Psychology is a massive part of trading IMO.
As an intraday trader with great education. Even as clear as targets and timings were, it still took a great deal of experience/effort to overcome not reacting to market makers and/or weak levels that were in the way. There are many ways to trade I guess, however, the rules of timing, liquidity are things all of us must follow. Anyway as a swing trader (albeit micro swings) getting break even, reacting to SRs/MMs are strategy killers. Trusting in process and seeing targets achieved over and over again (after reactions) was the only way for me to become comfortable trading serious money.
You can have the greatest strategy in the world but experience is what will make you great. Unless of course you were born for this. Which not many are. I certainly wasnt, I can tell you. Good news is you dont have to be a wizard, just experienced.
In order to successfully avoid the many pitfalls presented by active trading, ample time and effort must be given to the honest assessment of oneís emotional, and psychological state of being.
Just finished up Non-farms and a good week so thought I'd continue on with my Psychology & Mentality posts. If you haven't read my first post on Psychology and the Blackjack analogy, I would recommend that as this continues on similar concepts.
Trader Core Beliefs & Managing your emotions
After understanding that trading is a probability based activity, the logical next step is to truly believe in 'uncertainty'. Bear with me on this one as I know it sounds all theoretical.
So what is believing in 'uncertainty', it is that deep within yourself you accept that the market, can and will do, whatever it wants and that no matter how strong the signals, indicators, price action are suggesting it should do one thing, it could always, albeit with a small probability, do the opposite. If you think about it, the market is just a collection of a lot of people expressing their opinions. That means:
How does this translate into trading? Most importantly you need to accept that if you make money, you are lucky. Sounds crazy but let's break it down. Your job as a trader is to put on good trades with edge (refer Psychology post). Your job is to put yourself into a favourable position, i.e. let's say 70% trade. Now if the 70% actually happens, great, happy days, but that occurrence has nothing to do with you. Simply, one or a group of people agreed with your view and moved the market in your favour. This reinforces the notion that outcome is irrelevant and once you've put yourself into a favourable position, your job is done.
Greed / Overconfidence
Ego / Stubbornness
Patience is also imperative.
The philosophy of trade and the habit of observing not only money management, but also the rules of personal psychology (being calm, being confident, being able to take losses and not losing control from victories, etc.) is hard work. Only a fairly experienced trader can trade without emotion.
It is human nature to look guilty. For the trader who lost, the market or the broker acts guilty. It is very important to understand that the only thing that led you to failure is the wrong calculation. Probably just a mathematical mistake.
Cool thread @minter, im subscribed
Thanks for your thread Minter. Insightful.
It's been a very busy month and a good one at that. In terms of 'classroom' material I've already posted all that I teach from a psychology / mentality point of view, as mentioned earlier, I trade a very different market (AUS/US bond futures for those curious) and so my trading strategies and tactics are not very applicable at all to the FX market. If anyone has any psychology / mentality questions I'd be happy to help.
Not sure why I started another thread when I could've just put this link in here (don't know how to delete a thread neither).
The link below is an interview which reinforces the psychology and mentality concepts I've mentioned as well as various breakthroughs, lessons and other topics related to a trading career. There are some discussion regarding specific bond trading strategies which you can skip if irrelevant to you as well as the last 20 mins which talks about Minter Capital as a firm.
So true, your analogy is totally correct and Iíve noticed this with some of my friend, who get excited by the idea of trading, they think that they can make good money in a few days and then they are disappointed and give up. It takes a lot of efforts to work on good and quality trading rather than enjoy fast wins.
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