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Strategies & Market Trends : Strictly Buy and Sell Set Ups -- Ignore unavailable to you. Want to Upgrade?

To: chowder who wrote (7131)	1/18/2006 8:46:42 AM
From: chowder	Respond to of 13449

Seeking Out Protection In a Risky World ....................... Making a profit in the trading world is hardly a sure thing. How you deal with this fact of trading, though, depends on your personality. Some people take risks in stride, while others obsess over them. Which type of person are you, a natural born risk taker or an obsessive, fearful seeker of safety? Life is a matter of taking risks, but some people embrace it while others superstitiously try to avoid it. For example, have you ever seen an extremely ineffective car theft device called "The Club?" One is fooled into believing that by putting a massive metal bar on your car steering wheel, you are protected. It seems like it would work until you realize it takes merely a few minutes to cut the steering wheel with a hacksaw and pull it off. Similarly, why do car stereos have removable faceplates? Do you think thieves are actually unaware that there isn’t an expensive stereo beneath a removed faceplate? These kinds of "protective" devices make us feel better, at least until we realize that they don't work. At that point, we think, "How could I have been so stupid?" That said, feeling protected helps take the edge off. Even if it is just superstitious behavior, like wearing your lucky shirt on the day of a big trade, you feel better when you do it. There's a psychological benefit to it. We can alleviate some of the uneasiness of taking risks through risk control. By risking a small percentage of your trading capital on a single trade, and looking at the big picture, you will feel more at ease. From a psychological viewpoint it is to your advantage to make a potential trading loss so insignificant that you may start thinking, "Why am I even bothering making this trade?" There is no universal rule for how to limit risk. Some experts suggest risking merely 2% of your capital, while others suggest 5%, and still others suggest using past market action to determine the amount of loss you can afford to take (for example, if the market is bullish with many opportunities for profit, then you can take a little more risk.) The best way to control risk is to set a protective stop, but whether or not you set a stop loss or how you do it depends on your personality and attitude toward risk. If you are a natural born risk taker, you may not set a formal stop loss at all. You may keep an informal stop loss point in mind and close your position when the stock price reaches that point. At the other extreme, the obsessive-compulsive, worrier trader may set the stop loss too close to the entry price and end up getting stopped out too early. The middle ground seems to be reasonable for most traders. Again, it depends on your personality, but if you are afraid to take a loss, a stop loss can help. If you don't have a stop loss and hate taking a loss, you may not close out a position when the price falls hard. You may be prone to hope against hope that the trade will turn around, and watch your losses mount as you fail to take action. The stop loss order, however, guarantees that you will be out of the trade should it go against you. Innerworth.com (This message is linked to previous articles.)

To: chowder who wrote (7131)	1/22/2006 3:57:39 PM
From: chowder	Read Replies (1) \| Respond to of 13449

The Centered Trader ........................................ Profitable traders have full control over their emotions. They don't allow emotions to interfere with their concentration. They focus on the markets, and through focused concentration, they can react to subtle changes in the markets with aplomb. Trading expert, Dr Ari Kiev calls this state of mind "centered trading." In our exclusive interview with traders, we've heard master traders describe what it is like to cultivate a focused, centered mindset. Scott, a seasoned trader, describes how winning traders stay focused on the markets and on executing their trading plan even after a disappointing setback: "You can't let what just happened ruin what's about to happen." According to Scott, traders that do well are good at saying, "Okay, I made a mistake, what's next." Mark, a well-known hedge fund manager notes that a trader must recover quickly from a setback and not see it as defeat. It's similar to playing sports: "As soon as you lose the ball, you've got to head the other direction. You don't have time to think about it or cry about it. You've got to move. Your awareness of what's happening allows you to do that. You must look at what the markets are saying, position yourself, and don't think about the situation fully until the game is over." Centered traders are able to focus on the essential elements of the trade before them. They don't worry about the consequences of their actions during the trade. They disregard past mistakes and avoid worrying about future events. They distance themselves from their emotional responses. They let their thoughts pass through their consciousness. It's a meditative state where they can allow their mind to look at the market action from a creative, alternative perspective. The more centered you are as a trader, the less easily you will be distracted. Innerworth.com (This message is linked to previous articles.)