- Trading is a mind game
- Last Online:
- Feb 15, 2015
- Using Local Time:
- Joined Forex Factory:
- Jun 2012
Input by ForexMGames
- Trading From:
- Trading Style(s):
- Event Driven, Price Action, Technical Analyst
- Favorite Trading Book:
- The Market Wizards Series
- Visit me @ www.forexmindgames.com
Trading is a mind game. In order to win consistently in this game, we have to know what the big players (ie the operators such as hedge funds, international banks, central banks) are thinking. And we need to discern whether the small players (ie the retail traders) are trading with the big operators or not.
Ever since trading has shifted away from the floor pits onto the electronic screen, trading has become a mind-reading game. On the floor, we can hear, feel and breathe the excitement, boredom and sheer panic by the floor traders. We cannot literally replicate any of these on the computer screens any more. We can only gauge the mood of the traders via price action on our charting platforms. So in essence we are playing electronic versions of mind games with the market, with other traders, and with the price action.
When the market moves, we must inject our own emotions into that move. For example, while ECB Draghi is making a speech and EURUSD is dropping like a rock at the same time, what should we think? We say to ourselves, "Aha! I know what the market is thinking. The large players are selling and dumping their positions. I will join in the shorting."
Treating trading as a mind game forces us to think in a higher order of thinking. Here are the 5 orders of thinking.
1st order of thinking - we have to think for and of ourselves. I am feeling bullish today. I am not feeling well yesterday.
2nd order - we think of the meaning of the past and current price action. Is this price action a real breakout? Is this trend line going to hold?
3rd order - we think of what the retail traders are thinking. Do i trade with or fade the retail traders?
4th order - we think of what big operators are thinking. Do i know where the big operators are pushing the price to? If i know, i can follow them.
5th order - we think of the market as one single entity. The market is a living and breathing creature. It is alive! Think of the market as your girlfriend or wife. Or if you are a woman, think of it as your boyfriend or husband. Get to know your market as your girlfriend / wife. Talk with her. Understand her moods and emotions. Is it that time of the month already? Spend quality time with her. Buy her gifts. Bring her to her favorite restaurant. After spending years with her, you will gradually be able to predict her next move.
Likewise, after you spend years observing the market movements, you develop an intuition for where it is going. This is the highest order of trading. Trading is truly truly a mind game.