The stock market is really ugly right now, there is no two ways about it. Just look at the charts of the ASX200, the Hang Seng and the S&P500 – Ugly scary right?! But did you know there are two simple things that take away all the confusion and the stress?
But what should you do? Will it rebound and give you a chance to get out at a reasonable price or will these massive daily drops keep going for the next few weeks totally wiping out your financial future as the media will have you believe?
When something like this happens the media starts throwing around words like crisis, crash, billions and trillions of dollar losses.
You also get all the talking heads on the TV looking very serious and talking knowledgeably about how dire and precarious the situation is for the world economy. All this does is push up the emotions of everyone involved in the markets globally.
As I learned from one of my mentors – Blair Singer – when emotions are high, intelligence is low. This is because of the ‘Fight or Flight’ response we humans all have to stress.
When something stresses us out (like a wild animal attacking us) the body releases adrenalin and diverts blood to the muscles to get us ready to fight or run for our lives. This was great in the Stone Age because it kept us alive, but the trouble is it reduces our ability to think and make good decisions
The challenge for us in 2015 and beyond is that we are not being attacked by wild animals anymore… We are being ‘attacked’ by the financial markets crashing and burning, by volatility – just like the events over this last week.
When we are facing the stress of a global financial crisis or a market crash (or even just a correction) our ability to make good decisions is critical to our financial survival… The Stone Age stress response just doesn’t serve us well any more!
What we need is a way of ensuring we make good decisions despite the financial stresses we face!
There are two key tools that give us this and ensure our trading survives:
How do trading systems solve the emotional trading problem?
A trading system is a set of rules that tells you exactly when to get in and out of each trade. This solves the problem because the trading system rules remove all emotion from your trading.
I know for sure that every single stupid thing I have done in the financial markets (there have been many!) has happened when I was trying to make a decision in the heat of the moment rather than simply following an objective trading system.
Not only can trading systems remove the impact of your emotions on your trading, but they also dramatically reduce the amount of time you need to spend trading – giving you more free time to actually enjoy your life.
Create your own trading system FAST! Download My FREE Trading The Trading System Confidence Cheat Sheet Now!
Why do you need a trading plan too?
Your trading system saves you from making silly and erratic emotional decisions about entering and exiting your trades. But successful trading is about so much more than just your system.
A complete trading plan involves 8 components as the image below shows:
It is not just in individual trades that our emotions get in the way of profitable trading. Just think of how you feel after you have a huge win – you get confident right?
When you are confident, you impulse is probably to take on more risk…but that is an emotional decision and is probably NOT in your financial best interests.
What about when you have a cash flow problem in your life? You impulse may be to take additional money out of your trading account to cover it. This is also probably not in your financial best interests in the long run!
I have put together a video training series to explain the importance of your trading plan and how to put one together.
Discover how a trading plan improves your trading now!
Once you have a trading system and a trading plan in place, you don’t really have to worry any more about whether this is financial Armageddon. This is because the trading system will tell you when to get out and your trading plan will cover all the other decisions you need to make!
So click the links above and discover how easy it is to get your trading system in place and have a solid trading plan. Once you have done this you can start to breathe easy and not worry about whether this is the end of the financial world or not!