Trading is marketed as sexy profession. If you are good at trading, well you must be incredibly smart, good looking, funny, and of course, rich! We all know this furthest from truth. Traders are pale, unkept and have bad posture. I kid.
One of the biggest aspects of of trading is psychology, the manipulation and control of our biggest sex organ of all, our brain. However, an often overlooked aspect of trading psychology is mental framing – how we position our thoughts and ideas about the market. (more…)
Archives of “false sense of security” tag
rssSex Appeal and Trading
Trading is marketed as sexy profession. If you are good at trading, well you must be incredibly smart, good looking, funny, and of course, rich! We all know this furthest from truth. Traders are pale, unkept and have bad posture. I kid.One of the biggest aspects of of trading is psychology, the manipulation and control of our biggest sex organ of all, our brain. However, an often overlooked aspect of trading psychology is mental framing – how we position our thoughts and ideas about the market.
Newer traders approach trading from a “right versus wrong” perspective. They devise their trading system based on a false sense of security believing certain setups and strategies can be designed to give them”right” signals and helps them avoid “wrong” signals. (more…)
You don't need to follow trading rules
We’ve all heard the proselytizers of trade planning bemoan lesser traders that they need to follow their trade rules. Yet, emotional traders still dominate the retail trading landscape. After hearing about how bad they are for acting as they do, they flagellate themselves for allowing emotion to enter into their trading decisions and re-dedicate themselves to discipline trading without emotions. But who are we to judge why and how someone else trades with their money?
Of all the different types of trading styles, I find the emotional style of trading the most entertaining. It is more human and natural than a game of probability. There is personal stuff at stake. Anyone who preaches to you that you need to stop it and get a plan is really preaching to themselves. They are healing a wound, or trying to convince themselves that they no longer participate in the egregious activity of trading without one. They are essentially scared of their emotions.
You cannot detach yourself from your emotions. If you want to trade based on emotions, I support your decision. After all, it’s your money and it’s not my place to tell you what to do with it.
Rules. We think of them as ‘made to be broken’ for a good reason. Rules are limiting and suffocating. Yes, we need some basic ones in our lives, but as soon as a method of trading is defined as a rule, the inner workings of the imagination begins the task of find ways around it. It’s only natural. Our total human experience cannot be contained with stupid rules. And who is making these rules anyway? Why are they valid? We all know that rules are put in place because we basically don’t trust someone (maybe ourselves) to do the right thing when the time comes. (more…)
Successful trader needs five essentials
1. A Method
You must have a method that is objectively definable. This method should be thought out to the extent that if someone asks how you make decisions to trade, you can quickly and easily explain. Possibly even more important, if the same question is asked again in six months, your answer will be the same. This is not to say that the method cannot be altered or improved; it must, however, be developed as a totality before implementing it.
2. The Discipline to Follow Your Method
‘Discipline to follow the method’ is so widely understood by true professionals that among them it almost sounds like a cliché. Nevertheless, it is such an important cliché that it cannot be ignored. Without discipline, you really have no method in the first place. And this is precisely why many consistently successful traders have military experience – the epitome of discipline.
3. Experience
It takes experience to succeed. Now, some people advocate “paper trading” as a learning tool. Paper trading is useful for testing methodologies, but it has no real value in learning about trading. In fact, it can be detrimental, because it imbues the novice with a false sense of security. “Knowing” that he has successfully paper-traded during the past six months, he believes that the next six months trading with real money will be no different. In fact, nothing could be farther from the truth. Why? Because the markets are not merely an intellectual exercise, they are an emotional one as well. Think about it, just because you are mechanically inclined and like to drive fast doesn’t mean you have the necessary skills to win the Daytona 500. (more…)
Keys for Successful Traders
The biggest obstacle to successful trading is failing to recognize that losses are part of the game, and, further, that they must be accommodated. The perfect trading system that allows for only gains does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Trading is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! Remember, you don’t have to be perfect to win in the markets. Practically speaking, this is why you also need an objective money management system.
It takes experience to succeed. Now, some people advocate “paper trading” as a learning tool. Paper trading is useful for testing methodologies, but it has no real value in learning about trading. In fact, it can be detrimental, because it imbues the novice with a false sense of security. “Knowing” that he has successfully paper-traded during the past six months, he believes that the next six months trading with real money will be no different. In fact, nothing could be farther from the truth. Why? Because the markets are not merely an intellectual exercise, they are an emotional one as well. Think about it, just because you are mechanically inclined and like to drive fast doesn’t mean you have the necessary skills to win the Daytona 500.