Whatever sparked our initial interest in trading, we all have to answer the same question daily: “What do we do at the edge of the chart?”
Even now, that question haunts me after I’ve studied my charts, examined the overall market, and scanned economic news. Even with all that behind me, when the trading day begins and I’m ready to execute my plans, that “second guessing” or nagging feeling of “what if I am wrong?” plagues me and I suspect many others. “What if the chart pattern doesn’t work out this time?” “What if I lose money?” “What if they gun my stops this time like they did last time?”
Although I know trading is a game of probabilities and uncertain outcomes, I still have to work hard daily to “silence the inner critic” and move on with my positive game plans and enter the trades with the proper stops and not watch every tick. Early in my trading career, these questions never entered my mind. I haphazardly entered trades based on momentum or a ‘hot news story’ and rarely considered the “what ifs” mentioned above. I made money until one day when I was supremely certain in the outcome (mega-profits) based on a magazine article in Forbes. I risked twice my normal size and – got burned. I lost not just all the profits I had accumulated (through greed) so far, but almost twice that amount above that initial zone. That was my ‘trading trauma’ that began the spiral into fear for me.
So, as we become professionals, we tend to focus much more on the “risk” side of the equation – as we must do – but I focused so much that it inhibited my performance in various ways. Trading is a game of balance between acceptable risk and reward; between greed and fear; between too much knowledge and not enough; between the professionals and the mass public; between the mature and immature (in our trading education). There are many pendulums we have to address when making decisions. For me, and I suspect for many others, the pendulum swung too far for too long into the “fear” and “risk” sides.
Our previous experience, our knowledge/education, and our personality (confident or fearful) affect how we address that “Hard Right Edge” of the chart and the questions we address when seeing it. Not only do we question whether we should put a trade on, but how many shares should I buy, how much should I risk, where should my stop be, where should I exit, how long will I hold this trade, if I hesitate, where is ‘too late’ to enter, is it too soon to enter, etc.
While this post can’t answer these questions, there are many resources online that can assist you in your anxieties and trading decisions. Use the evenings to study the markets and set-up your trades through scanning and chart annotation (as well as blog reading), write down your plans (plans written down have higher odds of execution), and execute your plans based on your written strategy.
Each success you experience in your trading will chip away naturally at the “fear of the hard right edge” of the chart.
From “The Kirk Report” – “Flip the Chart”
Kirk suggests we turn the chart upside down in order to cool over-bullishness (or bearishness) and examine the chart from a different perspective to help determine trading decisions. Worth a read.