How to trade without emotion and guesswork (and how this can impact your trading results)
by Glenn Neely, founder of NEoWave and Neely River Trading technology

When trading, managing your emotions is paramount.

Long ago, I realized you cannot take trades based on emotion. Fear, hope, confusion, overconfidence, anxiety, and myriad other emotions can spell disaster for your trading account. When you're sitting in front of your TradeStation charts, emotion has no place at the table. Emotion can cause you to lose everything!

I also believe every trade taken must be based on logic and confidence – not guesswork. When analyzing your charts and making decisions, this is the time to be 100% rational, objective, and unemotional about every trade you take.

If you're trading without a plan – an objective, logical method to manage profits and losses – this can cause a rollercoaster of fear and guesswork. If you add emotionalism to the fact that you have no specific plan for when to enter or exit, then it makes trading a highly uncertain process that is not likely to yield profits. Trading without a plan virtually guarantees emotionalism and irrational reactions to price and news. It nearly always assures failure. The goal is to try to eliminate those things, which has been my focus for the last 23 years.

In my early years of trading, I assumed precise forecasting was the key to trading success. In those days, I could have great forecasts and great trades; other times it was not so good. It was a rollercoaster ride of watching my trading account go up and down. It was maddening and frustrating!

What's the worst thing that can happen? (You can probably relate to this.) You have a bullish forecast, and you stay in a position even though it keeps losing money. Your account is looking worse and worse. But you keep saying, "My forecast is bullish, so I'm going to stay in." That creates a disaster for your trading account as it keeps going down, down, down. The answer? You must have a point where you give up on a losing trade. You need to have a target that is objectively determined based on logic, so you won't get involved in the emotionalism of trading.

The good news: Neely River Trading technology (the methodology and the software) empowers you to replace emotion and guesswork with logic and confidence. This significantly helps to eliminate many of the issues of the typical trading process. Specifically, Neely River Trading guides you to:

• Objectively pick stocks
• Confidently enter positions
• Respond to predefined targets and stops
• Quickly cut your losses
• Let your profits run

This is key: You don't have to predict any of these things, so it makes trading a much more objective and profitable process. In this article, I'll step through key points about how Neely River Trading technology helps you do all this unemotionally. To see my real-world charts on TradeStation using NRT software, along with detailed explanations of everything I discuss in this article, CLICK to watch my free one-hour webinar (recorded December 2023).

My goal: Make trading easier.

Clearly, I'm a big fan of Wave Theory. However, about 23 years ago, I began to realize that Wave Theory was not the right tool to guide precise trading decisions, such as specifically when to enter or when to exit. I had to start thinking about a new way to deal with markets, a new approach that would enable me – and guide me – to confidently make profitable trades.

Then it hit me: Trading is like a river! I realized the progression of stock prices in a market is similar to the way water progresses in a river. If you look at markets in terms of a river environment, you have a south bank and a north bank – the turbulent zones where the water is choppy. In the stock market, that would apply to the top portion if you're beginning a downtrend or the bottom portion if you're beginning an uptrend. Eventually, you reach a point where the market starts to break out and trend more. If you're lucky, the stock will begin to accelerate beyond the speed of the average stock, just like the fast-moving water in the middle of a river. Those stocks are potentially the most profitable over the long term, so you want to find the ones that are moving the fastest in relation to a universal standard.

Starting with that "voila moment," I've been developing and perfecting Neely River Trading technology for more than two decades. While the process was immensely complex, the goal was simple: make trading easier.

In my webinar, I show several charts in my customer trading account and discuss the "river channels" – different trading environments and opportunities – in more detail.

A novel idea: Shift your trading strategy based on who's in control of the market.

You can only do three kinds of trading in a market. It doesn't matter which trading system you use or which formula you follow. There are only three things you can do: buy near the bottom, buy near the middle, or buy near the top of a range (daily, weekly, or monthly). This means:

• You are trying to pick a bottom when the market's going down.
• Or you are trying to buy a breakout when the market's making new highs.
• Or you are trying to get in on a retracement after you've seen the low and the high.

Those are the only three ways anyone can trade. I call these three types of traders:

• Bargain hunters
• Trend followers
• Top and bottom pickers

Determining who's in control of the trend is critical. Each type of trader has a different characteristic, which allows you to design your entry strategies, channeling, and exit strategies differently – depending on who is in charge of the trend.

• If bargain hunters are in charge of the trend, the market will be boring and choppy (just like the bottom of a river), and any market movement takes a lot of time. It's essentially an accumulation process.
• Trend followers are the traders who are using moving averages. They are buying into new highs or selling into new lows.
• Top and bottom pickers are generally using overbought or oversold indicators.

Neely River Trading (both the methodology and the software) allows you to know who's in charge of a particular timeframe. You'll know what kind of trading they're going to do, how they're going to enter, and how they're going to exit. When you know who's in charge of the market, then you know how to enter and what kind of channeling will be used. This means you can objectively determine your exact entry point without emotion and without the need to predict the future. You don't know exactly where the market will go, but you do know exactly where to put your stop. The Neely River Trading software guides you to objectively decide where to exit. This helps to eliminate the uncertainties of trading, which helps to eliminate the emotionalism.

How do you determine where to place targets and stops?

In addition to removing emotion from your trading process, having a logical, objective process for placing targets and stops is extremely important. Unfortunately, if you're using a forecasting approach to trade a market, these two scenarios are bound to happen:

1. You will get out too soon when you're making money.
2. You will get out too late when you're losing money.

The second point is particularly troublesome. When you're losing money, your ego gets involved, your confidence is tested, and your forecasting approach is tested. Even if the market is going down, down, down, you will keep hoping and waiting for things to turn around if you have a bullish forecast. Most of the time it won't get better. Simply put, you must quickly cut your losses.

And when it comes to targets, most people get so excited when they're making money – and they get so fearful they're going to have to give it back – that they take their profits too soon. You must let a winning position run.

How do you cut your losses and let a winning position run? By using a logical, objective process that avoids the self-defeating, rollercoaster process based on emotion and guesswork. With Neely River Trading technology (the methodology and the software), you don't have to predict your targets. The targets are automatically created by the NRT software, based on the channels that are defined by who's in charge of the trend. Neely River Trading enables you to be logical and objective in all aspects of trading. This allows you to remove the dangerous emotions that encourage people to make bad decisions.

• You don't need to predict the direction of the market. That is determined by volume flow and momentum, which is depicted on the monthly chart.
• You don't need to predict the trading timeframe. That is determined by how fast the market is moving in relation to a universal standard. You know if it's moving slow, medium, or fast, and that dictates the timeframe you want to focus on.
• You don't need to predict when to enter or when to exit. That is determined by the competition between the three types of traders and who's in control of the market: the bargain hunters, trend followers, or top and bottom pickers.

The NRT software knows all three types of traders and the fact that each one uses a different stop strategy. The stops are determined by the point where all three types of traders, no matter who's in charge of the market, will lose control of the timeframe. This provides an objective way to place your stops, so you won't get stopped out unless the trend on that timeframe has come to an end. Even if the control were to change, you will objectively know exactly where to put your stop – with no emotion and no guesswork.

Let's take a look at some real-world charts.

In my webinar, I showed my real-world TradeStation customer account, running NRT software, with the 31 positions we had at the time. Only one was losing a decent amount of money, and four were losing small amounts. Added together, it was about $400 in losses. The account was making over $5,000, so we were making about 1200% more on the winners than we were losing on the losers.

The Profit Protection app in the NRT software colors the positions that need attention or potential exiting. The app won't alert you to other positions, because once you're in a stock position you always want to make sure you give it time to perform. If you get in and it starts going against you, then you take action to place stops to get out of the loss. If it goes in your favor, you place targets to get out at a profit. Otherwise, you don't want to do anything; you just need to give the market time to do its thing. Remember, if you want to make money trading, you must quickly cut your losses, and you must let your profits run.

In the webinar, we viewed several charts using the Neely River Trading software on TradeStation. We started with a quick look at GBTC, a stock I've had for a while. I got in right as the market was breaking out of a fairly static environment, which I call a "lake environment," right before a powerful new uptrend. I took off part of the position during a panic rally, because the top and bottom pickers were in charge, another part when it reached the first level of resistance, and the final exit point was based on the weekly projected resistance.

I pointed out that volume flow and momentum were still positive on the monthly, that directional breakout was still positive on weekly, and that trend following was still positive on the daily. At the time, this stock was accelerating on all timeframes, so I planned to hang on to that position until the target was reached. The low came within a few ticks of the stop, and then it took off and rallied almost 50% in a short time. So, I was long on that stock. Remember, I don't need to predict any targets or stops. In this case, a target was set on the daily, which was objectively determined by the NRT software.

Next, I pointed out where I got in to DKNG and the fact that this stock went against me a bit at first. Then it took off and had a violent rally with the trend when the top and bottom pickers were in charge. That instigated a partial exit. I still held part of my position at the time, and I had an alarm to enter a target at a specific point.

I then showed where I got in on ZS. I had used the NRT software's scanner to find this stock (and others) that are in the middle of the river, are moving quickly, are trending, and have accumulation. When I got in, this one immediately started trending nicely. I did a partial exit when it reached the weekly resistance. The NRT software identified the point for a final exit if the weekly projection is reached. The daily momentum was starting to slow down – another reason to be out of this daily position.

What about timeframes? Do I rely on long-term or short-term strategies? I generally have positions that are three timeframes. If a stock is accelerating quite fast and the NRT software displays green across the bottom, then I'll have a monthly, weekly, and daily, and I'll exit in stages. I'll exit when the daily reaches a predefined target and I'm two-thirds long, when the weekly reaches the next predefined target and I'm one-third long, and then I'll wait for the monthly. This strategy allows me to have long-term trades, intermediate-term trades, and short-term trades – all in the same stock. Thanks to NRT, my trading strategy is completely logical and unemotional, with objective stops in all timeframes.

Logic trumps emotionalism every time.

Neely River Trading technology gives you a proven, logical process to select stocks logically, decide when to enter objectively, and react to targets and stops that are predefined by the NRT software. You don't have to predict any of these things. It makes trading a much more objective, unemotional, profitable, and rewarding process.

Remember, to see real-world charts on TradeStation, running NRT software, along with detailed explanations of everything I've described in this article, CLICK to watch my FREE one-hour webinar.