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Impatience Will Kill The Golden Goose
t is relatively simple to the frequency of trading signals
create a profitable system is high enough to keep the
for trading forex, stocks, attention of the trader focused
or commodities on paper, but it on trading. (Of course, there can
is not easy to successfully be successful variations on these
implement the system once it is fundamentals: for example, a
created. While the primary forces system that produces 95% winners
underlying market behavior are could have the average win much
fear and greed, the primary cause smaller than the average loss and
of unprofitable trading is still be profitable).
IMPATIENCE, which may very well
be a subset of both fear and Once a profitable trading system
greed. is created, the trader's
inability to follow the rules of
A profitable trading system the system is the primary cause
requires three basic elements and of unprofitable trading, and
three fundamental IMPATIENCE is one of the driving
characteristics. The basic forces behind a trader's
elements are a strategy for inability to follow the rules.
entering positions, a strategy
for protecting positions from Impatience will manifest itself
unacceptably large losses, and a in all of the following ways:
strategy for exiting positions
with a profit. The fundamental • A trader will follow a new
characteristics of a profitable trading system to the letter and
trading system are that winning begin to get good results, but
trades are on average larger than will see ways that each
losing trades, that the number of individual trade could have had a
winning trades is larger than the better outcome by bending the
number of losing trades, and that system rules just a little. So,
instead of being satisfied with X frustrated by the lack of action
amount of income from the system, on a slack day (or week or month
the trader will decide to try to . . .) and begin to talk herself
achieve 2X income by changing the into believing that a given
system rules on the fly, which scenario represents a valid
always results in errors in signal, even though all the
judgment caused by fear and greed proper elements are not quite
(which the system was designed to there, and enter positions that
eliminate by its carefully are doomed to failure because the
formulated rules). market is just not in the correct
mode for the system during that
• A trader will see an entry time.
signal forming (almost, but not
quite - it needs Y action to • A trader will hold a winning
manifest on the next bar before position too long because he
the signal becomes valid) and expects one trade to make up for
decide to enter a position on the the previous losing trade (or
supposition that the signal will trades) in one swift move that is
trigger soon, anyway. Of course, outside the parameters of
the system was designed with profitability expected by the
black and white entry triggers, system.
and violating these entry rules
results in the arrival of bad • A trader will take a profit
behavior ruled by fear and greed. too soon because the market is
taking longer to reach the
system's profit objective than
• A trader will wait for hours she is comfortable with.
(or days or weeks, depending upon
the system's time frame) for a • A trader will take a position
proper signal to form and become much larger than the system's
risk parameters allow for because These just begin to illustrate
he wants to make a big profit the danger posed by impatience if
quickly (often to try to make up a trader cannot keep it under
for serious previous losses control. Meditation, frequent
caused by violating other system breaks from the market, a clearly
rules), but then when the market defined trading system and a
goes against him he will panic clear set of profitability goals
and exit with a loss before the ("Forex Freedom", by Robert
system loss point is hit because Borowski illustrates a step by
the pain of holding the step strategy for building
over-sized position is too great capital in a rational manner
to bear. Then, she will scream in without impatience) can all help
frustration as she watches the to keep the trader relaxed and
market turn around and move back trading within the rules,
to profitability soon after she resulting in profits instead of
takes her premature loss. losses.
About the Author:
For more information on trading, or to find other articles by the author, visit http://www.forexprofitsmeister.com today.
Source: www.isnare.com
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