Archives of “Sympathetic nervous system” tag

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A Psychological Checklist for Traders

  
Analysis, Education
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Here is a checklist that might be useful for self-evaluation:
1) Have you experienced one or more recent large losses in markets that shook you emotionally?
2) Have you experienced a recent painful loss in your personal life that has left you feeling more vulnerable in your finances and/or your personal sense of security?
3) Have you experienced a recent threat to personal safety that shook you emotionally, such as a violent attack or a serious accident?
4) Do you find yourself emotionally “overreacting” to what should be normal trading stresses and losses? Are you experiencing significant anxiety, frustration, anger, or depressed feelings when trades don’t work out?
5) Do you find yourself “overreacting” in your trading behaviors during what should be times of normal stress? Are you freezing up and not acting on your ideas or impulsively lurching into trades after losing periods in markets?
6) Do you look back on your trading and feel confusion, shame, or puzzlement over actions that you took that run completely contrary to your plans for the day?
7) Have you tried to reduce your emotional and/or behavioral reactivity to markets, only to see the same destructive patterns return during times of stress? (more…)

How bear markets affect our decision making

  
  Education
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READ THIS NOWAs of this Friday, the S&P 500 has gone 980 days without a 10% decline, according to Birinyi Associates, the fifth-longest such stretch on record. This past week’s nervousness, set off by the insurgency in Iraq and the surprise defeat of U.S. Rep. Eric Cantor, is thus the perfect pretext for investors to think about what they will do when the market takes a serious beating.

For, sooner or later, it surely will—and those investors who have honestly prepared for it will stand the best chance of surviving unscathed. In a downturn, you won’t be the same investor that you are now—unless you rely on rules and procedures, rather than willpower alone, to regulate your behavior.

New research shows that the kind of stress brought on by a collapsing stock market fundamentally changes how people make financial decisions. (more…)

1+11 Reasons Why Traders Fail

  
  Education
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  1. They have inadequate capitalization.
  2. They are using someone else’s system.
  3. They lack knowledge of the system’s performance.
  4. They are unable to sit through flat periods or drawdowns.
  5. They are unable to handle stress.
  6. They lack commitment.
  7. They experience drawdowns that are greater than their hypothetical testing.
  8. They override the system’s signals.
  9. Their ego prevails.
  10. Their system is overoptimized; they make additional rules to take out losing trades.
  11. They lack parameters for spike performance in markets.
  12. They lack diversification between systems and/or markets.
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