Developing the right mindset from the beginning

Realistic goals for new traders are to develop trust in themselves, get used to trading real money and break even, in that order of importance. Accept the fact that during the early part of the trading learning curve, accomplishing two out of the three will qualify as being successful.

Developing trust in oneself involves the psychological aspect of trading. There are volumes of books written about this topic alone. The key to overcoming the tendency to personalize each trade is to properly frame the process. It is the process, not the individual result of each trade that is most important.

Are you disciplined enough to stick to your CFD Trading Plan?

By consistently following a trade plan - sticking to a process - you can minimize the tendency to personalize each trade and accumulate statistically significant results in order to discover what needs or does not need to be adjusted within the trade plan.

Establishing a Trading Journal

As you begin to trade your plan, it is imperative that records be kept of every single trade. If you are not reviewing your trades everything you are doing now and in the future is likely random whim. You will be destined to failure.

Write down where, why and how you entered and exited each trade. Preferably do this on the chart from which the trade set-up was triggered. Mark the entries and exits on the chart.

If just starting to trade, commit to taking a minimum of 20 trades following your trade plan. Be consistent and do not change your plan every day because that particular day was not profitable. At the end of the period sit down and study your trades thoroughly.

Time to sit back, evaluate, adjust and start again

This is the time to evaluate your trade plan. Study and make necessary changes. What are the net results? Which set-ups were most/least successful? What is the average gain of the winners? What is the average loss of the losers? What is the maximum number of winners, and the maximum number of losers?

These are just a few of the questions that can and should be answered by analyzing the results of the trade series. Then do the next twenty trades, and study, evaluate and make necessary changes. After three or four series your plan will likely begin to crystallize into a viable profit creating enterprise.

This process allows that no single trade is particularly important. A loss is just one trade in the process of gathering information about the results of a group of trades to be evaluated at the appropriate time.

Getting your EGO out of the way

In this way it is much easier for the trader to realize that the actual result of a given trade is a small part of the information to be analyzed, and therefore it is less likely there will be potentially paralyzing ego involvement with its particular outcome. What is important is the result from the series of trades, and the net gain or loss from that series is, at least initially, no more important than the other information gleaned from the process.

If you do this exercise, scales will begin to fall from your eyes. This is the way for you to find your Holy Grail. It is the only way to grow and develop as a trader.

In summary, the initial goals of a trader should focus on developing trust in his ability to consistently follow a plan, to learn to trade real money and to use the results accumulated and studied to continue to improve the trade plan. Preparing, sticking to and evaluating a written trade plan can accomplish all these goals.

Jeff Cartridge
LearnCFDs.com

12 December 2008

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