An very detailed overview of trading psychology worth the read

[Tradex]

Tradex, It might be that easy for you but it’s not for most traders. If it was the success rate would be a lot higher!

The success rate is very low precisely because the overwhelming majority of traders do not use a fully backtested trading system to begin with, simple as that.

 

[Andrea Wylan]

The success rate is very low precisely because the overwhelming majority of traders do not use a fully backtested trading system to begin with, simple as that.

I’m sure that’s the case with some traders. I just know from my work traders how much the mindset plays in to their success and how many of us traders have challenges with our mindset. It’s just part of being human!

 

[Tradex]

It’s just part of being human!

I hear you, Andrea.

And yes, we are all human.

But highly successful traders trade with zero emotion. They get a signal from their backtested and profitable system, place their stop - and sometimes the target, if known in advance - and just let the market do its thing.

And then, win or lose, they just move on to the next trade, totally unaffected by the outcome of each position.

But, again, this type of confidence and almost military discipline can only be gained if the trader is using a thoroughly backested trading system.

Otherwise his/her failure, as a trader, is virtually guaranteed.

 

[Andrea Wylan]

I hear you, Andrea.

And yes, we are all human.

But highly successful traders trade with zero emotion. They get a signal from their backtested and profitable system, place their stop - and sometimes the target, if known in advance - and just let the market do its thing.

And then, win or lose, they just move on to the next trade, totally unaffected by the outcome of each position.

But, again, this type of confidence and almost military discipline can only be gained if the trader is using a thoroughly backested trading system.

Otherwise his/her failure, as a trader, is virtually guaranteed.

I totally agree with you. I would just add that most traders will not achieve that level of discipline without dealing with their mindset (issues from past traumas, beliefs, etc.).

 

[Tradex]

I would just add that most traders will not achieve that level of discipline without dealing with their mindset (issues from past traumas, beliefs, etc.).

No doubt.

On that same subject, numerous studies have shown that women are much more disciplined when it's time to cut their losses short!

Why?

Because they usually leave their ego at the door, and don't even try to "teach" Mr. Market a lesson, something we men struggle with, generally speaking (LOL)

Have a pleasant day Andrea.

 

[Steve Alexander]

Before you read I have to know and please be honest. Do I have a gift to type and effortlessly stream my sentences together to forum tranquil harmony? I have zero education accept from other forums 4 years ago and stop trading 4 years ago. today is my first day doing anything whether it be research etc. about stocks. read this give me your honest opinion. remember your words will shape a human life's outlook on life itself. Please Transend me


All of this was typed by me with my own ideas


Trading Psychology refers to the mental and emotional state a person utilizes to dictate the outcome of a successful trade (Good/Positive psychology) vs a unsuccessful trade(Bad/Negative psychology). Alike normal psychology trading psychology is very much similar, taking into part individual character traits and behaviors that a person uses to make their trade.


( A good stock trader should have a professional psychologist once a week to lecture them about work related stress and fatigue, the impact of bad trades they might of made, how that impact is effecting their overall emotions and behaviors, and many much subjects. Having a professional psychologist gives you the benefit of insight to your unnoted patterns, actions, thoughts, feelings, emotional state, etc. Can help you make a decision if you need to go on a business retreat for a week instead of trading(while if you want you could spend that time trading online with fake currency as practice).


A business retreat is a trip to an exotic locations where you can unplug. No electronics etc. Your goal is to get your mind calmed down. You can develop techniques with your psychologist and strategies to utilize on your retreat. These are just some of the benefits of a personal psychologist.) Make friends with hope and regret stock trading is a situation where "too much hope can get a man killed in here".



Trading psychology is the emotional component of investor's decision making process which may help explain why some decisions appear more rational than others.


Fear and greed are emotions that you need to confront, exert your control over ether before they exert control over you. Take up Tai-Chi to learn how to control the flow of energy, and be one with yourself at any moment. Taking something like Tai-Chi gives you control of your body which transfers to control of your feelings/emotions which translates into a better trading psychology (positive trading psychology). Think of trading psychology as Heaven and Hell. Positive trading psychology is heaven(positive energy) negative trading psychology is hell (negative energy)


Try something I just thought of which is radical and groundbreaking. Try listening to music the entire tradinig session. Not just any music,"music to inspire creative people" "relax daily" "motivational music" "happy uplifting music". Music is truly a beautiful gift from God. So beautiful that I want to have sex with it after a date AND CALL music back!!!! But seriously music transcends you to a place in our current state or reality to a place where nothing can hurt you, nothing can break your resolve, nothing can break your will power, you will make it out more successful than before..


Affirmations- Affirmations are very important to any person period. When I am rich enough I am going to advocate that we test it in some "pilot" high schools with digital picture frames. This hopefully as I envision it will lead to an entire mandatory life skills class about how to deal with life in all its beautiful complexities. Its sometimes that the most complex of times, times where it all seems to fail and your on your knees screaming Abba Father and you just want to quit. But by some miracle you find the strength to get up, you thank God, and continue on your journey of life. That is what life is all about that paragraph right there those of you who understand it teach this to 1 person and change the world. Its like a rate of return 1% is better than 0% changing the world is no different 1%change from you might lead to the next apple or tesla lol. Try and do affirmations everyday actually know scratch that DO affirmations everyday as you are a winner with a never give up attitute. History is marked by failors. Athelets failing, inventors failing, buisness men failing, but it just takes that one moment that one success to make all those failures null and void.




Positive trading psychology- Here is an example of positive trading psychology. Today I am going to open strong with overwhelming confidence in any situation so called "life" wants to throw at me. I see my failures as challenges and challenges as lessons to be learned "life lessons". If I loose profit today I have to remember that this is normal infact it would be a sign of market instibility if I didn't loose profit sometimes. The stock market is like life sometimes you win sometimes you loose but you embrace everymoment and every oppertunitiy and you will be exhalted and transended to a higher pane of excistance beyond the cosmos. Some other postive trading psychology is nutriutional. What we eat plays a huge part in our mood, our confidence levels, our postive mindsets, our performance, our everything. Hire a nutritionalist and here the best part you can bill it as a buisness expense as its to help with your work performance so theres a forum of profit.


Negative trading psychology- Here is an example of negative trading psychology. I can't get over my losses yesterday how will I ever explain this to my spouse and if I lie to her I become lost and detached from her. Stock trading is becoming overwheling vs The stock market is overwheling my senses into pure undiscovered treasure. Which one would you rather be. We all have free will and choice for a reason. Make your choice now and stick to it. Never give up in life. Watch motivational music, motional speeches, tony robins, hell I'll even pay for 1 person next month to get a free tony robins course complelly on my dollar not yours. When you have destiny and discover it you become beyond happy all the time. It's like breathing for the soul

I think I am a "successful" trader. I make over 100% ROI, annually. I disagree with almost everything in your post. For example, music doesn't work for everyone, and affirmations work for nobody.

 

[Will90]

While I appreciate the sentiment behind your message, but I do not think it will work normally when it is been said and done.

 

[oraclewizard77]

You want to have multiple streams of income so that unless you are already a successful trader, you are ALWAYS making money.

This can be from a job, a gig, part time work, whatever. This way, when you do trade it will not be such a negative to have a losing day since you already made money that day.

You also want to have a plan and be disciplined so that you can carry out your plan without emotions. I agree with the other poster that said think that you are trading someone else's money or for a company that told you it does not care if you make or lose money as long as you follow these rules that have an edge.

If you are trading 2 contracts, your plan could be to take a small loss or win on the 1st contract, then look for a bigger win on the 2nd contract. This might be a better strategy than doing 1 contract and then averaging down if the trade goes against you and then taking a big loss if multiple contracts are stopped out.

 

[murray t turtle]

You are making it more complicated than it has to be. Trading psychology, or the fear of losing or event the fear of missing out are real fears a stock trader has. So, how do you remove the fear? The answer is reducing the risk to manageable levels where any loss will not faze or scare you. Think about it, the only thing you can control in stock trading is the risk you take when you place any trade for that matter. You do not have control over how much monies you will make or even know ahead of time, you will make x amount of dollars. Yet, risk you can control before you even place a single trade. For me, risk no more than 2% per trade and if you are a newbie, take no more than 5 trades all at once. That puts your maximum risk at 10% of your capital on a worst case scenario, assuming you lose every cent and experience a 100% loss of capital on those 5 trades. Using stop losses, you further reduce your risk to even less than 2% most times, it will just be 0.25%-0.50% per trade you end up losing. Now, I assume you have a viable trading system giving you an edge. You got to figure out which stocks you are going to trade and where you are going to enter and exit. Once, you take care of the risk, the psychological stress is gone.

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Good . DR Van Tharp interview in Jack Schwager Top Traders book is good also.
Plenty of businesses do not make money\ but some do. Especially if they dont want to work for someone else..................................................................................................................,.

 

[meatyoaker]

I hear you, Andrea.

And yes, we are all human.

But highly successful traders trade with zero emotion. They get a signal from their backtested and profitable system, place their stop - and sometimes the target, if known in advance - and just let the market do its thing.

And then, win or lose, they just move on to the next trade, totally unaffected by the outcome of each position.

But, again, this type of confidence and almost military discipline can only be gained if the trader is using a thoroughly backested trading system.

Otherwise his/her failure, as a trader, is virtually guaranteed.

Hey that’s exactly how I trade! Nice!

And yeah I’ve got plenty of daddy issues. I’ve also been abused by most of the women in my life. Kinda going through a quarter-life crisis right now. Some days I even have a mental breakdown and start crying. But I never let my emotions affect my trading or override my tested systems.

In fact, I try to avoid trading as much as possible. I only check my PnL sparingly, maybe if I'm curious how I'm doing at the end of the week. Before bed, I usually just take a minute to check that my orders were placed according to my systems, then just walk away and don't look at it again until it comes time to place orders the next day lol.