Quote from IanMacQuaide:
Having a method you can trust ranks up there with trusting yourself.
W/out both, you're lost.
This is the first post I agree with (I've only read the thread from the beginning until this post I'm quoting). You need a method that is proven to work, and of course (since it won't always work) you need proper money management and this will solve all psychological issues. As far as I am concerned, I confused for about 10 years not knowing myself with not knowing the markets. I thought that somehow I was sabotaging myself, by not applying stoplosses and similar. I thought I had a subconscious desire to lose.
The truth is that if you don't know what the ideal stoploss or takeprofit is, you will not be consistent in applying it. In other words you won't be using any method, because you don't know what method works. This will be because once you applied a stoploss, and then the market proved it was a mistake. The next time you didn't apply it and the market proved you wrong again.
So how do we find out what method works, and apply such a method consistently?
The answer for most of us cannot be through discretionary trading. We don't have rational enough minds when we're investing money on which depends our life. Also, you will never be able to remember what works and what doesn't work - you won't be able to compute statistics correctly in your mind. And so, without a clear idea of what works, your actions will be influenced by your emotions at the time, because once you are in the market you lose your rationality. So your trading will get even worse. It's not like playing a board game, where you lose nothing and you can still keep calm and rational (like when you're playing the strategy game "Risk"). Once you open your position, for most of us, your rationality is gone.
So what you need to forget about discretionary trading altogether, and to go into automated trading.
What you need is back-testing a system, finding what works, including money management, and then, once you are positive that it works, you will use it. Nobody wants to lose money. Maybe most of us don't have the energy to develop an automated trading system, and they would rather look for psychological reasons. It's more appealing to read about psychology, than to buy data, configure tradestation, solve all sorts of bugs... spend years building your automated trading system.
Once again, if you don't know what works, no psychological work or self-control will help you make money. And if you know what works, you won't need any psychological work on yourself, because nobody will deliberately choose to lose money, by doing the opposite of what he knows to work.
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Now I read a few more posts, and I agree also with TraderZones. Many others are calling "psychology" things that it is not, such as "method", "money management", and even "following a system". There can be no serious discussion if you don't all agree on the terms we are using. "Psychology" has nothing to do money management, with following a system and so on. If you follow an automated system, there is no psychology involved at all. Or else we could go on and say that soccer is all about Math, and biology is all about rythm, and music is all about looks...
I mean we cannot say that mastering your psychology is a key to making money in the markets and then go on to say that psychology also means "automated trading", and "finding a method that works", and "money management". This is simply ridiculous. There's no point in writing, if we don't agree on some basic concepts.
