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G. C. Selden Trading Psychology – Hunches And Gut Feelings

  
  Education
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Recently most traders probably have spent a great deal of time managing risk and emotions. I know I have. When it comes to correctly gauging and dealing with emotions it is paramount to analyze your reactions in a detached way. The best way to get objective insight is to imagine taking a step back and then ‘watching yourself.’ It’s as if you were your own mentor or trading coach. This is not an easy task. Good results require emotional detachment, a lot of experience and the ability to honestly assess the degree of trading proficiency you have attained. Ultimately it will tell you what those gut feelings you are occasionally experiencing really are worth. That’s exactly what G.C. Selden addresses at the end of his classic trading book : ‘Psychology of the Stock Market’ which was first published in 1912. Here’s an excerpt dealing with ‘hunches and gut feelings.’ Lots of additional and valuable insight for traders is provided. Enjoy! 

An exaggerated example of “getting a notion” is seen in the so-called “hunch.” This term appears to mean, when it means anything, a sort of sudden welling up of instinct so strong as to induce the trader to follow it regardless of reason. In many cases, the “hunch” is nothing more than a strong impulse.

Almost any business man will say at times, “I have a feeling that we ought not to do this,” or “Somehow I don’t like that proposition,” without being able to explain clearly the grounds for his opposition. Likewise the “hunch” of a man who has watched the stock market for half a lifetime may not be without value. In such a case it doubtless represents an accumulation of small indications, each so trifling or so evasive that the trader cannot clearly marshal and review them even in his own mind. (more…)

Three Main Areas of Trading You Must Master

  
  Education
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  1. Psychology: Trading is a miserable experience if your very self worth hangs on your every trade. You must separate your ego from your trading, you do not want wins to make you too happy or losses too make you depressed. In trading you are a business man, you are using capital to create more capital. When you lose money on a trade it has nothing to do with you if you followed your trading plan, the market was simply not conducive to a profit with your system, nothing more, it isn’t personal. Separate your ego from your trading.
  2. Risk Management: If you want to be successful in trading you have to avoid the risk of ruin. If you risk 2% of your trading capital per trade and you lose ten times in a row then you are down 20%, you need a 25% return to get back to even, you can do that. If you risk 10% of your capital per trade and lose ten times in a row you are at $0 and ruined. If you trade long enough you will have ten losses in a row, plan to stay in business after this happens. Carefully control what you lose.
  3. Method: You need to trade a method that fits your personality and is proven to win over the long term. Some people love to trade growth stocks, they need to find a method that is a proven winner and trade it. They will need to quantify what can be on their watch list, position size of each trade, and define entries and exits along with initial stop losses. Most importantly stick with the system so they will be trading it when it wins big. Each trader has to find the market they want to specialize in and become an expert. Before trading a system they need to look at the systems historical performance with some form of back testing. Find a winning method that fits your personality and trade it and it alone.

G. C. Selden Trading Psychology – Hunches And Gut Feelings

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Recently most traders probably have spent a great deal of time managing risk and emotions. I know I have. When it comes to correctly gauging and dealing with emotions it is paramount to analyze your reactions in a detached way. The best way to get objective insight is to imagine taking a step back and then ‘watching yourself.’ It’s as if you were your own mentor or trading coach. This is not an easy task. Good results require emotional detachment, a lot of experience and the ability to honestly assess the degree of trading proficiency you have attained. Ultimately it will tell you what those gut feelings you are occasionally experiencing really are worth. That’s exactly what G.C. Selden addresses at the end of his classic trading book : ‘Psychology of the Stock Market’ which was first published in 1912. Here’s an excerpt dealing with ‘hunches and gut feelings.’ Lots of additional and valuable insight for traders is provided. Enjoy!

 

An exaggerated example of “getting a notion” is seen in the so-called “hunch.” This term appears to mean, when it means anything, a sort of sudden welling up of instinct so strong as to induce the trader to follow it regardless of reason. In many cases, the “hunch” is nothing more than a strong impulse.

Almost any business man will say at times, “I have a feeling that we ought not to do this,” or “Somehow I don’t like that proposition,” without being able to explain clearly the grounds for his opposition. Likewise the “hunch” of a man who has watched the stock market for half a lifetime may not be without value. In such a case it doubtless represents an accumulation of small indications, each so trifling or so evasive that the trader cannot clearly marshal and review them even in his own mind. (more…)

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