You hit the “Enter” key and for a few milliseconds, your pulse is racing, your eyes are centered on your monitor at the flashing bid and ask prices. Then, you see it – your order has been filled. You are now one of the thousands, if not, tens of thousands of people who have decided to take responsibility for their financial health one lot, contract, or share at a time. The question now is not “were you long or short?”, or “am I going to make money or not?”

No. The question is: “Do you really know what you are doing?”

As many of you have probably heard at one time or another; you must have a reason to trade. I’m not talking about the metaphysical reasons like wealth, easy retirement, etc. I’m talking about a reason as to why you are going short, going long or staying on the sidelines (being in cash).

If you have a mentor who told you that, go take him or her out for a beer. That is great advice and has saved many a trader from losing unnecessary capital.

However, while that piece of wisdom is important, sometimes, we as traders have to remind ourselves as to the reasoning behind the reason. As every trader can tell you, the market is vast and wild. It’s a non-structured environment and the currents are only decided by the dynamics between the buying energy versus the selling energy.

“Then, why not figure out when either energy is in control?”, someone will eventually reply. Sounds like it would be an easy answer right? The fact is most traders cannot answer that question. It’s important because from the answer, you will get your reason, and from your reason you get your trade direction. After the trade direction, then we can flash to the wineglass toasting scenes, beachfront properties and fancy cars.

Posted in Categories: Contributor, Psychology.

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