Thought Process while in a trade

[wsam29 10]

This was one the main questions I had for Hubert Senters and John Carter when I went down there almost 1 year ago.

 

I asked HS specifically what he was thinking prior to a trade, while in a trade and after the trade.

 

HS said to me that he tricks his head into thinking he's gonna be right before entry. That did not work for me, I myself need to think in terms of am I willing to lose on this trade. I have a set amount in my head already. Each market is different.

 

When I am in a trade, I'll start looking for clues if the trade will work out or not. There is nothing specific other than the pace at which trades are happening and the relationship it has to price and TICKs and volume, in other words, tape reading. My exit orders are already placed so there is less to focus on other than moving up the stop when its time.

 

Some possible clues that the trade may not work out. TICKS go lower part of range, price does not, take a look at volume. When they don't confirm, its a "oh crap" this trade may not work out, but stranger things have happened so I don't mess with it, I just say to myself the stop order is in place and let it work.

 

If the clues show me this trade may indeed work out, then its time to move up the stop. Some possible clues include price and TICKS confirming their move, both are making highs or at least moving together in proportion. If the target gets hit, great, but I generally get a little anxious when the price trades near it. Why the limit may not get filled, then its decision time, get out or see if it will trade through your limit or risk it taking your stop out. There is no cut and dry method each time, you make your decision and live with it.

 

You need to accept the fact price may trade even further in your direction. Either have a scale out technique or just live with the fact price progressed WITHOUT you. We each come to terms with that at some point, its just a matter of when not how because everyone is different, but you need to come to terms with this possibility.

 

Now, the good part, post trade, win or lose. I think what I did right and wrong with the trade and take a break for about 10 minutes. After my 10 minute mental break, if it was a loser and I see a signal, the next thought is "Do I dig myself deeper in the hole?" If I accept the possibility of loss,then I enter the trade, if I don't at that moment, I pass up until I do accept the possibility of loss. If the prior trade was a winner, I ask myself the same quesiton.

 

Even if you have a mechanical exit, it all involves accepting the possibility of loss. Loss can be defined as a loss of one own's capital or loss of the daily profits accumulated from winning trades.

 

Now this is how you dig yourself into a deep hole, not accepting loss. That is how new traders blow their accounts in months or cut your account in half in a matter of days.

 

Understanding how you handle and deal with loss is more important in trading then entry set-ups, its just not as sexy when you think about it.

[drk1t 10]

Thought process? For me, I totally focus on the charts and numbers, bid/ask and the volumes of the bid/ask. There are only two things I can totally get focused on, the markets and chess, well maybe a pretty woman but that's another story. Anyway, I watch the charts, outside indicators (more charts) and when the setup looks right to me I'll enter the numbers and punch enter and then watch it, if things work out I hold until it looks like it's done, that might be minutes or most all day, towards the end of the day I decide how much to risk by holding overnight. Lots of variables and they are always changing, like in chess. Outside indicators, bid/ask, volumes, tend lines, support/resistance, breaking news, commission costs, partial fills, over head costs and lots more, all these factors fall into what my brain thinks is a buy, hold, sell at any given time. I don't think anyone would approve of my system but the bottom line is out performing the market and thus far I've been able to do that. It's all about risk and reward. When I think things look right I buy, when they no longer look right I sell. What am I thinking when I enter a trade? Usually that this stock looks like it ought to start moving up. When I sell, you guessed it, this stock ought to start going down, or &^%$ that didn't work out, better sell let it drop down more and maybe try it again in a while. I don't really think all that positive or negative about a position, it's just a position, it's what the stock does after I buy it, and then what I do with it as it makes it's move that matters.

[GCB 10]

While I'm in a trade hopefully I think about as little as possible. I have my stop, I have my first target. These are hard targets so there is really nothing to do but sit back and watch. Sometimes there is the potential for the market to shoot past my first target and giving me a few more ticks (or even points) so I will not enter a hard exit order. Then my thinking becomes a matter of watching how price moves up and past my target and watching closely for a pause in price movement at which time I will exit half. Then it becomes a matter of doing the same thing for the next target, at which time I will exit a quarter. The last quarter I hold with a loose trailing stop until it exit or EOD, or alternatively managing it with total discretion.

 

During this process my thoughts are often occupied with watching price and internals intensely, looking for signs of continuation or reversal. This is where I have to resist fretting and other detrimental emotions.

[doubletop11 10]

It really hard not to want to move your stops or your profit targets to capture a good sized winner. Even when you have the discipline not to. It still eats at me not to peal off a few contracts before my first target is hit.

[Tams 20]

this is what goes through most people's mind.

go3.wav

[Tradewinds 12]

It really hard not to want to move your stops or your profit targets to capture a good sized winner. Even when you have the discipline not to. It still eats at me not to peal off a few contracts before my first target is hit.

 

If your profit target is not hit, do you have indicators that tell you why the profit target was not hit? For example, there was not enough buying volume. If I see weakness on my indicators, and strength in price, that is a divergence that may cause me to adjust my expectations.

 

I can't forecast the future, or react fast enough to deal with every market move, but I can look at historical data, and see why the price did what it did.

 

My concern is, that some people my confuse "discipline" with totally unjustified hope. If I'm forcing myself to hold the trade when I have no basis for doing it, and can't explain why, then I don't call that discipline.

 

Think about this situation; A trader has a loosing strategy, but they force themselves to keep trading the loosing strategy in the name of being "disciplined". Then they loose all their money.

 

I'm just trying to provide another piece to the puzzle. I'm not trying to make a case for exiting early.

[davidjohnhall 10]

Not sure if this is a question for day traders only -- but as a swing trader while I'm in a trade I only do one thing -- look at a set of perfect trades and charts of old trades to remind myself of what I'm looking for. The current trade I'm in will either end up looking like one of those perfect trades, or it won't.

 

This method works wonders for me because I am one of those traders who loves to break his own rules. If I'm in a nicely trending position and there's a strong up day -- I want to close. Just sell into the strength and pretend I can all the top. I can't. So I look at my perfect charts and see that they all end when the trend ends and with a reversal pattern.

 

I also like to keep a group of charts of failed trades -- so I know what those trades look like as well. That way, if a position slides back inside the breakout zone I can stop trying to talk myself into thinking it's okay. LOL

 

Works for me!

[Tradewinds 12]

while I'm in a trade I only do one thing -- look at a set of perfect trades and charts of old trades to remind myself of what I'm looking for. . . . . . . . .

 

I also like to keep a group of charts of failed trades -- so I know what those trades look like as well.

 

It's good to have a system in place that reminds us what our rules are, and keep them fresh in our mind. I'm trying to work out a system of review for my rules while trading. I'm trying out a simple program that scrolls text on the screen. I have a list of questions to ask myself about my indicators, and a new question scrolls every 10 seconds. Every once in a while I look at the question, to check whether I'm analyzing everything I want to look at.

 

So I think your system is great. It's a constant effort to keep those rules fresh in our minds, and to keep applying them.

[doubletop11 10]

Thanks Tradewind for your input. The struggle for me is trend verse counter-trend. I am a counter-trend trader by heart. That's what I love. It works for me. I've been forcing myself a little more to take trend moves more. Buying and selling pullbacks, the rub isn't looking left which I can spot a reversal candle pattern no problem! It's just...... getting to caught up in smaller time frames I think. I also have a few people on my back watching the lower time-frames really hard as I trade live makes me fret. It's personal problem I think being in-front of people. I've been trading live in-front of people now for about a month. It's so much harder! I have no problem hitting a screen record button before a trade goes... but there's something about having people watching me....interacting with me while trading. I think that's my issue.

Going to go to my trading psychologist. It's time she earned another check.

Sorry for the disjointedness, this post has really made me think about what I am really wrestling with.

[Tradewinds 12]

this post has really made me think about what I am really wrestling with.

 

The answers often come after the struggle. No struggle = Maybe no answers. So I view forum threads as a process to work through the struggle. Everyone can provide a different piece to the puzzle, and collectively make the picture materialize.