Category: Trading Psychology

Psychological and behavioral issues almost always limit success in trading. Let us examine the qualities which facilitate or enhance trading results. The first among these is Discipline. You probably have heard the words “discipline” hundreds , if not millions of times. It is probably one of the most worn out terms in all of trading. The issue is that merely saying the word is one thing , but understanding its true definition operationally , or on a behavioral level , is a far more important thing.

Discipline is not just the ability to develop a good trading plan and stay with it , it is also the ability to know when your trading plan is not working and therefore , knowing when to abandon it.

Discipline is also the ability to give your trading positions sufficient time to work in your favor , or for that matter , sufficient time to work against you.

Discipline is the ability or having the courage to trade again once you have taken a loss. Discipline is the ability to ignore …

When we face defeat in trading we traditionally encounter grief. This is natural. This emotion is unavoidable and can be handled like all other emotions. It merely requires the undertaking of appropriate mindset and strategies.

The first stage in dealing with grief is to simply acknowledge that something has gone wrong. When things go wrong - Deal with it …

If we possess the rationality to be a trader then we will not be able to hide from what has happened. Denial is part of the arsenal of the amateur trader , not the professional. A loss is a loss and there is nothing we can do to alter this. Acceptance is the key to this first stage.

In the amateur trader , denial will give way to anger. This anger will be directed at almost any inappropriate source. Amateurs become angry at their system , the advice that was taken or at the black box sitting on the desk. They will blame almost anything , including their dogs …
Anger gives way to personal recrimination which in …

The following are some of the common ” I should have … ” syndrome.

I should have gone short when I wanted to. My analysis was correct that the market was topping.

I should have gone long when I wanted to. My analysis was correct that the market was bottoming.

I should have used a stop loss …

I should have added few more contracts to my position …

I should have done what my charts indicated …

I should have listened to the rumors …

I should have gone golfing …

Be honest to yourself and admit if any of these in their stated form or in other variations happened to you before …

Hindsight is easy , correct ?

Trading is a psychological game. After all the research and back testing is done , and , after all the trading systems have had their turn at bat and after all the market experts have given their forecasts , the fact remains that what traders actually do in comparison to what they should do are two very different things.

Many traders are overloaded with …

There is no shame in not trading when you should not be trading. This concept is one that you should cozy up to if your objective is to reach the next level of trading mastery and success. We have ups days and downs days , as far as level of energy and personal emotion goes. There are many traders who are convinced that they can trade regardless of how they feel. Those traders who have the discipline to take themselves out of the game when they are not up to par have fewer days they have to do so because they figure out ways to prevent occurrences.

The shame is in doing something that you are not prepared to do while putting yourself and your capital at risk. The best way to insure that you answer the question of whether or not you should trade today is to be disciplined. The routines of self-discipline that address your physical and emotional well being are your best defense against bad trading days. They are also the means to insure that you follow …

I spoke with one of the traders who read my trading blog. It was a good communication and also served as a reminder for me to stay focused in what I am currently trading. This trader was talking about few markets that he wanted to trade …

I tried doing the same idea when I first started my trading journey. Later I realized that each market had its own “personality” which is shaped , to a great extent , not only by the inherent characteristics of the market , but by the combined personalities and mass psychology of the major players who were involved in the market , both from the speculative as well as the hedge standpoint.

Staying focused and seeing the markets and ourselves from the psychological point of view is the key to success in trading. We have lots to learn about our own psychology as a trader.

I am sure most of us had came across what we once thought was a “perfect system”. Every trading seminar we attended , or every …

In the stock trading and investment world , there are two opposing philosophical camps. The first camp subscribes to the notion that ” the trend is your friend ” and that you must identify the trend and ride it in the direction that it is moving. Most traders fall into this category. A trend-rider is an integral part of the crowd , sensing its direction and merging with it. There is a compelling logic to this philosophy because it works perfectly well in the right context. Trend riders can do very well when they buy into a rallying market.

The second camp subscribes to the notion that , in order to make real money , you must do what is contrary to the crowd. Thus , to be a contrarian in the market means that you identify the trend and trade in the opposite direction , buying on widely perceived weakness and selling on widely perceived strength. Do you have the guts to trade in this way ? Not for me … There …

The psychology of trading is about the psychology of beliefs , strategies and behaviors. Trading is a mental and physical game which provides an intellectual with physical and emotional challenge of the highest order. This is absolutely true …

What is your reason for trading ? How does losses affect you ? It all depends on your psychological make-up. If you have fear of losing or fear of failure , this may have built upon itself. On the other hand , if you are more resourceful in such circumstances , losses can be an excellent opportunity for learning.

Our psychology determines the way we trade , the way we handle risks , how we react to volatility , and how we deal with losses if they occur. It is between maximizing profits or minimizing losses. Trading is really about maximizing profits at a managed level of risk. Proper education and hard work as well as analysis can help us understand and minimize risk.

Psychological make-up does not only include emotion , but also philosophy of life. …

Trade exits can be just as important , if not more important , than trade entries. Learning to love to take loss is an absolute necessity if you were to be successful in the trading market. Basically you need to reach a psychological stage whereby losses should not bother you much , so long as you act fast to be out of the market when the trade no longer represent a profitable opportunity. No one is going to be happy to have a losing trade , but you should be happy to be able to minimize loss before it ruin your capital.

Many traders learn this the hard way. They end up losing their trading account before they realize the importance of preserving capital and the concept of stop loss.

Just like a trade entry , the window of opportunity is rather narrow for trade exit too. Once you confront the possibility of being wrong , and when it is time to …

Neuro-Linguistic Programming , NLP - In 1972 , in California , Richard Bandler and John Grinder began the study of excellence in human language and behaviour. They listened to , observed and felt the behaviour of three great therapists - Milton Erickson , Fritz Perls and Virginia Satir , each a giant in their own field. They analysed and disaggregated the patterns of language and behaviour and then set about modelling them , to create tools and techniques for anyone to understand , resolve and change their own behaviours at will.

Now , more than three decades on , NLP Practioner is the fastest growing profession in the world. People are transforming their own lives and facilitating lasting change in others’.

NLP gives you the power to understand the critical psychology that sorts winners from losers in the markets and achieve lasting change in your life. A good poker player understands probability , but the world champion understands people. And trading in the world’s financial markets is no different. Analytical techniques and computer programmes help …

Online trading is very exciting , to beginners at least. When I first started trading “live” with real money , my excitement level was super high. My eyes never leave the computer screen and my heart beat was as fast as every tick and every pulse of the price bar movement. Mind was totally filled with excitement , anxiety , stress , fear … Obviously , that is not what trading is all about.

But there are still people who want to seek excitement by doing trading online ; and I feel that is one of the worst reason to participate in the stock market. For many traders , this type of trading becomes akin to purchasing a lottery ticket. Each action is motivated by an energising and electric fantasy. Buying a lottery ticket is like buying a Dream and buying Excitement. Buying lottery occassionally might be alright , I do that too . But to consistently throw money into the stock market just for excitement and hope for luck is …