The Cure for "Woulda, Shoulda, Coulda": Points A, B, C, D

Because there is always so much room for improvement between what you could have made and what you did make it is very easy for traders to spend a lot of time fixating on what might have been, the dreaded "woulda, shoulda, coulda" syndrome. "If only I had gotten in sooner (or later) and exited sooner (or later). If only this, if only that ..." This is a difficult malady to avoid, particularly because it. can affect you even if you are making money. Interestingly, as much as traders hate losing money, quite possibly the single most frustrating experience in futures trading is to close a trade with a profit and then have the market explode causing you to miss out on a much larger profit than the one you took. The only way to avoid the "woulda, shoulda, coulda" syndrome is, when trading, to focus solely on the action of the market from the time you enter the trade until the time you exit the trade. For the sake of your own sanity, what happened before you entered and after you exited the trade should be ignored (for now).

Traders often focus their attention in the wrong places. Consider an undisciplined trader who enters a long position after a market has already experienced a sharp advance. Instead of focusing on the trade itself and being thankful he climbed aboard at all, this trader will constantly admonish himself, sighing "I should have gotten in sooner!" After the trader exits this trade with a nice profit the market keeps rallying without our trader on board. He now beats himself with "I should have stayed in longer!" And the next time he finds himself in a similar situation he does everything just the opposite way. He jumps in too soon and the market tanks. He stubbornly continues to hold on because he doesn't want to miss "the big rally," which this time around never comes.

The antidote to the dreaded "woulda, shoulda, coulda" syndrome is twofold:

• The first part is to understand the psychological significance of Points А, В, С, and D.
• The second part is to separate the act of trading from the act of trading system development.

What are Points А, В, С, and D?

• Point A to Point В is what happens to the market before you get into the trade.
• Point В to Point С is what happens to the market while you are in the trade.
• Point С to Point D is what happens to the market after you exit the trade.

From a trading standpoint the thing to remember is this:

• The ONLY thing that really matters is what happens between Point В and Point С
• Point A to Point В (what happens before you enter the trade) is irrelevant.
• Point С to Point D (what happens after you exit the trade) is irrelevant.

Adopting this mindset can relieve a trader of a tremendous amount of excess emotional baggage. But this mindset also begs several key questions. "Shouldn't I be trying to improve my system?" "Doesn't it make sense to look at ways to enter and exit trades more efficiently?" "And if so, by ignoring Point A to Point В and Point С to Point D aren't I ignoring possibly useful information that might improve my trading results on future trades?" The answers to these questions are "yes," "yes" and "yes." However, the time to address these questions is NOT when you are in the middle of a trade. The time to focus on these questions is when you are focusing your efforts on developing a trading approach or enhancing your current approach, in other words, when the markets are closed and your mind is clear. This leads us to another cause of lack of discipline know as "system tinkering."

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Failure to control Risk
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Lack of Discipline
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