When in Doubt, Get Out!
|CONTROL - Let's get back to a little psychology today. Everything begins and ends here, and unfortunately, it's an area that is not given the right amount of attention. All of the focus on the best strategy and best risk management means nothing if you don't have your head screwed on right. The most important part of trading is that you feel comfortable and in control. If you ever are in a position where you aren't comfortable and in control, you need to step aside.
ERRING ON THE RIGHT SIDE - Our mind has a funny way of preventing us from stepping aside when we know we aren't in the right space and it's imperative that we override this message and step aside. It may not come natural at first, but the more you do it, the more you will be moving in the right direction. The easiest way to break it down is to know that when you start making the decision to step aside because it doesn't feel right, you start making decisions that err on the side of caution.
SELECTIVE MEMORY - If you err on the side of caution, you give yourself more time to figure it all out and more time to keep learning and moving towards being a trader that will be in it for many years to come. I say this because there will be times where you may exit for a smaller profit because it isn't feeling right and times you take a smaller loss than what you had allotted, only to then see these trades working out beautifully, leaving you frustrated you didn't stay the course. But don't be! It's better you first train your mind to err on the side of caution even if these things happen. Traders also have a funny way of torturing themselves for getting out too early and never remembering the times they didn't get out and lost everything.
PREDISPOSED - Once you get to that point where you have trained your mind in this way, then you can start to worry about the risk management and risk-reward ratios. But initially, when in doubt, get out! And don't worry about being too cautious. You need to understand that the fact that you are trading markets already means you are predispositioned to take risk. So that's already built in. The trick is to be able to find a way to counterbalance this. The best way I believe you can do that is by rejecting that urge to hold on when you know it isn't feeling right.
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