I would like to share with you some tricks of the trade that can help you minimize the stress of day to day trading and hopefully keep you calm, focused, and on plan.
Open Two Separate Trading Accounts.
Let’s face it. Most of us will never stick to our trading plan. Moreover there is no good reason for why we should. Experimentation is critical to creativity and creativity is absolutely vital to survival in the markets. Markets constantly change and the only way we can discern those changes is by interacting with price action in new and hopefully profitable ways. The critical mistake that most of us make is that we often commingle our experimental trading with our core setup trading in one account. The net result is that losses from our experimental trading almost always lead us to abandon the discipline of our core setup.
I used to believe that having two accounts at the same broker would help you solve that problem, but I no longer think that this is a good idea. It’s too easy to transfer money to and from two adjoining accounts at the same broker and you basically wind up sending good money after bad. Instead, it is much better to open accounts at two separate brokers.
For your “junk” account you should choose a broker with lowest possible spreads and smallest possible size executable, so that you can experiment trading lots as little as 1000 units. This is effectively your “play” account and you should open it first thing each day to satisfy your urge to trade and participate in the market.
Your “serious” account should be held at a broker who has the best possible execution rather narrowest possible spreads.
Ask yourself these questions.
- Does my broker widen spreads inordinately during news announcements, making it impossible to enter the market at reasonable cost?
- Does my broker frequently reject limit entries during periods of volatility?
- Does my broker often lag its price feed behind the market?
If the answer is yes to any of those questions, then that brokerage is not the place for your “serious” account. Your “serious” account should be traded only at a reputable broker with good dealing capabilities and top notch customer support.
Once you have set up this structure you must make a solemn promise to yourself that you will never, ever, ever ever, ever, ever trade anything but your prescribed setup in your “serious” account. Irrespective of whether you are losing or winning you cannot pollute your setup trades with experimental trades. That’s what the “junk” account is for. Having separation of purpose will hopefully create peace of mind and allow you to adhere to your trading plan with 100% consistency.