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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…)

9 Common Trading Errors

  
  Education
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1. Making trades with insufficient study and practice.

2. Making trades out of harmony with the general trend.

3. Taking a position too late after a move is well under way or is completed.

4. Taking a position too soon due to impatience.

5. Improperly estimating the distance a stock should move.

6. Letting eagerness to make profits warp judgment.

7. Failing to keep a position sheet and selecting stocks on hunches rather than calculations.

8. Buying on bulges instead of waiting on reactions.

9. Failing to place and move stops.

Technically Yours/ASR TEAM

How does the mind of a trader work?

  
  Education
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MindpowerIn order to understand behavioral finance and crowd behavior on the capital market, first of all we need to understand the factors that influence the trader mindset. Traders are “misled” by many things. Let us put these factors in two main categories, depending simply on their source, external or internal.

The most important external factor is “everyone else”, the trading crowd, the general opinion. We form an opinion about the others. We believe them to be either smart or stupid, either right or wrong, then choose one of the two main psychological trading strategies: “go along to get along” or be a contrarian. Then we have other external factors like payoffs, scale, psychological and academic background, social structure, external advisory and resources. (more…)

50 Trading Mistakes

  
  Education
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1. Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Consequently, they overtrade and use their equity to the limit (are undercapitalized), which puts them in a squeeze and forces them to liquidate positions.

Usually, they liquidate the good trades and keep the bad ones.

2. Many traders don’t realize the news they hear and read has already been discounted by the market.

3. After several profitable trades, many speculators become wild and aggressive. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”

4. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.

5. Some traders try to “beat the market” by day trading, nervous scalping, and getting greedy.

6. They fail to pre-define risk, add to a losing position, and fail to use stops.

7 .They frequently have a directional bias; for example, always wanting to be long.

8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market on too short a time frame.

9. They overtrade.

10. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system. (more…)

49 Trading Rules for Traders

  
  Education
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  1. Usually they liquidate the good trades and keep the bad ones. Many traders don’t realize the news they hear and read has, in many cases, already been discounted by the market.
  2. After several profitable trades, many speculators become wild and unconservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”
  3. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.
  4. Some traders try to “beat the market” by day-trading, nervous scalping, and getting greedy.
  5. They fail to pre-define risk, add to a losing position, and fail to use stops.
  6. They frequently have a directional bias; for example, always wanting to be long.
  7. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market in too short a timeframe.
  8. They overtrade.
  9. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system.
  10. Many traders get a fundamental case and hang onto it, even after the market technically turns. Only believe fundamentals as long as the technical signals follow. Both must agree.
  11. Many traders break a cardinal rule: “Cut losses short. Let profits run.”
  12. Many people trade with their hearts instead of their heads. For some traders, adversity (or success) distorts judgment. That’s why they should have a plan first, and stick to it.
  13. Often traders have bad timing, and not enough capital to survive the shake out.
  14. Too many traders perceive futures markets as an intuitive arena. The inability to distinguish between price fluctuations which reflect a fundamental change and those which represent an interim change often causes losses.
  15. Not following a disciplined trading program leads to accepting large losses and small profits. Many traders do not define offensive and defensive plans when an initial position is taken.
  16. Emotion makes many traders hold a loser too long. Many traders don’t discipline themselves to take small losses and big gains.
  17. Too many traders are underfinanced, and get washed out at the extremes.
  18. Greed causes some traders to allow profits to dwindle into losses while hoping for larger profits. This is really lack of discipline. Also, having too many trades on at one time and overtrading for the amount of capital involved can stem from greed.
  19. Trying to trade inactive markets is dangerous.
  20. Taking too big a risk with too little profit potential is a sure way to losses. (more…)

DISCIPLINE IN TRADING

  
  Education
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Discipline: “Habit of Obedience”

 Have a trading plan or system is essential to the exercise of good discipline, as it normally imposes certain parameters and sets out certain criteria which dictate how trading decisions should me made and what needs to be done in certain situations. Habitually following your plan is what is meant by the exercise of good trading discipline, which, in turn, will help you realize the best expected results possible from your plan. If you find that your trading plan or system is not meeting your expectations, despite habitually following it for a reasonable period of time, good discipline requires that you be prepared to review it and make any adjustments or fine tuning necessary for future use.

 Lack of Discipline

Day traders who suffer from lack of discipline often allow their emotions to rule their trading decisions, which often leads to bad decisions and unacceptable trading losses. Never allow your emotions to rule your trading. In order to trade successfully, you must develop a trading plan. (more…)

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…)

3 Trading Personality types-Intutive ,Data Crunchers and Impulsive

  
  Education
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Three popular trading personality types are intuitive, data crunchers, and impulsive. The data-oriented trader focuses on concrete evidence and is often very risk averse. Seeking out as much supporting data for a trading decision as possible. The trader who prefers to do extensive back-testing of a trading idea exemplifies data-cruncher type. Consider incorporating elements of data oriented trader personality into your trading style regardless of your natural inclinations. Make sure that you have adequate information (a reason) before executing a trade. Particularly important is to have and trade a detailed trading plan in which risk is minimized and entry and exit strategies are clearly specified. Most often however, the data-oriented trader may take things a little too far. Searching for “the perfect” set-up or other criteria, that just doesn’t exit in the trading world. At some point, one must accept the fact that he or she is taking a chance and no amount of data analysis can change this fact.

The intuitive trader is the opposite of the data-oriented trader. Trading decisions are based upon hunches and impressions rather than on clearly defined data. There’s a difference between being an intuitive trader who develops this style over time and one who is naturally intuitive. The experienced intuitive trader, bases decisions on data and specific market information. A seasoned trader, analyzes the data quickly and efficiently. It happens so quickly that it seems like it occurs intuitively, but it is actually based on solid information. Ideally, all traders should gain extensive experience to the point where sound decisions are made with an intuitive feel. (more…)

10 Common Trading Errors

  
  Education
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1. Making trades with insufficient study and practice.

2. Making trades out of harmony with the general trend.

3. Taking a position too late after a move is well under way or is completed.

4. Taking a position too soon due to impatience.

5. Improperly estimating the distance a stock should move.

6. Letting eagerness to make profits warp judgment.

7. Failing to keep a position sheet and selecting stocks on hunches rather than calculations.

8. Buying on bulges instead of waiting on reactions.

9. Failing to place and move stops.

10.  Listening to advice from brokers, Blue Channels,, friends, or Website Analysts

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