, they just have to be days that work for me.

"Never set a goal if you’re not in full control of its attainment."*

"Working Harder at Trading Means Trading More Often."*

Nothing can be worse than over trading. This is the first key to good risk management. I was doing anything to trade and make money. This was the biggest mistake I ever made during my trading career so far. If I only knew, and I hope I can inform somebody out there who is starting their learning process from a risk management point of view, I would never have allowed trading more and harder. Of course I could have avoided this problem, my mistake, but my trading started with learning about the technical aspect rather than risk management. If only at that time I had listened to the "pros," I would have stayed on SIM a lot longer in the first place and probably would have never fallen into the hole I did. Today I follow risk management for each and every single trade, for each day and week to make sure I don’t spiral into hard-and-often trading that would only dig me a deeper hole than before.

"Success Means Making a Living from Trading."*

Ooh yeah, this is the statement that got me into trading. The worst statement I ever heard. It came to me very quickly that this is not the goal to focus on in the beginning, but my family was "watching me" and expected nothing else but this. Thinking about making a living from trading is a good thing to do after at least 3-5 years of being bitten by the market, especially if you don’t have any idea what you’re doing. This amount of time is just necessary to get it all right and you can start making money after that. And again, if I only knew that this statement is the worst ever made, I would have saved myself a lot of frustration.

"There is no path to expertise that doesn't first require time to develop mere competence."*

If you’re looking for a way to make the process of acquiring expertise smoother and faster, the best advice I can give is to start with a journal, then make a plan and rules, learn to set goals, practice good risk management, and follow it all religiously.

"By focusing on risk-adjusted returns, not just absolute profitability, we blend process and outcome goals."*

*LESSON 12 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

Stress.

I always thought that my stress was killing me and my trading. It was always the one thing I was afraid of, that was stopping me from trading, but the truth is that it’s not. While reading this book I realized that stress isn't the problem but again rules, mistakes and me. How many stressful situations I've had over these last few years of trading is just impossible to say, to recall. But I do remember why they where stressful for me. 

Firstly, I remember myself trading before the news, and I don’t think I need to explain what that did to me and my trades. These trades were never winners, but always very stressful situations. Next, I remember trades at setup that I just saw. Those were made in a rush with no planning, thinking or even realizing what market I was in. And again those were putting me down as well. And last but not least, I remember the trades that were taken because somebody else took them. All my trades that were not planned were the most stressful of all, because in those situations I didn't know what I was doing, and I was getting pissed at another person who took the same trade, or worse, at the market. Now I know that it’s not the stress that’s the problem, but me and my rules. I know I didn't make all of the possible mistakes, but those three were enough to put any trader on the red side or in the hole for a long time.

So what was wrong?  Well, my rules weren't specific enough. Since I've found what was wrong, I now have rules like: “Never trade before the news,” or “If you just saw it, don’t do it.” Since then I've had them stuck around my screen and I follow them religiously.

"Stress is a mobilization of mind and body; it can facilitate performance."*

As I've mentioned several times before, I never traded without a stop, but I did make other mistakes; we as trades always do. All those mistakes were causing stress, but on the other hand if not for this stress I would have never known what was wrong. When I started going over all my trades that didn't work and were very stressful, they gave me an idea of what was wrong. It was truly and only my fault that they were losers. So I learned to set up all kinds of rules for myself that continually keep me trading with a lot less stress, but I also learned a valuable lesson in that, stress can be very helpful and I need to be alert when I trade so I can recognize the source of my stress and use it for my further growth.

"Position size limits, trading plans, and stop-loss levels are like snow tires on your vehicle: they may not seem to do a lot for you when things are going well, but they certainly help you deal with adverse conditions."*

Having rules is one thing but following them is a totally different thing. This is where I need stress. I feel alert during setup and I quickly go over my check list. Thanks to my stress I feel like I’m working. I’m doing well because I do check my rules and I make decisions based on those rules, not based on my feelings. Rules are sometimes big like, “Do not trade at all before the news,” but some are smaller like, “Swing size that I can read is a good signal in my setups.” So, having rules is one thing, but checking them every single setup and trade, every single day, is the thing that keeps me on my toes. And again, thanks to stress I know what to do.

"Preparation and familiarity keep stress from becoming distress, because they enhance your sense of control."*

For me, trading was always a lot of work, not because it was hard, but because I wasn't prepared. I now spend many hours doing my homework, sometimes in the morning, but more often in the afternoons, and for the next day I am always prepared and know ahead of time what I will do “if.” When “if” happens I’m ready to check my list and act, and the stress is gone as soon as I check the list. I know what I see and I trade what I see. It’s that simple.

"That doesn't mean repealing stress; it means creating active firewalls between stress and distress. Risk management is one of the best psychological firewalls of all."*

*LESSON 11 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

Knowledge.

I've already touched on how change started happening for me. It was all in stages; it wasn't just in one day, week or even a month. Change is not only about the moment we decide to trade in a different and better way, because change also happens with our state of knowledge. For me one example of change was learning the market profile (MP). It took me a lot of time, don’t ask how long because I don’t even remember, but I do know that it took me at least three rounds of studying to grasp it. I got the book and I was trying to read it, and oh my, it was hard and it sounded like Chinese to me. I breezed through it and didn't understand a word. After a while I tried to read it again with the same results, but my third attempt was the charm, total success. I just wasn't ready for it before then. I ended up reading three books about MP really fast, I watched the best seminars I could find about MP, and I also read a lot of articles about it at real time of market action. This was how the market profile became the base for my rules.

"You will change when you’re ready to change, and you’ll be ready to change when you recognize that you need to change."*

I wanted so many things to happen simultaneously. I was reading a book each about market shapes, MP and psychology all at the same time. And it was too much. I knew that psychology was the most important topic I should get into, but since I lacked belief in my plan and rules I decided first to study more and then make my final planned change, which was to focus on the psychology of trading. I went through books about shapes, then MP, and finally ended up and still continue to read only psychology books. And with that approach self-coaching became a lot easier for me. Day by day I was setting up goals to achieve. Some took longer to reach as would be expected, but some were easier and helped me feel successful. Goal by goal, I got to know myself, how I trade.

"Work on that one goal intensively and daily until you make and sustain significant progress; then move to the next change."*

"When you coach yourself, focus your efforts and let one success fuel others."*

The first thing I learned from working with my new coach (Me) was that I was missing goals. I saw that I made progress and that I was trading better, but it was very easy to make mistakes, to over-trade, to question myself twice about a trade instead of checking my list of rules. Since I started to work on myself, I realized that setting a goal and following it for a period of time until it becomes my habit is the best way to stay positive and focused on my rules. Doing the same good thing over and over again built sustainable change and made me want to continue doing it day after day, week after week.

"We've seen that the enemy of change is relapse: all of us too easily fall back into old patterns if we’re not making conscious and sustained efforts to build new ones."*

"Successful coaching means working as hard at maintaining changes as initiating them."*

Change came to me because my situation was bad, it was really bad. I knew I was doing something wrong and repeating the same, old, bad patterns every trade/day/week. It took a while to understand my mistakes and even longer to stop making them, but the next step was to get things right and start doing it all the right way. Realizing your mistakes is a big step, and stopping yourself from making them is another.  But this shaped me to do good things, and by repeating the good I became fearless, less stressed and a strong believer in my rules, plan and strategy. By setting goals and working towards them for a long period of time, until it became second nature, I started to see trades clearly, plan them slowly and take them with no possible anxiety. The most powerful goals for me were to be patient, to check my list of rules before taking a trade and to take photos (screenshots) and notes.

When finally I got things right, I saw that it was working and that I can do it. There was nothing left to do but continue the same to get consistent in my successful choices.

"If you’re trading well, that’s one of the best times to coach yourself."*

*LESSON 10 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

Self-confidence.

Trading is a very lonely profession, at home alone. If I hadn’t joined a trading group then I’d end up talking to my charts all day. When I have one good day after another I like to share my excitement, and when I have a bad day, losses piling up, I get frustrated, but this is when you have to remember the keys for self-confidence. Having targets before even entering the trade, having stop loss placement at the same time I enter the trade, and most importantly, having rules that dictate why I’m looking for a trade and why I’m taking this trade.

"The key to regaining self-confidence in such a situation is to turn the focus from making (or losing) money to the actual process of trading."*

"You control how you trade; the market controls how and when you’ll get paid."*

Rules come first. They must be strong, logical and smart in accordance with successful trading practices. Only then can I focus on following those rules, and not on my daily/weekly P&L. Rules must make sense being there because only then will I be able to measure my success, and by following my rules I can tell I’m working on my success. My choice and action to follow those rules is the one thing that I can control every trade, every day. By controlling this and showing myself that I can always follow my rules, I have proof, evidence that I am a successful trader. This control of my success, this self-mastery, is what gives me more and more confidence as a trader, thus leading to more and more success.

Good Sound Rules Are Followed Every Trade = Confident Successful Trading Process = Eventual Profits

What helps me grow self-confidence is to work on my charts, notes and trades daily and weekly on a consistent basis. Repeating over and over the same plan and rules builds self-confidence. When I see that I have followed my rules every single day I want to continue the pattern the next day and next week because it makes me feel good about myself, like I’m a strong trader.

"Self-confidence is not expecting the best; it’s knowing, deep inside, that you can handle the worst."*

Trading without a stop is unthinkable. I need to know where my risk is. If a trade is not working, what will I take as my loss? I know I can manage only that loss. Many times we as traders tell each other "I've been there, done that," but thanks to this book I started to say to myself:

“I've been here; I can handle this.”*

"Confidence doesn't come from being right all the time; it comes from surviving the many occasions of being wrong."*

So why do I need a journal? To build my self-confidence I go and read my notes over and over again. Thanks to my notes and pics I can find what I did right and what I did wrong, so I can stop making mistakes and do great the next time. If I didn’t take pics or notes I would never remember what happened earlier in the day, let alone at the end of the week. What I was looking for or how I traded would be impossible to keep track of after a week. Knowing your own mistakes will stop them from happening again, and being aware of what I do well will allow me to make it happen over and over. I use my journal as an essential tool to keep focused on my rules and plan. All my positive notes help me stick to my path.

"Every trader needs a plan for losing. Your stop-loss is your plan for a losing trade."*

"Your losing trades and losing periods are your trials by fire that build resilience and confidence."*

*LESSON 9 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.