Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Key to Trading Success

InvestorEducation / Learn to Trade Aug 26, 2014 - 05:05 PM GMT

By: EWI

InvestorEducation

If you are serious about trading, Elliott Wave International's (EWI) Jeffrey Kennedy has some advice for you: learn emotional discipline. In this article from his Trader's Classroom Collection, he shares some expensive lessons he learned during his 20+ years trading the markets.


Last Chance Access to All of the Resources - EWI is hosting a free Trader Education Week through August 27. It will feature video trading lessons from Senior Instructor and Chartered Market Technician, Jeffrey Kennedy. Register now and get immediate access to the lessons that EWI has already posted, plus 3 introductory learning resources -- and you'll receive more lessons as they're unlocked each day of the event.

Why Emotional Discipline is Key to Success
By Jeffrey Kennedy, EWI

To be a consistently successful trader, the most important trait to learn is emotional discipline. I discovered this lesson the hard way trading full-time a few years ago. I remember one day in particular. My analysis told me the NASDAQ was going to start a sizable third-wave rally between 10:00-10:30 the next day ... and it did. When I reviewed my trade log later, I saw that several of my positions were profitable, yet I exited each of them at a loss.

My analysis was perfect -- it was like having tomorrow's newspaper today. Unfortunately, I wanted to hit a home run, so I ignored singles and doubles.

I now call this emotional pitfall the "Lottery Syndrome." People buy lottery tickets to win a jackpot, not five or 10 dollars. It is easy to pass up a small profit in hopes of scoring a larger one. Problem is, home runs are rare. My goal now is to hit a single or double, so I don't let my profits slip away.

Since then, I've identified other emotional pitfalls that I would like to share. See if any of these sound familiar.

Inability to Admit Failure
Have you ever held on to a losing position because you "felt" that the market was going to come back in your favor? This is the Inability to Admit Failure. No one likes being wrong, and, for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I know now that being wrong is much less expensive than being hopeful.

Fear of Missing the Party
Another emotional pitfall that was especially tough to overcome is what I call the Fear of Missing the Party. This one is responsible for more losing trades than any other. Besides overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?

The solution is to use a time filter, which is a fancy way of saying wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. Anyway, I would much rather miss an opportunity than suffer a loss, because there will always be another opportunity.

This emotional pitfall has yet another symptom that tons of people fall victim to: chasing one seemingly hot market after another. To avoid buying tops and selling bottoms, I have found that it's best to look for a potential trade where (and when) no one else is paying attention.

Systems Junkie
My biggest emotional monster was being the Systems Junkie. Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked. I even went as far as becoming a professional analyst -- guaranteed success, or so I thought. Well, it didn't guarantee anything, really. Analysis and trading are two separate skills; one is a skill of observation, while the other, of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500.

I am not a psychologist or an expert in the psychology of trading. These are just a few lessons I've learned along the way ... at quite a cost most times. But if you are serious about trading, I strongly recommend that you spend as much time examining your emotions while you are in a trade as you do your charts before you place one. What you discover may surprise you.


Join Jeffrey Kennedy for Trader Education Week, a FREE trading event that will teach you how to spot trading opportunities in your charts. From now until August 27, you can view free video trading lessons that you can apply to your trading immediately -- from EWI's popular service, Trader's Classroom.

Here are some examples of what you will learn:

  • How to easily identify high-confidence trade setups
  • The 5 core Elliott wave patterns
  • How to incorporate momentum into your trading
  • How to use Fibonacci ratios to calculate price targets
  • Candlestick and bar patterns with proven reliability
  • How to apply Jeffrey Kennedy's proprietary channeling technique

Register now for your FREE trading lessons -- and get immediate access to the lessons that have already posted, plus 3 introductory learning resources >>

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in