Trade The Journey

Trade The Journey

Trading Lesson 2: Self-Trust

As my trading size and profits have consistently grown, I’ve decided to share weekly lessons from my trading journey. These brief posts will highlight key learning experiences. Reviewing trades, especially your mindset, is crucial, as trading is not only about market movements but also your reaction to uncertainty.

A vital lesson I’ve learned is the importance of self-trust. It might seem straightforward to cut losses short and let profits run, yet executing these strategies can be challenging. You might exit a trade too early, either missing a favorable turnaround or larger gains. Although capturing the full extent of a run may be elusive, as even the best traders acknowledge, striving for our best remains essential. This underscores the value of journaling your trades to identify patterns in performance and mindset. I’ve realized that I haven’t always fully trusted my reference levels or hypotheses eventhough they’ve held surpsingly well.

If you’re reference levels hold across timeframes, it can be a good indicator of their strength and reliability.

When SPY moves, it can do so swiftly, often surpassing anticipated levels. With a significant trade in play and profits accruing, deciding when to exit becomes crucial. Lately, I’ve been setting specific profit targets to guide my decisions but as you know markets don’t move in a straight line, they often zig-zag there way up or down. It can even more challenging when the range of price movement expands and it begins to look like the trend is changing. Moving between timeframes is highly advised for developing a wholistic view of market sentiment and structure.

Exiting trades prematurely has been a common theme for me, prompted by confusion and pressure about the optimal timing. Even with predetermined levels, watching potential gains diminish can prompt a premature exit. Conversely, in losing positions, deciding whether to wait for a rebound or cut losses presents its own challenges, highlighting the importance of market timing proficiency. Options trading, with its complexity and unique elements like the Greeks, ultimately revolves around market speed.

Recently, I allowed a trade to develop fully for the first time, which proved lucrative. Embracing uncertainty rather than resisting it enabled me to leverage charts and Level 2 data to anticipate further moves. Times and Sales data can also provide an idea of the supply/demand balance around your reference levels.

Over time, discerning market direction and trusting your established levels becomes intuitive. Whether the market is rising or falling, adhering to tested levels and exiting accordingly is key. Successful trading demands both boldness and caution.

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