Emotions: A Traders Worst Enemy; Get Rid of Fear and Greed - Youll be Glad You Did

You hear it over and over and over in books, forums, and chatrooms. Fear and greed, fear and greed, fear and greed. Emotions are a trader's worst enemy. What are we supposed to do about it? We are human after all. Human beings have emotions. We can't just throw a switch and suddenly behave like "Data" on Star Trek the Next Generation.

So what's the answer for the aspiring trader?

It all boils down to 2 main components:

1. Having a plan

2. Having an appropriate trading style

You hear the first point often. Obnoxious little phrases like "Plan your trade, Trade your plan" are thrown around like it was really just that simple. But without the second part, the first part is useless. What good is a plan if you don't know what type of plan is appropriate?

For example, you could plan your commute to work expecting to make the 30 mile trip in 20 minutes, but if you're on foot that plan isn't going to work very well is it? The plan was simply not appropriate for you in that situation.

There are an unlimited number of possible trading methods and styles, from chart reading to fundamental analysis, cycles to Fibonacci retracements, intra-day, Dogs of the DOW, Options, Futures, FOREX, Pork Bellies, Arbitrage ? it can make you feel like your head will explode! But what you trade does not matter nearly as much as how, or perhaps why you trade.

Why do you trade?

Are you the sort who likes to play video games, loves fast action, and has no problem being glued to a screen all day? Then maybe intra-day trading 1 and 5 minute charts of high volatility equity options is for you.

Rather check your trades maybe every few days, or maybe once a week? Then perhaps swing trading currency pairs is more your style.

Prefer sleeping easy at all times, never worrying in the least about your trades because you knew up front that they would profit? Then my friend, arbitrage trading is calling your name.

Every style has its advantages and disadvantages, its risks and rewards, but most important is that the style must match the trader. If you jump into trading believing that just because someone else can do it this way, then so can you ? you may be in for a very painful surprise.

Never trade someone else's plan. Never trade someone else's style. You absolutely must know your own temperament well enough to determine what you will trade, and exactly how you will trade it. Your money management rules, your tolerance for losses, i.e. costs, , your willingness to change the trade if your market opinion is proven wrong ? these are the true secrets to trading that separate the novice from the veteran. With these in place, emotions can be reduced if not eliminated.

After all, which would put you most at ease? Driving through an unfamiliar city alone with no guidance, driving with a map, or driving with a full color street-level-detail GPS navigation system?

I'll take the GPS, thank you.

So before you place your first, or next, trade, consider the following:

a. Do you understand what you are trading and why?

b. Do you know what you will do given any of the possible outcomes?

c. Are you ready and willing to admit you were wrong about the trade, and if so what will you do about it and when?

d. Are you comfortable with the thought of losing the money you are putting into the trade, and will your trading account survive to trade another day if you do?

These are all part of what you need to have in your plan. I urge you to have considered them thoroughly before risking the slightest amount of money in a real trade.

Emotions ? "You can't trade with 'em, and you must trade without 'em."

Jonathan van Clute is a full time investor, educator, speaker, and online options and sports arbitrage trader. In addition to his business activities, he is also a musician, video editor/animator, and one of the world's greatest Segway Polo athletes. He can be reached via email at jonathan@PMLinvestments.com and on the web at http://www.PMLinvestments.com, and is speaking at an upcoming teleseminar, visit http://www.snurl.com/emote1 for details.

---

The Perfect Mutual Fund

The Perfect Mutual Fund is the one you build yourself!The... Read More

Diversify!

The best way to avoid being hit hard by a... Read More

Just what is Arbitrage Investment?

In the simplest of terms, Arbitrage means to exploit price... Read More

Waiting 20 Years Can Cost You Millions - Dont Wait Start Today

Many Young people live for Today. They really don't fully... Read More

Brain Snappers and Other Wall Street Nonsense

The last time you spoke with your broker did he... Read More

Planning for Retirement

Almost without exception, people don't start planning for their retirement... Read More

The Perfect Economy?

The U.S. economic data reported this week showed strong output... Read More

When Its Too Late to Save for Retirement

You are 55 years old (or somewhere around there) and... Read More

Investing and the Fear of Regret and Greed

People tend to feel sorrow and grief after having made... Read More

Variable Annuities

You know all the articles you read about annuities that... Read More

Day Traders and Swing Traders and Options? Maybe!

Typical day traders and swing traders look for stocks with... Read More

The Arrow-Debreu Contingent Claims Model of Investment

Throughout the discussion of speculation and stability, we emphasized that... Read More

Press Release Scams and Successes: Reading Between the Lines

Press releases are a means through which companies can keep... Read More

Finding False Gold in Penny Stock

As far as traders go, many do not see the... Read More

Why You Need To Buy and Sell Gold Coins (Part 1)

The Value of Gold in a Era of Paper Assets,... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 1

Over 80% of all individual investors lose money in any... Read More

Forex Trading Best Practices

FOREX, the term for the FOReign EXchange market, is an... Read More

Gold; What Type of Gold to Buy

JewelryThe advantages are:? Gold Jewelry is the easiest of the... Read More

Investing & Online Stock & Share Trading- The Stock & Share Markets are Booming But Be Warned

I had the pleasure of being invited on a friend's... Read More

Useful Tips on Investing

Here are some useful tips on investing. When you make... Read More

The Past Does Not Equal The Future: Mutual Fund Returns!

A way that investors get ripped off and in a... Read More

Angels Investors and Their Networks

What is an Angel Investor? An Angel is usually a... Read More

Secret Stock Options Trading Strategies the Experts Don`t Want You to Know

To understand stock options, we need to look at Webster’s... Read More

Invisible Mutual Fund Fees Erode Your Returns!

Many investors think that investing in mutual funds is free.... Read More

Issuing Warrants to Investors

When raising capital for a business venture, warrants are a... Read More

How to Use Annual Report

There are many steps in calculating the fair value of... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #2

Here are ten more WISDOM packed GEMS that ooffer very... Read More

Is a SEP Plan Right For Your Business

A SEP is a special type of IRA. Under a... Read More

Looking For a Safe Investment? Try a Certificate of Deposit

If you are looking for a safe investment and you... Read More

Investor Guide to Financial Health

Step 1: Spend less than you earnPerhaps the simplest financial... Read More

Asset Allocation Lessons: The 70% Inflation Solution

For investors only... and for speculators who need to invest... Read More

College Savings Plans ? Are They The Best Choice For My Child?

College Savings Plans ? are they the best choice for... Read More

It Must Be Joe Cockers Market

Agonizing displays of poor theatrics failed to entertain my mind... Read More