Basic Principles Of Trading Stock

Provided By Ultimate Trading Systems

Once you decide you’re going to participate in trading stock, you can't change your mind - you're in for the duration.

To operate effectively in any environment where you trading stock, you need rules and boundaries to guide your behavior. It’s a simple fact of trading stock, no matter what “system” you’ve developed, that the potential exists to do financial damage to ourselves — damage that can be greater than we think is possible.

There are many times when trading stock in which the risk of loss is unlimited. To prevent the possibility of exposing ourselves to damage, we need to create an internal structure in the form of specialized mental discipline and a perspective that guides our behavior so that we always act in our own best interests. This structure has to exist within each of us because the market doesn't provide it for us.

The markets provide structure in the form of behavior patterns that indicate when an opportunity of trading stock exists. But that's where the structure ends - with a simple indication. Otherwise, from each individual's perspective, there are no formalized rules to guide behavior.

Even gambling games have built-in structures that make them much different from trading stock – and a lot less dangerous. For example, if we decide to play blackjack, the first thing we have to do is decide how much we are going to wager or risk. This is a choice we are forced to make by the rules of the game. If we don't make the choice, we don't get to play.

When trading stock, no one (except yourself) is going to force you to decide in advance what your risk is. In fact, what we have is a limitless environment, where virtually anything can happen at any moment and only the consistent winners define their risk in advance of making on a trade. For everyone else, defining the risk in advance would force you to confront the reality that trading stock has a probable outcome, meaning that it could be a loser. Consistent losers do almost anything to avoid accepting the reality that, no matter how good a trade looks, it could lose.

Without the presence of an external structure forcing the typical person involved in trading stock to think otherwise, he is susceptible to any number of justifications, rationalizations, and the kind of distorted logic that will allow him to get into a trade believing that it can't lose… which makes determining the risk in advance irrelevant.

Once you decide you’re going to participate in trading stock, you can't change your mind — you're in for the duration.

That's not true of trading stock. With trading stock, prices are in constant motion, nothing begins until you decide it should, it lasts as long as you want, and it doesn't end until you want it to be over. Regardless of what you may have planned or wanted to do, any number of psychological factors can come into play, causing you to be distracted, change your mind, or get scared or overconfident. In other words, you can behave in ways that are erratic and unintended.

trading stock has no formal ending. The market will not take you out of a trade. Unless you have the appropriate mental approach to end a trade in a way that is always in your best interest, you can become a passive loser. Once you're trading stock and losing, you don't have to do anything to keep on losing. You don't even have to watch. You can just ignore the situation, and the market can take everything you own. One of the many contradictions of trading stock is that it offers a gift and a curse at the same time.

The gift is that, perhaps for the first time in our lives, we're in complete control of everything we do. The curse is that there are no external rules or boundaries to guide or structure our behavior. The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create consistent success when trading stock. The structure we need to guide our behavior has to originate in your mind, as a conscious decision that will guide your actions.

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