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Psychological Aspects Of Handling Profitable Trades – In my opinion, trading is 90% psychology. While we as traders can have a great system, the way we execute the system is determined by our psychology and state of mind. The way we evaluate our performance and our trading is determined by our emotions. You can see the best setup, but if you’re coming off a losing streak, you might hesitate or under-trade because you lack confidence. And if you’ve just had a good run, you’ll often end up taking bad trades because you’re overconfident. When you exit a profitable trade too early or close a loss too late, emotions also drive your decisions. And of course, big problems like revenge trading, hunting, or over-taking are also a product of our emotions and our inability to control them. But I believe one particular trading emotion stands above them all: patience. Or better yet lack of patience. In my last podcast I talked about why I believe patience is the most important trading emotion/skill. What do you think? Let me know in the comments below and I’d love to hear your thoughts on patience and sentiment trading in general.
Posts, I want to take the opportunity to delve into important topics that I haven’t talked about much in our…
Psychological Aspects Of Handling Profitable Trades
What does it take to become a successful trader? Having mentored traders for the past 8 years, we have seen many traders come and go. But we have…
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In this week’s edition of the chart of the week, I want to zoom out and look at the broader market as there have been some significant changes recently… Skip the trading bottleneck with these seven key trading tips and advice from over 10 top traders and investors.
Many successful professionals in other fields struggle when trying to trade for a living. One big reason is that trading has several key aspects that go against our intuition. Here you will find seven trading tips that explain these aspects and help improve our chances in this worthy challenge.
If you pay attention to what top traders are saying, you will find common themes such as the importance of risk management, trading psychology and emotional resilience. These are general topics that are important to all traders.
Although these tips may defy our initial intuition, they are based on the experience of experienced top traders and bring us closer to the reality of trading.
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(Instead of introducing the traders as we discuss what they say, there is a list of links at the end of this article to learn more about the traders quoted.)
Many people get so caught up in the markets that they lose perspective. Working longer does not necessarily mean working smarter. In fact, sometimes it’s the other way around. Martin Švarc
Most jobs are designed 24 hours a day. Spend X hours and we’ll pay you Y amount. This relationship between time spent and reward is so common that we take it for granted in everything we do.
Most importantly, the market is not under our control. Of course, we can decide to spend more time trading, but if the conditions are not optimal, this will do more harm than good.
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The desire to keep going regardless of fundamental conditions is responsible for many of the losses on Wall Street even among professionals who feel they need to take home some money every day as if they were working for a regular salary. Jesse Livermore
As Jesse Livermore said, we need to get away from the “regular wages” mentality and respect fundamental market conditions.
Think it over. If the market does not offer you a trading advantage, it is best to stop trading.
If most traders learned to sit idly 50 percent of the time, they would make a lot more money. Bill Lipschutz
How To Master Your Mind: A Guide To Trading Psychology
Don’t think about what the market will do; you have absolutely no control over it. Think about what you will do if it gets there. William Eckhardt
William Eckhardt apparently thought he had a game plan for every possible scenario. Your trading plan is all about you – how
But it goes beyond a detailed technical trading strategy with entry and exit rules. This focus on you extends into your mind.
Most people think they are playing against the market, but the market doesn’t care. You’re really playing against yourself. Martin Švarc
The Most Important Trading Emotion
We tend to focus on market behavior when trying to figure out how to trade profitably.
But in reality, you should spend even more effort and time figuring out your feelings, instincts, and reactions. This is why trading psychology is so important.
There are only a few traders who have realized that they themselves are fully responsible for the outcome of their actions. There are even fewer who have accepted the psychological consequences of this realization and know what to do about it. Mark Douglas
Once you understand your role as a trader, you will see that you must take full responsibility for your trading. However, as Mark Douglas pointed out, this is a challenging endeavor.
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Making money is the goal of trading, so it makes sense for new traders to focus on making money in the markets.
Anyone can make money with luck. But it takes more than opportunity to make money without risking failure.
Crash risk is the probability of destroying your trading capital to the point where you can no longer execute your trading plan. The key is to stay in the game long enough to profit.
I always think about losing money instead of making money. Don’t focus on making money, focus on protecting what you have. Paul Tudor Jones
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An obsession with risk and how much you can lose is a characteristic of professional traders and investors.
Not surprisingly, leading investor Joel Greenblatt applied this risk-based mindset to his position sizing decisions. (How to logically set a stop-loss?)
My biggest positions are not the ones where I think I will make the most money. My biggest positions are the ones where I don’t think I will lose money. Joel Greenblatt
This explains why Bruce Kovner proposed cutting our position in half. This advice may sound simplistic, but it highlights the real and common problem of overtrading.
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Risk management is the most important thing to understand well. Undertrade, undertrade, undertrade is my second tip. Whatever you think your position should be, at least cut it in half. Bruce Kovner Tip no. 4: The demand for certainty is not productive.
Safety means a lot to us and we naturally seek certainty in our endeavors. And for the most part, this approach to life works quite well. Security in life allows us to focus our energy to achieve more.
However, this natural tendency to demand certainty is contrary to market behavior and can harm trading performance.
The most effective and functional trading belief one can acquire is “anything can happen”. In addition to the fact that it is the truth, it will act as a solid foundation on which to build all the other beliefs and attitudes that a successful trader must have. Mark Douglas
The Trader’s Mindchat Show
Accepting uncertainty is critical for all market participants, whether you are a day trader or a pension fund manager.
As a trader, if you insist on certainty and want one right answer, you will be stuck in a vicious cycle.
There is no single market secret to be discovered, nor is there a single correct way to trade the markets. Those looking for the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer. Jack Schwager
I trust Jack Schwager on this one. He has interviewed dozens of top traders and I highly recommend his Market Wizards series.
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In the world of money, which is a world shaped by human behavior, no one has the faintest idea of what will happen in the future… Thus, a successful trader does not base himself on what is expected to happen, but instead reacts to what happens. Linda Raschke
However, intelligence is secondary to successful trading. Peter Lynch has a more specific opinion on how academically competent traders need to be.
The key to trading success is emotional discipline. If intelligence was the key, there would be a lot more people making money trading. Victor Sperandeo
If you have enough trading experience, you would be facing problems like over trading, losing streaks and revenge trading. So you will agree with Victor Sperande. But we can use a reminder from time to time.
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If you are new to trading, I may not have convinced you about the importance of the emotional side of trading. But keep this idea in mind and hopefully it will shorten your search for the Holy Grail.
(Here we mean conventional intelligence. However, if we accept the theory of multiple intelligences, traders would benefit from high intrapersonal intelligence.)
Tip no. 6:
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