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The 14 Stages Of Trader

  
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.

2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.

3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.

4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.

5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.

6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.

7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason.

8. DESPERATION – All gains have been lost at this point. We had our chance to profit and missed it. Not knowing how to act, we attempt to do anything that will bring our positions back into the black.

9. PANIC – The most emotional period by far. We are clueless and helpless. At this stage we feel like we are at the mercy of the market and have absolutely no control.

10. CAPITULATION – We have reached our breaking point and sell our positions at any price. So long as we can get out of the market to avoid bigger losses we are content.

11. DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The markets are not for us and should be avoided like the plague. However, this rare point marks thepoint of maximum financial opportunity.

12. DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to ourselves. Some start to correctly look back and analyze what went wrong. Real traders are born here, learning from past mistakes.

13. HOPE – We can still do this! Eventually we return come to the realization the market actually does have cycles (shocking). We begin to start analyzing new opportunities.

14. RELIEF – The markets are turning positive again and we see our prior investment come back around. We regain our faith (although small) in our ability to invest our money. The cycle start all over again!

Emotions and Behaviors in Trading

  
  Education
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Successful trading requires the individual to have more than a certain amount of control over emotions and behaviors.
Emotions may include, but not be limited to, the following items:
1. Anger, anxiety, confusion, depression, disappointment, exhilaration, frustration, insecurity, passion, satisfaction, etc.
Behaviors may include, but not be limited to, the following items:
2. Arrogant, consistent, controlling, denial, following through, [im]patient, [ir]rational, letting go, perseverance, stubbornness, tenacity, etc.
Having control over these and other emotions and behaviors will allow for the trader to execute trades objectively, and more importantly, according to a strategic plan.

Sounds easy enough, does it not? “Execute trades objectively, and more importantly, according to a strategic plan.” Being that traders are human, it is not such an easy task to accomplish. It is not easy to be objective and diligent about sticking to a strategic plan day after day after day – especially with the constant volatility and erratic dynamics of the market tempting and enticing you at every turn to take actions that are NOT necessarily objective and NOT necessarily part of the strategic plan.

THE FIVE IMMUTABLE LAWS OF INVESTING

  
  Education
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Be Patient And Wait For your Trade.  Many investors suffer from “action bias” or a desire to do something.  However, when there is nothing to do the best thing to do is nothing.

 Be Contrarian.  The herd is usually wrong.  The punch bowl of speculation is usually spiked with denial.  Be careful getting in when the getting is at the end.  Risk Is Permanent Loss of Capital, Never A Number.  Pay attention to valuation, fundamental, and financial risks and thus avoid permanent impairment of your capital.

Be Leery of Leverage.  Leverage is a dangerous beast.  It can’t turn a bad investment good, but it can turn a good investment bad.  Whenever you see a financial product with leverage as its foundation you should be skeptical, not delighted.

 Never Invest In Something You Don’t Understand.  If something sounds too good to be true it probably is.  If you do not understand where your money is going then don’t press the pedal ’cause the vehicle may be in reverse. 

Invest when the law is on your side; otherwise you may find yourself on the other side of the barbed wire fence at BROKE prison. 

The 14 Stages of Trading Psychology

  
  Education
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.

2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making
.
3. THRILL – The market continues to be favorable and we just can’t help but start 
to feel a little “Smart.” At this point we have complete confidence in trading system

4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk We now start trading anything that we can get our hands on to make a buck.

5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.

6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.

7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profitand move on but we don’t for some stupid reason. (more…)

5 Emotional Stages of a Loss

  
  Education
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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.

The 14 Stages Of Trading Psychology

  
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.
2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.
3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.
4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.
5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.
6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.
7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason. (more…)

How can you tell when a trader is passionate about trading vs. addicted to it?

  
  Education
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The first step in dealing with any addictive pattern is identifying it–and identifying it as a problem. Here are a few questions that you might ask yourself:
* Have there been times when I told myself to stop trading, but still found myself placing trades any way?
* Do I find myself overtrading by putting on positions with too large size or by trading during periods when nothing is happening?
* Have my trading losses created problems for me in my relationship(s), or have they caused financial problems for me?
* Have people close to me told me that I need to stop trading?
* Is the pain from losing more extreme than the satisfaction from winning?
* Do I find my moods fluctuating with my P/L?
* Do I trade simply out of boredom sometimes?
* Do I find myself preoccupied with trading outside of market hours at the cost of other work and relationships?
Notice that, for many of these questions, you could substitute the word “drinking” or “gambling” for “trading”. The dynamics of addictions are the same across the board. If you answered yes to three or more of these questions, I would suggest that trading has become a problem for you.
How does one deal with addictive trading? The first step is to identify it, but the second–and harder–step is to acknowledge that you need help for it. It’s pride that tells us we can handle it on our own through will power, but addictions wouldn’t occur in the first place if will power were sufficient to prevent consequences. (more…)

Want to Become a Winning Trader?

  
  Education
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Denial is an insidious and serious human condition that can be extremely dangerous to traders. I think out of all the human conditions, denial is one of the most harmful.

Denial keeps us stuck in doing a negative event over and over again regardless of the outcome. Have you ever heard the saying that madness is doing exactly the same thing over and over again and expecting a different result? Denial is usually why people do this!

Are you a losing trader who is trading the same way over and over again expecting different results? If so, you could be in denial. Look at the list below and see which of these apply to you:

  1. Poor or no record keeping
  2. Consistently losing month after month
  3. Not profitable
  4. Feeling helpless
  5. Frustrated and stuck
  6. Lying about your trading results to others
  7. Creating diversions to distract you from reality
  8. Needing to appear successful to feel successful
  9. Spending out of control
  10. Drinking or wild behavior
  11. Anxious when alone, can’t sit still

If you can identify with two on the above list then you may have a denial issue. If you identify with three or more you have a denial issue. There are different degrees of denial and the idea is that to be a successful trader you must objectively look at yourself and your trading. If you are in denial, or flirting with denial, you are not being objective and are stacking the odds against you that you will be a successful trader.

Denial is insidious, meaning that it begins without you really being aware that has begun. Be on guard for denial. To catch denial before it get out of control, look for the occasional twisting of the truth about your trading results or being lazy about keeping good trading records all indicate that you may not want to face the truth about your trading.

Denial is a disease in that it rarely gets better on its own. Denial rarely just goes away without being proactive and taking conscious action to intervene. Always seek the truth in yourself, your trading and in life and you will be less likely to have a denial problem. Seeking the truth usually takes energy and at times is the harder path to follow and accept, but this is the path you must always follow to avoid denial. As a trader you will not be successful living in denial. Do whatever it takes so that you do not live in denial. If you cannot fix it on your own, get help. You must learn to deal with reality and get a better result!

Dealing With Losses

  
  Education
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A few quick caveats:

  1. There is no place for denial in successful investing.
  2. Don’t blame your losses on bad luck or outside manipulators.  Accept the responsibility yourself.
  3. Don’t be dependent upon trading for all your fulfillment and happiness.
  4. Focus on opportunities, not on regrets.
  5. Proper risk control and discipline is non-negotiable for every trade everyday.
  6. Revenge trading – trying to make back a loss – carries with it far too much emotion and is always costly.
  7. Poor money management skills are the number one reason that novice traders wash out.
  8. Learn to recognize your impulsive state of mind and take action to stop it.

Even the best traders in the world book small losses on a regular basis.  If you manage your emotions with consistency and if you strive for a disciplined trading mindset, then you should have no problem surviving a string of bad trades and showing profits at the end of the year.

A new investment scam out there

  
  Education
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NEW SCAM100% return in 4 weeks ! (Guaranteed)
Trick 1) ; Client has to show that he has at least 1 M $USD (with due diligence done on the source of the funds)
Trick 2) ; Client’s funds are never removed from his bank (they show you their contracts, urgent you to show your lawyers, and bankers).
Trick 3) ; Bank issues a confirmation that client has the 1 M $ (clean money)
Trick 4) ; The salesmen then pretends that traders in London will borrow money based on that “confirmation document” and invested in the Forex market ; he then pretends that my client will collect 100% in 4 weeks.
Salesmen usually look above 40, well dressed.
Where is the trick ? Psychological ……….
1) Safety ; they repeat over and over that your money stays with you
2) They call you everday (after market close), and tell you what they traded 🙂
3) After 4 weeks of daily calls, you are so pumped up that you want your 100%
NOW.
4) Before paying you, they ask you to pay the traders, and the salesmen
commissions.
5) You pay 5% ……. then ? Nothing comes …….
Pure psychology ……
Pass this info around
PS : your friends will be in denial at first ; telling you that your are jealous ….

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