Most of us have heard the adage, “buy low, sell high”. But now the dow futures are at new highs, so do we, “buy high, sell high”? The bottom line: what hinders a traders decision making is fear. While this may seem obvious to some, let us break down the obvious. Fear is an emotion that all of us have experienced at least once in our life. I recall one time long ago when I was about to lose a large customer of mine, and yes fear set in. Fear set in because, I would not make my quota, lose my commission, and as all salespeople know, we live for commission. Now, if I had another new large customer getting ready to come “on board” my fear would have been less and maybe even non-existent. This is my point. A trader must a replacement “customer” aka, “trade plan” because high, low, and higher are relative to the traders trading plan and trading goals.
Thus, to avoid fear there are many options. I will list two:
1 – Trade plan: Do you have a stop loss that is set to your plan? Do you have a reversal position plan? Are you following your initial trading plan? Hence, the key word is, PLAN.
2 – Capital: Are you using too much capital for risk?
I can almost guarantee, one of the two above options are in play when fear arrives to bat. So, what is the takeaway? If you have a proven trade plan stick to it and remember you will not win every trade. Also, never use money you cannot afford to lose, PERIOD.