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Trading Success

Trading success is determined by many factors in addition to an investor’s knowledge of the markets and trading strategies. Behavioral and psychological factors also determine trading success will be when trading stocks. In today’s article we discuss some concepts that deal with the psychology of investing.

Smart traders must have great discipline when they trade. This means they must come up with a trading plan based on their trading knowledge, they must keep a trading journal to document their trades and they must ensure that they keep their emotions in check. Trading anxiety has the potential to run very high when trading stocks and good discipline is the key to keeping this anxiety under control.

Not only must traders create a trading plan but he or she must also follow that plan. All too often, a plan is created but not actually followed. Your plan should include items such as your entry and exit points as well as your stop loss strategies. Successful traders create a trading plan and more importantly, they have the discipline to follow it. 

These traders also keep a trading journal in which they document each and every stock trade made each day. They document the same information each time in order to learn from each trade and to prevent themselves from making the same mistake twice. They also document their strengths and weaknesses so that they have an understanding of what they need to improve upon and what they need to utilize. 

Smart traders also have a clear understanding of those concepts associated with greed and fear in the stock market. They know that fear causes investors to exercise poor timing when entering and exiting the market. Too often these traders exit a trade too early instead of letting the trade play out. These traders also know that greed causes traders to buy at high prices or buy too much of the same share, which only increases their risk. These greedy traders will often stay in trades to long in hopes that the price will continue to rise instead of exiting the trade according to their trading plan.

There is a lot more to learn about as it relates to trading psychology. The concepts mentioned above are a good place to start but it is important that every trader not only explore the fundamental and technical aspects of trading, but also the psychology behind trading in the stock market.

We are pleased to have Adrienne Toghraie presenting a free webinar on Thursday, October 29th, 2009. Topic; 'Evolution of a Master Trader' and what it takes to get there.  Ms Toghraie is an internationally recognized authority in the field of human development. She is the noted Author of 'The Winning Edge 2' and 'Traders' Secrets.  Information to join this open session, (or to listen to the archived recording after the 29th).

Market Direction:  Identifying a perfect breakout provides multiple benefits. A break out, through a resistance level or a candlestick price pattern, has expected results. Those results usually consist of a very strong price move. That in itself is a major reason to know how to use candlestick signals and breakout situations. However, an additional factor is the strength that should be maintained in the price of a stock. A gap up breakout represents a strong desire to get into a stock position after it has breached what has been considered a resistance level. That makes for a very strong price move.

Another advantage is knowing the price move will usually start with  strong bullish interest. This usually occurs with not only a gap up in price but also the continuation of that price moving very strong from that point. This allows the option trader to put on a perfect option trade, the Staggered spread. As demonstrated in the last newsletter, buying POT nov 105 calls on the open for $2.60 was then followed by selling the POT Nov 110 calls at the end of the day for $2.60. This  now created a riskless transaction. If the stock price goes down, there is no loss from this trade. If POT close above $110 on the November expiration date, the investor walks away with five dollars per contract, the difference between the 105 and the 110 calls.


This allows for an option trader with limited funds to be able to control a large amount of stock. For example, each time one of these trades are executed, it has used very little funds from the account, if any. Placing five or six of these trades can result in no money being exposed to market risk but if the market remains positive, huge profits can be obtained from a small trading account.

Why isn't everybody making these trades? With out the information built into candlestick signals and patterns, an investor will not have the capability of knowing when to place these trades. Take advantage of the information built into candlestick signals. It allows you as an investor to minimize risk before the trade is completed. The more control an investor can maintain in executing their trades at the exact right time, the much greater profits can be made in the account. How do you keep emotions out of your trading? By knowing what should occur in the next price move based upon candlestick signals and confirming indicators.


Chat session tonight at 8 p.m. ET - We will discuss the elements needed for taking the risk out of a trade at the front end. Click here for instructions.

Next week, Thursday night, October 29, the Candlestick Forum is honored to present Adriene Toghraie, the traders coach, presenting the topic "The evolution of a master trader". Do not miss this opportunity to learn how to overcome some of the psychological barriers most investors are confronted with.

Good investing,

The Candlestick Forum Team

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