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price movement. The freshman DAET trader won't be able to distinguish a wiggle from a waggle so I advise keeping your ammunition (capital) preserved until you can discern irrational price movements (head fakes). |
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If there is any one concept in this book that is important for you to remember and will help you the most throughout your trading life, this is it. This is my major test for successful Direct Access Electronic Trading: |
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If I didn't already own (short) my position, would I do it now? |
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Ask yourself this question over and over again after you have established a position. This is what I call mentally "marking your position to market." Just because you already own or are already short a position does not mean that's the way it must be. Optimally a trader should have positions that reflect his or her current belief about where the market is now going. Just because you have a position doesn't mean that you should hold it.
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This acid test is applied on an ongoing basis to each position you have. In theory, you want to continually ask yourself this question when you have positions in your inventory. You would be like a computer constantly scanning and analyzing your criteria for maintaining your positions. |
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Keep concentrating on the answer to this question. Focus on the question as a mantra until the chant becomes synchronous with your heartbeat. The phrase should become as ingrained as a religious incantation. Recite the question "If I didn't own my position, would I own it now?" until it becomes a part of your trading persona. If you give yourself an honest answer to this question, you will cut your losses immediately when a trade turns against you. You will also evaluate your gains and decide whether to ring the cash register or let your profits rideuntil the next time you answer the question of ultimate truth. |
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A common and highly erroneous theory is that traders in a profit position are trading "with the market's money." Nothing could be further from the truth. The profit is real money and |
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