Today's Quote: “The indispensable first step to getting the things you want out of life is this: decide what you want.” Ben Stein.

A trader may spend all morning examining the daily chart patters of the S&P Futures and the NASDAQ Futures. This trader uses these charts to gauge the ‘market’. He/she trades the futures, and needs to know the direction they are going to take. After long study, a determination is made, that due to the trend, due to the lack of support, and due to bad news that caused a gap down, that this morning is going to be a bearish morning, so a short scalp position is taken out as the market opens.

After the first five minutes, the market starts down and the trader is off to a good start. The first bounce in the market does not surprise the trader, but the market seems to want to continue up. Soon it is over the high of the day, and the intraday chart is actually in an uptrend. The trader evaluates his initial market call, and determines that no mistakes were made. Even though this was a scalp and the stop was already hit, the trader still feels that the market should soon roll over and head lower. The market begins to do just that, as some weakness sets in. It barely trades down for a few minutes the rockets up and takes out the high of the day. Now the trader is confused and starts debating whether to exit with a serious loss or hold on, hoping that his original call was right. It really does not matter what the trader does at this point, this scenario is what many traders do, but it is not the proper action.

While it is proper to form a bias as to what may happen in the market, it should be used only to determine possible courses of action. A good trader knows the truth is that anything can and will happen. How a trader handles the truth when it differs from their bias is what separates good traders from bad. (Please note, this is not to say that you should not stick with your plans, it is just to say when your plan has failed, on the time frame you are trading, to accept it.) Many traders at this point get mad, thinking the market ‘has it in for them’. When they lose money, they blame market makers and specialists for making the market move in the ‘wrong’ direction, or for running their stops. They blame their broker for not being able to get into or out of a play. Or they just blame the market itself, as it is always going ‘against me’; no matter what direction they play. If you think it is against you because it just rallied when you were short, didn’t it just go in a favorable direction for traders who are long?

The market is not a live being. It has no personal bias. It has it in for no single trader. It often speaks volumes to us, but we are often not listening. We are not listening because we are trying to make if fit into our plan, rather than working our plans around what is really happening. The market often speaks the loudest to us when it speaks through its failures, but few are listening at that time. How do you see the market? Do you see it as a demon to hurt you, or a friend to serve you? Often this slight attitude adjustment in ourselves is all it takes to make a big difference.

“You must be rigid in your rules and flexible in your expectations. Most traders are flexible in their rules and rigid in their expectations.” – Mark Douglas, Trading in the Zone.