I've been sharing with you how many and what kinds of mistakes I make as a trader. The worst, my most common, the one that put me into the biggest hole was to push myself to constantly trade. Yes, I am a trader and yes, I make mistakes, but this one is the worst. Trying too hard to make money, trading to find trades, is a terrible thing to do. I was doing this until I realized that it was working against me. It wasn't easy to figure out what I was doing wrong. It wasn't easy to understand why I was doing it, but as was the case with all of my problems and mistakes, thanks to all the psychological books, I got to the point where I knew what I had to change. As soon as I realized that I was trading without rules that should be used in every single setup given by the market, I stopped trading and moved to setting my rules. These were not only rules for when to enter and where my stop or targets are, as these are the easiest ones. The difficulty was with rules for when not to trade. Rules for risk management were the worst I had, and this was the main thing that had to change.
"When rules are repeated and followed over time, they are internalized and become mechanisms of self-control."*
"The right trading behaviors start as rules and evolve into habits."*
And they did change. I set up rules for all possible situations I might be served by the market. During my SIM trading the main thing I was trying to follow was not the market but my rules. And I finally stopped losing by making sure to check all my rule boxes every single time, for entry, stop, target and timing. I realized that I plan and trade well when I’m relaxed, not frustrated, and I don’t focus on trying to make money or trade to make money. I realized where the problem was, but also I realized that I started to change and was following my rules religiously and getting to the point where I was planning instead of pushing myself to trade no matter what.
Thanks to psychological books I knew what to do and when:
"1. Make a list of your most important trading rules."*
These are rules for preparation, entry, stop, targets, days when not to trade, moments where to take a break and the time or situation when to stop for the day. I have rules for good setup and bad setup. I have them on the wall close to my screen, so even though I know them inside out, I still look over and check every single time, whether I see a good setup or not. Rules for taking breaks are very simple, like when it’s lunch time I just stop - period. I go out and it’s that simple. I’ve decided that days when I used to lose the most in the past, like FOMC days, are simply days off for me. I love days off!
"You can’t expect to internalize trading rules if you haven’t first made them explicit."*
"2. Create a routine before trading begins to review the rules."*
Visualization - this is why we need to do it. I prepare my charts for the day, but then I prepare myself for the trading day as well. By wearing headphones that stream calm music I visualize my day, my setups and my trades. My eyes are closed, but my trading rules are front and center in my mind. By doing this is I check the list in my brain, I repeat them inside out, so I always remember them every single time I have to check them.
"The more you think about rules and rehearse them, the more they become part of you. Repetition creates internalization."*
"3. Create a break in your trading day to review your rule-following."*
My midday breaks are different. Sometimes I just have a break to check if I’m doing well during the day, then I check my actions so far and just simply take a lunch break. Sometimes the day is not the best, it’s already a losing day. If I met the rule of loss limit for this day, then my midday break turns into being done for the day. I then write my notes, and relax for the rest of the day. I will not sit in front of the screen and look at what I’ve been doing or what I’m missing, or what I did wrong. What’s done is done and can’t be changed. There is always the next day. Also, when by midday I’m green and out of my trade, this time becomes my end of the day as well. I have a simple rule - one good trade per day!
"4. Use the rules at the end of the day as a report card."*
This is the best thing to do, set a goal for the next trading day. Simply put, if you don’t know what your goals are, or what they should be for you, check your trading day. If you find mistakes, set a goal for the next day to avoid making the same mistake again. On the other hand, if you did great for that day set a goal to repeat the same good thing the next day. Goals are always supposed to be positive. Write them down with positive words. For example, if you took a trade today with too big a risk then your goal can be, “I will watch my entry place to have the smallest risk possible” or if you had a super trade today with very extended targets then your goal can be, “I love my target placement and I will wait for targets to be hit.”
"Good self-coaching is the ability to correct trading problems. Great self-coaching is to develop routines to prevent problems from occurring in the first place."*
"When rules are repeated and followed over time, they are internalized and become mechanisms of self-control."*
"The right trading behaviors start as rules and evolve into habits."*
And they did change. I set up rules for all possible situations I might be served by the market. During my SIM trading the main thing I was trying to follow was not the market but my rules. And I finally stopped losing by making sure to check all my rule boxes every single time, for entry, stop, target and timing. I realized that I plan and trade well when I’m relaxed, not frustrated, and I don’t focus on trying to make money or trade to make money. I realized where the problem was, but also I realized that I started to change and was following my rules religiously and getting to the point where I was planning instead of pushing myself to trade no matter what.
Thanks to psychological books I knew what to do and when:
"1. Make a list of your most important trading rules."*
These are rules for preparation, entry, stop, targets, days when not to trade, moments where to take a break and the time or situation when to stop for the day. I have rules for good setup and bad setup. I have them on the wall close to my screen, so even though I know them inside out, I still look over and check every single time, whether I see a good setup or not. Rules for taking breaks are very simple, like when it’s lunch time I just stop - period. I go out and it’s that simple. I’ve decided that days when I used to lose the most in the past, like FOMC days, are simply days off for me. I love days off!
"You can’t expect to internalize trading rules if you haven’t first made them explicit."*
"2. Create a routine before trading begins to review the rules."*
Visualization - this is why we need to do it. I prepare my charts for the day, but then I prepare myself for the trading day as well. By wearing headphones that stream calm music I visualize my day, my setups and my trades. My eyes are closed, but my trading rules are front and center in my mind. By doing this is I check the list in my brain, I repeat them inside out, so I always remember them every single time I have to check them.
"The more you think about rules and rehearse them, the more they become part of you. Repetition creates internalization."*
"3. Create a break in your trading day to review your rule-following."*
My midday breaks are different. Sometimes I just have a break to check if I’m doing well during the day, then I check my actions so far and just simply take a lunch break. Sometimes the day is not the best, it’s already a losing day. If I met the rule of loss limit for this day, then my midday break turns into being done for the day. I then write my notes, and relax for the rest of the day. I will not sit in front of the screen and look at what I’ve been doing or what I’m missing, or what I did wrong. What’s done is done and can’t be changed. There is always the next day. Also, when by midday I’m green and out of my trade, this time becomes my end of the day as well. I have a simple rule - one good trade per day!
"4. Use the rules at the end of the day as a report card."*
This is the best thing to do, set a goal for the next trading day. Simply put, if you don’t know what your goals are, or what they should be for you, check your trading day. If you find mistakes, set a goal for the next day to avoid making the same mistake again. On the other hand, if you did great for that day set a goal to repeat the same good thing the next day. Goals are always supposed to be positive. Write them down with positive words. For example, if you took a trade today with too big a risk then your goal can be, “I will watch my entry place to have the smallest risk possible” or if you had a super trade today with very extended targets then your goal can be, “I love my target placement and I will wait for targets to be hit.”
"Good self-coaching is the ability to correct trading problems. Great self-coaching is to develop routines to prevent problems from occurring in the first place."*
*LESSON 15 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.
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