(1) Be faithful & honest with yourself in your trading, be diligent & consistent & it will bring you Prosperity.
(2) Those who work their plan will prosper, but those who chase fantasies lack judgment.
(3) Steady plodding brings prosperity; hasty speculation brings poverty.
(4) Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly fail“.
(5) Trying to “get rich quick” is wrong & leads to poverty.
(6) Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.
(7) Follow the rules & keep your financial life intact; ignoring them means financial ruin.
(8) A person without self-control is as defenseless as a city with broken-down walls.
(9) The wise control their temper. They know that anger causes mistakes.
(10) The intelligent are always open to new ideas, in fact they look for them. (more…)
Archives of “anger” tag
rssPsychological problems
There are two parts to fixing any psychological problems:
1. Recognizing that it exists
2. Accepting it so you can move on
In trading, this is where it’s so crucial to take responsibility for your own actions because it induces change and you can start making improvements. If you don’t recognize and accept a problem, then you won’t get anywhere!
What are some of these issues ? Here are a few along with their causes and/or effects:
1. Anger over a losing trade – Traders usually feel as if they are victims of the market. This is usually because they either 1) care too much about the trade and/or 2) have unrealistic expectations. They seek approval from the markets, something the markets cannot provide.
2. Trading too much – Traders that do this have some personal need to “conquer” the market. The sole motivation here is greed and about “getting even” with the market. It is impossible to get “even” with the market.
3. Trading the wrong size – Traders ignore or don’t recognize the risk of each trade or do not understand money management. There is no personal responsibility here.
4. PMSing after the day is over – Traders are on a wild emotional roller coaster that is fueled by a plethora of emotions ranging throughout the spectrum. Focus is taken off of the process and is placed too heavily on the money. These people are very irritable akin to the symptoms of premenstrual syndrome. (more…)
The 5 Emotional Stages of a loss
Stage 1: Denial
This is when you have the first sign of a loss. However, you justify this loss. You deny it’s true form and decide that it could be a winner…but you just have to “wait it out.” “Afterall, I bought a lot of time on my option.”
Stage 2: Anger
The loss judt got worse. Now you look to place blame. Freakin’ blog! I hate the marketcast anyway!!! Why didn’t I do my own analysis????
Stage 3: Bargaining
If somehow this stock can move in your favor, you promise you won’t do it again. Or even worse, you start to think of ways to salvage. Desperation sets in.
Stage 4: Depression
It couldn’t get worse huh? WRONG! Now this makes a huge mark on your account, your spouse is going to kill you, it is going to take forever to make it back, and you start to panic.
Stage 5: Acceptance
Alright, I will take the loss.
Anger
As traders, fear and greed are the two emotions that we commonly handle in our trading decisions.
But I believe another emotion that we also sometimes experienced would be – anger.
Most traders have learned to be calm and sensible during trading. But there would certainly be times times when we fumed at missing out a fantastic trade, for not buying more contracts of a great trade, or frustrated for committing that same trading blunder again.
We would blame just about anything or anyone when our trading suffered. Somehow we didn’t realize that the anger have originated from us.
I recently read a book called “Zero Limits” co-written by Dr Joe Vitale & Dr Hew Len. The book was quite an eye-opening read. It mentioned that we are the one who are fully responsible for any circumstances which are happening within & around us.
When we encountered another person pouring out his or her frustrations, whether they were meant for us or not, we should accept that we were partly responsible for that happening, since his or her frustrations had come into our lives.
Naturally, we are responsible for our own anger too.
The way to resolve this would be, strange it may sound, is to keep cleansing ourselves by constantly repeating the phrases “I love you”, “I’m sorry”, “Please forgive me” and “Thank you” to ourselves.
According to the book, these are simple but powerful words that we convey to the Divine. We connect to the Divine by expressing our love and gratitude to him. At the same time, we seek the Divine’s forgiveness of our wrong doings.
Saying these 4 phrases will cleanse the memories of greed, fear and anger associated with anything (including trading) as we give in to the Divine to handle the situation for us.
We would experience a peace of mind that the Divine is taking care of us. Another positive outcome of cleansing ourselves is that we are now open to receive the inspirations from the Divine for us to act upon.
I encourage you to read more about this ancient Hawaiian practice called Ho’oponopono from “Zero Limits” to experience this positive feeling.
I hope that in time you will gradually banish your anger not only in your trading but also in other parts of your life.
“I love you”, “I’m sorry”, “Please forgive me”, “Thank you”.
False Beliefs About Trading the Markets
1) What goes up must come down and vice versa.
That’s Newton’s law, not the law of trading. And even if the market does eventully self-correct, you have no idea when it will happen. In short, there’s no point blowing up your account fighthing the tape.
2) You have to be smart to make money.
No, what you have to be is disciplined. If you want to be smart, write a book or teach at a university. If you want to make money, listen to what the market is telling you and trade to make money — not to be “right.”
3) Making money is hard.
Nope. Sorry. Making money is actually easy. Statistically, you’re going to do it about half the time. Keeping it, now that’s the hard part.
4) I have to have a high winning percentage to be profitable.
Not true. How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula:
Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability
5) To be successful, I have to trade without emotions.
That is both wrong and impossible. You are human so you have emotions. Emotions can be a powerful motivator to your trading.
When you feel angry or scared in trading, take that emotion and translate it into something more productive. For example, if you’re feeling angry because you just got run over by the market, view that anger as a reason to be more focused and disciplined in your entry and exit levels on the next trade.
Confusion
No greater confusion than assuming an assumption
No greater confusion than being attached to an attachment
No greater confusion than adding more clouds to a cloudy mind
No greater confusion than blaming blame (more…)
Deadly Emotions
REVENGE, we all know it and have done it. It happens when you are tricked by the market and decide to take another trade before looking at the big picture, then BAM you are on the wrong side of the trade again. Pissed off and refusing to move while your money is going further down the drain. Scared to let go for fear that you are going to get tricked again.
PANIC, that is when you lack the confidence to enter or ride a profitable trade. This happens when you have taken some hits and now you lack the confidence to trade profitably.
IMPATIENCE, this happens when you can’t wait for a proper trade set-up and jump on a price hiccup/retracement, often finding yourself on the wrong side of the trade.
ANGER, you know that feeling that comes over you when you have taken a hit or two and you want to kill your computer.
SELF PITY, when you come to the market hoping for crumbs and get none, and can’t see why THEY won’t let you have just a little bit.
DEPRESSION, something perhaps outside of the market has you at an extreme low point.
INDIFFERENCE, it happens when you have gotten hit so many times that you just don’t care any more because no matter what you can win any way.
All of these emotions work hard against you clouding your clarity and give other traders the advantage over you.
If you are experiencing any of these emotions when you enter your platform; abandon your trading until you have yourself under control and have the clarity of mind to trade. Not doing so greatly increases your chances of handing your money over to a trader who is more emotionally fit and controlled than you are.
We are all human and it happens to us all, but what weighs heavy in your mind will often weigh heavily in your pocket.
Come to your trading platform, well rested, focused and ready to trade. You may take an occasional hit so what it is a LESSON. We all get them and if we learn the lesson that the loss has taught us; it will make us much better traders.
DO NOT TRADE YOUR EMOTIONS!!!!!—-
Why do we as traders hold on to our losses?
Hope,
Fear,
Anger,
Apathy,
Confusion,
When we see ourselves on the wrong side of a trade, we hold on with the thought that the market will soon come back in our favor, because most of the time it does. Hope, one of the greatest gift’s GOD has given us, can get you killed in the market.
The fear that when we let go of that loss, price is going to come back in our favor and we would have taken that hit for nothing.
The thought that we can’t take this loss, because we don’t want to give back some of our profits. Then the loss becomes so large that we really can’t afford to take it, so we leave it in the hands on the market hoping for mercy. In that situation, believe me the market is going to run over You every chance it gets, and will wipe You out as many times as possible. As generous as it is on the right side of the trade, it is a ravenous beast with no mercy on the other.
You have done all of Your analysis right, You have waited for a proper trade set-up and everything says that You have the advantage, You get in the market and the trade goes against you, and You are madder than hell because You were right, so You refuse to cut the loss. Let me say that the market loves that, because Your anger is only giving them more of your hard earned money. Your analysis can be 100% perfect and the market can still go against You, because the market will do as it pleases. It leads and You follow, but make no mistake, the same market that lines your pockets so fully can also turn on you like a mad dog.
Another thing that happens when a loss becomes too large is that thought that “I should have cut it at Rs1000.00, now it is Rs1,0000”. Then the apathy sets in and You just don’t care what happens any more. ‘If it comes around fine’, or ‘if I get wiped out so what’, ‘whatever’, then You turn off your screen and You do something else, but You can’t stop worrying about that loss that is looming over You larger than life. It is so much better for you to cut a loss than to have the market cut it for You.
The other thing is the confusion about when to cut a loss, it can get to be hard, but having a predefined stop before your entry or soon after or a physical SL, will make taking a hit much easier. I never like to try to define people’s SL’s because it is a matter of risk tolerance. You know how much You can afford to loss, and Zero is not an option, while none of us want to lose anything, it is just not realistic in this game. There are people who were prosperous for years in the market and got wiped out in single day or week because they could not stand to take a loss. As long as You have money, you have money to make more money, but when your money is gone, you have to get up from the table.
These things are easy to say in theory but hard to do practically, it is I think the hardest discipline that a trader learns, but we must learn to cut losses quickly. The heartache and money I could have saved by cutting my losses quickly and going in the direction that price was moving would be enough for that new Camaro that I love.
That is the great thing about the market, if You survive to play another day, You eventually get it.
CUT YOUR LOSSES QUICKLY (^_^)!!!!!!!!!!!
A failed long usually makes a good short, and a failed short usually means a good long (^_^). There is always good money to be made in the market, just don’t be the one because of your false hope, or stubbornness, that the market is making money off of. Don’t allow the market to feed on your families hard earned money cut losses quickly!!!!!!!!!!
Surfer vs Gambler
The ocean and the markets have many things in common. For one, they are both a dynamic event that is constantly in flux, and from the average traders point of view, beyond any possibility of manipulation. It is what it is; it will go where it goes.
This analogy works if we consider the mindset of a surfer. He knows that he is in a passive relationship to the sea, yet he also knows that he can develop a skill in relationship to its ever changing movements in order to reward himself. The surfer cannot demand anything from the sea, he can only wait for it to present him with an opportunity and engage it when the time is right. To go in during a total calm or a tsunami would be both equally foolish; he must wait for the conditions to be right. (more…)
The Trading Mindset & Common Psychological Issues
Plutchik’s Wheel of Emotions
How does someone know that they reached the trader’s mindset? Here are a few characteristics:
1. No anger whatsoever.
2. Confidence and being in control of the self
3. A sense of not forcing the markets
4. An absence of feeling victimized by the markets
5. Trading with money you can afford to risk
6. Trading using a chosen approach or system
7. Not influenced by others
8. Trading is enjoyable
9. Accepting both winning and losing trades equally
10. An open mind approach at all times
11. Equity curve grows as skills improve
12. Constantly learning on a daily basis
13. Consistently aligning trades with the market’s direction
14. Ability to focus on the present reality
15. Taking full responsibility for your actions
Developing the trader’s mindset takes time. It usually takes traders 2-5 years before they can read through the above list and honestly say that it describes themselves.
Let’s take 100 traders using the same trading system or approach. It is highly likely that no two of them will trade it exactly the same way in all aspects. Why is this? Because our mindsets, beliefs, and understandings are unique. It is no surprise that most traders fail and the reason why is because they lack the trader’s mindset. This article covers those in Stage III and IV within the 4 Stages of Learning. More importantly, it applies to those that survived Stage II.
There are two parts to fixing any psychological problems:
1. Recognizing that it exists
2. Accepting it so you can move on
In trading, this is where it’s so crucial to take responsibility for your own actions because it induces change and you can start making improvements. If you don’t recognize and accept a problem, then you won’t get anywhere!
What are some of these issues that I speak of? Here are a few along with their causes and/or effects:
1. Anger over a losing trade – Traders usually feel as if they are victims of the market. This is usually because they either 1) care too much about the trade and/or 2) have unrealistic expectations. They seek approval from the markets, something the markets cannot provide.
2. Trading too much – Traders that do this have some personal need to “conquer” the market. The sole motivation here is greed and about “getting even” with the market. It is impossible to get “even” with the market.
3. Trading the wrong size – Traders ignore or don’t recognize the risk of each trade or do not understand money management. There is no personal responsibility here.
4. PMSing after the day is over – Traders are on a wild emotional roller coaster that is fueled by a plethora of emotions ranging throughout the spectrum. Focus is taken off of the process and is placed too heavily on the money. These people are very irritable akin to the symptoms of premenstrual syndrome.
5. Using money you can’t afford to lose – Usually, a trader is pinning his/her last hopes to make money. Traders fear “losing” the “last best opportunity”. Self-discipline is quickly forgotten but the power of greed drives them, usually over a cliff.
6. Wishing, hoping, or praying – Do this in church, but leave this out of the market. Traders do not take control of their trades and cannot accept the present reality of what’s happening in the market.
7. Getting high after a huge win – These traders tie their self-worth to their success in the markets or by the value of their account. Usually, these folks have an unrealistic feeling of being “in control” of the markets. A huge loss usually sobers them up pretty quickly.
8. Adding to a losing position – Also known as doubling, tripling, quadrupling down, typically, this means that the trader does not want to admit the trade is wrong. The trader’s ego is at stake and #6 comes into effect as the trader is hoping the markets will “work in their favor”.
9. Compulsive trading – Similar to #2, except these traders have an addiction to trading and quite possibly gambling issues. They need to constantly be trading, even if there is no rational reason to do so. They are always excited whether they win or lose.
10. Afraid of “pulling the trigger” – This usually means that the trader does not have a system or approach already in place. They have not calculated risk/reward and many times, these trades are unplanned. This also comes after a string of losses. They don’t want to be “wrong again”. There is no trust from within. (more…)