Do you have doubts while placing a trade order?
Do you hesitate to get in a trade, even though all the factors for the trade have lined up perfectly?

Trusting your analysis, and pulling the trigger at the correct time, without any second thoughts, can be a real challenge.
It’s a natural part of trading and overcoming this problem is one of the key hurdles, which a trader has to overcome.

First & foremost, it is the faith and confidence that one must have in the system. Whatever technique one has decided to follow, one must enter the trade with no second guessing.

Easier said than done!

And this is exactly what we need to discuss.
How does one do that?

From personal experience, I can tell you that this comes from taking trade after trade based on the same technique, regardless of the outcome.
This is the key….regardless of the outcome.
In the process of trading, one will experience losses.
For most traders, this is the most difficult part to accept.
It’s not easy to accept a loss.
More than the financial loss, the effects of the psychological damage are more pronounced. Most of the times, it results in a “revenge” frame of mind.
It’s a natural human tendency to want to recover the loss & I have seen a lot of traders “get back” to the market by doubling their positions.
This is the beginning of a vicious circle that would only end in a greater loss.
Hence one has to learn to look at losses very objectively.

What I do, is look at these losses as a necessary expense, since one is learning from it…..here, I assume, that a trader would learn from the mistakes.
Taking an example, if you have to travel from one city to another by car, you would need to fill gas in the vehicle.
Would you consider this gas expense as a loss? The bottom line is that you have spent the amount, which is not going to come back to you.
I would look at this expense as a necessary requirement, since it is getting me from one city to another.
Similarly, if you learn from a loss, then it only adds to your experience…and makes you a better trader.
So….is it a loss or a necessary expense?

Coming back to the topic, we can conclude that the faith in your system comes only after taking it time & again…regardless of the losses.

So it has to chart time, chart time & chart time, till you know your system inside out…which then gives you the confidence.

One note of caution – One has to back test the system to check its effectiveness, before you start using it in real time.
There are different factors that go towards making a system effective & I would not advise trading with a technique which cannot give you positive results.
It would naturally end in losses & more losses….then you would want to catch my neck & say….you told me so -J

The second important factor is money management.
If you do not risk more than 2% of your capital at any given time, your risks become affordable.
Hence you go into a trade knowing that even if it ends in a loss, these losses can be taken in stride.
That itself, should give you the confidence of taking a trade.
The flip side is that one feels the expected profits will also be small, and one would tend to increase the capital exposure.
And this is where the discipline comes in.
Once you have decided on a certain procedure, you must have the discipline to follow it.

Most traders do not give the time to the technique, to prove itself.
Human nature being what it is, one tends to look for another technique because this one has had some losses.
And most traders quit a system when they have put in a lot of efforts, and are almost at the finish line.
This is not the place to give up.

The bottom line is that a trader should learn to analyze the markets for himself.
Only when he knows why price is moving…the way it does…will he have an edge & the confidence in the technique.

It’s only when you stick to one plan that you tend to make it perfect.