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Lack of Discipline & Patience

  
  Education
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When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week. (more…)

Stress hormone linked to financial crisis

  
  Education
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STRESS TRADINGThe stress that financial traders suffer during periods of high volatility in the markets reduces their appetite for risk, according to a study led by Cambridge university neuroscientist and former Wall Street trader John Coates. This may prolong financial crises.

The research, published in Proceedings of the National Academy of Sciences, combines field and lab work. Prof Coates and colleagues discovered that levels of the stress hormone cortisol increased by 68 per cent on average in a group of City of London traders over eight days in which market volatility increased.

 The scientists took this finding to Addenbrooke’s Hospital in Cambridge where they used pharmacology – hydrocortisone tablets – to raise cortisol levels in volunteers, also by 68 per cent over eight days. Participants then played an incentivised risk-taking game. The appetite for risk collapsed, by as much as 44 per cent according to one measure, in those with raised cortisol. (The study was double-blinded with a control group taking dummy tablets.) (more…)

Accept you will make many mistakes

  
  Education
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Those who learn how to minimize the damage when they are wrong and who readily own up to the mistakes they make will do far better over the long haul. Making mistakes is a part of this game, but knowing how to handle them is everything. Likewise, if you attach your ego to your portfolio’s performance you are destined for failure. The market absolutely loves to kill those with big giant egos and who look for the markets as a place to prove how smart they are. Markets chew and spit out these folks routinely for good reason and they will continue to do so at every available opportunity.

My Goal

  
  Education
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Technical analysis is often misunderstood as being the holy grail to making profits. What is often overlooked is its ability to warn you of impending price moves and its ability to help avoid huge losses. Applying technical analysis and using stop losses are the only way to protect your financial and mental capital. If you want to play the markets you need to stay in the game. My goal as a trader is still the same:

  • To continue to learn about the markets and price movements
  • To learn from my mistakes in order to avoid repeating them
  • To continually increase discipline
  • To be emotionally detached.
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