What’s Your Market Approach?

08/15/2012 1:00 pm EST

Focus: STRATEGIES

Toni Turner

Author, Short-Term Trading in the New Stock Market

It’s a great time of the year to review the progress you’ve made as a trader—especially in the all-important mental and emotional arena. The following are questions you are meant to ask yourself, and then give yourself high-quality, insightful answers. These answers will give you guidelines for improvement.

“So far this year, what has been my mental approach to the market?” Have I come to the market each morning with a sense of confidence, or a sense of uncertainty? Do I view the market as a field of opportunities or a place where market makers have the edge (and are out to get me)? Do I feel the urgent need to make trades, whether the environment is hospitable, or not?”

The best traders approach the market with a written plan of their trading style (intraday, swing, position), most reliable set-ups, target stocks (or other asset) for the day, and trading plans for each. Their mindset is relaxed and nimble.

“So far this year, what has been my primary emotional approach to the market? Have I been calm and confident or anxious and panicky? When the closing bell rings each day, do I feel happy and or exhausted?” One of the biggest enemies traders encounter is stress. Most of our stress is self-induced. We trade against the market direction, or throw a trade at the market with no plan in place. We chase stocks, ignore our stops, and go into denial when our losses get worse. Of course, all of those actions incite anxiety, fear and downright panic. Instead, let’s execute trades only when we have a well-thought out plans in place. Cherry-pick your trades, and leave the “B” and “C” candidates alone. Flow with the direction of the market. When you do take a small, contained loss, examine it and write down the lesson.

Now is a great time to review the trading year, with its successes and challenges.  Along with profits and losses, we also need to review our mental and emotional attitudes. When you ask yourself the aforementioned questions and use the answers as a guide for improvement, the results will help you achieve your trading goals.

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