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Below I am going to break down what I believe are some of the most important components to trading. Technical Analysis I believe TA is deeply misunderstood. Many believe it's some sort of 🔮to see the future. There are various styles of TA, many of which are referred to as "patterns". Price seeks liquidity, as people place Bids, Asks, set stop losses, liquidation, and profit taking targets, it would be reasonable to suspect some "patterns" might arise from that activity. If you pay attention to order flow, you will see that the majority of traders consistently make similar choices. One of the most recognizable cases of this is when price makes a significant high or low, ranges, and comes back to barely take that level before reversing. Here we see a pattern arise, it's not generated by some mystical force, but instead by the consistency of human behavior. Everyone has placed their stop losses in the same place, and price has revisited that liquidity, taking out the positions before reversing. Most of you have probably experienced being on the losing side of this price action many times. In my view technical analysis is simply using tools to identify the "patterns" generated by predictable human behavior. The goal is then to structure a trade around these higher probability events with clearly defined risk management. Instead of consistently getting stopped out of trades by "predictable" market activity, you are consistently finding your shorts from the highs, and longs from the lows, with high risk/reward. RISK MANAGEMENT No matter how hard you try, there is no way to enter the market without risk. All we can do is manage our risk. We don't want to rely on our intuitions to figure out what reasonable risk is, as our intuitions about probabilities are often wrong. Instead We can use mathematical modelling to understand how to manage our risk. Let me give an analogy, lets say that you bet someone $1,000 that if you flip a coin, heads wont land 5 times in a row. You probably intuit that the odds of heads landing 5 times in a row is an extremely unlikely event, but what if your opponent insists that the coin must be flipped 300 times? Your intuition might not tell you that there is now a 99.4% chance that heads lands 5 times in a row. Much like trading, flipping coins is a set of independent random events, but over large sets, we see various events arise with near 100% certainty. A trader uses risk management because they truly accept that they are operating in a space of probabilities. Given enough trades, outlier loss streaks are certainties. We can mathematically calculate the odds of various loss streaks happening, given enough trades. Most systems should be able to withstand a 10 trade loss streak comfortably. This leaves room for probabilistic variance, and execution errors. This is why the value "1% risk per trade" is often seen as a standard for risk management. TRADING PSCHOLOGY (Patience, Greed, Fear, and everything else) After a trader has done their due diligence, planned out their technical trade, defined their entry criteria, calculated their positions size based and their invalidation (risk management), and their targets. It is now time to execute the trade. In some ways I view executions as a sub category of trading psychology. Patience - Patience is one of the most important aspect of execution. It doesn't matter how well your trade is planned if you don't have the patience to wait for that key level or idea. A trader may enter a position well before their level is hit, because price has a significant bounce before that level, as they watch price move further and further away from their entry level they decide to enter, fearing that they will miss the move. Suddenly they are trading well beyond the scope of their plan. They may be able to justify the decision as logical at the time, "the level almost got hit", but the next day reality sets in, they entered at the top of a local bounce, and they placed their stop loss under the most recent low, right at the level they had planned to long. In hindsight it might feel unbelievable to you, how are you getting stopped out exactly where you had planned on entering? I prefer not to think in terms of "missing a trade", if my level doesn't get hit, then I missed nothing, because I don't know what the market is going to do. How can I be expected to trade something I had no plan for? I simply accept my level may or may not get hit, and wait for my trade. GREED? - When the term Greed is thrown around, it evokes images of Scrooge Mcduck. Someone rubbing their hands together, with a villain's smile on their face. I believe it's more subtle then that. Greed often takes the shape of hope, or optimism. You might be thinking about paying off a looming bill, or paying off some debt quicker. These aren't insidious ambitious, but they are just as deadly. Without even realizing it, you are no longer thinking about the technical mechanics of the trade you are executing. You aren't thinking about "risk management" or "invalidation" you are thinking "If I put this big of size on the trade, I can pay this months rent from one trade" or "If I don't take any profits at my target, and price goes up to this price, I can make enough to pay for the family trip next week". These thought processes detach a trader from the reality of the market. The market doesn't care about the bills you have to pay. We have to detach our personal goals from the trades we are currently taking. We must do our best to remain objective at all times. We don't size our trade based on when rent is due. We don't base our targets on how much money we want to make on the trade. Those factors must be based on the reality of the market, not the conditions of our lives. FEAR - Fear can come in many forms. A trader might be afraid to lose, so they find themselves unable to enter when their planned trade presents itself, or fear might cause them to remove their stop loss entirely. That fear of loss has turned what might have been a small, managed loss, into a ruinous one, as price goes further and further against the trader, the fear of accepting that loss leaves them frozen as they watch their trading account evaporate. Fear of losing is only one side of the coin. We are all familiar with the term FOMO, the FEAR OF MISSING OUT. It does not take long for a trader to have the experience of barely missing a trade, or exiting a trade right before a large move takes place. These experiences create emotional baggage. When a trader finds themselves in a situation where the market is doing something entirely unexpected to them those memories of missing out on a large move come flooding back to them, and they might find themselves scrambling to enter a random, unplanned position to catch the unexpected move, often times with no risk management or invalidation. Inevitably this FOMO has caused them to enter right before price reverses, maybe a long at the peak of a move, or a short at the bottom. When we accept that there is no way to catch every move, or predict every pivot, we release ourselves from the pressure to do so. We can accept that it doesn't matter where the market goes, we simply want to trade pre-defined levels and setups. What happens between those levels is irrelevant. Everything else- Everyone has their own personal experiences, goals, baggage, and journey as a trader. Sometimes the emotional triggers might not fit neatly in a particular category. Trading represents freedom for many, it represents an opportunity to break away from the mundane routine of life. An opportunity to write your own ticket with the sense that your opportunity is limitless, only restricted by your own hard work and performance. Often times all of these hopes, dreams, fears and ambitions entangle themselves into our trades in such a way that only we can identify. Single trades might start to subconsciously represent all of the hopes and ambitions a trader has for their life. We can't carry all of that emotional weight into the market with us. We must detach the outcome of random trading events from our personal self-worth, or hopes for out future. This practice is referred to as "Mechanical Trading". You simply take trade setups with risk management and invalidation, with no expectation or care as to what the outcome of a specific trade is. JOURNAL - Keeping a journal may seem like something teenage girls do, but it is the most valuable tool a trader has to develop in all areas. Collect the data on your trades. Win-rates, average loss, average win, outlier events, reflection on your emotional state when taking trades, etc. Start identifying your strengths and weaknesses. Maybe you find that you performance suffers after to many hours at the chart, or at the end of the week, maybe you find that you start taking on too much risk after a 4+ win-streak, or certain setups greatly out-perform all of your other setups. I can't tell you what you will find in your personal trading data, All I can tell you is that you will find gold.