By Darrell Martin
Some say when trading that the battle is of the bulls and the bears. It is between the buyers and the sellers. It is whether the market is going up or down. Nevertheless, you probably know when it comes to trading, the true battle is you.
It’s being disciplined, having a good mentality, a good system, but not waiting for the perfect system or strategy that never loses, the elusive Holy Grail. You have to be disciplined to follow your system, even when there is a loser, because when trading, there will be losers.
You have to have an honest estimation of yourself. Be able to identify your strengths as well as your weaknesses. Realize the benefits of both and apply them to your trading.
You cannot control the outcome of a trade. You do not know where the market is going to go. You cannot control whether the market is going to go up or down, or stay flat. It is out of your control whether your trade loses or wins.
However, there are some things you can control. You can control your schedule: the time when you are available to sit and trade. You can control what system or strategy you are going to use, and whether or not you are going to follow your system’s rules. When you actually press the button to enter the trade is in your power to control. You control getting into the trade, but you have no control of the outcome. You can choose what you trade. You can learn to trade in Demo before going live. You control whether you react or respond to the outcome of a trade.
What is the difference between responding and reacting?
Unquestionably, there is a huge difference. Reacting is automatic, an emotion, a reaction. Responding is thinking it through momentarily before responding properly.
For example, if you have an argument with someone and they say something that further angers you, either you can react immediately or you can take a minute, breathe and then respond thoughtfully and properly. Reacting is an emotion. Responding is thoughtful.
If you have a losing trade, you can usually feel a simple “Augh!” or it can mess with your head, especially if you have had a few losses in a row. When you are in that mental state and another trade presents itself, you could react by entering early. You would not be following the rules of your system exactly, but you justify following your gut thinking you’ll make up for lost money.
Maybe you react after losing three trades in a row by seeing the next trade perfectly set up, but you are too scared to enter. You miss a crazy winner–the start of a huge trend because your emotions got in the way. These are examples of reacting. It’s being emotional. It isn’t smart and it’s not following a business plan.
If the rules to your system are met, you respond by entering the trade. If it goes against you, it hits your stops and you get out of the trade. If it goes in your favor and hits your profit level, you trail your stops and let your profits run. You get out of the trade when your trailing stops are hit. This is following your plan. You are responding to what your system is telling you to do. You don’t push a trade. You stick to the rules.
When trading Binary Options on Nadex, you are trading on a secure, US-based, regulated exchange, with guaranteed limited risk. You know your maximum potential profit and loss before you enter the trade. Since the trade is fully paid for up front, there will never be a margin call. Knowing this can help you stick to the rules of your system so you can respond instead of react to any trade.
The battle is all about you. Sure, you can have issues with the strategy or system. You can have technical issues with your computer or charts. You can watch the bulls battle the bears, and the markets move up and down, but the true battle is you.