Jalarupa wrote:aliassmith wrote:Jalarupa wrote:Nice Topic!
Great posts all, I especially like bredin's approach to trading psychology
Its a very tangible experience when one becomes aware of the way the body's natural chemicals begin to react in the brain when one is in the process of anticipation of risk vs reward, and yes we must always listen to our heads... THINK TWICE! Check your entry rules, are you trading with the predicted price action and not against it? (unless taking a quick counter trade)
I am busy reading a very interesting book that I would recommend to anyone who is serious about learning more about what goes on inside the investor brain whilst the trade is on...
Your Money & Your Brain
I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained...
"I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained..."
If you think about how you react emotionally having a specific goal
on a daily basis, what do you really think about it?
How about possible stress, pressure, failure if it isn't obtained?
I am sure these emotions will cause you to trade in an unintended
manner unless you are conditioned properly, maybe cloud your vision.
I didn't make my goal on Monday, so I feel ____________ !
I didn't make my goal on Tuesday, so I feel ____________ !
I didn't make my goal on Wednesday, so I feel ____________ !
How about daily time limits and/or you reward yourself with time off
after you "net" (x) profitable trades.
BTW, thanks for the book recommendation
Yeah, to tell you the truth, I have definitely considered what you are referring to above. You first have to get your trading right and also your mind so that you can deal with or detach yourselves from such things as loss and even from such things as gain... I believe this comes with the development of your trading method, and only if this method becomes profitable over the long run will you be able to detach and say "Well tomorrow's another day... I didn't make it today..." I believe capping your losses at 2% is also a great way of getting out before your emotions, desperation and ego get the better of you and causing you to loose more... IF this happens for three days in a row, consider going over your trades, see what went wrong and consider going back to demo trading till these 'bugs' get ironed out.
I have also considered the nature of the market to be one not to be argued with, and having said that I believe that we all have a lot of work to do, to really detach ourselves from our emotions, ego and mixed perceptions of what should be going on...
If your trading method is solid, you should with a certain degree of certainty be able to 'predict' where the market is most probable to be moving next and follow that. Now you just need the patience and resolve to follow your method.
Chapter 6. Sankhya-yoga
For one whose mind is unbridled, self-realization is difficult work. But he whose mind is controlled and who strives by right means is assured of success. That is My opinion.
Bhagavad-Gita Web Page
Some of the psychology stuff I have been researching recommends to
practice the fundamentals a lot. While doing the fundamentals (following
the trading plan) conjur up positive emotions every time you follow the
plan win or lose.
When you don't follow the plan conjur up negative emotions stronger than the positive ones you made for following the plan.