Ask Colin

In Mark Douglas' words, I am 'living by the results of the last trade'. I do not take buy signals after losses and then force winners by taking profits too soon. Can you suggest anything?

Having read Douglas, you will know that the hardest thing to do, but the most important key to success, is to follow your plan.

If your plan is to take every buy signal, then you must do so.

If your plan is to set protect profit stops somewhere, you must leave them there.

Everyone has to take this difficult journey. Some get there in the end, but most never arrive. Even the best will lapse sometimes.

I think the most powerful technique for dealing with it is to keep a trading diary. When you get a buy signal, print out the chart and paste it into the diary (you can keep it electronically by copying and pasting the image). Mark on it your levels. If you move a stop, print out a new chart and mark your levels on it.

Now, the secret is to write down your reasoning. If you decide not to take a signal, write down why. If you move a stop, write down why.

If you can also make yourself stop and answer some key questions in writing, it will also help:

What have I decided?

Is that my plan?

If not, are my reasons in my plan, or are they rationalisations?

Am I being influenced by my recent trading results?

If my results had been different, what should I have done if I follow my plan?

The actual questions can be these, or whatever you think.

The idea is to turn yourself into your own devil's advocate. It is not easy. Even if you lie to yourself, your lies will be on paper and you can review them and look for patterns of behaviour later. The first step in changing your behaviour is to recognise what it is and what you should be doing.

I would like to acknowledge that the idea of a trading diary is something I learned from Dr Alexander Elder. I hope you have read his books Trading for a Living and Come into my Trading Room. Read them more than once. I learn something each time I read them. I am currently listening to Dr Elder read Come into my Trading Room on CD. The CD or audio tape versions are great for people who spend a lot of time commuting. They are available from www.elder.com.

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