I am always scanning the Internet for information and important details that are related to price action trading, particularly when it comes to price action day trading rules. I have many articles here on the PATs website that are related to day trading and price action too, and if I took most of the best articles and combined them into one article, I would probably come up with something like the article I came across today that was written by Robert Weinstein of thestreet.com. Robert has done a great job of putting some day trading rules together in his article.
The part I like the most is that Robert talks about the importance of taking the market serious and the mental challenges that go along with day trading. He actually likens the markets to an amusement park with most of the new and inexperienced traders looking at the markets like a young kid would eye that amusement park and its enticing rides. You remember that feeling don’t you? I know I do and I remember when I looked at the market the same way, so it really struck a nerve with me. I can’t argue one bit with the description he chooses and in fact, I think he is 100% correct in this analogy. This gentleman has captured my thoughts exactly when I am contacted by most new traders wanting me to teach them price action trading, so I related to it instantly.
Here is a small snippet from the Robert Weinstein’s thestreet.com article……
Most new traders are not interested in spending the needed time and work required. Thoughts of losing money are cast aside to make room for a mind filled with dreams of riches and success.
Simply put, it’s challenging to discern a difference between many new “traders” and my 8-year-old son arriving at an amusement park freshly armed with a fistful of credits.
Day trading is a decidedly different beast from investing and requires a different skill set for many things, but one area where the skills are particularly complementary is the level of discipline needed for success.
The first key is to have the discipline to know when a trading idea is not working. My son is likely to walk away from the amusement park with little more than a plastic spider ring in his pocket; an undisciplined day trader will experience much the same fate given enough time.
The discipline needs to be found ahead of time. Studies have shown clearly that people generally make the best decisions when emotion is not influencing choices. Knowing when a trading idea is bad is not “being wrong” or “losing,” and it’s crucial to understand all investments are winners regardless of the results if the reason for entering the position is solid. If you’re not sure if the idea is solid and or questioning why you’re in something, it’s time to rewrite your entry and exit rules.
You do have rules of entry and exit, correct? If not, it’s the first thing you want to do. Consider this: You’re about to board an aircraft with a new air carrier and you ask the captain, “What’s your plan to get us to Vegas?” If she replied, “I don’t actually have a plan. I’m hoping to figure it out as I go along,” would you still want to fly?
If you meet your financial adviser and get the same response, are you going to feel comfortable handing over your hard-earned money?
You sure wouldn’t, and you shouldn’t do it without your own plan, either.
See the rest of Robert’s original article here.
Does any of this sound familiar to you? I meet new traders on an almost daily basis, and what Robert is describing sounds so common that I would say 95% of all new traders have this very same mentality. They believe that they will be different than the other 90% that instantly lose their bankroll on their first trading attempt. In fact, most traders lose their bankroll on every attempt, and it is only after a long and difficult battle that a rare few finally beat the odds.
If most of these traders would stick to trading the simulator until they can make money consistently every single day for months, they would drastically increase the success curve and reduce the account blow outs. Don’t get me wrong, even if you can do it on the simulator, there is still that mental anguish of trading real money that is not present with trading the simulator, and when you actually put your real money on the line, you tend to make different decisions.
The fact that you can make money on the simulator on a consistent basis only proves that you have the ability to trade profitably and that your trading plan or trading system works. You still have to get past the mental game of trading with real money, but by doing it on the simulator first; you will certainly shorten the learning or adapting curve when it comes to trading with real cash on the line. Most importantly, you won’t be throwing away your hard earned money while you learn to trade your system properly.
If you are interested in learning to trade, we can tell you emphatically that the best trading system you can find is price action trading. If you would like to learn more about how we trade with price action here at the Price Action Trading System website, you can learn more at http://priceactiontradingsystem.com/pats-price-action-trading-manual/. We believe that learning to read a price chart and learning to trade with price action day trading rules is the only way to trade, so find out more about this strategy today by exploring our site and reading our materials.