How to Become a Better Trader: Know Thyself | Elliott Wave International

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How to Become a Better Trader: Know Thyself
EWJ Editor Jeffrey Kennedy offers wisdom to guide your search for trading success.

By Jill Noble
Mon, 02 Jul 2012 17:15:00 ET

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Jeffrey Kennedy has more than 20 years of experience as an Elliottician and trader. As editor of our new Elliott Wave Junctures service, he helps traders and investors improve their trading skills -- which includes expanding their own self-knowledge.

"If you are serious about trading, I strongly recommend that you spend as much time examining your emotions while you are in a trade as you do your charts before you place one."

"Success in trading comes from the consistent application of a proven methodology. If you don’t define your methodology, then your trading style could change with each new issue of Stocks and Commodities magazine. Trying a variety of analytical techniques rather than consistently following one is a problem for traders, and it’s also a great way to lose your trading account."

Jeff trades with the trend, and specifically likes to "buy pullbacks in uptrends and sell bounces in downtrends." He prefers a three to five day time frame. And he keeps his emotions in check, avoiding what he calls the "Lottery Syndrome," the too-common bad habit among traders who let small profits slip away by pursuing the statistically elusive jackpot.

Can you define your own trading style as easily, or do you continue to struggle with major pitfalls from Jeff's list below?

1. Inability to Admit Failure

Have you ever held on to a losing position, because you 'felt' that the market was going to come back in your favor? This behavior is the 'Inability to Admit Failure.' No one likes being wrong, and for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I now know that being wrong is much less expensive than being hopeful."

2. Fear of Missing the Party

This one is responsible for more losing trades than any other. Besides encouraging overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?

The solution is to use a time filter, which is a fancy way of saying, wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. I would much rather miss an opportunity than suffer a loss, because there will always be another opportunity."

3. Systems Junkie

My own biggest, baddest emotional monster was being the 'Systems Junkie.' Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked.

I even went as far as becoming a professional analyst — guaranteed success, or so I thought. Well, it didn’t guarantee anything really. Analysis and trading are two separate skills; one is a skill of observation, the other is a skill of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500.

If Jeff's list of pitfalls sound uncomfortably familiar, don't despair -- the good news is that you don't have to struggle through the learning process on your own.

In Elliott Wave Junctures, Jeffrey picks one of his invaluable lessons off the shelf and, 3-5 times per week, and offers traders a short, simple instructional video on real-life Elliott wave application -- plus, shares insights from hard-earned wisdom he has gained over the years.

Get Real-World Trading Lessons to Help You in Real-Life Trading Scenarios

"I began my career as a small trader, so I know firsthand how hard it is to get simple explanations of methods that consistently work. In the 15-plus years since my early trading days, I’ve learned many lessons: but, I don’t think that they should have to be learned the hard way." -Jeffrey Kennedy

Let veteran Elliott wave analyst Jeffrey Kennedy be your trading mentor. 3-5 times per week, Jeffrey walks you through REAL market junctures with one overarching goal: to help you master the critical aspects of spotting and acting on high-probability trading opportunities in the markets you follow.

Learn more about this first-of-its-kind service
and get a 30-day risk-free offer now >>

Tags: Elliott Wave Education, Elliott Wave trading, Jeffrey Kennedy, risk management, technical analysis, Traders

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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.