The Road to Successful Trading

Imagining your worst trading nightmare 
Often, we keep our fears locked up in our subconscious and they lurk there, grumbling and 
threatening. It’s always a good idea to draw those monsters out and see them for what they 
are. For example, you have done all your analysis and you feel very positive that a stock will 
be making a big move very soon. Perhaps it will be the announcement of a new cancer cure 
or other big news that will send the stock soaring. You buy a substantial long position on the 
stock and, as called for by your trading plan, you place your stops and wait and watch. The 
stock starts to move in your direction and you add to your position. It moves even higher but 
not in the explosive manner you expected because the news hasn’t come out yet. But you 
can feel it in your bones. This is going to be a slam-dunk. The stock starts a gentle slide back 
down toward your stops. You don’t want to get stopped out. The price creeps a little lower 
and you start to get nervous. You need this big trade. You quickly call your broker to have 
the stops lowered to give the price some “room to breathe”. Then it happens.
How to Design and Construct An Effective Trading Plan 
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Your other line rings and it’s your spouse. He is tied up at the office and can’t pick up the 
kids at school. You dash to your car thinking of the heavy fine for being late for the pick up.
Silly you, you have tens of thousands of dollars on this trade and you run in fear of a two 
digit fine. You pick them up and race back to the house. You try to make yourself walk 
calmly up the stairs to the office but as you reach the top steps, you take them two at a time 
and burst into the office-room and are stopped in your tracks. This wasn’t supposed to 
happen! 
The price has gapped… straight down! Something horribly unexpected has happened.
Thank god for stops! Then it hits you. You had asked your broker to take off the stops but 
didn’t specify a new stop. You were naked! You took the ride down the elevator shaft. OH 
NOOOOO! 
Of course there is no lack of trading nightmares but the idea is to think it through and decide 
how you should react. Would you quit trading after a massive loss? Would you punish your 
self through self flagellation or would you just submit to the cruel silence of your spouse?
Anyway, it’s always good to have a positive attitude but it is also good to try to imagine the 
worst case scenario and walk it through in your mind. Airline pilots practice in-flight 
emergencies in a simulator so that they will learn how to react even while the emotions may 
be boiling over. The same strategy is a good idea for a “trading emergency”.