Do you find yourself needing to be in a trade? As long as you are in front of the charts, is it hard to stay out of the market? (I know some of you have a hard time pulling the trigger to get into a trade. I am not talking to you folks here!) But for those of us who have no problem taking a trade, we may have a problem not taking one.

The other day, I came to the computer to look for my trade of the day, the gap fill. There was no gap, so there was no gap fill trade. I told myself, “I won’t be trading for a while, until another really good setup presents itself.” And I didn’t trade. But I had that anxious feeling inside, like I was missing out on something.

Are You AFraid of Missing Out?

By the end of the day, I had taken several trades. Honestly, I didn’t wait for the really good trades—I jumped in too soon. I notice, when I take a trade that isn’t great, it tends to go into the red fairly soon. Then I feel anxious; I can feel it in my stomach. Conversely, when I wait for a good trade, one that follows my rules, often it goes green first and never goes into the red. These trades obviously feel much better. Can you relate? So I ask myself, “Why wouldn’t I wait for the good trades?” After all, they feel better!

Why do we enter trades prematurely? The reasons are different for each of us, and yet similar. I hear from clients of the awkward feeling they have when they’re not in a trade.  This is especially true for newer traders. There is an anxiety one experiences sitting there, waiting, thinking you are “missing out.”  Or, you may have lost money, which also creates anxiety. Then the goal is to win back the lost money, as soon as possible.

What To Do with Anxiety?

If this phenomenon affects you, try to start noticing how you feel in your body during these times. Notice the butterflies or the pit in your stomach, or whatever it is you feel. In times like these, what you do with your anxiety (after a losing trade, for example) represent the decision points that separate the winners from the losers. It is critical to be able to tolerate the uncomfortable feelings that compel you to get revenge–taking trades that aren’t in your plan.

As you learn to trade, you are training yourself to be a robot, to repeat appropriate actions over and over. You learn to plan a setup, wait for it, execute it according to plan, and be prepared for a loss— should that be the outcome. Trading should be boring. . .

So what can you do if you tend to be impulsive? First, make sure you become aware of your feelings trading. Journal about these feelings along with recording your trades. It is helpful to write down your feelings before you take a trade, during a trade, and even when you don’t take a trade. Recording feelings helps you to recognize them.  I know this is not appealing to most traders. But, your feelings can be like a little devil inside you, making you do things you don’t want!

Create Some Structure

Creating structure and accountability can also help. One client has a rule that after every losing or impulsive trade, he does 20 pushups followed by a 5-minute rest away from the market. This is not punishment; it is a tool to disconnect the impulsive sequence and get distance from the market. It helps him to regain clarity. For another client, when he was able to deeply associate compulsive trades with pain, he stopped taking them.

What tool can you create to support yourself in taking only planned trades?

Andrea Wylan

http://awylan.com/

Do you trade on a simulator? If so, what do you use it for?

1. Are you practicing learning a trading platform?
2. Are you perfecting strategies and testing them?
3. Are you going wild to see how much $ you can make in this “safe” environment?

I got to thinking about my use of the simulator these last few weeks. In the past, I have fallen into number 3 above–going wild–on the simulator. I realize now, I was only training myself for failure. Let me tell you why. . .

My Training

When I learned to trade, we were taught to use real money. The simulator was just for learning the platform and maybe testing a strategy. (But, even the platform and strategies were learned using real money.) The message was, just trade really small share sizes until you “get it.”

Now, this same school teaches students to use the simulator first. Thank God. They teach students to simulated their trading for several months through “stage 2” of a 8 stage progression. (Each stage requires having a certain level of competence before moving to the next stage.) This way to start trading make so much more sense to me.  I wish I had learned this method when I was trained.

So, fast forward to now. I am back on the simulator as I progress through stages 1 and 2, on my way to trading live again, when I reach “stage 3″. I have no issue with this. I have lost enough trading live money, that I am happy now to show competence first!

Reflections on Simulating

Now, I am reflecting on using the simulator. Up until recently, I didn’t give it much thought. The simulator for me was more of a game. I suspect that is why we were taught not to use it. Because if you don’t have real money in the game, you don’t take is seriously, right?

Most of us take simulated trades we would never take with live money. It is challenging to trade simulated trades the same way we trade live money. Haven’t you traded thousands or millions of dollars, doubled down, been crazy with your simulator trades, just to see how much money you could make? I sure have. I remember one student in my class making $60k-100k “playing” on the simulator. . . I think it is a mistake.

The simulator is not a game, even as much fun as it can be to play with. I think it should be taken with utter seriousness and only be used as though it is live money. This may seem harsh to some, and like a no-brainer to others. For me, it wasn’t a consideration. I was trading live money even when I was losing money on the simulator. No one taught me differently, and I didn’t figure it out on my own.

From now on, I will make sure to be profitable on the simulator before I trade live. If my live trading starts to go South, I will go back again to the simulator for “training.”

Practice Makes Perfect

I suspect that what we practice on the sim is training us. Period. So, if you practice being carless, it can carry over to your live trades. As much as you can, try to believe it is real money you are trading. Practice until you have profitable days consistently. Train your mind and subconscious not only how to make money, but also to be comfortable making money. It prepares you for the real thing.

The Upper Limit

We all have an “upper limit” tolerance level for “good” in our lives. Beyond this limit, we may not be able to tolerate any more good coming to us. This might sound counterintuitive. “Of course I want more good, more $, etc.” you might say. But that isn’t how the subconscious works. There is a level beyond which we are not used to, or are comfortable with, more good.

When we hit our upper limit, our behavior changes and we “correct” for the situation. Things have become too good and need to be brought back into our comfort range. We sabotage ourselves, almost like a resistance level acts as a ceiling for a stock’s price upward. Price reaches the resistance levels and retreats. . .

How to Expand Your Upper Limit

The good news is your upper limit level can be expanded. That is the goal of practicing, of visualizing (I will do a blog on this soon), of journaling, etc. These tools let you grow your comfort zone. (See the book, The Big Leap, for a great read on the subject of The Upper Limit.)

So, I invite you to practice expanding your upper limit using the simulator.

My client Bill had traded successfully for years. However, he “played small.” Although he had been profitable, had winning strategies, and had great self-discipline, he hadn’t let himself trade more than 100-200 shares per trade. If you are in a similar situation, try expanding your comfort zone. Use the simulator first for practice. Let yourself assimilate growth slowly as you expand share size, stop size, how far you let your winners run, or wherever you are playing small.

I advised Bill to try trading 300-400 shares in the simulator. To treat it like real money as much as he could. He was to notice discomfort or other feelings or thoughts that came up when trading the larger share size. Pretty soon, he was able to “stretch” his comfort zone with increased share size and try it live.

This is a great use for the simulator. Just make sure you keep it “pristine.” If you goof around using it, and you go for those big wins, your brain gets trained that way.

What is your experience with the simulator?. . . let’s hear your comments.

Wishing you enlightened trading.

Andrea Wylan

http://awylan.com/

I understand from personal experience the challenges of one’s mind when trading. I’ve had issues with being impulsive when trading. According to the  Tharp Trader Test  (trader personality test) I took, I am a “spontaneous trader,” i.e. impulsive trader, one of the most challenging categories.

I remember feeling envious of a trader friend who was a cautious trades. She erred on the other side—having a hard time pulling the trigger. She complained about missing good trades, being too scared to get in.

Being cautious is a benefit for a trader and their account’s bottom line.  It is a safer problem to struggle with than being impulsive. If you don’t lose your money, you can still be in the game.

I lost Money Anyway

Even after attending a quality trading school and being taught how to not lose money, I still did. I took the initial course three times, and even took advanced courses. I heard teachers describe how they had lost 100k or 50%–75 % of their accounts when they started.

They told us what to do so that didn’t happen to us. Use stops. Use risk management. Only risk 1% of your account per trade. Let the winners run. Don’t overtrade. . . You know the drill.

And still, I didn’t do as I was told, and I lost money. I thought I knew what the market would do. I was stubborn.

There were days my trading was out of control. I am a bit ashamed to say, a few days I took 50 trades total on the ES (the S&P E-mini–at 5$ per contract, that is $250 just in commissions!) My plan said five trades maximum. On my worst day, I took 90 trades! These days for me felt so out of control. As I traded, I stopped caring about the losses I was incurring. Trading had turned into video gaming for me, without any bearing in reality. The result was a sick to my stomach feeling, and fear to trade the next day.

I was left wondering how I would finally get “control” over my trading? . . .I even went to a gamblers anonymous meeting one afternoon!

Why Don’t We Follow Our Rules?

Why didn’t I listen to my teachers? Why was it so hard for me to follow my plan? Can anyone relate?

This question needs to be understood, for all of us. If one can’t follow the rules in this game, the game will be over! Following the rules means doing what you have been taught. It means having a trading plan and sticking to the plan.

I learned, I didn’t follow the rules because something stronger than the rules was driving my actions.

We have heard how fear and greed grab us and control our actions. These emotions can take over our best intentions to follow rules. Additionally, add our own childhood experiences and resulting beliefs, and there can be a volcanic force operating under the surface!

Core Beliefs from Childhood

What are your core beliefs? Have you asked yourself? How can you find out?

One way is to start journaling your trades. Write why you got in and out. Did you follow your rules, if not, why not? How did you feel during the trade?  As I journaled my trades, I was able to uncover some of the reasons for my impulsive actions.

Recently, I heard my teacher say, “if you had a traumatic experience as a child, you are about to relive it trading, whether you know it or not.”  Even if you had a great childhood, you can have doubt, beliefs, opinions, and so forth that affect your trading. Trading is different from most professions. It requires that you face and know yourself.

Freeing the Mind

The key to success then, is understanding and healing the mind. When your mind is free, you can much more easily follow your rules. Your mind is no longer hijacked by old stuff operating covertly beneath the surface. Whether your issue is impulsiveness, over-analyzing,  playing too small, being “cheap”, or whatever it is, healing comes from first understanding.

What will you do when faced with your trading demon? I almost quit trading. (Some family members were 100% in favor of me doing just that!) Instead, I decided to heal this because I wanted to trade.

For me, through a mixture of working with a great therapist, getting coaching, and tightening my trading plan, I finally got onto the path for trading success. The process focused on “inner child” work, helping my “little girl” heal and grow up.

It turns out, it was she who was doing most of the trading. Can you imagine letting your 5-year-old child push the buttons on your live trading account?

Do the Work

If you are struggling with discipline challenges in your trading, I recommend you start journaling your trades (even if you have resistance to this). Hire professional help as needed, and see if you can’t discover what is going that is keeping you from your trading goal.

Do what it takes now to work out these issues. It may seem expensive, time-consuming, scary, or hard, but the alternative is harder and more painful. A few great books might be helpful as well. These are my favorites:

• Trading in the Zone by Mark Douglas
• The Daily Trading Coach:101 Lessons for Becoming Your Own Trading Psychologist by Brett N. Steenbarger
• Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology also by Brett N. Steenbarger

The best athletes have great coaches and a support team. Consider doing the same for yourself.

Wishing you enlightened trading,

Andrea Wylan

http://awylan.com/