When your trading life pulls you in all directions, it can be difficult to find your center. Consider these four steps to help you develop your trading mindset.
Ever get to the end of a trading cycle and feel like you were your own worst enemy? You overruled your game plan and started second-guessing your second-guesses. Then, by the time you hit the red button, you just felt relieved to be out of the trade. You might’ve even made money—but it left you so mentally drained that it felt like a loser.
It happens to the best of us. Here’s the thing: From a point-and-click perspective, trading’s never been easier. But mentally and emotionally, it’s perhaps never been this hard. It’s easy to get distracted and stressed—and the amount of data available these days can be overwhelming. If your trading life starts to pull you in all directions, it’s important to recognize that you need to get back to your center. In other words, find your trading Zen. Nope, this isn’t another recommendation to eat right, exercise more, take up yoga, or buy a bunch of self-help books. There’s nothing inherently wrong with any of those things. But you might consider looking closer to home for the key.
Spoiler alert: Helpful tools are on the thinkorswim® platform. Fire it up and consider these four steps as you work to reclaim your center.
In the words of the late economic analyst George Goodman: “If you don’t know who you are, the stock market is an expensive place to find out.”
So, who are you? What’s your “trader personality”? A good starting point might be to answer these questions:
Answering these and similar questions can help you outline your optimal game plan. If you’re an engineer type, you might like some of the hands-on, automated tools and gizmos on thinkorswim, such as automating trades with Strategy Roller or writing your own code hacks in thinkScript. Visually oriented traders might prefer to use technicals and manage order entries and exits directly from the charts. Like to analyze? There’s an entire tab devoted to analysis tools, as well as a button (OnDemand) that lets you turn back the clock for backtesting and scenario analysis.
Remember that double-edged sword of available data? It really can be TMI. But relative to your trading strategy, a lot of it is extraneous noise. Too much clutter upstairs? It might be time to clean house.
Rather than letting your attention focus too much on the bright, shiny object or on stuff that doesn’t matter, focus on what’s relevant to your game plan. Once again, thinkorswim can help give your brain a break.
For example, option traders can use the Risk Profile (see “Risk Profile: The Option Trader’s Travel Companion”) to crunch the numbers and track the options greeks. And you can clear your head of dates to remember, like expirations, economic reports, and ex-dividend dates. Just go to the Calendar under the MarketWatch tab.
Do you spend too much time looking for trade candidates and strike prices? Head over to the Scan tab, set your parameters, and narrow the list. And don’t obsess over your entry/exit parameters; instead, try setting up Alerts (see figure 1). Think of these tools as outsourcing brain-sucking tasks to a tech platform that’s designed for it.
FIGURE 1: PULL UP AN ALERT. From the MarketWatch tab on thinkorswim, select Alerts, edit the values you’d like to be alerted about (such as the bid or ask), choose how you’d like to be notified, and create the alert. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.
It goes without saying that you need to feed your body with the stuff vegetables are made of. But what are you feeding your brain? Reliable daily market information, news, and education is the brain food for good ideas.
Some personality tests detect your tendencies during normal times as well as times of stress. Many of us are entirely different people when our blood pressure builds and the hair on the back of our necks stands up. When you log in to the trading platform, make sure you know which personality is with you.
Once again, it’s all there on thinkorswim. Swing by a chat room and bounce ideas off fellow traders. Or take it one step further and tune in to the programming available from our media affiliate, the TD Ameritrade Network, for a full trading day’s worth of live programming from early morning until an hour past Wall Street’s closing bell. Plus, you can always access free courses, articles, videos, and live webcasts under the Education tab.
If you’ve followed the first three steps, you should be closer to finding your trading Zen. You’ve assessed your personality and synced it with your trading style. You’ve cleared some of the junk out of your body’s attic to make room for the stuff that matters. And you’ve started feeding your trading brain a healthy diet of nutritious content.
If these initial steps are about getting you back to or finding your center, this next step is about keeping you there. One approach: Put your trading decisions on autopilot. “Trading Systems: Black Box Trading for the Rest of Us, Sort Of” spelled out one example of a quick, simple, rules-based trading system:
Setting up a trading “machine” can help filter out those extraneous variables from the equation. It’s a bit like what the ultrafast trading systems do—simplify the inputs to streamline the outputs.
Trading is hard enough in the best of times. So, don’t make it harder than it needs to be. Find your Zen to become a more objective and centered trader. It will take some practice, diligence, and maybe a cup or two of herbal tea.
Doug Ashburn is not a representative of TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the author and may not be reflective of those held by TD Ameritrade, Inc.
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