Step #8- Psychology of Trading

Executing a trading plan without fear is how to win consistently!

Learning to trade is not about making money. Learning to trade is about the process of understanding what trades you can execute without fear. Some of that process involves winning and losing trades. Nexgen stresses that all new traders should complete their education using the simulator and market replay. In our experience, many traders test their trading and emotional control skills too early with real money. Meaning, many traders trade an incomplete or poorly developed plan without the winning mindset with real money and usually end up paying the price with frustration and losers that are completely avoidable. We intend to give you the tools to avoid this pitfall.

John Novak spent much time with Mark Douglas informally for years in the early 2000s and very much respected his work. The following 4 YouTube videos that are publicly available, are essential for new traders to gain a functional understanding of the correct psychology needed to execute Nexgen's (your) trading plan. Nexgen trading setups and management techniques give you the edge, your mindset regarding your trading edge will make the difference between winning and losing. Please watch these videos. No endorsement of Nexgen Software is implied by the late Mark Douglas. This is just good information that all new traders need to understand in order to use their Nexgen Software to its fullest potential.

All traders must eventually experience the thrill and emotional impact of real-money trading. Most new traders make the mistake of starting off using an unacceptable amount of leverage. If a new trader uses large amounts of cash with too much leverage, they may quickly spiral into a "fear" of the loss. The fear comes true when their trading plan or mindset is flawed, incomplete, and not thoroughly tested. Fear sometimes prevents a new trader from taking the appropriate measures to fix the problem, such as posting pictures in the room or asking for help. When transitioning from the simulator to live money, a trader may experience small losses, which may be acceptable while testing the emotional impact of real-money trading. When new traders experience extreme losses, learning to trade may become unhealthy. This is why when transitioning from the simulator to live money, conventional wisdom suggests that it is best if you trade small, win or lose small. Once you have achieved consistency in generating profit, grow the number of contracts you trade with profit generated by positive trading.

To that end, bridging the gap between simulator large contract trading with micro-futures may be a prudent step in the process. The psychological effects are negligible when trades are taken using micro contracts to test your ability to trade flawlessly and devoid of fear. Form a tangible percentage of your account you will risk on each trade. For example, risk as little as 0.1 - 0.3% of your account on any given trade. That percentage will go up to 3-5% of your account value as your experience and results warrant. Traders that use every available tool to protect themselves and their psychological well-being tend to survive and thrive for a lifetime. Everyone has the same software, the same education, and the same opportunity to win or lose. You must control the only variable in the game you can control, yourself, and your mindset about trading.

Conversely, the top Nexgen traders are not afraid of the loss; rather, they welcome, even thrive on the opportunity to make a profit. When you have made it through the educational process, your sole focus will be following your rules. Elite traders know that a loss may occur and ignore any fear of such a loss as long as they follow their plan.

Nexgen Software Services Inc. is not a registered Commodity Trading Advisor, Stocks Broker, Pool Operator, or Fund Manager. As such, Nexgen nor any of its employees, contractors, or associated persons do not and will not make recommendations to clients as to what is best for each individual. Nexgen will be responsible for creating indicators and educating clients to understand the expected outcome of those indicators. Your responsibility as a trader is to execute the plan that is appropriate for yourself based on what Nexgen teaches.

There is no finish line. Historically, traders continue to improve using Nexgen’s trading software forever. The good news is that traders should make money after live trades mimic the simulated results. 1-2 months on the low end, and some take up to 4-6 months. Generally, those that take a long time can look back and blame it on the lack of committing to creating a personal plan and the wrong psychological state when they started trading. Not writing a plan or just "trying" too many trades. Hyper-focus on one trade or two looks that win most of the time and build your plan from those trades.

It is worth noting that a trader's live money trading should mimic simulation results over the course of 20-25 trades. If not, stop immediately! Traders may need to return to the simulator several times before they learn to control their emotions. The use of micro contracts will mitigate the financial burden the educational process may cause. This is less of a glamorous get-rich-quick scheme than it is a long-term plan for making money forever. We want all Nexgen traders to trade profitably forever. Once a trader proves that the patterns win, synching their emotional control to execute those trades flawlessly, without fear, will make a successful Nexgen trader. The rules SHOULD/ MUST be practiced enough times so that the decision-making process is devoid of emotional conflict. Confidently trading high probability patterns is the goal.

IT IS IMPERATIVE NOT TO BLOW OUT YOUR ACCOUNT while learning to control your emotions! Only a traders’ live results should determine the right time to trade live or return to the simulator. Make sure you are always aware and in sync with the financial limits of your plan.

Everything you need is in you and the Nexgen Software. Suppose you need to read a book. Try Mark Douglas' trading in the zone. https://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447

More videos by Mark Douglas in case you need more!