29 Trading Rules and 6 Guidelines

29 Trading Rules and 6 Guidelines

Trading Rules

1. Never over-trade.
2. Never risk more than 10% of your trading capital in a single trade.
3. Never trade without protective stops.
4. Never cancel a stop-loss after placing a trade.
5. Never average a loss.
6. Never let a profit run into a loss.
7. Never buy or sell just because the price is low or high.
8. Never try to guess tops or bottoms.
9. Never limit a profiting trade, instead move your stops to guarantee a profit.
10. Never get out of the market because you have lost patience or get in because you are anxious from waiting.
11. Never hedge a losing position.
12. Never change your position or close a trade without a good reason.
13. Never follow a blind man’s advice.
14. Never enter a trade if you are unsure of the trend. Never buck a trend.
15. Avoid scalping for small profits and taking large losses.
16. Avoid trading after long periods of success or failure.
17. Avoiding going in and out of the market too often.
18. Avoid getting in wrong or getting in right and out wrong, making a double mistake.
19. Always identify strong support/resistance levels.
20. Always lock in a profit at predetermined increments on profiting trades.
21. Always use protective stops on open trades.
22. Always distribute your risk equally among different markets.
23. Always be willing to make money from both sides of the market.
24. Always reduce trading after the first loss; never increase.
25. Always cut your losses short and let your profits run.
26. When in doubt, get out. Do not get in when in doubt.
27. Only trade active markets.
28. Only pyramid trades that have a strong trend and should be accomplished once the price has crossed support/resistance.
29. Profits from a successful trade should be kept for future trade margins.

Guidelines

1. Understand for yourself the type of trader that you are, whether aggressive or conservative, long-term or short.
2. Have a trading strategy before entering the market. Know before the trade is executed where you will take profits/loss.
3. Understand why a win/loss occurred and how you could of made the trade better.
4. Consistency is the key to trading success, without it you have nothing.
5. Your judgment is the only concern, do not let outside factors affect the way you trade.
6. Not everyone can be a trader, deem yourself worthy if given this opportunity.

Joldas`s 15M System and Plan.

Assalamu Alaykim.

This is my 15M system;

Trade on 15M TF.
Draw S+R, trend lines.
Investigate chart patterns.
Look at RSI with A/D to identify trend acceleration and divergence.
Add candlestick information.
FIBO;
Pivot point.

Enter:
Enter from 15M: 1. Limit order; 2. Instant order;
Where: at S+R area, when trend lines validates the support or resistance, validate chart pattern were confirmed. Use FIBO conjunction with those tools. Enter those 33%, 50%, 68% area. Set limited order on the high or low of that previous candlestick. Set stop loss just above or under this candlestick. Consider set stop loss around those S+R and PP`s S+R levels.
1. Enter when candlestick cross the trend line.
2. Enter with the measurement of FIBO retracement.
3. Enter from support and resistance line when a trend pull back the alongside of its trend.
4. Investigate those chart patterns then enter within its breakout.
5. Set profit target with R+S, and FIBO levels.
6. Broken support or resistance become new resistance or support area.
Find out the important support and resistance levels.

Exit:
Exit from 15M or even high TFs.
Where: on those predefined S+R, FIBO level, and trend line touches. And were the candlesticks were signaling the reversal. Exit on targets;

Profit target:
1. Set using R+S methods
2. Set by FIBO level measurements.
3. Set by pivot point.

Stop loss:
1. Set by trend lines, just under or above of it.
2. Set by R+S, just under or above of it.
3. Set under or above low or high of previous candlestick.

Money management:
0.1 mini lots for $1000;
Stop loss: 15----35pips;
Take profit: 40----200pip;
Trades for per day: 3---7;
Daily goal: 100---300pips;
Risk: not more than 0.5% per trade;

Rules:
Risk/reward ratio must be higher than at least 1:2, enter if qualifies, otherwise stay aside, wait the other boat to come. Follow the trend, do not go against him.
Stick on your trading goal, do not change it, do not interfere by your emotion, care about your psychology, how can I beat those emotional attacks? Answer: Plan your trade, stick on it, and then trade your plan. Cut your losses, let your profit run. Stick on only this 5 indicators. Think why you have taking this trade? And answer it via your plan. Stick on your trading system. Learn from your loss; take the losses as a part of your winnings. Glad when you your loss had been hit, why? Because had saved your capital from even greater losses. Only enter from 15M TF, do not change to other TFs, because every time has its own signal, you will get mixed then there would be many contradiction signals, so stick with on 15M TF.
Set up winning attitude, stay discipline. Avoid hearing what your emotion, gut is pointing to you.

Plan:
Follow your system, stick on it at any condition;
Except stop losses as winning part, be glad when it had hit.
R/R: should be higher than at least 1:2;
Trades for per day: 3---7;
Daily goal: 100---300pips;
Stop loss: 15----35pips;
Take profit: 40----200pip;
Holding time: open-close in intraday the more 2 days.
Keep eye on news;
Do not see other`s opinion or posts.
Analyze the market at least half hour, stay focused, treat as a business, and only be with it.
Do not change your target after you have set it. Do not overtrade.
Keep a captured photo of your trade when enter and exit. It is better for you to evaluate your trading method.
Do not shoot everywhere; enter only when signals were come. If miss a trade, wait for another, keep yourself in patient and come down both in losing or winning conditions, belief your trade, maintain your psychology of trading.
Do not be haste, be normal. One of the most important is that you are using 15TF, so the target is short as 40 pips to 100 pips, not much more than that, I mean you have to control your greed and desire on such TF, it only can do such.
Take your profit as much as possible at any given strength, beat those your greed, fear, overconfidence, how? Trade your plan, obey it, listen it, do not listen your urge, gut, or your wish and wanting desire, because market independent from you. Just work as machine, as mechanical, without any emotion regardless that you are qualified to feel the market as your qualified emotion, it is possible when you become a professional trader.
Remember: use money management, stop loss, earn little by little, and control greed and fear.
Rules from my experience:
1. Avoid selling at S1, S2, and S3. Just wait what will happen then make decision.
2. Avoid to buying at R1, R2, and R3. Just wait to what will happen then make decision.
3. Do the 1 and 2 regardless of other confirmations were looking good.
4. Avoid buying at resistance and selling at support.

Enter trade:
Entering besides of trend lines with measured pending order or instant order.
How: when trend line going to be validate the trend lines as support or resistance even further. Just it was validated signal.
Enter from support or resistance areas with pending or instant order.
Enter that trade if it did not break.
Enter from PP analyses.
Examine the candlestick formation at those defined areas, and use with conjunction with Fibonacci.
Enter S+R, PP, Trend lines with combination of candlestick formation.
Examine the candlestick formation at those defined areas.

1. Tactics on breakouts. (447---455 pages.)
2. The breaking of trend lines
3. The use of support and resistance.
4. The use of Fibonacci retracement.
5. The use of gaps. (Not for now).

My trading recodrs(1).

I think one currency pair is one langguage. correlated currency pair like those relative langguages, same langguage family, ex.each of them children of latin langguage ...not correlated pairs are in the different langguage family..ex. thier differences like the differences of Turk, Arab, Chinese, Englsih with each other... So, i only favor trading on EUR/USD, learn others later..

This is my real account trading records.

Trading Psychology: Mistakes in a Trading Environment

Trading Psychology: Mistakes in a Trading Environment

When it comes to trading, one of the most neglected subjects are those dealing with trading psychology. Most traders spend days, months and even years trying to find the right system. But having a system is just part of the game. Don’t get us wrong, it is very important to have a system that perfectly suits the trader, but it is as important as having a money management plan, or to understand all psychology barriers that may affect the trader decisions and other issues. In order to succeed in this business, there must be equilibrium between all important aspects of trading.

In the trading environment, when you lose a trade, what is the first idea that pops up in your mind? It would probably be, “There must be something wrong with my system”, or “I knew it, I shouldn’t have taken this trade” (even when your system signaled it). But sometimes we need to dig a little deeper in order to see the nature of our mistake, and then work on it accordingly.


When it comes to trading the Forex market as well as other markets, only 5% of traders achieve the ultimate goal: to be consistent in profits. What is interesting though is that there is just a tiny difference between this 5% of traders and the rest of them. The top 5% grow from mistakes; mistakes are a learning experience, they learn an invaluable lesson on every single mistake made. Deep in their minds, a mistake is one more chance to try it harder and do it better the next time, because they know they might not get a chance the next time. And at the end, this tiny difference becomes THE big difference.
Mistakes in the trading environment

Most of us relate a trading mistake to the outcome (in terms of money) of any given trade. The truth is, a mistake has nothing to do with it, mistakes are made when certain guidelines are not followed. When the rules you trade by are violated. Take for instance the following scenarios:

First scenario: The system signals a trade.

Signal taken and trade turns out to be a profitable trade.
Outcome of the trade: Positive, made money.
Experience gained: Its good to follow the system, if I do this consistently the odds will turn in my favor. Confidence is gained in both the trader and the system.
Mistake made: None.

Signal taken and trade turns out to be a loosing trade.
Outcome of the trade: Negative, lost money.
Experience gained: It is impossible to win every single trade, a loosing trade is just part of the business; our raw material, we know we can’t get them all right. Even with this lost trade, the trader is proud about himself for following the system. Confidence in the trader is gained.
Mistake made: None.

Signal not taken and trade turns out to be a profitable trade.
Outcome of the trade: Neutral.
Experience gained: Frustration, the trader always seems to get in trades that turned out to be loosing trades and let the profitable trades go away. Confidence is lost in the trader self.
Mistake made: Not taking a trade when the system signaled it.

Signal not taken and trade turns out to be a loosing trade.
Outcome of the trade: Neutral.
Experience gained: The trader will start to think “hey, I’m better than my system”. Even if the trader doesn't think on it consciously, the trader will rationalize on every signal given by the system because deep in his or her mind, his or her “feeling” is more intelligent than the system itself. From this point on, the trader will try to outguess the system. This mistake has catastrophic effects on our confidence to the system. The confidence on the trader turns into overconfidence.
Mistake made: Not taking a trade when system signaled it

Second Scenario: System does not signal a trade.

No trade is taken
Outcome of the trade: Neutral
Experience gained: Good discipline, we only need to take trades when the odds are in our favor, just when the system signals it. Confidence gained in both the trader self and the system.
Mistake made: None

A trade is taken, turns out to be a profitable trade.
Outcome of the trade: Positive, made money.
Experience gained: This mistake has the most catastrophic effects in the trader self, the system and most importantly in the trader’s trading career. You will start to think you need no system, you know better from them all. From this point on, you will start to trade based on what you think. Confidence in the system is totally lost. Confidence in the trader self turns into overconfidence.
Mistake made: Take a trade when there was no signal from the system.

A trade is taken, turned out to be a loosing trade.
Outcome of the trade: negative, lost money.
Experience gained: The trader will rethink his strategy. The next time, the trader will think it twice before getting in a trade when the system does not signal it. The trader will go “Ok, it is better to get in the market when my system signals it, only those trade have a higher probability of success”. Confidence is gained in the system.
Mistake made: Take a trade when there was no signal from the system

As you can see, there is absolutely no correlation between the outcome of the trade and a mistake. The most catastrophic mistake even has a positive trade outcome, made money, but this could be the beginning of the end of the trader’s career. As we have already stated, mistakes must only be related to the violation of rules a trader trades by.


All these mistakes were directly related to the signals given by a system, but the same is applied when getting out of a trade. There are also mistakes related to following a trading plan. For example, risking more money on a given trade than the amount the trader should have risked and many more.


Most mistakes can be avoided by first having a trading plan. A trading plan includes the system: the criteria we use to get in and out the market, the money management plan: how much we will risk on any given trade, and many other points. Secondly, and most important, we need to have the discipline to follow strictly our plan. We created our plan when no trade was placed on, thus no psychology barriers were up front. So, the only thing we are certain about is that if we follow our plan, the decision taken is on our best interests, and in the long run, these decisions will help us have better results. We don’t have to worry about isolated events, or trades that could had give us better results at first, but then they could have catastrophic results in our trading career.
How to deal with mistakes

There are many possible ways to properly manage mistakes. We will suggest the one that works better for us.


Step one: Belief change.
Every mistake is a learning experience. They all have something valuable to offer. Try to counteract the natural tendency of feeling frustrated and approach mistakes in a positive manner. Instead of yelling to everyone around and feeling disappointed, say to yourself “ok, I did something wrong, what happened? What is it?


Step two: Identify the mistake made.
Define the mistake, find out what caused the mistake, and try as hard as you can to effectively see the nature of that mistake. Finding the mistake nature will prevent you from making the same mistake again. More than often you will find the answer where you less expected. Take for instance a trader that doesn’t follow the system. The reason behind this could be that the trader is afraid of loosing. But then, why is he or she afraid? It could be that the trader is using a system that does not fit him or her, and finds difficult to follow every signal. In this case, as you can see, the nature of the mistake is not in the surface. You need to try as hard as you can to find the real reason of the given mistake.


Step three: Measure the consequences of the mistake.
List the consequences of making that particular mistake, both good and bad. Good consequences are those that make us better traders after dealing with the mistake. Think on all possible reasons you can learn from what happened. For the same example above, what are the consequences of making that mistake? Well, if you don’t follow the system, you will gradually loose confidence in it, and this at the end will put you into trades you don’t really want to be, and out of trades you should be in.


Step four: Take action.
Taking proper action is the last and most important step. In order to learn, you need to change your behavior. Make sure that whatever you do, you become “this-mistake-proof”. By taking action we turn every single mistake into a small part of success in our trading career. Continuing with the same example, redefining the system would be the trader’s final step. The trader would put a system that perfectly fits him or her, so the trader doesn’t find any trouble following it in future signals.


Understanding the fact that the outcome of any trade has nothing to do with a mistake will open your mind to other possibilities, where you will be able to understand the nature of every mistake made. This at the same time will open the doors for your trading career as you work and take proper action on every mistake made.


The process of success is slow, and plenty of times it is attributed to repeated mistakes made and the constant struggle to get past these mistakes, working on them accordingly. How we deal with them will shape our future as a trader, and most importantly as a person.

Trading Using Multiple Time Frames

Note: there are many forex systems that trade with more than 1 time frame. Why? It is usually to accurately time the entry to make the trade a "high probability" trade. Some systems however only trade one time frame such as daily systems as they look for broader and bigger moves in the currency market. Here's the article by Umashankar: Why do we need to Trade Using Multiple Timeframes?
To improve the efficiency of our trading strategy. We see the major Trend using a higher time frame than what we intend to use & a lower Time frame to enter a trade.
Say we want to trade using the Daily Charts. We take the Weekly charts to see the major trend. Suppose it's an uptrend in a Weekly chart. We will tend to trade only long positions. We will use entries in the daily charts to enter long positions only. When sell signals are generated we will just exit our long positions. I.e. we don't short sell.
Suppose it's a downtrend in a Weekly chart. We will tend to trade only short positions. We will use a entries in the daily charts to enter short positions only. When buy signals are generated we will just exit our short positions. I.e. we don't enter long positions.
Now that we are using two timeframes. Now coming to timing the entry of trades or adding additional positions. (Pyramiding) We can further use a Hourly chart to time our entries. Suppose the weekly & daily charts are in a uptrend. We will enter a long position or an additional long position when a hourly chart gives us a buy signal. Suppose the weekly & daily charts are in a downtrend. We will enter a short position or an additional short position when a hourly chart gives us a sell signal. This timeframe would not be used to exit the trades. It's solely to improve the timing for entry. For exits we would use the signals generated in the daily charts.

Using multiple time frames to trade.
We take three charts of the same security. First is the weekly chart. Next chart is the daily chart. Third chart is the hourly chart.
We will now use the daily chart to trade. We check the weekly chart for the weekly trend. Lest assume the weekly trend is up. So based on this information we will just trade long positions in the daily chart.
We look for a buy opportunity in the daily chart or we can see the hourly chart to enter a long position.
Now for entering additional positions we use buy opportunities in the hourly chart. We would exit based on the daily chart only, because we were trading based on the daily chart.

Similarly we can trade short where weekly charts are in a downtrend and daily chart generates sell opportunity. Additional positions are entered whenever sell opportunities are generated on the hourly charts.

For Day trading we can use the Hourly, 15 Min and 5 Min charts here we trade the 15 Min chart. Or we can use 15 Min, 5 Mins and 3 Mins charts here we trade the 5 Mins chart.

Good Luck and Happy Trading.

The Mental Aspect of Trading

by Linda Bradford Raschke

Many traders quickly come to acknowledge that despite being familiar with winning strategies, systems, and money management techniques, trading success is dependent on your psychological state of mind. If you're a trader just starting out, where do you find the initial confidence to pull the trigger? How do you deal with the down times without digging yourself deeper into the hole? If you are in a hole, how do you work your way back out? How do experienced traders push through the ceiling of profitability that caps their initial trading years and make a truly fabulous living?

Trading is a performance-oriented discipline. Stress and mental pressures can affect your ability to function and impact your bottom line. Much of what has been learned about achieving peak performance in both business and sports can be applied to trading. But before looking at some of these factors, let's first examine the ways that trading differs from other businesses.

1. Intellect has nothing to do with your ability as a trader. Success is not a function of how smart you are or how much you have applied yourself academically. This is hard to accept in a society that puts a premium on intellect.
   
2. There is no customer or client good will built up each day in your business. Customer relationships, traditionally important in American businesses, have little to do with a trader's profitability. Each day is a clean slate.
   
3. The traditionally 8-5 work ethic doesn't apply in this business! A trader could sit in front of a screen all day waiting for a recognizable pattern to occur and have nothing happen. There is a temptation to take marginal trades just so a trader can feel like he's doing something. There's also the dilemma of putting in constant hours of research, having nothing to show for it, and not getting paid for the work done. Yet if a trader works too hard, he risks burn- out. And what about those months where 19 out of 20 days are profitable, but the trader gives it all back in one or two bad days? How can a trader account for his productivity in these situations?
   
4. If you were to invest time, energy, and emotion into developing a business venture and backed out at the last minute, it would be considered a failure. However, you should be able to invest time and energy into researching a trading idea, and yet still be able to change your mind at the last minute. Market conditions change, and we cannot be expected to predict all the variables with foresight. Getting out of a bad trade with only a small loss should be considered a big success!
   What IS the definition of a successful trader? He should feel good about himself and enjoy playing the game. You can make a few small trades a year as a hobby, generate some very modest profits, and be quite successful because you had fun. There are also aggressive traders who have had big years, but ultimately blow-out, ruin their health or lead miserable lives from all the stress they put themselves under.

Principles of Peak Performance

The first principle of peak performance is to put fun and passion first. Get the performance pressures out of your head. Forget about statistics, percentage returns, win/loss ratios, etc. Floor-traders scratch dozens of trades during the course of a day, but all that matters is whether they're up at the end of the month.

Don't think about TRYING to win the game - that goes for any sport or performance-oriented discipline. Stay involved in the process, the technique, the moment, the proverbial here and now.! A trader must concentrate on the present price action of the market. A good analogy is a professional tennis player who focuses only on the point at hand. He'll probably lose half the points he plays, but he doesn't allow himself to worry about whether or not he's down a set. He must have confidence that by concentrating on the techniques he's worked on in practice, the strengths in his game will prevail and he will be able to outlast his opponent.

The second principle of peak performance is confidence. in yourself, your methodology, and your ability to succeed. Some people are naturally born confident. Other people are able to translate success from another area in their life. Perhaps they were good in sports, music, or academics growing up. There's also the old-fashioned "hard work" way of getting confidence. Begin by researching and developing different systems or methodologies. Put in the hours of backtesting. Tweak and modify the systems so as to make them your own. Study the charts until you've memorized every significant swing high or low. Self-confidence comes from developing a methodology that YOU believe in.

Concentrate on the technical conditions. Have a clear game plan. Don't listen to CNBC, your broker, or a friend. You must do your own analysis and have confidence in your game plan to be a successful trader.

Analyze the markets when they are closed. Your job during the day is to monitor markets, execute trades and manage positions. Traders should be like fighter pilots - make quick decisions and have quick reflexes. Their plan of attack is already predetermined, yet they must be ready to abort their mission at any stage of the game.

Just as you should put winning out of your mind, so should you put losing out of your mind - quickly. A bad trade doesn't mean you've blown your day. Get rid of the problem quickly and start making the money back. It's like cheating on a diet. You can't undo the damage that's been done. However, it doesn't mean you've blown your whole diet. Get back on track and you'll do fine.

For that matter, the better you are able to eliminate emotions from your day, the better off you will be. A certain amount of detachment adds a healthy dose of objectivity.

Trading is a great business because the markets close at the end of the day (at least some of them). This gives you a zero point from which to begin the next day - a clean slate. Each day is a new day. Forget about how you did the week before. What counts is how you do today!

Sometimes what will happen during the day comes down to knowing yourself. Are you relaxed or distracted? Are you prepared or not? If you can't trade that day, don't! - and don't overanalyze the reasons why or why not. Is psychoanalyzing your childhood going to help your trading? Nonsense!

The third important ingredient for achieving peak performance is attitude. Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant 2 steps forward and 2 steps back. Every professional has gone through long flat times. Slumps are inevitable for it's impossible to stay on top of your game 100% of the time. Once you've dug yourself out of a hole, no matter how long it takes, you know that you can do it again. If you've done something once, it is a repeatable act. That knowledge is a powerful weapon and can make you a much stronger trader.

Good trades don't always work out. A good trade is one that has the probabilities in its favor, but that doesn't mean that it will always work out. People who have a background in game theory understand this well. The statistics are only meaningful when looking at a string of numbers. For example, in professional football, not every play is going to gain yardage. What percentage of games do you need to win in order to make the playoffs? It's a number much smaller than most of us are willing to accept in our own win/loss ratios!

Here is an interesting question: should you look at a trade logically or psychologically? In other words, should every trade stand on its own merits? Theoretically, yes, but in real life it doesn't always work that way. A trader is likely to manage a position differently depending on whether the previous trade was a winner or a loser.

How does one know when to take profits on a good trade? You must ask yourself first how greedy do you want to be, or, how much money do you want to make? And also, does your pattern have a "perceived profit" or objective level? Why is it that we hear successful winning traders complain far more about getting out of good trades too soon than not getting out of bad trades soon enough? There's an old expression: "Profits are like eels, they slip away."

Successful traders are very defensive of their capital. They are far more likely to exit a trade that doesn't work right away than to give it the benefit of the doubt. The best trades work right away!

OK. Realistically, every trader has made a stubborn, big losing trade. What do you do if you're really caught in a pickle? The first thing is to offer a "prayer to the Gods". This means, immediately get rid of half your position. Cut down the size. Right off the bat you are taking action instead of freezing up. You are reducing your risk, and you have shifted the psychological balance to a win-win situation. If the market turns around, you still have part of your position on. If it continues against you, your loss will be more manageable. Usually, you will find that you wished you exited the whole position on the first order, but not everyone is able to do this.

At an annual Market Technician's conference, a famous trader was speaking and someone in the audience asked him what he did when he had terrible losing trades. He replied that when his stomach began to hurt, he'd "puke them at the lows along with everyone else." The point is, everyone makes mistakes but sooner or later you're going to have to exit that nasty losing position.

"Feel good" trades help get one back in the game. It's nice to start the day with a winning scalp. It tends to give you more breathing room on the next trade. The day's psychology is shifted in your favor right away. This is also why it's so important to get rid of losing trades the day before. so you don't have to deal with them first thing in the morning. This is usually when the choice opportunity is and you want to be ready to take advantage of it.

A small profitable scalp is the easiest trade to make. The whole secret is to get in and get out of the market as quickly as possible. Enter in the direction of the market's last thrust or impulse. The shorter the period of time you are is the marketplace, the easier it is to make a winning trade. Of course, this strategy of making a small scalp is not substantial enough to make a living, but remember the object is to start the day out on the right foot.

If you are following a methodology consistently (key word), and making money, how do you make more money? You must build up the number of units traded without increasing the leverage. In other words, don't try going for the bigger trade, instead, trade more contracts. It just takes awhile to build up your account or the amount of capital under management. Proper leverage can be the key to your success and longevity in this business. Most traders who run into trouble have too big a trade on. Size influences your objectivity. Your main object should be to stay in the game.

Most people react differently when they're under pressure. They tend to be more emotional or reactive. They tense up and judgement is often impaired. Many talented athletes can't cut it because they choke when the pressure's on. You could be a brilliant analyst but a lousy trader. Consistency is far more important than brilliance. Just strive for consistency in what you do and let go of the performance expectations.

Master the Game

The last key to achieving mental mastery over the game is believing that you can actually do it. Everyone is capable of being a successful trader if they truly believe they can be. You must believe in the power of belief. If you're a recluse skeptic or self-doubter, begin by pretending to believe you can make it. Keep telling yourself that you'll make it even if it takes you five years. If a person's will is strong enough, they will always find a way.

If you admit to yourself that you truly don't have the will to win at this game, don't try to trade. It is too easy to lose too much money. Many people think that they'll enjoy trading when they really don't. It's boring at times, lonely during the day, mentally trying, with little structure or security. The markets are not a logical or fair playing ground. But there are numerous inefficiencies and patterns ready to be exploited, and there always will be.

The Best Psychological Test of All

by Brett N. Steenbarger, Ph.D.

In a recent post, I suggested that we may lose discipline in trading for the right reasons, not wrong ones. We naturally gravitate toward the intersection of our values, our abilities, and our skills: those arenas in which we can do good and do well. If we find ourselves veering from what we tell ourselves we *should* be doing, the answer may not be to "discipline" ourselves to our original path. Rather, it makes sense to view the loss of discipline as information and identify what it might be that we're moving *toward*.

But how can we know if we're truly operating in our ideal niches, whether in trading, romance, or careers? It turns out that there is a very simple psychological test that can provide this information.

Keep a journal of your emotional experience: how you are feeling at the end of your mornings, afternoons, and evenings. Make particular note of the number of occasions in which you were totally absorbed in what you were doing--so much so that you lost your sense of time passing and lost your awareness of yourself. Also make note of occasions in which you felt frustrated for any reason.

The result of your psychological test is simply the ratio of occasions in which you are absorbed to occasions in which you are frustrated. It turns out that highly creative, productive, and successful individuals have an unusually high ratio.

The reason for this is that these successful people are operating at that nexus of interests, talents, and skills. Because they're doing what they love and have the resources to do it well, they become wholly absorbed in their experience. This is the "flow" state described by Mihalyi Csikszentmihalyi: a pleasurable, altered state of consciousness, in which we feel at one with our situation.

During frustration, on the other hand, we are either doing something that doesn't interest us or something for which our skills and talents are poorly matched for the demands of the task. If task demands are too easy, we become frustrated with boredom. If task demands are excessive, we become frustrated by our inadequacies. Frustration divides subject and object; in flow, those are joined. It's the difference between a highly satisfying sexual experience and a highly unsatisfying one.

If you're operating in your proper niche, you will be experiencing a state of flow on a regular basis. You will be doing what you do well, and you will love and value what you're doing. That is true for the job you're in, the marriage you're in, and the trades you're in. That psychological test applies to most of life's arenas.

Too often, we justify frustration today by the vague hope of fulfillment tomorrow. In my book, I mentioned the Kansas bar near my home where a neon sign promised "Free Beer Tomorrow". Of course, naive patrons who returned the next day were always told that the free beer was, indeed, tomorrow.

In the end, life is a succession of situations: careers you're in, people you know, relationships you enter, markets you trade. You are your situation: you always experience the fit--or lack of fit--between who you are and what you're doing. Successful people find good fits in life: their situations bring flow. Taking your emotional temperature at the end of trading days--assessing your periods of flow and frustration--will tell you a great deal as to whether or not you're in the right markets, with the right methods, in the right timeframes, with the right skills.