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The following guest post is courtesy of Jens Chrzanowski, Member of the Management Board of Admiral Markets Group AS.
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Preparing and implementing a trading plan is critical when formulating a consistent approach. A trading plan helps traders reduce emotional reactions to price volatility. However, most traders notice a gap between theoretical trading and actual trading. Trading ideas may seem simple on paper, but can quickly become complicated when a final decision is needed. In this article, inspired by my analyst colleague Chris Svorcik, we will discuss several slogans you can use for scanning the markets.
Short Trading Phrases Help
Traders have little time to react when the markets are in full motion. Traders often feel that a quick decision is needed, otherwise, they might miss a trading opportunity.
Does this sound familiar? Don’t be alarmed – this is a common reaction. Traders tend to make impulsive, reactionary decisions when the pressure is high. You can fight against this urge by following these steps:
- recognise when internal pressure is forcing you to make a trading decision;
- use short slogans to help remember the best action as a rule of thumb;
- practise, check, and know your trading plan.
Let it centre before you enter
Traders have the urge to enter the market immediately when a trading opportunity presents itself. In most cases, however, the price tends to retrace and correct before the momentum really pushes the price up or down.
As a trading friend of Chris used to say, there’s no such thing as an emergency when trading the markets. He meant to say that we should take our time evaluating the setup, plan, and entry before entering a trade without proper preparation.
Don’t jump the gun or chase the market
Jumping the gun occurs when traders enter the market before a signal arrives on their chart. The problem is, you enter the market, but the signal never appears. It’s tempting to ‘push the button’ and enter the setup earlier than planned.
However, traders need the discipline to wait for the actual signal to appear on the chart. Remember to always wait for your trading plan to materialise and never assume something is bound to happen.
The market acts independently. It follows the path of least resistance, not your vision of how the price should move. That same goes for entering the market too late, i.e., chasing the market. Once the setup is gone, don’t justify a late entry… and just let it go.
The market will always be there
Once you miss a setup, remember that the market will not suddenly disappear. Yes, you may have missed out on some opportunities, but the new ones will definitely arrive in their place. It is way more beneficial to keep focused on potential new setups rather than get distracted by the past. In other words, better money missed than money lost.
Find a wide open space
When analysing the markets, it’s always important to remember that not all setups are worth the trouble. There is a maximum number of daily decisions our brain can handle before it experiences decision fatigue.
Traders need to scan the charts and focus on the financial instrument with the best potential for the day, week, or month.
What does Admiral Markets’ analyst Chris consider the best potential when analysing the charts? He prefers to avoid trading in large congestions and focus on trading the momentum in wide open spaces. Most often, this occurs when there are less support and resistance levels standing in the way, which is what he calls space. His motto is, “let the market lead, and I will follow”. Other traders agree: “The markets speak, and traders listen.”
We control nothing but risk
As explained earlier, traders need to be flexible in their approach to the market. At all times, you should avoid ‘hoping’ that the market will go in your direction. Why? Traders cannot control price movements, hence all setups are probabilities. The only part traders can control is the risk taken per setup, day, week, month, and quarter.
Plan the trade, trade the plan
Ultimately, the entire article can be summed up as the following, very simple message: Plan the trade and trade the plan. It sounds doable, just takes time to master both parts of the approach.
See you next week!
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Trading on margin carries a high level of risk, and this article should not be seen as advice or solicitation to buy or sell, but written for informational purposes.