Where Philosophy Begins
"An important place to begin in philosophy is this: a clear perception of one's own ruling principle."
— Epictetus, Discourses
Well I can't believe we are into the third month of these daily meditations already. March is upon us; How time flies!
Today's meditation is a tough one to compare to trading but I think the one thing that stands out for me as a trading philosophy, is to trade what you are seeing and not what you expect or hope to see! We will use the stats/data that we have available and come to a decision on whether to enter a trade, based on what this history tells us. However, once we have entered the trade, we must now have a neutral opinion of what is going to happen. We have the edge from utilising the stats/data and that hopefully gives us an advantage of the trade going our way. Having said that, it can just as easily go against us now and again and this is where it is vital to be ready to act accordingly when this happens!
You must have a cut off point so you can minimise your loss at a controllable level, therefore protecting your bank and this means you must act swiftly and without hesitation in a heartbeat, BEFORE your loss becomes unmanageable and a large chunk of your bank disappears! A general rule of thumb that I always say is; if you are hoping a trade will swing back in your favour, you have left it too late. You do not want to be in the land of hope, so you need to force yourself to cut that loss without hesitation, before it gets to that stage.
The more you do this and you benefit from seeing the results of your swift actions, the easier it will become as you look back at your trading results. When you see a few targeted profitable greens and a small controlled red that means you are still very much in profit for the day, there should be no looking back; as long as you are patient and disciplined and have the correct mindset to pull the trigger to exit that potentially losing trade in a heartbeat, things will become easier.
This is really all about having the ability and the self-awareness to analyse what is actually happening at that moment in a trade, before it is too late to act.
So the message here is to trade what you are seeing unfold and not what you think is going to happen! This is where philosophy in trading begins.