TRADING IS LIKE CHESS

YOU HAVE TO PLAN YOUR MOVES AHEAD…

I love the game of chess, but truthfully, I am a much better trader than I am a chess player, probably because I have the attention span of a cocker spaniel, and don’t like to bog myself down with more than 3-4 moves ahead. That, and the fact that my husband is a far superior strategist, and I convince myself beforehand that I’m going to lose. Yes, there is a psychological lesson there, but for another day. Trading successfully, like winning in chess, is determined by planning your moves ahead of events. It’s a collection of if-then-else statements that will allow you to trade with structure, confidence and discipline.

You can’t win a chess game without reason and planning; impulsive and irrational moves often leave you with most of your pieces in the opponent’s labor camp without food or water…no Geneva convention rules in our home. The same is true for trading, only instead it’s your money ending up in someone else’s account.

Lots of people call this impulsiveness and irrational behavior, emotional trading, but I’d venture to say all trading is emotional.

Merriam defines emotion as ‘a state of consciousness having to do with the arousal of feelings’. I’d pose that it is physiologically impossible to act without feelings or emotion, much less do something like move your liquid net worth around all day balancing risk and reward. Perhaps what the proponents of unemotional trading desire is to eliminate irrational or impulsive trading.

So give up the desire to trade unemotionally as it is a futile exercise.

Instead realize that your market moves must be planned, to avoid irrational or impulsive moves, so that you may come to the chessboard (market) prepared in the morning. It is the trader who works after the market is closed, searching, reviewing, isolating opportunities, studying the trade that went well and the trade that didn’t, and refining trading techniques who has the greatest chance of ending the next day in the green.

So ask yourself…how much do you plan for the day ahead? Seriously, not just glance at the charts that someone’s taken the time to put up, but study them in order to develop a strategy set for the following day?

If the answer is not much, or not at all, begin today. It is a critical element in your trading success.

As the euphemism goes…failing to plan is planning to fail; and if you plan to fail, then why trade? Why not just take the money in your trading account and go on a nice vacation; you’ll have a much better time watching your money disappear…I promise.

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