Resisting impulse in trading– #AnirudhSethi

Resisting impulse in trading refers to the ability to control one’s emotions and make logical, well-thought-out decisions when buying and selling securities. It is important for traders to resist the impulse to make impulsive trades based on fear or greed, and instead to stick to a well-developed trading plan that takes into account factors such as market conditions and risk management. This can help traders to avoid making costly mistakes and increase the chances of achieving long-term success in the markets.

FEAR in trading -#AnirudhSethi

FEAR, or “False Expectations Appearing Real,” can be a major obstacle for traders. It can cause traders to make impulsive and irrational decisions, such as selling at the bottom of a market downturn or failing to take advantage of profitable opportunities.

Some common fears in trading include fear of losing money, fear of missing out on a profitable trade, and fear of making a mistake. These fears can lead to procrastination, indecision, and ultimately, missed opportunities.

To overcome fear in trading, it’s important to have a well-crafted trading plan that aligns with your goals and risk tolerance. This can include setting stop-loss orders, diversifying your portfolio, and maintaining a long-term perspective. Additionally, it’s important to have discipline and stick to your strategy, not to let emotions guide your trading decisions, and to educate yourself about the markets, different financial products and the associated risks.

It’s also important to remember that trading is a high-risk activity, and there is always the potential to lose money. It’s important to only invest what you can afford to lose and to consult with a financial advisor or professional before making any trading decisions.

It’s also important to develop a mindset that allows you to handle uncertainty and volatility, and to focus on your process, not the outcome. Keeping a journal and reviewing your past trades can help you in developing a better mindset and avoid past mistakes.

FOMO for Traders – #AnirudhSethi

FOMO, or fear of missing out, is a common phenomenon among traders. It refers to the feeling of anxiety or urgency that an individual experiences when they believe that they are missing out on an opportunity to make a profit. This can cause traders to make impulsive or poorly thought-out decisions, such as buying into a stock or market that is overvalued or entering a trade without a proper risk management strategy.

FOMO can be particularly dangerous for traders because it can lead to poor decision-making and increased risk-taking. It can also cause traders to ignore their own trading plan and deviate from their strategy, leading to losses.

To overcome FOMO, traders can take several steps. One effective strategy is to set specific and realistic goals for trading and stick to them. This can help traders focus on their long-term objectives and avoid getting caught up in short-term fluctuations in the market.

Another strategy is to practice patience and discipline. Avoiding impulsive decisions and instead, taking the time to research and analyze a trade before entering it can help traders make more informed decisions.

Traders can also benefit from setting stop-loss orders and take-profit levels, which can help them manage risk and avoid FOMO-driven decision-making.

Finally, keeping a trading journal and reflecting on past trades can help traders identify patterns in their behavior and better understand the emotions that drive their trading decisions. This can help traders identify and overcome FOMO when it arises.

In summary, FOMO can be a significant problem for traders, but by setting clear goals, practicing patience and discipline, managing risk, and reflection, traders can overcome it and make more profitable and less emotional decisions.

Addictive Trading: When Trading Becomes a Problem – #AnirudhSethi

Addictive trading, also known as compulsive trading or trading addiction, occurs when an individual becomes preoccupied with trading and begins to prioritize it over other aspects of their life. This can lead to negative consequences such as financial losses, relationship problems, and mental health issues.

Individuals who suffer from addictive trading may engage in excessive trading, even when it is not in their best interest. They may experience feelings of euphoria when they make a profit, and feelings of despair when they incur a loss. They may become isolated and neglect other responsibilities, such as work or family obligations, in order to trade.

There are several factors that can contribute to addictive trading, including a predisposition to addiction, stress, and a lack of healthy coping mechanisms. Those who suffer from addictive trading may also have underlying mental health conditions such as depression or anxiety, which can be exacerbated by the behavior.

Treatment for addictive trading typically involves therapy and counseling, which can help individuals develop healthy coping mechanisms, improve their emotional regulation, and regain control over their lives. In some cases, medication may also be prescribed to help manage underlying mental health conditions.

Trading and investing can be exciting, but it’s important to remember to maintain balance in life and not get carried away. It’s crucial to set clear goals and stick to them, be aware of the risks, and practice self-discipline. Moreover, it’s always a good idea to seek help if you think you might have an addiction problem.

Bank of Japan preview – “may be on the verge of its biggest policy change in decades”

  • “Looking at the FX options market, USD/JPY remains the stand-out interest. One-week implied volatility remains at a very high 20% and volatility for the Bank of Japan (BoJ) meeting next Wednesday is priced as high as 40% or a near 1.7% move in spot USD/JPY. As events showed yesterday with the 2% USD/JPY fall, even at these levels the FX options market may still be under-pricing volatility. This huge interest in USD/JPY is understandable,” ING notes.
  • “The BoJ may be on the verge of its biggest policy change in decades. Even short-dated JPY Interest Rate Swaps have started to move and are at the highest levels (near 30bp) since 2008! We suspect few will want to stand in the way of the USD/JPY downside,” ING adds.

Bank of Japan governor Kuroda will be holding his regular press conference after the BOJ statement on Wednesday.

  • There is no set time for the BOJ statement on Wednesday, you can expect it most likely in the 0230 to 0330 GMT (2130 to 2230 US Eastern Time) time window. I’m leaning towards that later time, or even past it given there will be plenty to discuss at this meeting.
  • Kuroda’s presser begins from 0600 GMT (0100 US ET)

PBOC MLF liquidity injection today – unchanged rate expected (but some expect a small cut)

  • 700 billion yuan of this medium-term lending debt is maturing.
  • according to Reuters polling 12 analysts expect the PBOC rollover the 700 billion yuan, 10 expect and lend a greater amount, while 3 expect an only partial rollover
  • 21 of the surveyed analysts expect the MLF interest rate to stay unchanged at 2.75%, 4 expect a 10bp rate cut

The rate on the MLF will give us a clue to LPR rates to be set on Friday. A cut would likely indicate a move lower on one or both of the LPRs. Unchanged suggests the LPRs will remain at an unchanged rate. Current LPRs are:

  • 3.65% for the one year
  • 4.30% for the five year
pboc mlf rate graph 16 January 2023

Decision-Making and Emotional Arousal in trading – #AnirudhSethi

In the context of trading, decision-making and emotional arousal can play a significant role in the success or failure of a trade. Emotions such as fear and greed can drive traders to make impulsive decisions, rather than ones based on sound analysis and strategy. This can lead to poor trades and financial losses. On the other hand, a trader who is able to control their emotions and make decisions based on objective analysis and a well-defined strategy is more likely to be successful. It’s important for traders to be aware of the impact of emotions on their decision-making, and to have techniques in place to manage those emotions.

Why Grit Is Important To Trading ? – #AnirudhSethi

Grit is a combination of passion and perseverance, and it is important to trading because it allows traders to remain focused and motivated in the face of challenges and setbacks.

In trading, grit means having the ability to stay committed to one’s trading goals and plans, even in the face of losing trades or market volatility. This allows traders to learn from their mistakes, make adjustments as necessary, and continue to work towards their goals.

Grit also enables traders to maintain a long-term perspective and not to get bogged down by short-term failures. It is critical for traders to be resilient and persistent, as the markets are dynamic and ever-changing, this requires traders to be adaptable and be able to learn from their experiences and not give up easily.

Grit also involves being willing to put in the time and effort necessary to develop the skills and knowledge required to be a successful trader. This may require traders to be self-motivated, disciplined and to be able to work independently.

In summary, grit is important for traders because it allows them to stay focused, motivated and persistent in the face of challenges and setbacks, to develop the necessary skills and knowledge, and to maintain a long-term perspective.

Why do losses hurt more than gains? -#AnirudhSethi

Losses tend to hurt more than gains for several reasons:

  1. Prospect theory: According to this theory, people experience a greater emotional impact from losing something than they do from gaining something of equal value. This is known as the “loss aversion” bias, which causes people to feel more pain from a loss than pleasure from an equivalent gain.
  2. Anchoring effect: People tend to anchor their expectations to a certain point, and when the outcome is worse than expected, the pain of the loss is greater.
  3. Regret: People may experience regret when they realize that they could have made a better decision or taken a different action, which can amplify the emotional impact of a loss.
  4. Self-esteem: Losing can make people feel like they are not good enough, which can affect their self-esteem and self-worth.
  5. Social comparison: People often compare themselves to others and when they lose, they feel like they are not as good as others, which can be a painful experience.

It’s important to note that these are some of the reasons why losses hurt more than gains, but it may not apply to all individuals, as people have different levels of emotional intensity, and what affects one person may not affect another. Additionally, traders can work on developing a more realistic attitude towards risk and to focus on their overall performance rather than individual trades.

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