The Psychology of Trading
Note: Written for Professional Traders (hence the aggressive undertone).
I should have? If only I had?
Second only to learning the skills required in analysing price data and trading financial assets, these are undoubtably the hardest things to get your head around:
Second guessing yourself
Not all about the yield
How many traders have an abundance of experience, speak the jargon fluently, fundamentals on point, technicals check. Performance poor…
Second Guessing Yourself
If your mind isn’t right then you should stay far away from the exchange.
The work is done, you’ve found your asset – determined that’s undervalued and found an entry point. You know your strategy already, you’ve done this before many times but still that fear, that doubt, that sense of uncertainty kicks in…
Don’t Second Guess Yourself!
Once you’ve put your order on the book, take your eyes off the charts!
Whether you start punching your numbers into spreadsheets or switch screens to plant your stops or OCOs.
Whatever you do, take your eyes off the charts!
Don’t go switching intervals, closing at market and trying to reopen at the bottom. Not only are you making more work for yourself in keeping accurate trading records, you’re not learning from experience and creating a pattern of bad behaviour.
It’s hard, but we all do it.
Greed – by whatever name…
We all like to think we don’t have this horrible sin of never feeling like we’ve made enough… If your limit gets called and filled then be happy with your profits, punch the numbers into your spreadsheets and STOP!
It doesn’t matter that you were ‘right’ and the bull run continues, if your order got filled then you’re done with that trade.
Don’t go opening at market again ‘chasing the green candles’ and trying to pull out at the top. You’ll hate yourself by giving into this horrible lack of self-control when the market dumps so quickly you can’t click ‘Market Sell’ quick enough and all profits gone.
Each trade has to be calculated and executed before the foreseen event.
If your strategy is to jump on trends (or ‘Day Trade’) as they expose themselves then stick to that, but switching strategies due to market conditions is a recipe for disaster.
It is greed, doesn’t matter what you call it trader.
You suffer from it, we all do.
Drop the silly mind chatter…
‘But if only I had…, My stop loss was….’. Save these thoughts for your notes and don’t act upon them in the moment.
The reason why this is such a high paid profession with an alarming suicide rate is because traders often lose touch with the actual buying power of money.
Learn to step away, be happy with your results (however humble) and take notes of what you’ve learnt.
There will always be other ‘opportunities of a lifetime’!
Not all about the Yield
If you’re in finance you probably want to punch me in the face for that header. Now that I’ve got your attention I want to emphasise on what separates the real pros from the ‘YouTube experts’.
It’s the ongoing commitment to learning!
Humble yourself, as there’s always something to learn from each trade. Not only by retrospective observations in price moment and their relation to technical and fundamental cues but also…
Your attitude and mindset when opening and closing a position!
Can’t emphasise this enough:
If you don’t love working on an exchange…
If you’re not 100% committed to learning and growing as an investor/trader…
If you’re emotionally invested in returns (yield) over how you earned it (learning) then take a job application out at McDonalds!
All about self discipline.
*Personally, I have much more respect for McDonald’s employees than us traders.
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