The Forum is an important feature of The Disciplined Trader Training & Support Program. It is the place where our students can share training experiences with others and ask questions to our Expert Advisers.  By limiting discussions to “all things trading discipline”, we can help our students stay focused on getting results.

In this section of the newsletter we’ll pull one pertinent question asked by one of our students on the forum and give you our expert response, so YOU can benefit from what our students are learning.

This week’s expert is Vadym Graifer, who is know as an expert Tape Reader (it’s an old-school art) … but we know him as an expert in Trading Plans …

“Vad” as I know him (and you will, too), is the author of several trading books, including “The Master Profit Plan”, on the topic of Trading Plans… http://www.realitytrader.com/masterplan

I own it and you may want to, as well.

Take a look at this week’s question from our student and the response from Vad:

The Question:

Vadim,

In my trading plan (psychology part) I use some of your trading mantras from Trader’s Intuition chapter of TTR. Do you have any additions/changes to these mantras (may be more specific to 2008-2011-? market conditions, or just from your experience as a trader and mentor for extra 7 years)?

Any suggestion, hints would be very useful for us.

Andrey

 

The Response:

Andrey,

 

My mantras haven’t changed other than some language corrections. After all, they are just templates, a trader can make some variations to them. What I did change though is: in A Taoist Trader course I introduced so called Trader’s Routines, where mantras are included as one part of the standard procedure designed for situations a trader faces frequently. Let me site an example of such routine, you will see how the mantra is incorporated in it.

 

 

1. Routine for Revenge trading.

 

Situation: A trader encounters a loss at the start of the day. Not willing to accept the loss, he starts pushing hard for remediation, initiating trades where there is no valid setup for them, digging the hole deeper and, again, pushing harder. As a result, the day ends with a sizeable loss, much bigger than the initial one that caused the spiral of self-destructive behavior.

 

Diagnosing the problem: Finding out the trigger for revenge trading – an exact number of losing trades or dollar amount of a loss that triggers the harmful behavior.

 

Philosophical foundation: Our knowledge is limited – we can not know all there is to know. We can not predict the future, thus there is always room for an unforeseen turn of events. It means that losses are unavoidable and a certain percentage of losing trades and days are expected. Cyclical nature of all phenomena also means that winning trades and days will take turns with losing ones. Losses are a normal, natural and inalienable part of the trading process. Not every day must be a winning one; there is no need to be alarmed by a loss and try immediately to remediate it.

 

Revenge Trading Prevention Routine.

 

1.   Leave your computer for 30 minutes. Go outside, do a breathing exercise. Recite the part of your trading philosophy describing the place and role of losses in trading. Your mantra:

The only reason to put on a trade is a valid setup in terms of my system. Being down for the day is not a reason to trade. The market doesn’t care about my being up or down. It generates profitable opportunities every day. I wait for the market to create a situation I can recognize. I am not eager to find the trade. I will know when it comes along. I  don’t have to win back immediately what I lost earlier. I will win it back when the right trade comes along. I sit and wait for the right opportunity.

2.   Return to your computer. Start observing market action trying to view it as a fresh start, as if your day just started.

3.   Make your next three trades a paper trades. Pay special attention to the reason for the trade – make sure that your entries are based on real setups, not on wishful thinking. Staying with paper trading will give you back your discipline – discipline of stopping yourself from harmful behavior, taking back control over your action.

4.   If your trades continue losing, stay with paper trading till the end of the day. If they are winning ones, start trading real money again but with half of your usual position size.

5.   When you establish firm pattern of returning to setup-based trading as opposite to emotion-based right after returning to your computer, you may switch back to real trading skipping paper trading stage, but with half lot position size.

 

Hope this helps,

Vad

 

Did Vad’s response help you?  Let us know.  Leave a comment below…

 

This entry was posted on Tuesday, September 20th, 2011 at 3:27 pm and is filed under Newsletter. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.