What Goes Through The Mind of A Trader When Taking A Position?

I’ve spoken at length about the technical and charting factors that I take account of when looking for trading setups. Obviously momentum is the main factor that I prioritize, along with the stock’s recent levels and float size. You can read a full reckoning of those elements in my morning scanner breakdown.

While practical questions about each setup tend to introduce a trade to me, there are quite a few other things that will compel me to place an order. Some of these factors are circumstantial, others are psychological. I want to give some attention to those factors through the lens of some of my recent trades.

The Market’s Momentum

While objective trends in the overall market (like the stuff you might hear ad nauseum on CNBC) don’t generally affect the types of trades I tend to take, my own experience in a given week on the market absolutely impacts how I’ll look at a setup, and for good reason.

I experienced some of this lack of momentum midway through this week in trade in Synthetic Biologics Inc SYN, a trade I knew would be a struggle after several other losing positions in Truett-Hurst Inc. THST. While the latter I may have taken based solely on its merits, the volume in SYN was way too thin to sustain the levels I was aiming at.

The Account's Balance

Even after hitting four- and five-figure green days, I remain as aware of my monthly balance as possible. After accounting for Uncle Sam’s cut, I take my profits from account at the end of each month. That means I start every month from basically the same spot.

August has revealed part of this financial influence on how I trade. I had a rocky start to the month, which I can only partially blame on the market. I’ve taken that loss into subsequent trading days, tempering some of my enthusiasm and making me much more cautious about the size of my positions so I don’t overextend my buying power. I actually dedicated one day last week to only trading 6,000 or fewer shares.

My Trading Statistics

Finally, something that is always on my mind is my recent performance. This generally comes in the form of statistics that are always at my fingertips or in the margins of my trading journal.

Unfortunately, this can be as harmful as it is helpful, particularly during a stretch of red days. If my accuracy is suffering, or my average P/L is dropping significantly, I can either use that information to alter or moderate my strategy. On the other hand, I might end up fixating on that information and use it as an excuse to make a reckless trade.

In fact, any one of these factors can help or hurt your trading. What separates successful traders from those who find themselves constantly frustrated when their strategies fail is that successful traders are aware of what is going on in their head to influence their decisions at their trading station.