Some thoughts of a genius. From Mark Douglas, The Disciplined Trader
The following typical trading errors have a specific cause rooted in a thinking methodology that can be changed.
1. Refusing to define a loss.
2. Not liquidating a losing trade, even after you have acknowledged the trade's potential is greatly diminished.
3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: "I'm right, the market is wrong."
4. Focusing on price and the monetary value of a trade, instead of the potential for the market to move based on its behavior and structure.
5. Revenge-trading as if you were trying get back at the market for what it took away from you.
6. Not reversing your position even when you clearly sense a change in market direction.
7. Not following the rules of the trading system.
8. Planning for a move or feeling one building, but then finding yourself immobilized to hit the bid or offer, and therefore denying yourself the opportunity to profit.
9. Not acting on your instincts or intuition.
10.Establishing a consistent pattern of trading success over a period of time, and then giving your winnings back to the market in one or two trades and starting the cycle over again.
Any thinking methodology requires a series of approaches to goals and problems. These approaches might be better described as mental techniques, even skills of thought application. For example, one such skill might be the ability to identify those conditions that are conducive to making a common trading error before it actually happens. Other techniques or skills include:
1. Learning the dynamics of goal achievement so you can stay positively focused on what you want-not what you fear.
2. Learning how to recognize the skills you need to progress as a trader and then stay focused on the development of those skills, instead of the money, which is merely a by-product of your skills.
3. Learning how to adapt yourself to respond to fundamental changes in market conditions more readily.
4. Identifying the amount of risk you are comfortable with - your "risk comfort level"-and then learn how to expand it in a way that is consistent with your ability to maintain an objective perspective of market activity.
5. Learning how to execute your trades immediately upon your perception of an opportunity.
6. Learning how to let the market tell you how much is enough, instead of assessing the potential from your personal value system of how much is enough.
7. Learning how to structure your beliefs to control your perception of market movement.
8. Learning how to achieve and maintain a state of objectivity.
9. Learning how to recognize "true" intuitive information and then learning how to act on it consistently.