Conceptual Keys to Day Trading /Part 4

by Dave Smith on July 12, 2012

A sure way to tell if you are trading from an unbiased perspective is indifference. The reason you will feel indifferent is because you have stopped placing your focus on where to get into the market and started placing your focus on Risk. I can always tell the difference about the type of trader I am speaking to by the subject of our conversation. If we are talking in terms of entry method and stop loss, I know they still have not found any kind of consistent profits and they are still in search for a “better method”.

A profitable day trader on the other hand if we discuss trading at, it will be in terms of risk. I know I am speaking to someone that understands how to make money in the markets because there is nothing left to prove. They understand that trading is about probabilities and the only thing you can do is protect your capitol by limiting your risk. When you prove this to yourself, there is nothing left to prove to anyone else. I cannot put it any more plain and simple than that.

If your pulse quickens as you place a trade, then your market analysis is based on hope, greed, or fear.  You have projected what you want see into the charts and now you are watching price action hoping that you are right and fearful that you are not. Unfortunately, your market analysis is going to be flawed. The reason is because you are seeing only what you want to see in your illusion of where price will go in the future. There may be times when this works but there will be many more times that your inner conflict will cause disastrous results. And what is worse, in your hind-sight retrospect analysis, you will see that the charts are now telling you something different than they did at the time of the live trade. When you are in combat and under fire your interpretation of evolving events tend to be jaded because you are frozen in fear about being wrong. The market will have to slap you silly to convince you that you are dead wrong and throw you out only to once again reverse and prove you right. You will find that you are questioning yourself, as to why you saw it that way at the time. Then you will start questioning your own interpretation of every chart. Once you are at that point, you are just a lily pads jump away from understanding what it takes to become a profitable trader. The reason why I use the term lily pad is because as you make the jump into understanding, most likely you will first take a bath or two.

All you need to do is learn to shift your focus from a single minded conclusion to several of those 360 degrees of perspective. Once you work through the process of dissecting something from the 360 degrees perspective, and I mean take the time to do it, you will find that you question your interpretation of every event in your life.

How will this help you on the road to profitable trading? You will stop seeing what you want to see happen in the charts and start seeing for the first time what is happening. Once you have crossed “That bridge”, you will have freed your mind and will now be able to focus on exactly what you need to be focused on….. risk.  This is why I call the road to profitable trading an inner journey. It will set you free on many levels.

Indicator Warehouse came out with an amazing tool to help you define risk. It is an indicator called the “Risk Manager” and personally, I wouldn’t trade without it because it does all the math for you. We will discuss this more thoroughly in my next post.

All the Best!

Dave Smith

A proven trading system will definitely help the learning curve, check out the Diversified Trading System videos in action!

 

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Conceptual Keys to Day Trading/Part 3

by Dave Smith on June 28, 2012

In the last 2 posts we have reviewed that anything can happen at any time and that there are at least 360 degrees of a perspective view point. We have asked ourselves the question: Do any of these trading systems work, or is it that I am not capable of making any of those systems work? I stated what is below in a prior post called “Day Trading Systems and Car Accidents”.

“Profitable trading is the transformation of focus from the outside world of price and indicators to an inner journey of finding the peace and harmony to make unbiased opinions of the highest probability outcome, away from the abyss of Hope, Greed & Fear.”

The reason why only 10 to 15% of the trading community is consistently making money is because they get it.  Only 10 to 15% of traders reading this blog will realize the value of what they are reading. Statistically speaking 85 to 90% of traders do not make money.  Interesting coloration isn’t it?

So why do I believe that it is so important to be able to see and accept these different viewpoints?

 The reason is that, as you teach yourself to acknowledge them and accept their existence it will help you to stop projecting what you think will happen into the charts and trade what is actually happening. How many times were you so certain that the market would do something only to be disappointed as it did the opposite? As a person it is human nature to have expectations about what to expect out of your life and these ideas become a self fulfilling prophecy as your achievement of them are attained. As a trader, you cannot have these expectations about what to expect out of price action. You must learn to leave these expectations at the door and trade from the neutral unbiased perspective.

There are 3 major steps that need to be addressed if you want to learn to trade successfully. Use this as your trading guide, I have listed them in order of importance. You will never be able to consistantly execute steps 2 and 3 without first mastering step 1.

1) A Neutral Psychological Perspective from which to view the markets

2) A Money Management Plan with exit strategy

3) A Method to extract money from the Market

I would highly recommend you begin your journey by picking up a good book.  

TRADING IN THE ZONE by Mark Douglas is a book that I highly recommend you read. It will help you to take the proper steps necessary to understand of how to view the markets from a neutral perspective.  

It took many years of reckless trading before I found this book. After reading it several times, things started to click. Then I was lucky enough to be personally trained by an Indicator Warehouse trading coach named Erich Senft. It is amazing how fast you will learn with the proper mindset and excellent guidance.

All the best,

Dave  

A proven trading system will definitely help the learning curve, check out the Diversified Trading System videos in action http://pwc2.com/dts-videos

 

 

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Conceptual Keys to Day Trading/Part 2

June 28, 2012

Understanding that anything can happen at any time and that there are 360 perspective points of view is an easy concept to understand but it takes some time to accept it into your belief system. Considering a second point of view or a third, is very difficult for most people but an absolute necessity if […]

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Conceptual Keys to Day Trading/Part 1

June 26, 2012

  To my readers of the past; Sometimes life makes you take things in the order of priority and you have to put your passions aside. *********************************** I think as individuals “You Step into the Reality, that you most believe in”. I actually have that scrolling across my computer as a screen saver.  You build […]

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Defining Your Day Trading Edge

January 3, 2012

Every time I sit down to write I try to give you something that can be useful in your own journey to profitable trading. I draw upon my own stumbling blocks where no one was there to tell me where I was going wrong. I try to give you my insights so that you might […]

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Day Trading Systems and Car Accidents

December 3, 2011

Have you ever heard the expression “Good things come to those who wait…” ? In trading, that is the reality that you must conform to or find yourself in a financial disaster. CONFIRM, Confirm, confirm what price is telling you, and if you’re not sure, confirm some more or sit on the sidelines and watch […]

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The Growing Family at Indicator Warehouse

December 1, 2011

A lot has happened with the Indicator Warehouse family. Erich Senft connected back with his absolute favorite Trading system Diversified Trading System, and is writing some amazing Blogs about it. Ray Burke from Reality Futures Trading is writing stories about his trading and is now hosting his own trading room at Indicator Warehouse. I was […]

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There is No Denying When Price Confirms

November 11, 2011

Over the years I have probably written 50 different trading methods in my quest for the Holy grail. Each different method had its strong points but none allowed me to trade every situation. Indicator Warehouse helped me to understand that my major malfunction was trying to figure out a method that allowed me to catch […]

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What You Think About Your Day Trading Method Matters!

November 8, 2011

Bad new travels faster than good news. That is pretty much a given with most everyone except when it comes to trading results. When it comes to trading results, most people only tell you about the good stuff. Kind of like when my wife goes to the casino and tells me she came back with […]

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Our Projected Direction

October 20, 2011

Erich Senft from Indicator Warehouse was instrumental in helping me connect the dots to understand that it was not the method, that held me back. Erich is a seasoned professional trader that teaches trading from the ground up. He teaches you how to think so it is possible to act. I think as struggling traders […]

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