Most traders focus on developing strategies for making money.. I do the same. There is no other way. Nevertheless, your attitude to trading is often the "missing link", the presence of which can lead to better results. To get a sustainable source of income, you should focus on the psychological part as well, as on trade figures. For those, who didn't trade much, it may seem a little strange. How Psychology Can Affect Tough and Cold Trading Numbers? After trading for several years, you will find, that everything is not so simple here, how it might seem at first glance, just the opposite. If you cannot follow the rules of your strategy, you just don't have a strategy.
My results from the end 2011 years to summer 2012 the years were mediocre, to say the least. I conducted a deep analysis of my trading and came to the conclusion, that my attitude to trade was pulling me back. My trading strategies weren't bad, i just had to change my habits and my thinking. After this analysis, I completely changed my work habits.: I spend less time on real trading, and more time for research and other things, not directly related to bidding (like this blog, for example). I force myself not to look at P / L anymore (profit and loss, report about incomes and material losses), and instead just focus on my tasks. As a result, I made more money., and actually became much less worried about my profit and loss. I focus on executing my strategies. P / L is just a byproduct of my job. Actually, this blog helps me stay focused and disciplined.
Now I will try to summarize my findings after changing my trading style..
Be goal-oriented
You must develop your skill relentlessly, to deal with yourself and the markets. Some traders like to take action, others dream of easy money, but really good traders think about, how to develop strategies. Work should be the goal, and money and actions are just a by-product. Trade – this field of activity. Success is talent, skill and conscientiousness. Not everyone can become a trader. Mark Minervi (Mark Minervi) gave an interview to Jack Schwager (Jack brother-in-law) for his Books "Stock Market Wizards" (Stock Market Wizards). Here quote from this interview: “The fruits of your success will directly depend on the honesty and sincerity of your own efforts in relation to, how do you keep your records, how you think, and what conclusions do you come to. In other words, you on 100% are responsible for your results ".
Learn more about yourself
It's the most important. You must understand, what kind of person are you, and know about your character traits. Are you an introvert or extrovert?? You are disciplined? You can work for yourself? You are a confident person by nature.? What is your goal? Why are you trading? Many people want a lot of money and start trading. They want to stay at home and not commute to work every day.. The dream of an easy life seems so attractive. Sometimes you can go to a cafe and trade from there. I think, this is the main reason, which many people want to trade. But if you do not take into account then, that trade is intellectual activity, then you, probably, fail. If you concentrate on analysis and just apply your findings, then one day you will be able to realize your dreams and trade in a cafe. But trading is an occupation for people, loving solitude. She attracts introverts.. They, who rely only on intuition, can hold out in trade for several months, a year or two, but not longer. They, who has intuition associated with thinking, spend more time planning a trade, and can last longer. Introverted extroverts, backed by thinking, it will take a long time, to start trading, but once they master the game, they will have a huge advantage. However, the biggest obstacle for them is the implementation of plans., they must understand themselves and change, that their trading is done properly. But if they can change to some extent, they can become really good traders.
Stay focused
If you decide to open a pizzeria, then, probably, make some plans, to decide on further actions. Maybe, will make a budget and even do some marketing research, to check the viability of the plan. Do you think, potential trader does it all? Probably, No. But you need to have a business plan and develop some methodology.. This methodology should be related to your personality traits.. Better to have bad methodology, than not having it at all. It takes time., a lot of time. You need an idea first, some kind of hypothesis, and then you need to backtest that idea, to check, does it have a statistical advantage. For some people, this is the easiest part.. The difficulty is, to perform it. It all looks simple, when the decision is in front of you. The problem is, that while trading you will never know the future. Everything, What do you know, this past. After a drawdown, you can lose faith in the system and stop trading at the most inopportune moment. In this way, you must practice and stay focused on, what you should do. Try not to think about money. But, concentration on tasks will make many traders bored. They need action. They have to make a lot of money. They have to do it now. Extroverts are just like that. Don't fall prey to this. Focus on improving your skill, at that, how to adapt to markets, and try to minimize your weaknesses. Be disciplined.
Discipline
Discipline is a negative word for many.. I quote from Wikipedia: “Self-discipline is the ability to motivate yourself, despite a bad emotional state. Qualities, associated with self-discipline is the will, hard work and perseverance ".
Self-discipline is a product of will. Since will is the effort and ability to perform a specific task, self-discipline is the ability to use the will regularly and even automatically (as if she was a reflex). An analogy for the relationship between them can be defined as follows: will is a muscle, self-discipline is structured thought, which controls this muscle. In most cultures, it is considered, that self-discipline is the main path to success.
Yet again, Mark Minervi makes a very good analogy: "For the first time, when i watched a game of poker in a casino, i noticed, that the average winning combination is more 50 Dollars, and to see the first three cards, you only had to pay 50 Cents. I couldn't believe, that for half a dollar I could get a pretty good idea of my chances of winning, which is a hundred times this amount. If I played fifty times and only won one, I would still get twice as much, than lost. This chance seemed amazing to me. That's how I started playing poker. My strategy was, to play only with a very high probability of winning. Schwager: Didn't everyone else fold, as soon as you made a move? Not, and you know, why? Because they weren't disciplined, and they wanted to play. The answer is, to know, when you need to do nothing. Most people, even if they have a winning strategy, won't follow her, because they lack discipline ".
I think, what willpower, hard work and perseverance are not characteristic of many! Not surprising, that it inspires negative thoughts. Despite, that trade is not a military boot camp, be honest with yourself and check, do you have any of these three signs. If not, then trading can be quite difficult for you. One more word, which is not mentioned on Wikipedia, these are the "rules". Another negative word! As mentioned, you need a methodology and then, which implies strict rules and system. If you find a method like this, and this is not an easy task, the real difficulty is, to stick with the strategy. You need to apply it systematically.. Hope, you have an idea of your personality traits, therefore you are able to deal with strategy. Discipline Can Help You Stay Confident.
Be confident, but not cocky
“The key to trading success is emotional discipline.. Making money has nothing to do with intelligence. To become a successful trader, you must be able to admit your mistakes. Very discerning people don't make many mistakes.. Besides trade, I guess, there is no other profession, where you are forced to admit that you are wrong. In trading, you cannot hide your mistakes " – Victor Sperandeo (Victor Sperandeo).
Trading is no different from any other activity, it requires going through different stages of the learning curve, and the quality of this learning process depends on, how focused and disciplined the trader is when using the acquired skills. If you are a confident person, then it is much easier for you to stick to your methodology. However, there is a fine line between confidence and overconfidence..
Brit Steenbarger (Breet Steenbarger) wrote an interesting book on the psychology of trading, he also blogs. According to him, self-confidence is the worst trait of a trader.. Here is an excerpt from his blog:
"Research, conducted in the field of behavioral finance show, what's about 3/4 all traders rate their skill as "above average", despite the obvious fact, that only half of us are better than the other half. This self-confidence, Besides, affects the real trading results. Research by Terence Odean (Terence Odean) and his colleagues show, that overconfidence affects the frequency of trading, which in turn contributes to poor trading results. In one study of online traders, a group of traders prefers companies with a small capitalization and a high beta (high volatility), And, usually, does not diversify its portfolios. Their actual trading results slightly outperform the small caps, but after accounting for trading costs, they are significantly worse than the index. Traders, most frequent traders, lagged behind the index more strongly than others… One of my favorite self-confidence studies was done at the London Business School. (London Business School). Traders were shown price patterns, asked to suggest the future direction of the market and say how confident they are in their forecast. Price patterns were chosen quite randomly. The traders with the highest confidence in their forecasts trade more often than others and suffer the greatest losses. ".
Steenbarger's argument is a good reason to have a mechanical trading system. Certainly, this applies to those, who, usually, is an extrovert and / or impulsive person.
"Don't be a hero. Give up your ego. Always listen to yourself and your abilities.. Drive away the feeling, that you are doing very well with everything. That second, when you believe it, you are dead… If your trading is going well, не думайте, what the reason is, that you have an inexplicable foresight. Always keep a sense of confidence, but keep it under control " – Paul Tudor Jones II (Paul Tudor Jones II)
Give up your ego and beliefs
«Они (traders) would rather lose money, what is recognized, what were wrong… I became a good trader, when could I say: fuck the ego, making money is more important " – Марти Шварц (Marty Schwartz).
Some people have big egos.. They must be right. Some of them always know everything. These people may seem, that completely mechanical trading is difficult. A mechanical system may have a payoff ratio of less than 50%, and still make money. It's hard enough to have so many losing trades. Somehow such people have to feed their ego. This shows up in online forums. They brag about their forecasting accuracy, the, how did they do 200% behind 6 Months, and why others are wrong. They live with their egos and die because of it.. Certainly, there are successful unsystematic(discretionary) traders, but, probably, many more successful mechanical traders. In trading, you must admit, that losses are part of the business. To make money, you have to admit the loss. Some people find it very difficult to do this., leading to overtrading, to that, that they get stuck in losing trades (which grow to large sizes) and quickly fix winnings. But to succeed, you have to shut yourself off from your ego. Leave feelings outside of the trade.
Don't get hung up on money
Money is just a way of scoring. Try not to get hung up on money, it can be harmful. Бретт Стеенбаргер (Brett Steenbarger) did a lot of research on the psychology of trading. IN 2004 year he together with Andrew Lo (Andrew W. Lo) and Dmitry Repin (Dmitry V.Repin) published the work "Fear and Greed in the Financial Markets: intraday trader clinical study (Fear and Greed in Financial Markets: A Clinical Study of Day-Traders). They studied the possible links between psychological factors and the trading performance of 80 anonymous day traders..
Here are their findings:
«…common sense is confirmed, what traders, who are too emotionally dependent on their daily gains and losses, average, менее успешны…
…It means, that a strong "emotional swing" within the 24-hour time horizon, hit hardest on trading results…
…Our results show, that excessive emotional reactions, seemingly, counter-productive in terms of trading results, and significant changes in emotional state over short periods of time do the most damage…
… For example, in a recent study of Fenton-O'Crewley (Fenton-O’Creevey) etc. (2004 of the year) 118 professional traders, working in investment banking institutions, they found, that successful traders, usually, are emotionally stable introverts, open to new experiences…
… Ultimately, we hope to provide a scientific basis for something like recommendations for successful trading., made by Gilbert (Gilbert) in his summary of the Fenton-O'Crewley study: be introvert. Keep your emotions stable. Be open to new experiences. And that, try, lest you be fooled by chance, stop thinking, that you are in control…».
Fear of loss
For introverts, fear of losing can be a barrier.. Instead of focusing on work, you think about, how much can you lose. You quickly take profits just to, to feel good. You may even come up with an increased risk, trying to keep it to a minimum. The biggest risk in trading is not getting the most out of your methodology. The fear of loss will slow down your trading, especially after a series of losses. Every trader has experienced this feeling at least once.. If it happens, it is reasonable to rest a little. If you can't stick to your methodology, you need a break. However, this simple advice is much easier to give, what to accept.
Conclusion
Trading is really a simple thing, but most traders make it difficult (including me). Trading is a game of chance. Find a profitable methodology, test and implement it. Diversify into multiple strategies (with the lowest possible correlation). Try to make trading simple and smooth, насколько это возможно. Не думайте о деньгах. Feel indifference to them. Focus on being, what you should do. Будьте проще!
Transfer:
author: Oddmund Grotte
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