There is very little that is new in the world of trading psychology but mastering the basics and mastering our mind is essential if we are to develop as highly efficient traders. The following are common discipline issues and suggestions to counteract them. Discipline is needed if you are to succeed as a Forex trader
1. Boredom and a need to trade for the “buzz”
Try to use dead time between trades for things like self improvement training i.e. read a book by your favorite personal development guru or learn to meditate/practice Yoga! Anything that keeps you in the right frame of mind for the job of trading. A positive mindset will have a positive impact on your bottom line over time.
2. Trading when tired.
One of the great things about trading is that we can close for business whenever we want. If you are not in the correct mindset for trading then shut the shop! There will be no customers banging on the door shouting for you to open up.
3. Not taking a loss well and revenge trading (more…)
Archives of “scared money” tag
rss20 Skills for the Trader
1. Know the difference between trading and investing. We are traders, NOT investors. •• Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.
2. Don’t let losers run! Always use stops . Riskmanagement is very, very important in your trading. Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right. The best traders are the first to admit (to themselves and the market) that they made a mistake.
3. Trade only price pattern set-ups.
4. Trade for skill, NOT the money. If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’. And SCARED MONEY NEVER WINS!
5. Concentrate on what you are trade. Each market has personalities, habits and friends…get to know them all.
6. Focus on your executions. Remember, every execution is a trade. Money is valuable…don’t leave it on the table. (more…)
Conquering Your Negative Trading Emotions
The trader has two emotions that must be controlled in order to become successful. I call them ‘the two sides of a coin’ and they are commonly known as FEAR & GREED.
The beginning or new trader will first encounter FEAR. There are two types of FEAR. The fear of losing money and the fear of being wrong.
The fear of losing money usually derives from a trader risking money that should be used for the rent, food, children’s education etc. ‘Scared money’ will render one incapable of pulling the trigger when a trade setup comes along. The only way to overcome this paralysis is to be well capitalized with funds that you can risk.
The fear of being wrong is simply that part of all of us that feels that to make a wrong decision is reflective on our personal competency. The cure for this is to simply realize and accept that losses are part of this game. Think about this? A baseball player needs to hit the ball once for every three times at the plate and this will get him into the Hall Of Fame. Whenever you feel the fear of being wrong, just remind yourself that… “My approach for trading has both historically and real-time produced over (number)% winning trades.” This will give you the confidence to step up to the plate and keep swinging. Also tell yourself that the only way to earn the big money is to get into the game. Have confidence in your trading system that when properly executed, it will make much more money than it loses.
So, why is GREED the flip side of fear?
Greed is caused by the fear of not making enough money. Traders who are greedy are often the exact opposite of the ones who are fearful. They have no fear and usually are very aggressive traders, which can get them into big trouble fast. Greed will usually lead to overtrading, failure to follow the trading rules, and not applying the system consistently. One of the biggest problems when greed sets in is the inability to know when to take profits. These traders are so bent on making a killing that they are never satisfied. If they have significant profits they don’t even think about cashing out, as they want more. This often leads to the inability to see the trade turning against them and they will allow winning trades to turn into big losing ones. (more…)
Every mistake a trader can make
Symptoms:
Trading with “scared” money
- Trading from a state of desperation and fear
- Ruled by emotions and unable to take a loss
- Changing her trading plan often
- Trying to be perfect
- Looking for medication to deal with emotional issues over trading
- Adopting a trading technique (scalping one futures contract) that is beyond her level of trading competence
- Attached to the outcome of each trade
- Not committed to the process of learning to trade—using trading as a temporary “stop-gap” source of income until something else becomes available.
Acting out personal dramas in the financial markets
Why Do I Want To Trade?
“I Want To Find Out Who I Really Am”
When you trade your monitor will do a funny thing. It will become a mirror. A special type of mirror. A mirror that reflects your self-confidence, your self-esteem, your self-worth. The numbers and lines you see on your screen are just that, numbers and lines. Market information. At your choosing, when you decide to become part of those numbers and lines (putting on/off the trade) a sort of test begins. A test about you.
If you see the test as threatening, you will feel threatened. If you see the test as war, you will be engaging in war. If you see the test as one more failure, you will fail. If you see the test as the need to prove yourself right, you will administered the pain of being wrong. If you see the test as certainty, you will be rudely introduced to uncertainty. If you see the test as a battle of wills, you will sacrifice your soul. If you see the test as fear or loss of money, you will be giving away your scared money.
If you see and believe the test to be an exchange of information, you now become the one to confirm or deny information. If you believe the test to be one of giving up what you want in order to get it, you will get it. Get it?
There is an irony in trading of both price and time. It is exactly what you have to give of yourself in order to trade it with understanding.
P.S. There are only two types of traders, “Long Lived” and “Short Lived.” Both know the markets well. The “Longed Lived” just choose know “Themselves” better.Anyone who contemplates trading should ask themselves one simple question…..”Why Do I Want To Trade?” There are many wrong answers to this question, and only one right one…..
20 Trading Skills for Traders
1. Know the difference between trading and investing. We are traders, NOT investors. •• Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.
2. Don’t let losers run! Always use stops . Riskmanagement is very, very important in your trading. Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right. The best traders are the first to admit (to themselves and the market) that they made a mistake.
3. Trade only price pattern set-ups.
4. Trade for skill, NOT the money. If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’. And SCARED MONEY NEVER WINS!
5. Concentrate on what you are trade. Each market has personalities, habits and friends…get to know them all.
6. Focus on your executions. Remember, every execution is a trade. Money is valuable…don’t leave it on the table.
7. Model Yourself After Successful and Experienced Traders. You will be all you can be…but you need to start somewhere.
8. Be Teachable. Learn something new every day (or at least every week). The ‘Losing’ and ‘Winning’ trades can teach you a whole lot.
9. Remember that even the best of the best traders lose money. Learn to accept your losses and move on to the next trade. That’s just part of the business – you will NEVER win 100% of the time.
10. Use only 1 contract at the beginning. Large wins at the beginning generally means large exposure. (more…)
MARKET WISDOM
A list of golden sayings and rules I have gleaned from many sources:
- Plan your trades, trade your plan.
- Trade Quality, Not Quantity.
- Keep it simple.
- Don’t look for a reason to enter the market, look for a reason NOT to enter.
- Don’t act due to “Newbie Nerves”
- Don’t make up a trade. If you have to look, it isn’t there.
- Never play with scared money.
- You are not the market.
- Buy dips in an uptrend, sell rallies in a downtrend.
- Do not try to pick tops and bottoms.
- It is only divergence if it came off a retracement – not a sideways market.
- Indicators warn, price action confirms.
- Divergence is early, cross-overs are late.
- You cannot expect your positions to go immediately into the money.
- Divergence means a detour, but not necessarily a new trend.
- No-one knows what will happen in the markets.
- Standing aside is a position.
- Subordinate your will to the will of the market.
- Large ranges beget small ranges, small ranges beget large ranges.
- Once a thing is set in motion, it tends to stay in motion.
- Sniper-rifle, not a shotgun.
- Cut your losses short, let your profits run.
- Only move stops in the direction of your position.
- Do not let a winner turn into a loser.
- Never add to a losing position.
- Forget losses quickly. Forget profits even quicker.
- Consistent behavior equals consistent results.
There are probably more, send ’em in…