RAX: Why having discipline and having a plan is so important in trading

RAX: Why having discipline and having a plan is so important in trading

Here is a look at the RAX daily chart after its action from yesterday.

On Thursday I noticed that RAX had two strong days after a gap down that held. I also noticed that it was approaching an area of resistance, and area that I did not think price could go above. Of course in trading anything can happen but from a probabilistic perspective that was my line in the sand. You can see it drawn on that chart. Since we do not know how the stock is going to open on a particular day we come up with a plan as traders. For a gap up scenario, a gap down, a flat open etc. My bias here was short ONLY. I love to have a strong set bias because i do not become confused if my bias isnt as strong. Having a bias is one thing, timing an entry is a completely different ball game. This is what separates a stock picker from a trader. I can say " this will be short" but completely mess up my entry and end up losing money even though my direction was right.

Here is a look at what happened intraday.

This is a look of the 1min chart for RAX. As you can see RAX gapped down. If you do not have your plan written out and a system for trading a gap down stock into an area of resistance you may do what I did to start the day and short into the weakness of the early morning action/ This is a purely psychological mistake. I know that in this kind of situation you wait for the stock to bounce a little perhaps to r/g area and then short from that area or close to it. For each situation you need to have a plan , a system you can't just look at intraday action and say oh I think this is going to happen. You need to know what usually happens in a particular scenario and WAIT FOR IT. What if I saw the r/g play setting up and forgot that the daily was at resistance. I would have taken this play long and got screwed again.

Sometimes a stock that gaps down after touching an area of resistance will just collapse, it could happen of course and if you want to be in it you can with a small position or on a pullback. You do need to know that the "setup or plan" for this scenario is usually going to involve a move higher to make people feel this is a r/g and then the short comes into play. o So develop your play list and your checklists and plan for each scenario and trading will start to become much easier.

The hard work should be done BEFORE the trading day NOT in it. This is what leads to failure , confusion and random trading which kills all accounts