I N N E R W O R T H

NQoos ;-)

TRADING NAKED

Master your setup. Master your Self

the interpretation and application of price action concepts

We all share a similar path in Trading. Even though you may not be a consistently profitable trader now, you can chose to enjoy the path. This alone may make the difference in your success.

Mind Over Markets ^TM - February 23, 2005

Adventure is not outside a man; it is within.
	- - David Grayson - ;

Feature Article

Looking for a Way Out

Dave complains to his wife, "It's all a sham. There's no way to make money in the markets. There are just too many roadblocks. The odds are against you all the way." Dave is fed up. He's ready to quit, and he is searching for a way out. Rather than persist in the face of adversity, he's ready to find a new profession. At these times, though, resilience is vital. It's not a time to brood, but a time to stand up and persist.

Dave's complaints are somewhat legitimate. If someone tells you trading the markets is easy money, they are either kidding you or kidding themselves. If trading were easy, everyone would be making huge profits doing it. There is no Holy Grail, no quick-and-dirty way to make profits. If you want to reach the status of a master trader, however, it's going to take sacrifices, commitment, and just plain hard work. Indeed, there are endless setbacks, and unless you are a skillful, experienced trader, the odds are against you. For those who approach trading as an amateur hobbyist, it might as well all be a sham because taking such an approach isn't going to make you a winning trader. If you want to convince yourself that it just isn't worth it, you can find many reasons to give up. At that point, you will try to find any excuse to avoid the hard times ahead, and just walk away. You'll sabotage yourself by taking unnecessary risks and impulsively trading poor setups. If you want to find a justification to give up, you will find it. It's natural to fall prey to such a pessimistic attitude, but if you want to be a winning trader, you can't give in to such pessimism. To make it, it is vital that you learn to stay optimistic, persistent, and ready to overcome any setback.

That said, it is often hard to stay upbeat. There are times when nothing seems to click. Your trading strategies don't work, or you may have trouble getting an accurate read on the markets. It is a common ailment. Depending on your past experience, there are times when the market doesn't seem to behave in the way you anticipate. Market conditions are fluid, and unless you have a wealth of experience, you may simply not be familiar with all the factors that are driving market action. It may just be a matter of standing aside until market conditions change. To a trader who is tired, worn out, and looking for excuses to give up, however, less than optimal market conditions can be a deathblow. It's just one of the many reasons to give up. But to reach the status of a master trader, it is necessary to weather the storm. Instead of reacting with stunned paralysis, the winning trader views unfavorable market conditions as a learning opportunity. It is a time to gain more market experience. The optimistic trader objectively studies the markets, trying to understand how the market moves and why. It isn't a time to be stuck, but a time to think creatively and hone trading skills. It's at times like these that it is time to stand up and cultivate a fighting spirit.

When you're down and out, and ready to give up, it can be difficult to cultivate a fighting spirit. All looks bleak, as if it is impossible to get back on track. But it's possible to overcome the malaise. First, acknowledge that you feel beaten. There's no point in pretending that you are not feeling down. If you don't, you may not put your feelings in perspective. Rather than think, "I may be down, but I'm not out," you may start thinking, "It's time to throw in the towel." If you admit you're merely tired and worn out, though, you won't make matters worse by making trading errors and digging yourself into a deeper emotional hole of despair. Second, stand aside and rest. It's all right to take a break. Even the most successful trader feels a little burned out at times. By resting, relaxing, and rejuvenating, you'll find the strength to muster enough enthusiasm to tackle the markets again. And this time, you may find that the obstacles that once seemed insurmountable are now just minor bumps in the road to success.

After you have taken care of practical issues, like managing risk and building up enough trading capital, you can then address the psychological side of accepting losses. First, put the money you spend for trading in a different "mental compartment" from the money you allot to your personal life. Second, identify and refute assumptions about risk and loss. It may be useful to make a list of justifications that you can read after you have lost: "Losses are a business expense. It's like a personal investment in your trading business. It's like paying tuition in order to learn important trading lessons." These sayings may not work at first. It's hard to change your expectations over night. It takes practice. That's why you should actually write down these sayings about losses, and read through the list when you feel guilty about a loss.

Trading the markets can be emotionally draining, and if you aren't careful, you can feel beaten and ready to quit. But rather than search for a way out, it's essential to remember the reasons to stay. If you persist, gain as much experience as possible, and hone your trading skills, you'll achieve enduring financial success.