What is ONE thing that can change your trading career upside down?
What is ONE thing that can change your trading career upside down?
Knowing What You Control
It is human nature to want to control everything we can in our life. But in reality, there are only very few things that you can control. Same is true for trading. When it comes to trading, there are only a few things over which you have control. In fact, there are only four things in trading that you can control.
Before you make the trade, you can control:
- Which stock to trade
- How much quantity of stock to trade
- Where you enter
After you make the trade, you can control:
- Where you exit
That’s it. You can make three decisions prior to making the trade, and you can make only one decision after you’re in the trade. Once you take an entry into a trade, you can’t control whether it goes up or down, any more than you can influence the weather. The trade, just like the weather, is going to do whatever it’s going to do.
As a trader, you should do your research, take your position, and wait for the market to do whatever it wants to do. Sometime markets will move in your favour, sometime it won’t – you can’t control it. Only thing you can control at this point is “Where you exit”.
Knowing what you control will help you keep things in perspective and focus your attention and energy on what you can do to manage your risk. Like I mentioned earlier, once you are in a trade, you have only one decision over which you have the direct control. So don’t over complicate it. People will get nervous and their BP will shoot up the moment they get entry into a trade and they scramble to do lot of things nervously until they exit from that trade.
But in reality, with just only one decision over which you have direct control after you’re in a trade (which is – Where you exit), there is nothing to be nervous about. So you need to calm down and just focus on this one decision. The moment you realise this truth, you won’t get nervous or anxious about your trades and your trading will improve tremendously.
For more details and examples, checkout the video: