Specific Topics – Recognising the BAD Trader

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BPT Specific Topics - Bad TraderAre you a BAD trader? It is the dead of summer and the markets are grinding – both up and down. With the VIX around 14, volatility is low. Often trade plan set ups are harder and slow to come by (this can actually happen at any time of year). These types of markets often leads to BAD trades. BORED, AGRESSSIVE and DUMB trades. We all succumb from time to time to being a BAD trader.

BORED: Waiting hours for your trade plan set up, it is easy to get BORED. Often we get the itch to push a button. This can lead to quickie trades that don’t necessarily follow our normal trade plan for just a few pips, but it will help to kill the boredom. To your surprise the market suddenly moves against your position by 10 pips, leading to the next wrong move.

AGRESSSIVE: Being down 10 pips, you think, a quick double down and out to get out of the position. Unfortunately the position gets worse and you are now down 20 pips x 2. This aggressive move leads to the next step.

DUMB: It is clear that you have guessed the direction wrong in the markets so you get real clever and reverse the position, only to have the market retrace back to the original price. So in the end you are now down 40 pips x 2.

Of course none of this trading is even close to what your trade plan would dictate. It all stemmed from BAD trading. So what are some suggestions to stop BADtrading?

Sitting in front of a panel of screens for hours doing nothing is hard. We need to have other tasks that are daily and timed (each 15 minutes). Here is my list of potential ideas that I have found useful:

  • Maintain your electronic journal (with screen shots),
  • Open a small micro account (or paper) to absorb the need to click,
  • Do 10 push ups (or some physical activity away from the trade desk) every 15 minutes, or
  • Keep a forward trade picture (marked up screen shot) of potential price movements with your potential trade trigger every 15 minutes.

Perhaps you have some ideas as well. Please place your suggestions in the comment section below …

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