In uncertain markets, it can be easy for a trader to lose both focus and discipline. Here’s a recent e-mail I received from a currency trader.

“Dr. Doug: I made the critical mistake, this week, of turning my long-term bearish thesis about instability in Europe and the falling Euro into a short-term trade. I was so afraid to miss out on the big move that I started shorting the rally and got squeezed out near the top. Now the Euro’s falling out of bed and I’m sick to my stomach thinking about what could have been. Please help me get my head back in the game. Signed, Premature Trader.”

Well, here’s the deal: You need to slow down and accept that many times, the best trade is no trade. Most traders naturally fear that if they don’t participate right now, they’ll miss that big move and regret it. The irony is that by jumping in and going against your game plan, you could actually end up missing out on the same money making opportunity.

The solution is simple. Stop trying to be perfect. Great trading is not about perfection, it’s about probabilities. If you go to a restaurant and order a steak, you don’t need to eat the bone, gristle and fat to enjoy the steak. And you don’t need to sell the top or buy the bottom to make a killing in the market. Just look for the sweet spot and dig into that. If you leave some profits on the table, that’s ok. You’re still going to leave the table feeling confident, in control and with a full stomach.

Learn the lesson this time so you avoid this common trading mistake in the future.

Read it and learn why H + W + P = E will change the entire way you trade and think about risk.

Trade well, Dr. Doug

1) What goes up must come down and vice versa.

That’s Newton’s law, not the law of trading. And even if the market does eventully self-correct, you have no idea when it will happen. In short, there’s no point blowing up your account fighthing the tape.

2) You have to be smart to make money.

No, what you have to be is disciplined. If you want to be smart, write a book or teach at a university. If you want to make money, listen to what the market is telling you and trade to make money — not to be “right.”

3) Making money is hard.

Nope. Sorry. Making money is actually easy. Statistically, you’re going to do it about half the time. Keeping it, now that’s the hard part.

4) I have to have a high winning percentage to be profitable.

Not true. How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula:

Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability

5) To be successful, I have to trade without emotions.

That is both wrong and impossible. You are human so you have emotions. Emotions can be a powerful motivator to your trading.

When you feel angry or scared in trading, take that emotion and translate it into something more productive. For example, if you’re feeling angry because you just got run over by the market, view that anger as a reason to be more focused and disciplined in your entry and exit levels on the next trade.

Trade Well,
Dr. Doug

Doug, I really need to call you on this.
I bought your book “8 Ways to Great”,and so far find it insightful, I am only up to chapter 2, “Know Yourself”, but felt compelled to identify a glaring error. You have identified introverted as a weakness. Now it may be that trading may not be the best job for an introvert, I will let you comment on that. But if your book is intended for opera singers, teachers and any other profession you need reconsider your placement of introvert on a weakness list. Optionally you should add extroversion onto the weakness list as well, accepting both traits have their weaknesses.
Introversion is neither positive nor negative. It simply is who you are, introverted or extroverted.
I would suggest researching introversion as a part of a normal personality spectrum would be of benefit to at least one third of your clients.
I am surprised that someone with a psychology background would perpetuate this harmful misconception. Too often the media indentify reclusive mentally unstable people as introverts. Introverts are normal functioning people who have friends and can effectively deal with people in our day to day lives. We can do public presentations, network for business and have a conversation with a stranger.
I would further suggest that Warren Buffet, Albert Einstein and Steven Speilburg would attribute some of their success to strengths gained by being introverts.
Thanks for your time. I look forward to reading the rest of the book.
John v L. – Winnipeg, Canada

Hi John,
Thank you for your email.

I certainly have made more than my share of errors along my path.
In this case, however, I do not believe I made an error as I am not suggesting at any time that introversion or any other individual’s PERCEIVED strength or weakness is a definable predictor of success or even a strength/weakness for that matter.

The point of the strength/weakness and how it helps/hurts a person exercise is to open the reader’s mind to understand that we ALL have traits that we are LED to believe or conditioned to think they are strengths or weaknesses, but in the end, all of our traits both HELP and HURT us….so none are good or bad. They are just parts of our personality.

I think if you carefully re-read this section of my book, that message may become more clear.

I firmly believe (as it seems you do, that what a person perceives as their greatest strength, can be their greatest weakness…and vice-versa.

I believe in obtaining self awareness and looking at oneself objectively so one can break down preconceived notions and bias about personality traits determinate of success or failure.

For what it’s worth, I am an introvert and was raised to believe that introverts were good at some things and extraverts at others.

I believe that is just not true as the true core determinant of a person’s success in any endeavor in business and life is dependent upon their level of self awareness, willingness to commit to a goal and be held accountable.

I truly appreciate your well constructed email and for taking the time to send your thoughts to me.

I believe we are on the same page on this matter, however.

I am confident if you re-read that section of my book, my message may be a bit clearer. If not, then I trust this email gave you greater understanding of my point of view on this matter.

Thank you again -
And keep finding your way to great.
Dr. Doug

Many of my clients are “afraid” or are experiencing “fear.” Fear is not always a bad thing, though. In fact, for traders, feeling fear is not a problem, as long as they don’t panic and allow it to drive them out of or in to trades.

Among the fears traders face:

• Not making enough money in these huge market moves
• Missing out on big trades
• Getting caught on the wrong side

At times like this, top traders see opportunity when others crawl into a hole because they are frozen by their fears.

Traders who keep their cool make money from the fear (i.e. shorting oil). Others keep their head and cut positions so they don’t get blown up (Greece and the ripple effect). Still others are waiting patiently for the moment to strike, like a sniper.

So how can all traders think like the top traders when it comes to fear?

• Lay out the data and look at it from an objective point of view.
• Pay attention to where the disconnects are because others are trading based on fear.
• Keep positions smaller with wider stops; be ready to get bigger quickly the moment the uncertainty starts clears up, which it always does.

Trade Well,

Dr. Doug