Struggling with impulsive or random trades? Missing trades you should be in? Try “commentating” the price action to stay engaged and focused on the correct things while trading.
When I do it, it nearly eliminates trading mistakes. It’s only when I don’t do it that I tend to make more mistakes.
It’s an excellent skill to learn, but like anything, you actually have to do it for it to be effective.
Commentating the price action is continually talking through the price action (or current conditions) as it relates to your strategy while trading. I do it out loud, or when that’s not possible, I commentate with my own clear voice in my head.
A “clear” or vocal voice is key. If you just “think” (how you usually do), you’ll keep making the same mistakes you always have. You need clearer direction, and it is possible to give yourself that by learning how to commentate.
The mind is full of chatter. Clear it and use one distinct voice to definitively tell yourself what’s going on, what strategy is setting up, and how you’ll trade it. This is why talking out loud, even if it is quiet, works well.
Here’s what to talk about.
How to Commentate the Price Action to Reduce Impusive, Random, and Missed Trades
Below are examples of things I look at, and that I like to “discuss” with myself while trading.
You’ll commentate on things relevant to your strategy.
- Are overall conditions good?
This there enough movement? Are triggers being respected? This there enough room for my target if the price is inside a range? Are the waves big enough to easily hit my target? No news in the next few minutes?
- What strategy is setting up? Is there a strategy setting up?
What does price have to do to create the pattern/strategy? If there’s no strategy setting up then say that. Say “no trading because there’s no setup.” Then talk about what needs to happen for a setup to occur.
- Is this a good trade?
As a trade approaches, go over the stop loss size and how much the price is moving. This gives you your reward:risk. Note any red flags. Decide if the trade is worth taking. If unsure, don’t take it.
- How will I handle this trade?
Good trade: let it play out.
Some red flags: trailing SL.
Price stalls near the target: Exit right then.
Willing to hold through pullback? If yes, leave it alone, if not, use a trailing stop loss.
Really big movement: Use a bigger target, with optional trailing stop loss past 2R.
Define how you will handle the trade before you take the trade. This gets into scenario planning.
- During a Trade: Continue to talk through your plan. Keep talking, continually. Reciting your exit plan over and over. Go over why you’re in this trade, the pattern you’re trading, and the reasons you selected that stop loss and target. This all helps stick with the plan.
If you are interested in learning my stock day trading method, check out the Price Action Stock Day Trading Course.
Why Commentating Reduces Impulsive, Random, and Missed Trades
All these steps help avoid impulsiveness because you’re talking yourself through every step. You’re reinforcing your plan all the time. You’re ready to pounce when your trade occurs, and you talk yourself through staying out when a trade isn’t setting up.
Once you have a strategy, this is the work: getting your mind right to implement it. For most of us, our minds will wander after a few minutes. Keep bringing the focus back to talking about anything and everything related to the current price action and your strategy.
I know a trader who sets a timer to go off every 5 minutes to make sure he’s in the right head space and commentating. The timer reminds you to do it. It may sound extreme, but most traders fail. You have to do something that actually changes your losing behavior. If you keep thinking like you always have, you will continue to get the results you have always gotten.
Emotions are Okay In Trading – Use Commentating to Manage Them
Despite popular opinion, it’s okay to be emotional while trading. We’re human, we have emotions!
Ignoring or fighting it will actually hurt performance. When I notice an emotion during trading, I verbally accept it, then proceed with restating my plan.
“I’m nervous about taking this trade…but it’s ok. If W happens I’ll take the trade. My stop loss goes at X, and my position size is Y, so my risk is controlled. My Target is Z which is well within reach of typical movement and provides a good reward:risk. I may be nervous but I’m in good hands with my plan.”
That’s just an example of how I’ll talk myself through an emotion, whether I’m feeling nervous, too excited, biased, greedy, or like I want revenge. I accept the feeling and then talk myself through how my plan has me covered even though I’m feeling this way.
I’m prone to taking impulsive trades, and getting scared of trades. Commentating is how I manage that. I don’t fight it, I talk myself through it.
If I’m nervous, I incorporate that, saying something like: “I’m nervous, but movement is good, there are no whipsaws, it’s a nice reward/risk, if I get stopped out that’s ok, etc…”
Great traders/athletes make mistakes, they just don’t repeat them often. They get back to “best practices” as quickly as possible. If you make a mistake, bring yourself back to commentating. Skip the negative self-talk. Just get back to commentating so the next trade is quality.
If I’m unable to commentate, or I’m too distracted to commentate, then my mind is not right for trading, and I stop. No questioning it. Take a break. Come back, try again.
If I still can’t do it, I stop. I need to commentate to trade well. My mind must be right and able to focus.
Commentating is a Skill – Work Up
If you can only commentate for 10 minutes before your mind drifts off, then your trading is done after 10 minutes. Take a break and come back and try again.
Tomorrow, try for 11 or 15 minutes. The next day 20 minutes and so on.
If you’re going to trade, do it right. If you can’t do it right, don’t do it all. Try again tomorrow.
Trading when you are not focused or in the right head space IS NOT practice or proper trading. It’s a mistake, it’s developing a bad habit, and it will eventually cost you dearly if you keep doing it.
If you try to trade with a poor mindset (not prepared for action/inaction) you’ll make more mistakes and make those habits harder to break. Stop the cycle. The goal is a proper mind frame, always. Without it, trading a strategy effectively is highly unlikely.
My goal each day is not to focus on trade results. It’s to focus on maintaining my commentary and a focused mind.
If I can’t focus/commentate, and I walk away…that’s a good day too! I pat myself on the back for a job well done. Noticing when you aren’t in the right head space, and being able to walk away, is a pivotal skill for every successful trader.
If I commentate, it helps me stick with my trading plan.
If I follow my plan, I make money over many trades.
Final Word on Commentating to Reduce Impulsive Trades and Missed Trades
This is how I control my mental state while trading. I use it for day trading and also when placing swing trades (when my platform is open and I can trade).
Note where you have issues while trading. Make those key points to discuss/commentate while trading. Do it constantly!
I also work on this outside of trading. I call it “identity work” where I build up the qualities I want more of, whether it be in my trading or another area of my life.
Put effort into it. Set a timer to bring your focus back every few minutes if needed.
What do you have to lose? Except for some of your mistakes!
By Cory Mitchell, CMT
I’ve been trading for 18 years. If you liked this insight on commentating, maybe you want to check out my trading courses. They reveal my strategies step by step. Learn them and commentate your way to profitability.