Archives of “psychology” tag

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The World’s Worst Teacher

  
  Education
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The market often rewards bad behavior. You exit a stock because your stop is hit. You are okay with this because you followed your plan. The market then immediately reverses. You begin to think, “If only I stayed with the position.” The next time the market goes against you, you decide you are not going to get tricked again. This time though, the market does not reverse and what started out as a small manageable loss is now huge.

The market will give you loss after loss forcing you to abandon a methodology right before it takes off without you. On the flip side, the market will lull you into a false sense of confidence. You trade larger and larger, taking on excessive risk. You print money until your risks become so excessive that one or two bad trades wipe you out.

Learn from the market, but realize that sometimes it can be a lousy instructor.

Are Great Traders Born or Bred?

  
  Education
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Harvard Business School Mark Sellers, founder of Chicago-based hedge fund Sellers Capital, argues that great traders are born and not bred. He believes that there are seven “structural assets” that cannot be taught, adding, ” They have to do with psychology. You can’t do much about that.”The traits:
1) The ability to buy when others are panicking, and vice versa
2) An obsession with the trading game
3) A willingness to learn from past mistakes
4) An inherent sense of risk based on common sense
5) A confidence in your convictions and a willingness to stick with them
6) An ability to have “both sides of your brain working” (i.e. to go beyond the math)
7) The ability to live through volatility without changing your investment thought process
I  think that some of the concepts discussed here are spot on (and I spend a great deal of time hammering home the importance of #7) , but I disagree with the overall idea that great traders are born, not made. I believe success in trading is not about a specific style, but rather about understanding your personality traits and then developing a trading style (and which product – i.e. stocks, commodities, fx) that fits you best.

Essentials of a Winning Psychology

  
  Education
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fear-1
Four fears that block a winning psychology:

  1. Fear of Loss
  2. Fear of being wrong
  3. Fear of missing out
  4. Fear of leaving money on the table.

Realize that trading is based on probabilities, as such, every trade is unique. In other words, the past does not equal the future.

Probability thinking manifest other states and beliefs:
  • Because we know that we will succeed in the long run and because we know we will protect ourselves no matter what the market does, we acquire the state of “self trust” and the state of being “carefree”.

In turn these states allow us to remain….

  • Focused, confident and carefree when we are experiencing the inevitable prolonged drawdown.
  • Because at the micro level we know that the market is random, we will not allow euphoria to set in and lead us to reckless trades. Each trade will only be one in a series of probabilities.
  • We will view market information not as a source of pleasure or pain but merely as data providing us with opportunities.

Personal Attributes Essential to a Winning Mentality
  • Awareness – the ability to step outside ourselves and observe. The more effectively we can do this, the easier our progress to “Acceptance”.
  • Honesty – the ability to seek to perceive reality in spite of our filters.
  • Courage – the willingness to bear the pain brought about by our awareness and honesty.
  • Commitment – the willingness to do whatever is necessary to achieve our goals

To succeed, a trader must have a vision about where he is heading, and must internalise that a winning attitude is total submission to the trading outcome.
This means managing Fear and Euphoria. To do this, we need to ACCEPT, with every fibre of our body, the belief that at the micro level the market is uncertain and unpredictable and at the macro level it is relatively certain and predictable.

The Most Powerful Trader in the World

  
  Education
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Once you’ve mastered putting in protective stops, you’ll feel empowered. Why? Because at that point you are emotionally balanced and are WILLING to transfer the risk to someone else and exit with a small loss. You have emotional and financial understanding that trading is a process and that any one trade is meaningless over 1,000s of trades.

At that point you have personal power in that trading is just one part of your day and your life is abundant. And you don’t need to tell anyone about your trading. You’re in love with your process – be it mechanical or discretionary – and not in love with any one particular trade.

At that point, you’ll also realize that you can’t really speak to anyone about trading anymore. Most amateurs don’t understand that trading like a professional requires a combination of self-awareness, emotional intelligence, and some level of technical proficiency.

You won’t be able to communicate with such a person as they are speaking one language and you another. They are ignorant about your expertise and necessary behavior. It’s a dialect all its own and it’s unique to you and only you.

This ability is learned behavior – but most will never achieve this level because they are focused on the wrong principles. They’re missing the 80% of the puzzle that is most significant.

3 things that will kill your trading success

  
  Education
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Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.

Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.

Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.

Mark Douglas : Trading in the Zone

  
  Education
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Without doubt the foremost reading, it seems, in trading circles. Douglas’ book, in my view, deserves its place at the top of a traders reading list. Whether you are trading currencies, commodities, stocks or futures this book will have something for everyone. The book tackles the psychology involved in being a successful trader. The book attempts to give the reader the tools to develop the Confidence and discipline to become and consistent winner.

I think the book is a superb read and although I cannot say right now how succesful it has been, it is one of the few books that I pick up nearly every day and read another chapter again and remind myself of some of Douglas’  inspiring ideas and thoughts.

The book ends with a great 20 trades learning excercise that is a must.

The key learnings I get from reading this book :

1)The market is random; you cannot predict it. Unless you know every individual who has a position in the market and you know their strategy for each trade it is impossible to know what will happen next.Give up trying to predict, and focus on the now moment and managing yourself , your money and your strategy.

2)The Power of Association. Douglas uses throughout the book a story about a boy and his fear of  dogs. He uses this analogy to describe how previous experiences that have given pain, or expected pain, to us will mean that our mind will do everything possible to protect itself from future pain when it is exposed to similar circumstances at some point again in the future. i.e. If you recognise a market pattern where previously you lost a trade you will be compelled to exit the trade at that point or not take that trade on; because you will not want to experience pain. Douglas again talks about the here and now and describes how we can overcome these internal obstacles.

101%….Don’t miss to Read this Book !!!!

Trading Success

  
  Education
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“Trading success is a function of possessing a statistical edge in the market and being able to exploit this edge with regularity. Trading failure is most likely to occur when you trade subjective, untested methods that possess no valid edge or when you are incapable of consistently applying edges that are available. Improving your psychology as a trader by itself will not confer an objective edge. Developing or purchasing a valid trading system will not in and of itself make you a great trader. The development of trading methods and the development of yourself as a trader thus must proceed in concert. You are only as good as the methods you implement and your ability to implement the methods.”

Trading Mindset Upgrade Profit Opportunity -Anirudh Sethi

  
Analysis, Education
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Image result for Trading MindsetAnybody that has traded for an expanded timeframe comprehends the significance of having the correct attitude with regards to trading beneficially. Truth be told, without the correct attitude, it’s practically difficult to deliver reliable outcomes. In addition, the greatest test I’ve seen for some traders understands what the right mentality involves, and after that making it perpetual so it turns out to be second nature while connecting with the business sectors. Most traders concentrate on creating techniques with a specific end goal to profit. Henceforth, there is no other path around. In any case, your mentality is regularly “the missing connection” with a specific end goal to perform better. To get consistent returns you need to concentrate on the mental part the same amount of as the trading numbers. For the individuals who have not traded much, this may sound somewhat abnormal. What does brain science need to do with hard and cool trading numbers? In the wake of trading for a few years, you’ll find that trading is absolutely not as simple as it appears to be, an incredible inverse. On the off chance that you can’t take after the principles of the procedure, you essentially have no technique.

Target is Most Valuable Consequence of Trading Mindset

Your mindset and convictions will be a noteworthy deciding component in your trading come about. Consider this illustration, where the same fruitful trading approach is utilized by a hundred traders and ordinarily no two of them will trade it the very same way. Why? Since every trader has a one of a kind conviction framework, and their convictions will decide their trading style and their trading comes about. That is the reason even with a gainful and demonstrated trading approach; numerous traders will come up short. They don’t have the best possible conviction framework to empower them to trade well. At the end of the day, they do not have ‘The Trader’s Mindset’. When you experience mental issues it is best to perceive the issues, simply know about them and don’t deny they exist. Keeping in mind the end goal to settle mental issues, we should first wind up plainly mindful of the issues that are making the issues altogether mind. This is a lot of what truly matters to analysis. The therapist or psychotherapist tries to get the patient initially to perceive issues that are causing their issues. The patient must trust that these issues are making the issue altogether for the patient recuperates. The reason this procedure can take so long, maybe even years, is on the grounds that the patient needs to perceive their issues as well as must acknowledge that there genuinely is an issue. They should assume liability for their issues to recuperate. (more…)

Nicolas Darvas Quotes

  
  Education
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Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.” (more…)

The Right frame of Mind

  
  Education
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The psychology of the trader plays a very important role in his trading decisions and style. The best traders keep their sentiments (greed and fear) out of their analysis and decide to trade with clear mind. Follow the advices below and you will notice a great deal of improvement in your trading style.

Never trade when your mind is occupied with other things. Try to be concentrated on the market. Try to feel the market, that is the Market Sentiment. When you feel overwhelmed of the information in your head, take a break. Then come back with clearer mind. Do not be trigger happy with your trades and always have a trading plan. Follow your Forex system with discipline. Apply the rules of Money Management with care. Always mind your loses! Then let the profits come. Stop loss orders are there to save you by yourself. Always use them and never stay on a false trade just to feed your ego. Ego never makes money! Even the best traders are often wrong. But market is always right!

The best traders have the vigilance to realize the market sentiment quickly and ride the market in the right position. Even when they are wrong at first, they quickly change their posiotions when they realize it!

d your ego. Ego never makes money! Even the best traders are often wrong. But market is always right!

The best traders have the vigilance to realize the market sentiment quickly and ride the market in the right position. Even when they are wrong at first, they quickly change their posiotions when they realize it!

 

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