Five,Ways,Stay,Profitable,Scar DIY Five Ways to Stay Profitable in a Scary Market

When starting a new work at home business it is very easy to become consumed by it. We spend so much time trying to get the business up and running that we may end up becoming burned out and lose our motivation. There is so much to learn and Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable{mso-style-name:"Table Normal";mso-tstyle-rowband-size:0;mso-tstyle-colband-size:0;mso-style-noshow:yes;mso-style-parent:"";mso-padding-alt:0in

This title assumes a great deal. It assumes that as a traderyou are already profitable and that markets are not ordinarily scary. If youcan identify with these assumptions, then you have come a long way in your developmentas a successful trader. In as much as 95% of traders fail in their attempt tobecome successful trader. I suggest I back up a bit and address this to thosewho would be amongst that 5% who are consistent winners in this zero sum gamewe call day trading. Market BasicsFirst let us understand some market basics. Markets exist tofacilitate trade. From moment to moment the market offers traders theopportunity to profit from price movement. It’s an environment where everytrader has the freedom to create his own results, i.e. all the choices and thepower to exercise those choices reside with the trader.  ‘Scary’ implies fear, anxiety, or insecurity. In his book, The Disciplined Trader, Mark Douglas addressesthese issues in a no-nonsense, no holds barred way.  Let me give you an example of his views on this subject: “It was only the lack of trust I had in myself to do whatwas needed to be done that I was really afraid of.” “The market is never wrong in what it does; it just is.” “The market cannot take anything away from you that youdon’t allow.”“In the trading environment the outcome of your decisions isimmediate, and you are powerless to change anything except your mind. You haveto learn to flow with the markets; you are either in harmony with them or youare not.It becomes self evident that your trading success will bedependent on your ability to correctly perceive opportunity, to execute a tradearising from that perception and your ability to allow your profits toaccumulate.Are You Consumed byFear? Markets are inherently scary. If you are a trader consumedby fear, then the market will always be scary, and the only variable is howscary it is at any given time. When consumed by fear a trader is doomed tofailure. Fear will twist your perceptions and blind you to the opportunitiesavailable. Fear will almost always drive us to make the wrong action, and itwill without question make us totally incapable of accumulating profits that might be made.However even for disciplined andproven successful traders, the markets can be scary. Objectively scary marketscan be quantified by the Volatility index, the VIX - theticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index.It is constructed using the implied volatilities of a wide range of S&P 500index options. This volatility is meant to be forward looking and iscalculated from both calls and puts. The VIX is a widely used measure ofmarket risk and is often referred to as the "investor fear gauge.”  Levels below twenty are associated with marketcomplacency and over thirty with increasing market anxiety. Extremes are oftenexcellent contrarian indicators.Trading should be considered abusiness, and your rules should reflect good business practices. These wouldinclude adequate capitalization. Conservation of capital is your primary job.If you are under-capitalized, you are half way to the losers stall before youeven start.Over-Trading & YouDo not over-trade. This too willdrain your energy, your attention to detail, your perception of price changesand the efficiency of your trade execution. Over-trading will inevitably drainyour capital from your account to the guy on the other side of your trades, whoyou can be sure does not have his/her perceptions blunted. If you have this asyour guiding star, chances are you will eventually succeed in this business.Preserving capital is closelyassociated with risk management, and I will address this in the five things youcan do (successful trader or not) to be successful even when there is evidenceof market anxiety.5 Rules to Trade By1)     Stick to a TradingSystem that has proved itself over time to be profitable despite losingtrades. No system is 100% correct. It only needs to be correct 50% of the timeif profits are substantially greater than losses.  2)     Never AnticipateYour System. Let your system fully play out so that its various criteriaare fulfilled before entering your trade. When in doubt keep out or if alreadyin a trade, get out! 3)     Always UseStops; NEVER Trade Without Them. Make it your practice to enter your stoploss trade before you enter your trade. 4)     Never Let aWinning Trade Become a Losing Trade; use a trailing stop once your trade isshowing a profit. Once a trade is showing a two point profit consider bringingin your stop to the entry price; so should the market unexpectedly reverse, itwould be a scratch trade. After that trail your stop two points for every twopoints prices move in your favor. 5)     Trade with the Trend.Do not attempt to pick tops and bottoms to trade against the trend.Following these principles and spending the time necessaryto create the psychological stability necessary to succeed is the mostdifficult part of this profession. Your goal should be to have the selfknowledge and confidence that you unquestionably believe in your trades. Identifywith Mark Douglas’ dictum, “markets can’t do anything to any trader whocompletely trusts himself to act appropriately, in his best interests, underall market conditions.”