Observe Cause And Effect
"Pay close attention in conversation to what is being said, and to what follows from any action. In the action, immediately look for the target, in words, listen closely to what's being signaled."
— Marcus Aurelius, Meditations
Today's meditation is a constant reminder to stick to the rules/criteria for our strategies 100% of the time. This way we can ensure that we are sticking to what works for us and not trading on impulse or on a whim, or jumping on other people's trades with no research.
By doing this, we can easily identify and "observe cause and effect."
Let's break this down then into the 3 categories.
1) "Observe:" We observe all our trades so if a planned trade goes according to plan as per the historical stats/data that we have at our disposal, it's job done; we take our pre-event targeted profit and move on. If the trade starts to go against us which will happen occasionally, we cut our trade at our targeted exit point, for a controlled red and move on.
2) "Cause:" If we hesitate and end up in the land of hope, praying that the trade will go back in our favour, then this is the cause of our unmanaged and damaging trade.
3) "Effect:" This is the effect of the cause and it can seriously affect our trading mindset, making us angry and frustrated that we didn't stick to our rules! It can also be damaging to our bank and we can become impatient in our attitude towards our next trades; trying to recover the heavy loss asap, revenge trading, going on full tilt and jumping on trades that don't even meet our criteria; we have become desperate and all our rules have gone out of the window! The list is endless and it can end up with disastrous consequences very quickly!
It is vital that we stick to our rules/criteria for our strategies and cut that loss in it's tracks, BEFORE the loss gets to an unmanageable level. If we "observe" and execute our trades correctly, we can get out of the trade and avoid the "cause" which in turn means there will be no "effect."
This means that we remain in a calm and peaceful trading mindset, by being consistent in the way that we manage our trades.