An old friend shared how discouraged he was with not being able to manage his impulsive trades. That evening we decided to observe how he traded the US session.
He certainly was hard working and eyeballed every 5 minute bar. He had a reasonable trading strategy, but on several occasions strayed from the original plan, and “analyzed” various opportunities on the fly. Quite a few times, I had to stop him from committing to a trade regardless if it eventually won or lost.
My friend was too eager to make money. (In his case, to make up for previous lost investments.)
Based on his trading methodology, I explained how he could use a simple filter, as well as an alarm alert. After he prepared a simple trade management plan and set the alerts, I told him to just leave his laptop. If he wanted he could watch TV, read a book, or even review market updates from Bloomberg, Forexlive etc – just not watch the currency rates or the charts.
He need not be dismayed – many traders were like him. These traders who stared painfully at every movement, hoping to catch an elusive winner, ultimately put on impulsive trades. No amount of self restraint would have helped. For my friend, it was better to have a strategy that would not require watching the market so intently.
By using a filter, we let the market scream out to him when his edge was in play. Once the alert had been activated, he could review how feasible the edge was in the current market condition – and if he decided to take the play – to monitor the market for a potential entry or set a limit order.
If successfully executed, he needed to set the necessary stop and take profit alerts, be watchful over when the next major event or announcement would be made, and just leave his laptop.
Simply not being glued to the screen is itself a major step to avoid impulsive trades.