Leave emotion at the door when you enter your trading space, collect it at the door on your way back out. It might come as a surprise to you that there are many traders out there who know absolutely nothing about horses, jockeys, previous form, pedigree, trainers etc. Some don’t even watch the sport at all, yet they still have the skills at their disposal, enabling them to step into the markets, and leave with a profit.
They have developed their style as more technical analysis rather than fundamental. I’m not saying that one style is better than the other, technical analysts use the numbers and charts more, whilst fundamental analysts use all the other outside influences such as a change in the conditions, tipsters etc. Trading is all about finding which method works best for you, and then you develop it from there.
One common similarity, whether you choose technical analysis or fundamental; you need to learn to detach yourself from the money you are using to trade with. Never trade with more money than you feel comfortable with. If you have a fear of losing, then you tend to put extra, unnecessary pressure on yourself, which generally results in bad decisions costing you money.
Once you learn to detach yourself from the money, you will find it becomes so much easier. Depending on your style of trading, you must learn to understand that it is still gambling. The majority of people who attempt cold trading can still fail because they attempt to mix punting and trading when things don’t go their way.
The best example I can offer on cold trading is from my own personal experience. I predominantly trade on horses. I have no emotional attachment to the money I use, I’m not depending on it to pay for anything in my lifestyle. I’m certainly not using my rent money to see if my prediction on market direction was correct. I like to use both technical and fundamental analysis. I am 100% focused on reducing my risk before I enter any market, and even more focused whilst my money is in there, constantly processing the information as it becomes available, 100% prepared to pull the trigger to exit at break-even or at a small loss should I need to. I don’t take it personally if a trade goes wrong, it’s just second nature to me now to get out as quickly as possible. Some people in that same situation will re-evaluate the market when that happens, looking to recover the loss, whether they close that trade out and enter a new one, or simply let the losing position run hoping for a bounce-back. Personally I always close out. I find that looking to re-enter that market again can often result in putting extra pressure on myself, especially with less time now left before the race starts. I just move on to the next race, giving myself more time to assess the information before entering my money again.
Some races, I just skip on past. Reason being, they just don’t suit my particular style, and/or my trading plan. For some traders, they need to feed that hunger of being involved in every single race. They find themselves entering a market, just for the sake of entering it. The very nature of trading is that you only enter the market once you have analysed the information and you believe that you have a bigger chance of success than failure. Once you have developed complete independence from the money you are using, you are on the right path.