Following an Unemotional
Trading Plan
Equals Profits
When it comes to making decisions, our minds tend to perceive
and react to the information available to us, each in its
own particular way. This is not something we think much
about. It is a part of each of us. Trying to change this
natural process is almost impossible.
This is usually not of any consequence in our everyday lives, but in the realm
of investing, our perceptions and reactions, and the emotions they generate,
are very often the opposite of what is needed to be successful.
How do we start making consistently correct trading and market timing decisions?
How do we make decisions without emotions interfering? How do we trade with confidence?
The answer is simple. We follow an unemotional trading plan which keeps us on
the path to profitability.
Gunslingers
Many traders, market timers, investors have no plan at all. They are like the
proverbial gunslingers of the old West. A news event causes the market to decline
and BANG, they sell. An economic indicator comes in better than expected, the
market rises, and POW they buy.
Trading by emotion, they make trades that seem solid at the time, and they hold
that position until it becomes more painful to hold it than to not hold it. They
may even make an occasional profit.
"...Why
do so many traders sell at bottoms, and buy at
tops? It is such a well known fact that it is
almost funny, except when "you" are the person
at that top or bottom." |
But that lack of focus...lack of planning, will ultimately
lead to poor performance, and to outright losses.
Why do so many traders sell at bottoms, and buy at tops? It is such a well known
fact that it is almost funny, except when "you" are the person at that top or
bottom.
Have you (or someone you know) ever said, "well.. I finally decided to go
long (or short), so expect the market to reverse on me... again." Actually
expecting "ahead of time" that the trade will be unprofitable.
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You will not hear that from someone following a trading
plan. He or she knows that not all trades will be successful,
but that following the plan will avoid emotional trading
errors, and lead to long term profits.
Disciplined Trading
Trading (market timing) requires "discipline" ... Some have it, and others that
wish for success must learn it.
The benefit of of following a proven trading plan is twofold.
First - if you have a plan, you'll be able to ignore all the data that
doesn't affect your trading. The media is rough on traders - at any given time,
you could find ten reasons to buy and ten reasons to sell. That emotional roller
coaster is a nightmare, but if you are following a plan, you won't talk yourself
out of good trades, nor will you keep yourself in bad ones.
Second - our emotions cannot cause us to make unprofitable decisions.
We have a plan! All we need do is follow the plan. Never second guess it. That
is allowing your emotions to come back into play.
Only through following a trading plan will you save yourself a great deal of
frustration, and successfully grow your investments.
Recent articles from the Fibtimer market timing services;
© Copyright 1996-2019, Market Timing Strategies, Inc.,
All Rights Reserved.
Fibtimer reports may not be redistributed without
permission.
Disclaimer: The financial markets are risky. Investing is
risky. Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical research
and data believed reliable, but there is no guarantee that
future results will be profitable. |