I bet the best traders on ET do this...

One of the main reasons (not the only reason) that traders are not able to apply proper money management, proper capitalization, proper trade management, understanding the true cost of a trade et cetera is due to underestimating the importance of trader psychology.

A trader that has read and learned proper money management will still need discipline to apply it consistently.

In addition, most traders are not suitable for trading prior to their first trade and it's mainly because they've WAY underestimated the importance of trader psychology.

Can these types of traders change?

Of course they can and hopefully before they've burned through their trading capital.

Also, don't make the classic mistake of thinking one (trader psychology) is more important than the others (proper money management, good strategy et cetera) because that's not how profitable traders look at it.

Profitable traders see that there's an interdependence between many different variables (psychology, money management et cetera) that allows them to continue their success as their trading plan adapts to market conditions that's forever changing.

Simply, remove, ignore or get fixated upon one thing and you'll self sabotage your trading as most traders do.

Yeah, sure there are times in our trading careers where one of the variables has more of our attention but that should only be due to the fact it's something we're learning for the first time along with trying to merge it into our trading plan with all those other variables.

Last of all, there are different types of edges as noted in past threads about the topic of what is an edge. Therefore, don't make the mistake of thinking an edge is only something related to your strategy and this gets back to issues involving trader psychology.

P.S. My biggest edges has nothing to do with entry or exit signals and the edges are key to my current longevity in my career as a trader.

Mark
 
Quote from TraderZones:

psychology is WAY over rated. Trading is a negative sum game. You are fighting slippage, commissions, self-education, fees, broker or personal errors, disruptive market events, various taxes, inherent risks of trading, your own time, etc.

You can go to a casino, and have the greatest self control and calm. And you will still lose. The only one who MAY beat the house regularly is someone who is an expert, such as a card counter or poker player, at a game that is not completely chance (roulette wheel, eg).

A true market outperformance edge is number one. No amount of studying will allow you to win, unless you have a quantifiable ability to make more than you lose, over a long time period

Number two, is money/trade/portfolio management. Once you learn how to make money, you need to master the Risk:Reward nature of trading. Controlling leverage, stop losses, not overtrading, etc. help you KEEP your winnings

Psychology wise, you can have the best psychology traits in history, but you will not be successful until you master an edge and proper management.

I would far rather be depressed with a serious edge, than serene without one.
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I cant help but agree with this guy more. If psychology is the most impt part, all the algo traders, stat arb people would be dead. I personally think that psychology is important only if you allow yourself to make lotsa discretionary decisions in your trading. Because your decisions are the output of both your rational cognitions and your emotions. Your psychology will always affect your decision on whether the market is going up or down.

http://finance4traders.blogspot.com/2009/06/5-things-you-need-to-know-when-creating.html
 
I believe there are two equal parts in trading, psychology and method. A well back tested method producing less than 15% losing trades is min for me to day trade, but that is only if I trade perfectly which is where the psychology comes into play. After nearly three decades of trading, what I once thought was important in year one of designing many sigals and high winning % is least important, and low losing %, one signal and dozens of rules for money management is most important to me now. I have found that if my method cannot be computerized and backtested 3000 plus sample size, all the psychology in the world is not going to allow mw to have warm and fuzzy feeling to trade it.

Handle
 
Quote from Handle123:

I believe there are two equal parts in trading, psychology and method. A well back tested method producing less than 15% losing trades is min for me to day trade, but that is only if I trade perfectly which is where the psychology comes into play. After nearly three decades of trading, what I once thought was important in year one of designing many sigals and high winning % is least important, and low losing %, one signal and dozens of rules for money management is most important to me now. I have found that if my method cannot be computerized and backtested 3000 plus sample size, all the psychology in the world is not going to allow mw to have warm and fuzzy feeling to trade it.



Handle
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Why would you need a system with 85% winners??? You should be able to be successful with less than 50% winners---much less.
 
Quote from Buy1Sell2:

Why would you need a system with 85% winners??? You should be able to be successful with less than 50% winners---much less.
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Why should anyone trade a system with less than 50% winners when can make money with 85% winners???
 
Quote from aiyah_mark_lah:

a coin flip is 50%, a system should do better than that...no ?
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Winning percentage is one of the lowest priorities in a winning system. However, prudent risk management is paramount.
 
the proportion of psychological threads on this board is directly propotional to the amount of successful traders on here.
if your not at least breakeven before commish u don't have that part sorted out yet, needs more work ! - we all know its 95% between the ears dont we :eek:
 
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