Rule #1 in Trading: Don’t Trade Anything You Can’t Afford to Lose [Beginner]
Most of us have an emotional connection to money. When we have more of it, we feel good. When we have less of it, we feel bad, or maybe even anxious or unfulfilled. Imagine the kind of pressure this puts on us if we add the increased pressure of tying our trading income to our debt obligations. The idea here is to “trade to trade”. Be smart. Look at it as a game. An important game where you don’t want to lose your chips, or you are out. Play by the rules (of your trading plan) consistently over time, and you place the probabilities of “winning” the game in your favor.
The markets move on mass psychology, signified by two emotional drivers: greed and fear. We become part of this phenomenon when we enter the markets (i.e. place a trade). Knowing this, it is important that any money invested into the market is expendable. If we tie our mortgage or car payment to the outcome of a trade, then a dependency is created. This, in turn, creates pressure to perform on any given trade, which may change the decisions made in managing the trade. In turn, affecting the trajectory of the outcome of the trade. This outside “mental” pressure we create may even influence the decisions we make around the position sizing and risk management of the trade if we are not careful. When the outcome of a trade is not tied to anything extraneous, then we are free to simply “trade to trade” with no other ties or influences. In future posts, we learn the importance of planning the entry and exit of each and every trade. Breaking any extraneous monetary ties or expectations will allow us to do this much more easily.
Remember: When you begin trading, this will be the worst trader you will be. Start small. Be prudent. Be humble. Be smart. Learn the lessons you need to learn. There is no substitute for experience. Gain that experience in a thoughtful way.
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