Anyway, one day I met a friend of mine in a bar who brought withhim a much older friend of his, Jason, and we started talking about what each one was doing for a living. I found out that Jason worked as a stock broker in a financial institution. He told me about technical analysis and how it was the key to explosive gains in short periods of time. He shared with me some insider information that was truly unbelievable for me and recommended I read some specific books on the subject.
The next day I ordered four books from my local bookstore and I could not wait for them to arrive. I read each of them at least two times throughout the following month. “WOW, I can make millions” was my first reaction after the intense reading. Five days later I opened an account with a reputable stock broker and started trading. Six days later I had depleted approximately 75% of my trading account! Why?
I was emotional and hasty with regard to my decision to start trading. Four elements attributed to my failure:
- I did not have a trading plan.
- I relied on out dated strategies I have learned from these books (the books were good as far as providing general guidance, its just that markets change and with them so do trading conditions).
- I did not have a money management system.
- I lacked discipline.
I put my trading aside (as if I had a choice!) for four months to study, refine, analyze and come up with a trading plan both on paper and in my head. The paper plan consisted of two elements already mentioned above: First, a trading strategy (entries, exits, profit objectives, indicators etc.) based on my OWN research and findings. Enough of all the recycled information. This had to be my own! I took all the trading strategies I could find and synthesized them into my unique approach. Second, I developed acoherent money management plan with a risk control element that fit my personality.
But probably more important than developing a trading plan was analyzing my inner self , my most vulnerable sides that came into play while I was trading.
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