The following is a great question from YTC reader Aaron.
I thought this would be worthy of entry into the blog and newsletter as it's a question which will be relevant to anyone who allows discretion in their trade management plan.
And I'm really keen for anyone else to add their ideas and thoughts into the comments section of the blog post.
Super impressed with all your content. Do you have anything out there on managing your psychology while in a trade? I find I often deviate from my plan due to anxiety from who knows what.
Off the top of my head these come to mind:
(1) General psych content which may or may not offer something of relevance:
(2) Perhaps more targeted directly to your question:
- – Some people have had issue with the use of the word "drawdown" in this article. It's reference is to that single trade moving into negative territory, not to portfolio drawdown from equity highs. I thought that was obvious… but apparently not!
- – The concept in this article is essential. Expect adverse trade excursion. And have some pre-considered idea as to how it will be managed.
But more importantly, give this a try. It's the general framework that I use whenever stuck with any problem like this:
Set aside some time and just brainstorm any and all options which might fit within these categories.
The fact is that there will not be a "one size fits all" solution for this problem of anxiety interfering with trade management. You might need to go through a process of trial and error.
So do the exercise and see what you come up with.
For starters, a few obvious ones:
- Just go complete passive. Set the stop and target and walk away. Let it fall wherever it falls. (Not my preferred approach, but some people need this)
- Partially passive in that decisions and actions are ONLY made at certain times or price points. eg. the obvious solution here is when you only assess the trade on the close of each TTF candle. Inbetween these "decision points" you might find it helps to step away or look at other screens.
- Closely aligned to the above idea, just push your chair back away from the screen immediately after the order is filled and initial stops/targets are set. Don't laugh. It's very effective. If you're out of reach of the keyboard and mouse, it's a whole lot harder to emotionally react.
- Another option for "partially passive" is to actually split the position into two. One part is managed through a passive set & forget target. The other allows discretionary adjustment. Essentially you're diversifying your trade management across both styles. As a bonus it allows you to directly compare the impact of discretionary versus passive trade management and you'll clearly see whether or not you're adding to or reducing your edge.
Your turn. I'm sure there are a ton more. See what you can come up with.
Nice question by the way.
My experience with issues like “managing psychology during a trade” led to purchasing heart rate monitors, developing routines of meditation and incorporating breathing exercises during trading to keep my heart rate down; all of which made no difference. They were just superficial solutions trying to band-aid problems at a systemic level. I experienced similar failures when trying to superficially apply rules to problems like “over-trading” or “chasing entries”. Instead of applying rules, the real solutions were always tweaking my trading style. It became apparent that by “tailoring” my trading style to my personality, all my trading woes seemed to fix themselves. For example, I had a lot of trouble managing trades post entry due to anxiety and a cynical view of the markets, so I accepted these inclinations and simply reduced my time in the markets. I developed a trading style that placed heavy emphasis on scalping; which led to a need for a high win rate which led to a need for a good profit factor and so on. With most of the help coming from Mr. Beggs’ tutelage from “Your Trading Coach”, I was able to develop an effective market edge and a trading style that better aligned with my personality; allowing for clean consistently profitable months. So keep in mind, rules can be effective for some, but too many rules and feeling like everything is an uphill battle can be an indicator that a trading style lacks natural alignment with personality.
Great comment David. Thanks. You’re 100% right. The second article linked to above lists five areas that need to be explored BEFORE considering any “trading psychology” solutions (https://yourtradingcoach.com/trader/how-can-i-get-more-discipline/).
One of these is “Incorrect niche”, which means that the style of trading is not a good fit for your personality or lifestyle.
Fix this first… and the other areas mentioned in the start of that article. And then you can explore all the standard “trading psychology” options. Heart rate monitors, meditation, breathing exercises, visualisation – they all can help. But they help to build upon a pre-existing edge. They don’t create edge where there is none.
Best of luck,