Control of Emotions and Mastery of Focus

The Fear and Greed Factors

Nothing affects your trading behavior like these two disruptive emotions. You need to be aware of their influence whenever you're in a trade. The fear factor keeps you safe, but you make very little money. The greed factor tempts you with the chance to make a lot of money, but it usually just gets you in trouble.

Fear is a natural instinct. From birth, you're hardwired to avoid risk. But greed has the power to override fear and cause you to do things that you normally wouldn't. In day trading, fear and greed have to be squarely faced, always watched out for, and tamed. You can never totally apprehend their influence on your subconscious. No one is completely immune to these overwhelming impulses, but you can train yourself to resist them in each of your trading decisions.

How to Control Them

The way to keep fear from manipulating your performance is to limit your exposure. This is why I stress that you only trade in 100-share blocks, and sometimes less. With 100-share blocks you won't feel as much fear as when you're wrestling with 1,000-share blocks.

Suppose you're in a trade with 100 shares and the stock moves against you by a full dollar. You're only down $100, not so bad. But what if you're holding 1,000 shares? Then you're down $1,000. You will soon find that I trade stocks that can fluctuate one full dollar every minute. If you're a nervous wreck while trading a position, then most likely you're trading more than 100 shares per trade.

Other ways to avoid fear include:

• Not holding a losing position all day—always having an exit plan
• Not holding an intra-day position overnight because it closed in the red
• Not trading with your rent/mortgage money
• Not trading when you've been consistently losing for days—taking a break instead

If you find yourself unhappy with making small profits all day, then greed can start kicking in, and you can quickly get in way over your head. The way to avoid a disaster while sating your urge to trade more than 100 shares is to deliberately limit yourself to a maximum of 300 shares (three tiers) per trade setup whenever you're intra-day trading.

Other ways to avoid greed include:

• Never recklessly average-down a position. Trade real price levels.
• Avoid breaking your consistency. If you've been trading a certain way all day, do not start trading differently in the last hour.
• Never break the Golden Rules.

How to Stay Focused While Trading—All Day

Focus is the quintessential factor in the success rate of every day trader. Here are crucial ways to stay focused:

• Never take your eyes off your screens while in a trade, especially when it's an intra-day trade for 15 cents. That means no lunch breaks, no phone calls, no trips to the bathroom, and so on. Before you engage in any activity that distracts you from watching your screens, you must close your positions, hopefully at a profit.
• Don't trade on a day when you have personal/family issues that will most likely cause you to trade on emotion.
• If you have a hangover, then wait until late afternoon to start trading. You don't have to start early in the morning.
• If there's a major national crisis occurring, and it's having an effect on the stock market, then you should take the day off.
• Drink coffee to stay alert, and exercise and stretch at your trade station. The exercise is especially effective because your blood circulation is improved. You'll be more energized, but also more calm, and you won't get fatigued and have muscle aches.

After I've trained you, if you don't stray from my system, you'll be a much better day trader. What I teach is very structured and procedural and will keep you on target and alert, that is, focused. Once you master this system, you'll know when you've made a mistake, and how. But most of all, you'll know when you're about to make a mistake in real time, and how to head it off, because you're focused.