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Ego in Trading -Anirudh Sethi

  
Analysis, Education
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There is something about yourself that you may really not know. Something that you will deny even exists in you until it’s too late to do anything about it. It’s among the reason you rise up in the morning, the sole reason you suffer the shitty boss, the sweat, the blood and also the tears. This is because you would like people to understand how attractive, good, generous, wild, funny and clever you actually are. “Fear or revere me, but please think I’m special”. We share an addiction. We’re approval junkies. We’re all in it for the pat on the back and the gifts. The “hip, hip, hoo-rah.” check out the clever boy with the badge, polishing his trophy.

 

Because we are all human, we do not want to accept that we are wrong about anything, including trades. The ego wants to uphold a perfect version of ourselves allows nothing more but successes not failures. Many traders collectively lose many dollars trying to guard the ego’s version of reality. Our goal should be to trade without ego.

 

“The greatest enemy will hide in the last place you’d ever look.” Caesar 75 BC

 

You must recognize what’s keeping you from taking your trading to another level. The majority of the time, it’s your ego. How many times have you made a great trade and walked away with your chest puffed out thinking ‘I am the greatest trader in the world?’

 

“The only way to get smarter is by playing a smarter opponent.” Fundamentals of Chess 1883

 

The market always reminds you the person in charge. Try to always use same way to approach each trade, ditch each previous trade when entering a current one. Reset your mind and expect to lose money on each trade, and this could assist you recover from the super-trader ego after  a pleasant winning trade! Ego must be left out of your trading. Check your ego at the door, have a stop loss, and stick with your plan.

 

The ego may be a person’s sense of self-esteem or self-importance. The ego is a mental construct that can be both on a conscious and unconscious level. An ego is that the self-concept that an individual tries to guard and keep safe from pain and destruction. A trader has got to trade the maths and their own trading system and abandoning signals and their trading plan in favor of their own ego may result in stubbornness, self-delusion, and big losses.

  1. Most market predictions are ego based. A trader wants to be ready to say they called a top or a bottom or had an excellent stock pick. Signal and system-based trading may be a path that removes the necessity to predict you simply
  2. Stubbornness is an emotion that flows from the ego as it does not want to be proven wrong. Many times, this results in letting a losing trade still run against a trader. Egos do get trouble taking stop losses because they hate to be

 

  1. Egos lock into being bearish or bullish and let their opinions lead their trading. Following the particular price trend creates better odds of success than having an opinion on what should happen
  2. You should not let trading consume your entire life. The markets should be just one of several belongings you neutralize life. A diversified life outside the markets with friends, families, hobbies, learning new things, and staying healthy will assist you keep perspective during losing streaks and draw downs in trading
  3. A profit and loss statement can not define your self worth. Your profits are more of a mirrored image of whether the worth action is conducive to your method currently not whether you’re an honest trader or not. Your egos have got to be determined by whether or not you followed your trading system with discipline, consistency, and risk management.

 

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Emotions In Trading -Anirudh Sethi

  
Analysis, Education
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For many traders emotional trading is a problem and it stops them from being consistent in the market. We see what causes emotional trading in this article and I share six steps to greatly help reduce it, or stop it entirely.

Emotions in trading have always been one of the main causes of losses, and at the same time − the main driving force for all types of money. Remember the classic idea: buyers push the price up because of greed, and sellers sell because of fear of losses?

It still works perfectly in any market.

Popular training materials on market trading almost do not pay attention to managing emotions. This is understandable: any broker is the first participant in the trading process, which is vitally interested in having you leave your deposit to the market.

That is why most newcomers, especially those who passed the super-fast and super effective training in various brokerage kitchens, remain psychologically unprepared for trading. And even good technical training will not help such players save their money.

Assessing and reacting to market risk is one of the most important things you’ll have to do as a trader. Sadly, human being as a whole are so mediocre at this task, investors and traders reliably make decisions that economists consider “irrational.”

So obviously these are commonly more referred to as emotional trading.

 

Six Steps to Help You Stop Emotional Trading

Financial markets are a by-product of modern era and, in the grand scheme of things, our brains have evolved over millions of years for survival out in the open. They haven’t had the time to get good at making sound and perfectly rational financial decisions.

We have brain processes; an emotional one and a logical one that are constantly competing against one another for our future expression in the market. And normally, for the trader that has little to no market experience, who trades money they can’t afford to lose, or who has a short fuse overall, the stage is set for an incident.

But also more seasoned traders tend to make emotional trading decisions that they consider stupid in hindsight. Perhaps less often than inexperienced traders do, and with minor consequences, but those errors do happen.

Many a times, although we know with the logical part of our brain that we will get better results if we follow our trading rules, so many of us do exactly the opposite, despite clear knowledge of what we should do.

We remove stops, we cut winners short, we go in with too big of a size… I mean, we’re clearly

not purely rational beings ― and we can’t be because that would make us robots, not humans.

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EXPLANATIONS OF COMMON TRADING PROBLEMS

  
Analysis, Education
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Why Traders Naturally Cannot Follow Their Trading Plan

  • The brain automatically engages “distinct mechanisms” to handle these two scenarios differently: (i) risky situation where the probabilities are known, and (ii) ambiguous situation with incomplete information where historical probabilities provide only a clue. For the latter, there will be a “uncertainty circuit” that will raise a red flag to say “more information needed”.
  • This results in traders trying to do exactly what they planned while their brain fights them to find more information or to scramble in the face of a clear, but maybe only subconsciously perceived, threat.
  • Just because you decided on taking a long or short trading position, your “brain on uncertainty” doesn’t change how it goes about making judgment calls in uncertain circumstances. The basic process steps through the context-belief-perception cycle because it can’t help it.
  • Uncertainty means — at least to part of your neural and white matter networks — that a black bear, ready to eat all your apples (and you with them) could be just around the corner. The more uncertainty, the more you can realize how much you are relying on contextual clues in order to make sense of the situation.

Maintain your Physical-Psychological Edge

  
Analysis, Education
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  • Trading is actually a physical game. Playing the “sport” of trading should be handled as if you are the quarterback of an American football team.
  • Rest: Being well-rested is an edge.
  • Diet: When one really concentrates, the body and brain use an inordinate amount of energy. Eating properly keeps your energy up and adds to that physical-psychological edge.
  • Exercise: Exercise gives us a physical boost that makes us feel more optimistic, and that counts as psychological capital.
  • The body counts essentially as much as your intellect. If the body is feeling the static of tired or drained, the feelings and emotions of risk-management and people reading can’t properly communicate their data.

Detecting Your Unconscious Mental Fractals

  
Analysis, Education
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  1. Find a voice recorder and record your stream of consciousness through the sequence of two to three trades or decisions.
  2. Do this in sequence
    • Write down five to ten memories from before you were 18 years old.
    • From that list, pick three that stand out from the rest. Maybe they still have an emotional charge, maybe you even think of them every once in a while.
    • For these three memories, write the story of what happened, in the form of a kind of news report on who, what, where, why, and when.
    • Take these stories and look at them from a different point of view. Ask what the other people in the story were feeling or what it seemed like they were feeling.
    • Last, write down how the situation made you feel in the moment and what you told yourself about the situation.
    • Then set the writing and the recordings aside for a few days or weeks. Just let both simmer in the back of your mind.
  3. Keep a bedside notebook and jot down your thoughts and feelings from your dreams right away. What matters is the sequence of feelings and emotions in the dream; or, in other words, those feelings that you wake up with in reaction to the events in the dream.
  4. Now summarize the following using the data of your memories
    • What do I expect for myself?
    • How do I expect things to turn out?
    • How do I seem to feel about myself?
    • What kind of labels do I talk about myself with?
    • What fears come up?
    • How do I react to others?
    • How do I react to being told something other than what I want to hear?
  5. Go back to your trading recordings and summarize what feelings came up during your decision-making moments. We are looking for the themes and feelings that repeat themselves across market and decision sequences. Compare his information with what you discovered in the previous steps. What seems similar? If it doesn’t immediately click, let it rattle around in the back of your brain for a few weeks.

A Winning Mindset is Required To Succeed

  
Analysis, Education
  • A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to
    transform himself. That’s the kind of thing winning traders do.
  • The winning traders have usually been winning at whatever field they are in for years.
  • It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to
    satisfy them. Those who want to win and lack skill can get someone with skill to help them.
  • The “doing” part of trading is simple. You just pick up the phone and place orders. The “being” part is a bit more subtle. It’s like being an athlete. It’s commitment arid mission. To the committed, a world of support appears. All manner of unforeseen assistance materializes to support and propel the committed to meet grand destiny.
  • In your recipe for success, don’t forget commitment – and a deep belief in the inevitability of your success.

Do Not Shut Out or Ignore Your Fear

  
Analysis, Education
  • The positive intention of fear is risk control.
  • People who are unwilling to experience fear tend to take big risks and wind up in big drama in which the risk materializes.
  • People with poor risk control tend to bet heavy. So they tend to outperform others in good markets, and under-perform them in poor ones.
  • Risk is the uncertain possibility of loss. If you could quantify risk exactly, it would no longer be risk.
  • Risk control has to do with your willingness to allow your stop to do its job.

Hold Your Position Until the Trend is Invalidated, Do Not Let Go of Your Position. Be Willing to Experience Your Anxieties

  
Analysis, Education
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  • Maintaining a commitment is particularly important when it comes up for a test.
  • Somewhere along the line of keeping your commitment you may get a feeling that you don’t like.
  • If you are willing to experience the feeling, it can transform into an AHA that supports your commitment.
  • If you are unwilling to experience the feeling, you might abandon your commitment to try to make the feeling go away. That only results in having to feel the feeling after all.
  • The more you are willing to experience the feeling of bumping into walls, the less you have to bump into walls.
  • Trading requires skill at reading the markets and at managing your own anxieties.
  • People have a Conscious Mind and Fred. Fred wants to communicate feelings to CM so CM can experience them and gain experience and share it with Fred so Fred can learn how to react. This is how we manufacture wisdom. When we don’t like our feelings we tie them in k-nots and do not experience them. This interrupts the wisdom manufacture process, and draws drama into our lives.
  • K-nots, protect us from truth and keep our lives in drama. To untie k-nots, fully experience whatever appears in the moment.
  • When you keep your eye on the prize and are willing to experience all the feelings that arise, the prize soon becomes yours.
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