Every trader will have to trade back to health several times throughout the trading experience. When a point is reached where profits are elusive and losses escalate once must turn it around and right the ship. These rough patches are inevitable and can happen to anyone at any time. Unfortunately, they are part of the trading business. They may occur because of a market shift or it could be a flaw in the trader’s mindset. At other times, it may be because a method is not adhering to a trading plan anymore. No matter the reason, don’t’ let it become a personal financial crisis, it must be identified and stopped!

Markets continually transform from low to high volatility and vice versa, and ranging to trending to what I call a “banger day,” where it moves with a lot of volatility within a short range during the intraday. These are perfect for the short-term day trader to profit. A plan could be executed brilliantly, but traded in an improper market environment it will likely fail. A trader must ask the question, “Am I trading a market that can produce a profit from my methods?”

When it is time to claw back to health review your plan and possible alter it. It might be time for a trading plan renovation. A trader should map out a plan for exits and entries in greater detail in their trading plan. How/when trades will be entered and exited is very important. Taking note of the amount of capital exposed might be the need some tampering too. Every trader has a different psychological threshold for the amount of money being traded.

Furthermore, traders must question if they have made small changes their plan without even knowing it. Introspection can work wonders to spark a turnaround. I used to always write down what I was thinking when I made a specific trade. When I looked back on it later I knew my exact thought process at the time of the trade.

Maybe the struggling trader is only trading certain indicators at certain times. A proven trading method could fail if this is the case. When I send out an advisory trade through email it doesn’t always pan out the way I’d planned, but I assume all indicators registered will be traded so overtime a net will be profited in the trading account. If a method is reliable, it’s a matter of always doing the trades.

If a trading set back has a trader gun shy then he can easily miss out turning it around sooner, rather than later. Too few of trades could be a problem or even too many. If additional trades are made then the plan is not at fault. Cease excess or unnecessary trades. It only takes one bad one to take away the day’s profits.

 

One Response to Restore Trading Health and Avoid a Financial Crisis

  1. [...] D. Cook @ Pathway to Trading writes Restore Trading Health and Avoid a Financial Crisis – Former U.S. Investment Champion and “Stock Market Wizard” Mark D. Cook [...]

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