Archives of “expectation” tag
rssThe secret to trading success: You.
The secret to trading success: You.
You are the weakest part of your system. It is a defeatist statement. It makes your expectation to fail easier to accomplish and more importantly it makes failure easier to handle. It shifts the pressure away from you and unto fate.
Would you fly on an airline if their motto was “Our pilots are the weakest part.” I do not think so. You are your system. Even if your system is automated you added the inputs, parameters.
Taking responsibility for your action is not easy. Taking control of the outcomes of trading or life is a huge responsibility. You will have moments of weakness, but you are not weak. The market does not go straight up and either does the road to success.
Trading Experiences
A major key to success as a Trader and Investor lies in your mind. Actually, it lies in your ability to use your mind optimally and creatively.
Please remember – there is NOTHING WRONG WITH YOU. You don’t need to change YOU. What you most likely need to change is the “software” that you are running in your mind. When we are born we do not get a user’s manual on how best to use our mental abilities. So we learn by soaking up what we see and hear around us as we grow up. And often times what we learn is not conducive to being a successful trader and investor.
One of the key mental approaches is to “Welcome Every Experience.” Welcome every experience that comes to you. It may be an expectation, or it may be a surprise. It may be ‘good’, or it may be ‘bad’ based on your first assessment of it. It may involve someone getting hurt, someone getting promoted, a tragedy, a triumph, a windfall, a bankruptcy, an ‘aha’ moment….anything. The most useful way to approach experiences we receive (which are mostly experiences we can’t control as they are outside of us) is to welcome them and learn from them. Realize that they are exactly what we need in that moment, at that point in our lives. And since we don’t have a time machine, once something has happened, there’s no changing it. (more…)
It's not the trade, it's the battle.
Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word – expectation. If you expect to win
all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war – not the battle.
Hallmark of a Position Day Trader
Greed & Fear
Greed
As prices rise, they naturally attract more attention. As more and more people jump onboard the rally, its climb accelerates. But in all the excitement, there is a tendency to confuse account balance (the amount actually on your account) with account equity (the total value including the sum of your open positions). People begin to treat their potential profits as if they were already realized. This expectation can sometimes cause basic reversal signals to be overlooked.
Additionally, those who missed out on the opportunity early on, when the trend was still young, are becoming hypnotized by the length and size of the rally. Jumping onboard late is a risky game, however, as those who got in early will eventually need to take their profits. There is also a bit of the “greater fool” factor, as anyone who is still buying is now buying at a higher price, and from a seller who has reason to believe the move may soon be over. The idea then is that hopefully someone will keep on buying after you, at an even higher price, when you eventually decide to become a seller yourself.
Fear
When prices start falling, they awaken fear and panic. Fear is one of our most primal emotions, which explains why prices often fall faster than they rise. People holding longs run for the door trying to sell as quickly as possible, and short sellers motivated by the falling prices add their own orders to the mix as well. When those short orders are eventually covered in order to realize profit, there are temporary rallies which can give false hopes.
This crowd mentality frequently creates moments of market imbalance which can be capitalized upon, once one can learn to recognize the signs and interpret them correctly. Above all else, the key to developing this skill is practice.
Mood Swings
If you do experience mood swings around losing trades, it’s probably because you are evaluating yourself by the criterion of being right–not by the criterion of trading well. It isn’t the losing trade making you feel bad; it’s the perfectionistic expectation that you should always be right. By embracing uncertainty and staying open to learning from it, the threat of losing can turn into the opportunity of rethinking market assumptions.