Anxiety.

Anxiety is the worst thing we can experience as traders, and it can ruin us. When we as traders do well we increase our risk. And when we start losing day after day, then our anxiety goes up, too. This pushes us away from good trading, the kind that’s planned and based on rules, and pulls us towards the kind that’s emotional.

"The expert performer does not think positively or negatively about a performance as it’s occurring. Rather, he is wholly absorbed in the act of performing."*

"Thinking positively or negatively about performance outcomes will interfere with the process of performing. When you focus on the doing, the outcomes take care of themselves."*

We’re supposed to be doing what we've planned to do. Trading based on a plan and rules will never cause a trader to be overwhelmed with anxiety. If you do what you plan to do, and you do it no matter what the outcome, then you’re always going to do the best you can. By going over each trade we know what we did well or badly. By tracking bad days we can see what setup and what kinds of trades are not working, and this becomes our learning process.

"When you are your own trading coach, you want to get to the point where you actually value good trading ideas that don’t work."*

Each trade is a lesson. The best lessons are actually bad trades, but it’s up to us as traders to take something away from them and learn. It isn't necessarily always our mistake that made it a bad trade. It might be a change that occurs in the market. It might be the news, something that just happened and moved our trade from green to red. But, we must be prepared for outcomes like this every single time. That's why we have stops, plan and rules. They keep us from getting anxious and reacting emotionally.

"That good losing trade is either telling you something about the market, something about your trading, or both. Your task is then to take a short break, figure out the message of the market, and make an adjustment in your subsequent trading."*

*LESSON 18 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

Fear.

Every single trader experiences fear. Some traders feel it all the time, some only experience it early on then get rid of it totally, and some feel it only at certain moments like I do. I generally feel fear only at the moment when I get into the trade or just before entering the trade. I don’t like this feeling. But I’m very curious about why I don’t feel fear before I get out of the trade or before I should decide to get out of the trade. I’m starting to see that I’m missing a piece of the puzzle. I feel like I should feel fear before getting out of the trade or just before I should get out of the trade. Let me explain why that is, both to myself and to you my readers.

I’m afraid when I’m taking a trade because of the risk of losing, but I do not feel it when I’m getting out of the trade. When I’m out of the trade on the stop loss I do not feel fear either. When I’m stopped on the green side of my trade, but not on the target I’m not afraid. When I’m stopped at break even I still don’t feel fear. But I should. Why? How many times has your trade been very green, and you, based on your rules and plan could only move the stop to b/e and then you were stopped? I was in a situation like this many times, but if I would have felt fear and realized what was going on, I probably would have gotten myself out of the trade, because of the fear at the green side. How many of you have been in a situation where you took a trade against the rules, but you didn’t get out of it because it was a little green, and then all of a sudden you were stopped? This was a moment when you should have felt fear and gotten yourself out, but you did not. Same here, I’ve done the same many times. Why?

"When we feel nervous in a trade or feel nervous about putting on a trade, it’s important to know whether our response is one of fear or one of anxiety."*

"Fear is the friend of trading when it points to genuine sources of danger: a felt discomfort with a trade will often precede conscious recognition of a change in market conditions."*

Feeling fear is very important and very helpful in my opinion. If I trade with no emotions I don’t know what I’m doing. We all have emotions in our trading, the point is to know how to use them. Nobody knows if a trade is going to work or not, NOBODY. The not knowing shouldn’t make you nervous because that’s just a given, but being active, being awake, being in the zone, that means experiencing emotions like fear. If during the trade I follow the market and my rules and plan, then thanks to my feelings I can trade to the best of my ability.

"When you are your own trading coach, your goal is not to eliminate or even minimize emotion."*

So what are we to do in order to start feeling fear as a tool, during the trade? How do we feel it and use it to be sure about still being in this trade or not? When we drive a car and any kind of light on the dashboard goes on, we don’t ignore it. Being awake and in the zone during the trade will allow us to see figurative lights blinking on the screen to keep us feeling fear when necessary, to help us get out of the trade when it’s right. This is what I’m missing. I have rules for when to get into the trade and when not to take a trade, but I don’t have rules, feelings, for when to see the warning signs. I need to hone my fear instinct to recognize that “Voila!” moment where I just notice something in front of me and it can trigger my need to reexamine my trade.

"When nervousness hits, the first thing you want to do is simply acknowledge that fact."*

"Fear is a warning light; not an automatic guide to action. It is our mind and body’s way of saying, “Something doesn't look right.”"*

I always work on talk-aloud mode, but that’s before I take a trade. Now, I think it’s time to be more fearful and look for "questions" that might lead me to get off the trade. I need to keep talking to myself and voice the “why” observations in order to recognize them as potential scary scenarios. Fear can be very helpful if it’s used properly, as long as it’s not turned into anxiety.

"You can use your fear as a cue to examine your trade more deeply and adjust your confidence in the idea, up or down."*

"If you can use fear in this way, even negative emotions can become trading tools and even friends."*

"Confidence doesn't come from an absence of fear; it comes from knowing you can perform your best in the face of stress and uncertainty."*

*LESSON 17 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

HANG IT UP!

This is just incredible how I've been feeling these last couple of months, and not in a good way. It’s incredible because this chapter is the next one to be covered in my blog, but it’s also just because of how I feel. January started the year off great, February was flat in my trading, and March put me down. It’s now just the second half of April and I’m asking myself, why not hang it up? Last year took a lot of hard work to get to where I thought I would love to be. I worked hard and put myself in a position that looked great for the future, but in March I took so many steps back that now I don’t know where I am anymore. I feel like I’m going nowhere. I’m tired of being wrong and of losing money. This chapter is so exactly about me that I just want to copy it and sign below.

"If you are meant to do something—something that speaks to your talents, skills, and interests—you will display a significant learning curve in the first year or two of effort."*

And today thinking about my last two months or so, and reading this chapter, I think about possibly hanging it up.

"Let’s face it: for many, there is a time to give up trading. I know quite a few traders who have been at it for years and have never developed the skills (and perhaps who never had the talent) to simply reach a point of competence where they cover their costs."*

"If such a learning curve is not apparent, it’s probably not your calling. Hang it up and pursue something that genuinely captures your distinctive abilities. It’s not quitting, it’s not being cowardly. It’s cutting a losing position and getting into something better: a course of action that is as sound in life planning as in trading."*

The effort I put into trading is keeping me from acting on these thoughts and feelings. The goals that I set for myself and my vision of whom I’d like to become are stronger than the recent disappointment.

"Discouragement tells us that, at that moment, we perceive an unbridgeable gap between our real selves (who we are) and our ideal selves (who we wish to be)."*

"Our real selves are always distant from our ideals: the question is whether we perceive ourselves to be competent to bridge the gaps."*

I ask myself what is wrong. And it might be that my plan and the setups I trade are no longer present in the market the way they used to be. Perhaps the market patterns have changed, so what was working for me in the past is not creating the same potential today. And all these things that I’m experiencing and feeling tell me that maybe I should temporally hang it up. How many of you are in the same place? I was thinking about expectations as well, but this is not the problem in my situation. If you are looking to make money every single day, you will be severely disappointed within one week. Here this isn't the case with me, because I can wait for a good setup all week long, and take only one trade per week if there is just one to take. Another thought is that maybe I’m just overloaded. This is the type of situation that may put me into a psychological burnout.

"Burnout occurs when we feel that the demands on us exceed our resources for dealing with them."*

"Maybe it’s a reflection of changes in markets; maybe it’s a sign of unrealistic self-demands or a signal that life is out of balance."*

There’s nothing else for me to do but find out where the problem is. It could even be the market, so then the solution will be just reducing the risk.

"Reduce your risk, reassess your trading, and you preserve your capital and turn discouragement into opportunity."*

If the problem is connected with my expectations the best solution is to keep them low. This will make it easier to achieve each daily goal, by making it small and realistic.

But it can also be, and honestly I think that I've found the problem in this already, that I've put everything into trading and I miss having a life.

"An excellent strategy for achieving psychological diversification is to have significant life goals apart from trading."*

It is again time for me to embrace change. Change is the best way of staying positive and on topic, and having goals.... Change was the best way for me to get better as a trader, and now I have to change again in order to get back my good feeling about trading.

*LESSON 16 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

"trading under control instead of pushing"

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."*

*LESSON 15 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

Journal.

I've shared about my journal before, but this post will be very specific about why I have a journal and how I keep it. I had always taken notes from the very beginning of my trading days, but those notes were about stocks I was watching, price patterns, price action, trends, and many other things based on viewing charts. Now after over three years of trading I recall that this type of journal really wasn't giving me anything, it was a total waste of time. Thanks to the last few years of experience and thanks to many books that I went through, I started to learn how a journal is supposed to look and why I need it. And this book* had the biggest impact on my trading journal. I realized that my journal has to be something that both helps to find my mistakes and the problems with my thinking, and also helps me fix those problems. So my NEW journal started to have info about the market and what was happening based on my plan and rules. It had info about my feelings while watching what’s happening as well as at the end, and included all the consequences of that day’s thought patterns and of my actions.

Having a journal like this became very helpful with going through the day. I found that I love to use it with many aspects of trading. First off, I check myself on each and every single setup. I control my emotions, and work based on what I see not what I feel. Secondly, my new journal has helped me very much with my goals. After setting a goal for the day, week, or even month, I now have a way to check if I’m consistent in doing things towards achieving it. And thirdly, a journal like this happens to be the best way to check every single trade, the setup I was considering or did take, and whether I’m really following my rules and plan. There is no other way I would remember on Friday what I was doing on Monday. During the weekends I always review my journal and check myself. Why was the past week as it was, what was wrong or right, what am I supposed to do in order to correct myself and/or keep doing well.

"The psychological journal is a tool for developing your internal observer: learning to recognize what you’re doing, when you’re doing it."*

Thanks to this book* I started a very specific journal and with it I began to see what I do and when I do certain things. The journal I use is made of columns. The first column is about what I see on the market, what kind of pattern is unfolding on the chart. And based on what I see I study my rules to be prepared in case a pattern will show up so I’ll know what to do. As soon as my first column is filled, I move on to my second column which is about my feelings. In here I write about my feelings as I watch a pattern unfolding on the screen. Working on my notes allows me to see that I’m not doing anything against my rules, that I am following my plan, and that there’s nothing to worry about. It’s immediately evident there are no emotions connected to the situation. And after all this, I start the notes in the third column. If there was a trade, I use this column to record the resulting consequences, and if there was no trade I write why I didn't take it. If there are things that I did wrong I always go back and have a clear understanding of what I saw, thought and did then. I make mistakes, and by having notes like this I can see what they were. Sometimes it’s bad reading of the market, or I can be emotional, or it was bad execution. By going back over my notes I can correct it the next day or even the next week without any confusion.

"When we clearly link maladaptive patterns to negative consequences, we develop and sustain the motivation to change those patterns."*

"You cannot change something if you’re not aware of it."*

*LESSON 14 The Daily Trading Coach 101 Lessons for Becoming Your Own Trading Psychologist by Steenbarger, Brett N.

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.