You Need To Ask Yourself This Key Question

It is the one I use on our DVD course, as well as in-person trainings, “If I had no money in this play, would I be executing a buy or sell ‘action’ at this moment, based on objective observations?”

1.  If the answer is a buy action; if I have no position, I buy to get long exposure.

2.  If the answer is a buy action; if I have a long position, I do nothing or buy more long exposure.

3.  If the answer is a buy action; if I have a short position, I buy to cover.

Or,

4.  If the answer is a sell action; if I have no position, I sell to get short exposure.

5.  If the answer is a sell action; if I have a short position, I do nothing or sell more short exposure.

6.  If the answer is a sell action; if I have a long position, I sell to exit.

Then, the only thing you need is an objective decision support model that gives acts in a way that the above protocol results in growing capital over time.

If you don’t have that model, the question tree won’t work.  If you don’t have the question tree, the model won’t work, as you’ll continue doing the same action eventually at the wrong time.

Notice that no where in this process does profit or loss come into play.  That is because the market doesn’t care about your money.  It only gives you clues to follow along the path of staying in sync or not with it.  Ego, profit/loss status, etc. are counter productive inputs to the logic of objective decision support.  If you operate the process to perfection, you will always get small losses and large gains, in either direction.  The profits and losses will be the result of efficient and perfect operation of the process, rather than a counter productive component of the process itself.

Therefore, emotions will be removed from the money; a goal that every successful trader strives to accomplish; and fails 99% of the time.  Why?  This is due to the doubt that most traders have in their decision support model.  When they reach their point of maximum pain, they doubt the model, and act against it, exactly when they should be acting with it.  That leads to a string of “I knew I shoulda” instances with the benefit of 20/20 hindsight.  They end up “shoulding” all over themselves, resulting in a stinky mess in the trading account.  Does this sound familiar?

That is why I use my DSE, every time, all the time, only it, nothing else, right or wrong, win/lose/draw, even when really wrong.  Why?  Because, usually when really wrong, it wasn’t the DSE’s fault, but my own operation of the process along the question-tree path, due to my human weaknesses of ego, greed, and general emotionality.  To the extent I can minimize those human attributes, my trading outcome improves.  It’s just that simple, for me, which is why I do what I DO, and not what anyone else on the planet does.  I’m not saying it’s the only way, best way, or that there aren’t many other ways that are equally good or better.  I’m only saying this is my way, and that is the only thing I do.