So far we have gone over why we trade stocks, what is important (your price), how to define your risk reward (ideally you want a 5:1 RR), where to place your stops once the trade is put on. We have also gone over our most popular long set up (The Bull Flag). You should be able to trade in any market condition with a proper game plan. Furthermore, know how to manage a profitable trade with trailing stops and how to review your trade to spot your strengths and weaknesses with the trade report card.
In this lesson we want to ask you a question that is below for you to answer:
The Technician, the Manager, and the Entrepreneur… Which one are you?
(Take a moment to think before scrolling lower to continue reading)
The correct answer is all three of them, it only matters which facet you excel at. The most important part of trading is finding a consistent system that works for you.
The three people inside your mind and inside your trades are either hurting or helping you and that's what we need to determine and improve on.
The Technician - How you look at charts and identify a good trade idea vs a bad trade idea. How you formulate the game plan for the trade, how you determine your ideal risk reward. Ideally you want to aim for 5 to 1 or more on your trades and 10 to 1 on our A+ trades that we will go over later on.
The main factors of the Technician aspect focus on:
- Chart work
- Using layers of probability to determine the effectiveness of each set up (moving averages, sector, your time frame, relative strength/weakness, results of earnings, etc.)
- Identifying Strong stocks to buy (stocks in the top right corner of the chart)
- Identifying Weak stocks to short (stocks in the bottom right corner of the chart)
- Game plan prior to the entry
The Manager - When you put on the trade are you able to buy or short it at the price you set in your game plan? The Technician inside of you found the proper entry price. Was the Manager inside you able to buy when you said you would?
After the trade is placed, the Manager inside you makes sure to keep the plan the same, the stop the same and the profit targets the same. If you are able to stick to your original game plan from your Technician side that is usually the best outcome, but as you start to trade the greed and fear tend to come out. If you are able to stick to the stops and profit targets you should be successful in the long run.
The main factors of your Manager side focus on:
- Were your entries, stops, and profit targets in your game plan stuck to?
- Did you get out too early or too late? (Fear)
- Did you hold on or give back too much profit? (Greed)
The Entrepreneur - When looking at trades, can you see where you believe the stock can go, and in time does it go there? Are you realistic with your expectations or is every trade your next million dollar trade? The Entrepreneurial part of your thinking looks at each trade as a business to run, how will this trade make me more profitable, give me the freedom to do more of the things I enjoy, etc. Or are you over enthusiastic and expect the stock you bought at $50 yesterday to be at $100 tomorrow just because you bought it.
The main factors of your Entrepreneurial Mindset focus on:
- How the overall trade went
- What you did well
- What needs improvement
- How will you implement these improvements in the next trade
You will see over time that one of these three will stick out the most, the one that is helping you and also the one that is hurting you. Are you having trouble increasing your position size, or are your gains and losses on trades reckless?
As you go through your trades and game plans you will be able to find your strengths and weaknesses and over time, and when you can recognize these problem areas you can improve them.
Your entrepreneurial mindset keeps you engaged and forever making improvements, your manager mindset gives it order, and the technician in you puts you to work. You need all three working in tandem or your business will eventually end and this is one tough business to be in!
Do you have balls?
So far you have set up a few paper trades, I would like for you now to go over those paper trades and answer the following 4 questions for each trade in the Group Chat. Take your time and really look into your ideas and find your strengths and weaknesses when you are done.
- What was your risk from the date you entered each trade?
- What was the most profitable price the stock traded at after you got in?
- Did the trade get stopped out or did the trade hit your target?
- Of the three characteristics we went over that are inside of you in each trade (the technician, the manager, the entrepreneur) which stands out the most? Which the least?
POST IN THE GAME PLANNING CHAT