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10 Trading Psychology Points

  
  Education
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1) We are most likely to behave in inhibited or impulsive ways, violating trading rules and plans, when we perceive events to be threatening;

2) What we perceive to be threatening is a joint function of events themselves and how we think about those events;

3) A key to gaining control over trading and maintaining consistency is to be able to reduce the threat associated with market events and process adverse outcomes in normal, routine ways;

4) We can reduce the threat associated with adverse market events through proper money management (position sizing) and through proper risk management (limits on losses per position);

5) We can reduce the threat associated with adverse market events by training ourselves to respond calmly to adverse outcomes (exposure methods) and by restructuring how we think about those outcomes (cognitive methods);

6) Optimal skill development in trading will occur in non-threatening environments in which learners can sustain concentration, optimism, and motivation;

7) A proper mindset is therefore necessary to the development of trading skills, but does not substitute for such development;

8) The cultivation of trading expertise is a function of the amount of time and effort devoted to learning and the proper structuring of that time and effort;

9) Proper structuring of learning involves the setting of specific, doable, cumulative goals and the provision of rapid feedback and correction regarding the achievement of those goals;

10) Practice does not make perfect in trading or anything else; perfect practice makes perfect. Training must gradually build competencies and correct deficiencies in a manner that sustains a positive mindset and optimal concentration and motivation.

Few suggestions

  
  Education
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suggestion1) Forget about performance and results numbers (i.e. P/L, Wins vs. Losses). These numbers only blur the plan and increase the anxiety on not losing on next trade. This aggravates the proper mindset to prepare to trade properly. Perfectionists will not execute well and will try to focus on buying low (bargain hunting to win) when the entry is not right.
2) Create the trading plan and write it into details to avoid ambiguity. This helps prevent loosely interpreted actions and end with too much leeway and perfect execution won’t be successful.
3) Focus on the charts and work toward identifying and preparing the entry and exits. Having these numbers in mind will keep the focus on the executing at the right prices.
4) Focus on the Risk:Reward ratio in mind. Having this ratio will keep the execution precise because any miscue will change the ratio in negative way. If the ratio is set, chances of the making the perfect entry and exits are higher. (more…)

Ten Core Ideas of Trading Psychology

  
  Education
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1) We are most likely to behave in inhibited or impulsive ways, violating trading rules and plans, when we perceive events to be threatening;

2) What we perceive to be threatening is a joint function of events themselves and how we think about those events;

3) A key to gaining control over trading and maintaining consistency is to be able to reduce the threat associated with market events and process adverse outcomes in normal, routine ways;

4) We can reduce the threat associated with adverse market events through proper money management (position sizing) and through proper risk management (limits on losses per position);

5) We can reduce the threat associated with adverse market events by training ourselves to respond calmly to adverse outcomes (exposure methods) and by restructuring how we think about those outcomes (cognitive methods);

6) Optimal skill development in trading will occur in non-threatening environments in which learners can sustain concentration, optimism, and motivation;

7) A proper mindset is therefore necessary to the development of trading skills, but does not substitute for such development;

8) The cultivation of trading expertise is a function of the amount of time and effort devoted to learning and the proper structuring of that time and effort;

9) Proper structuring of learning involves the setting of specific, doable, cumulative goals and the provision of rapid feedback and correction regarding the achievement of those goals;

10) Practice does not make perfect in trading or anything else; perfect practice makes perfect. Training must gradually build competencies and correct deficiencies in a manner that sustains a positive mindset and optimal concentration and motivation.

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