trading-psychology-discover-7-secrets-to-improve-discipline

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The Importance of Trading Psychology

Containing fear and greed are key to making money

Many skills are required for trading successfully in the financial markets. They include the abilities to evaluate a company’s fundamentals and to determine the direction of a stock’s trend. But neither of these technical skills is as important as the trader’s mindset.

Containing emotion, thinking quickly, and exercising discipline are components of what we might call trading psychology.

There are two main emotions to understand and keep under control: fear and greed.

Snap Decisions

Traders often have to think fast and make quick decisions, darting in and out of stocks on short notice. To accomplish this, they need a certain presence of mind. They also need the discipline to stick with their own trading plans and know when to book profits and losses. Emotions simply can’t get in the way.

Key Takeaways

  • Overall investor sentiment frequently drives market performance in directions that are at odds with the fundamentals.
  • The successful investor controls fear and greed, the two human emotions that drive that sentiment.
  • Understanding this can give you the discipline and objectivity needed to take advantage of others’ emotions.

Understanding Fear

When traders get bad news about a certain stock or about the economy in general, they naturally get scared. They may overreact and feel compelled to liquidate their holdings and sit on the cash, refraining from taking any more risks. If they do, they may avoid certain losses but may also miss out on some gains.

Traders need to understand what fear is: a natural reaction to a perceived threat. In this case, it’s a threat to their profit potential.

Quantifying the fear might help. Traders should consider just what they are afraid of, and why they are afraid of it. But that thinking should occur before the bad news, not in the middle of it.

Fear and greed are the two visceral emotions to keep in control.

By thinking it through ahead of time, traders will know how they perceive events instinctively and react to them, and can move past the emotional response. Of course, this is not easy, but it’s necessary to the health of an investor’s portfolio, not to mention the investor.

Overcoming Greed

There’s an old saying on Wall Street that “pigs get slaughtered.” This refers to the habit greedy investors have of hanging on to a winning position too long to get every last tick upward in price. Sooner or later, the trend reverses and the greedy get caught.

Greed is not easy to overcome. It’s often based on the instinct to do better, to get just a little more. A trader should learn to recognize this instinct and develop a trading plan based on rational thinking, not whims or instincts.

Setting Rules

A trader needs to create rules and follow them when the psychological crunch comes. Set out guidelines based on your risk-reward tolerance for when to enter a trade and when to exit it. Set a profit target and put a stop loss in place to take emotion out of the process.

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In addition, you might decide which specific events, such as a positive or negative earnings release, should trigger a decision to buy or sell a stock.

It’s wise to set limits on the maximum amount you are willing to win or lose in a day. If you hit the profit target, take the money and run. If your losses hit a predetermined number, fold up your tent and go home.

Either way, you’ll live to trade another day.

Conducting Research and Review

Traders need to become experts in the stocks and industries that interest them. Keep on top of the news, educate yourself and, iif possible, go to trading seminars and attend conferences.

Devote as much time as possible to the research process. That means studying charts, speaking with management, reading trade journals, and doing other background work such as macroeconomic analysis or industry analysis.

Knowledge can also help overcome fear.

Stay Flexible

It’s important for traders to remain flexible and consider experimenting from time to time. For example, you might consider using options to mitigate risk. One of the best ways a trader can learn is by experimenting (within reason). The experience may also help reduce emotional influences.

Finally, traders should periodically assess their own performances. In addition to reviewing their returns and individual positions, traders should reflect on how they prepared for a trading session, how up to date they are on the markets, and how they’re progressing in terms of ongoing education. This periodic assessment can help a trader correct mistakes, change bad habits, and enhance overall returns.

Mindset: 7 Secrets to Tap Into Your New Psychology of Success and Build Powerful New Habits, Confidence and Self Discipline for Powerful Growth In Your Health, Wealth, Love and Happiness

Описание

What’s Stopping You From the Success that You So Desire? Is It Your Mindset or Your Skillset? Continue Reading.

We’ve all heard that success is 80% mindset and 20% skillset. It’s about the psychology, not about the mechanics. This book “Mindset” goes deep into the mysteries of the mind, and helps you to know yours better. The ability to change one’s mindset is already present in all of us. Change is not a matter of just motivation, it’s about education. Motivate a fool and he’ll be a. motivated fool. You see, that just won’t work.

What do most self made millionaires have in common, that the average person doesn’t? Their strong self-discipline and confidence. These two ingredients are key to a powerful cocktail of a successful mindset .

“Once Your Mindset Changes, Everything On The Outside Will Change Along With It.” – Steve Maraboli

The brain represents 2% of your total body weight. Nevertheless, it consumes 20% of your energy. It’s amazing how powerful our brain is. It never rests, not even when we sleep. If you learn how to change your thoughts into positive ones, and have a strong mindset that fits the goals you have, your life will be completely changed. With this book, you will learn 7 essential secrets that are crucial to bring more health, wealth, love, and success into your life.

Learn how to look into yourself and analyse your thoughts, Replace them with positive, constructive and ambitious thoughts. A better life is obviously, possible. You attract it with the power of your thoughts. Instead of wondering how life looks like on the greener side, step up and take control of your own life now.

Act Now by Clicking the ‘Buy Now’ or “Read Now” Button After Scrolling to the Top of This Page.

P.S. What’s holding you back? In life, most people are stopped either by their fear or their laziness. Remember, the best investment you can make is in yourself. Invest the time and the price of less than a coffee to make a quantum leap in your life, wealth, love and happiness. Act Now!

Отрывок книги

Mindset

7 Secrets to Tap into Your New Psychology of Success and Build Powerful New Habits, Confidence and Self Discipline for Powerful Growth in Your Health, Wealth, Love and Happiness

© Copyright 2020 by Timothy Willink – All rights reserved

No part of this book may be reproduced in any form without permission in writing from the author. Reviewers may quote brief passages in reviews.

Disclaimer

No part of this publication may be reproduced or transmitted in any form or by any means, mechanical or electronic, including photocopying or recording, or by any information storage or retrieval system, or transmitted by email without permission in writing from the publisher.

While all attempts have been made to verify the information provided in this publication, neither the author nor the publisher assumes any responsibility for errors, omissions, or contrary interpretations of the subject matter herein.

This book is for entertainment purposes only. The views expressed are those of the author alone and should not be taken as expert instructions of commands. The reader is responsible for his or her own actions.

Adherence to all applicable laws and regulations, including international, federal, state and local governing professional licensing, business practices, advertising, and all other aspects of doing business in the US, Canada, or any other jurisdiction is the sole responsibility of the purchaser or reader.

Neither the author nor the publisher assumes any responsibility or liability whatsoever on the behalf of the purchaser or reader of these materials.

Any perceived slight of any individual or organization is purely unintentional.

Table of Contents

Introduction

Chapter 1: No Approval Needed

Rejection is Par for the Course

A Growth Mindset is a Must

Chapter 2: Purpose Driven

Explore What Brings You Joy and What You Excel At.

Always Follow Your Heart and Your Gut.

Clearly and Concisely Declare Your Purpose

Age Means Nothing

Chapter 3: Obstacles=Opportunities

Quit Seeing Life Stop Signs

Hope Is Not a Game Plan

How Do You Change the Way You Think?

Chapter 4: Mistakes or Learning Opportunities?

Opportunities Are Presented Often as Mistakes

Learn from Others Mistakes

Find a Coach or Mentor

See a Beginning, Not an End

Be Observant and Analytical

Trusting Your Intuition Is Important

Mistakes Do Have Benefits

Chapter 5: The Value of Growth

Human Service Work

Value Your Health

Valuing health means:

Honestly Evaluate Your Life

Harness your Time Management

Chapter 6: Be Realistic

Embrace the Process

Focus on Improving

Embrace Not yet and Erase Never

Embrace Not Yet Instead.

Chapter 7: Own Your Attitude

Act with a Purpose

Push Your Limits Daily

Embrace Setbacks to Improve Your Skills

Forgive Others for Their Limitations

Adopt the Habits of Successful People

Develop the Traits of Successful People

Conclusion

Description

Introduction

You hear people every day say that ” if only .”

› I could be happier.

› I could be wealthier.

› I could have more self-discipline.

› I would be healthier.

Is that you? Do you desire to make changes to your life, if only?

In this book, you will learn the way to achieve your biggest goals and realize your grandest desires lies within you; you only need to take action.

Simple Hacks On How To Improve Your Trading Psychology

One of the most important aspects in any trader or investors journey is trading psychology. If you have been trading for any length of time, you’ll more than likely have experienced the highest of highs and lowest of lows.

But is this conjusive of good trading behavior ?

Trading psychology is a massive part of your success in trading and investing, yet so many people pay little to no attention to it. Why ? Because very few recognize the significance of it.

What exactly am I talking about ?

Well, have you ever entered into a trade only for it to go against you straight away and stop you out ? And then get angry when it immediately goes in the direction you initially figured it would do ?

Now imagine this happens a couple of times, you start to get angry and revenge trade. This is trading psychology 101 causing you to make dumb decisions based solely off your emotions.

Don’t be too hard on yourself, we have all done it and it can occasionally slip in even with veteran successful traders and investors.

So how on earth can we fix this ?

Well, first things first, we must identify it is a problem. A lot of people aren’t willing to accept it, therefore everything they do is wrong. But once you figured out your issues, you can work on fixing them.

*Before we get started, I am in no way a specialist or have any skills in psychology, I am simply outlining what has happened to me on my journey and how I continue to improve the issues we all face as traders.

What are the main components of trading psychology ?

Simply put, in terms of trading, your psychology framework is made up of 4 parts. Fear, Greed, Hope & Anger.

Have you ever wondered why if you give 4 traders the exact same trading strategy, there will be 4 different results ?

Look at the turtle trader experiment. They all traded the same strategy yet were widely different in their overall returns.

Simply put, our psychological profile.

If we are honest, most of us have experienced some if not all of these emotions outlined above at some stage in our trading journeys. When I started out, I think I would experience all of these emotions in a given day but that’s another story ��

Here is an absolutely great tweet by millionaire trader Mark Minervini.

So let’s dive into the individual parts of our psychology in trading.

1.Fear

Picture this. You see a stock breaking out and you missed your initial entry. What do you end up doing ? You chase that entry because you just don’t want to miss the move.

If we are honest, we have all done this. Fear of missing out (FOMO) is one of the most deadly aspects of your psychology that can really play havoc to your underlying returns.

If you have a valid strategy, chasing trades can really effect the end results. Even a few cents difference in the price you enter can skew risk and reward and over time this will take away profits.

And who want’s to earn less ?

Obviously no one.

Imagine you change the question around to something more basic.

Ask yourself, Would I like to give away some of my profits due to chasing trades ?

You see when you look at it this simple, this is exactly what we are doing. When we trade based off FOMO, we are essentially saying, yes we would like to give away some profits chasing trades.

That’s obviously a very basic understanding but us humans are very emotional beings (some more than others) no matter how hard we try.

Trading Psychology Tips To Improve Fear Issues

Once you can accept you have this issue, what can we do to improve it ? Don’t be too hard on yourself at the start. It takes time to essentially rewire your brain. You’ve identified the problem. Looked at your stats and realized that FOMO is causing you to lose X amount of dollars on average per trade.

So now, armed with hard statistics that cannot be denied, you can go about sorting yourself out.

There is no magic pill or solution. Just hard work. In my own stats early on, I figured out I was leaking 1% of trading profits on FOMO. This was either because I skewed my risk reward to much and that affected my underlying returns or I would just be pissed off I missed an entry and chase it to death.

Some of you might be thinking, 1% is nothing. But TRUST ME, over the course of a year, this adds up massively. So much so that it could be the difference between a profitable and losing trader.

The most simple changes usually can have the biggest changes. Instead of chasing an entry I may have missed. I set up all the alerts for setups I wanted. It’s embarrassing to think I hadn’t done this prior but I was new and needed to make these mistakes to learn.

I swore to myself that if I didn’t get the price I wanted, so what ! There are plenty more opportunities out there.

Sure ! I’d have missed out on some big winners but the overall returns were much much better from this one adjustment. When you really know your statistics inside and out, making these psychological changes in trading becomes a lot easier.

When we trade based off FOMO, we are essentially telling ourselves, yes market, I don’t wan to make as much profit as long as I get this entry.

We can’t argue with our stats, it’s right there in front of us so yes, it really is that simple. We don’t want to make as much.

2.Greed

You are in a trade and are up nicely and almost at the area you plan on taking your profits. But then you decide, I’ll move my profit point even more. Then the price hits your original planned area and then retraces.

Even writing this, I recall times this happened to me and made my blood boil.

How could I be so stupid I think to myself

Well, this is greed is full swing. Annoyingly, this too was a common early trait in my trading career that needed to be ironed out.

Again, I looked at the maths. It was losing me money in the long run and I always simply asked myself, do i want to make less money by doing this ?

I flipped greed on it’s head and reversed it. Instead of wanting to make more money by moving targets, i was actually losing more money long term so now I just stuck to my pre made plan and took it from there.

If I moved my targets while in a trade for no reason, I simply said to myself, okay I’m accepting I want to make less money overall by doing this.

Don’t get me wrong, there are times when you will need to make take profit adjustments depending on your strategy, e.g a new announcement in a stock you’re holding causing an unexpected move in the price.

You may notice a pattern by now, my absolute reliance on my statistics to make decisions.

It’s soooo important you keep a trading journal. You need to know all there is about yourself. Otherwise, you won’t know what changes to make.

3. Hope

Ah yes, my good old friend hope. There have been times when I questioned my own sanity and hoped for trades to come back after I left it get out of hand. I would say I made every mistake in the book when I started the this was another psychological issue that needed to be addressed.

Don’t believe me, just look at my trading story . Tough times to overcome indeed !

Hope is another dangerous thing in the world of trading. Why ? Because you can really screw yourself over.

How many times have you been in a trade that got out of hand and found yourself hoping it would come back to your original planned stop area or breakeven point?

If you are honest with yourself, probably a lot. I know I did this a lot.

How can this be fixed ?

Again, it all boils down to your statistics. I might sound like a broken record constantly referring to my trading stats but it really is that important.

So how much is my good friend hope making me ? Well, no surprise, zero ! So why continue this relationship I thought. She had a good hold on me but after reviewing over and over again, i realized I had to let her go. One of my tougher break ups it must be said ��

4. Anger

Finally, anger. Probably the most destructive of all trading psychology issues I faced. I’m embarrassed to say it but my anger did get the better of me at the start.

One too many keyboards suffered as a result of my anger at a particular trade.

So what happened ?

Picture the scenario. You enter a trade, get stopped out. Enter another trade and get stopped out. Try this 10 times in a row. Obviously, you are going to get angry. it’s human nature.

So how can you fix this ?

I joke but you guessed it, diving into my trading statistics helped me realized that it wasn’t making me any money. Sounds common but as Ed Seykota said.

“Everyone gets what they want out of the market”

Can you see what he means now ?

If we are angry and start revenge trading, we get what we want and that is revenge. Unfortunately this usually comes at a price, usually a very costly one.

Trading Psychology Of Successful Traders

Right, now we know what not to do. What do the good traders do ? Well, they focus on always improving. Standing still in this game is really going backwards and we don’t want that.

To summarize this. Top discretionary traders have common traits that they learned the hard way.

  • Discipline to trust and follow their trading plans
  • Understanding their psychological weaknesses and tackling them head on
  • Constantly improving through learning and tweaking
  • Ability to analyze themselves with no bias.

Every part of the psychological framework would not be fixed without absolute control and discipline. It is very tough to simply say, follow your statistics and don’t be greedy or fearful.

But it is one of the challenging parts of trading that needs to be fixed.

Obviously you sometimes might not be able to do this alone. And that is okay. There are some great educational resources to help guide you in the right direction.

So where can you get started with finding help ?

Trading Psychology Course

Don’t worry, I’m not trying to sell you some course I have an affiliation with. On the contrary. I’m simply outlining some places that helped me on my journey. First up, we need to outline the best and most well known trading psychology coaches out there today.

  • Van Tharp
  • Brett Steenbarger
  • Mark Douglas
  • Dr. Alexander Elder

There are tons more but these are the most well known and common. Some offer great workshops and courses to help improve. When I was working in a prop firm, we regularly had sessions with trading psychologists (not the ones outlined above) but it is obviously important.

Van Tharp

Van Tharp has a great trader test where if you can answer it without bias, you will receive a report through email on what type of trader you are and a comparison to a successful trader or investor who has similar traits

This report offers areas you need to focus on going forward so this can be helpful. Again, the tricky part is answering this test honestly. Otherwise, you won’t get accurate results.

Here’s a video of Van Tharp teaching . The quality isn’t great but its the best I could find.

Tharp also has a few books where you can learn from him if you couldn’t afford to attend a workshop he does. Keep in mind that in the list of workshops on his site, they are not all delivered by him.

Brett Steenbarger

Another really great guy for learning how to work on your trading psychology is Brett. He has many great posts about it to help guide you in the right direction.

Here is a great webinar to help gain insight into the man and what he has to offer.

Trading Psychology Books

There are lots of trading books out there tailored to addressing your psychological issues. My favorites are :

  • Super Trader By Van Tharp
  • Trading in the zone by Mark Douglas
  • Trading For A Living by Alex Elder
  • The Daily Trading Coach By Brett Steenbarger

Again, you might have your own preferences but these we very helpful trading books for me.

Conclusion

I could go on and on with what all these different coaches have to offer but honestly, it is down to your own preference. Some people will say that you don’t need help with psychology. I personally believe you do. Well, I did ! Maybe you can overcome your issues and that’s great if you can go it alone but I preferred to get a helping hand along the way.

It doesn’t matter if you want day trading psychology tips or long term investor psychology tips, it is all the same. As long as you are human, we all suffer the same re occurring issues all the time, it doesn’t matter what style of trading you do.

Fear, Greed, Hope & Anger are very real issues that need to be addressed. The best way of dealing with them as we have seen is through discipline. The trading coaches mentioned offer help in improving this too and the books can be very useful in guiding you on the right path.

The very best of luck in your trading and I hope you all get the discipline you deserve !

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