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Sacramento, CA
Experience: Advanced
Platform: NinjaTrader
Broker: NA
Trading: Stocks, Forex
Posts: 64 since Nov 2013
Thanks Given: 14
Thanks Received: 19
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Book: Trading in the Zone by Mark Douglas
Finished reading this great book on trading psychology and i have to say its one of the top ones out there. Ill have to give a another read soon to refresh myself on it. What I learned was that you can be your worst enemy when it come to trading and not the market, or participants, itself. It goes deep at the subconscious level of trading mental beliefs, how they can ruin you or make you a consistent profitable trader. For example, being raised in a bad family, picked om, feeling worthless can affect your perception on trading. Your mental health, psychological makeup affects your trading. But don't worry, that can be changed to be a consistent profitable trader, however with some effort.
One glaring problem to trading is the human habit of risk aversion. We are more likely to avoid a loss than seek a gain. This affects our trading for example when we exit a trade early in fear of losing out and hold onto a losing trade longer than normal because we still believe we are right.
We fail to take responsibility for our trades by not following a plan, trade randomly, or set a risk and profit target. We shift blame onto the markers themselves, however the market is neutral and simply relaying information. You color it as your beliefs color your perceptions of it. Trading is difficult because we have freedom to unlimited choices to make. We have to make those choices as specific as possible.
Here are our problems as traders:
PROBLEM: The unwillingness to Create Rules
PROBLEM: Failure to Take Responsibility
PROBLEM: Addiction to Random Rewards
PROBLEM: Blaming External versus Internal Control
"Remember, nothing happens until we decide to start; it lasts as long as we want; and it doesn't end until
we decide to stop."
"The hard reality of trading is that, if you want to create consistency, you have to start from the premise
that no matter what the outcome, you are completely responsible."
"When we act on our own ideas, we put our creative abilities on the line
and we get instant feedback on how well our ideas worked."
(We feel emotional pain for being punished from expressing ourselves how we naturally feel like doing, We feel excitement and exuberance when we are rewarded. Our emotions become a roller coaster, affecting our next trades for the worse. By showing our true selves, our creativity, we are vulnerable, and when we are punished or criticized when that happens, we feel emotional pain and will associate that pain with the event/action. We must then strengthen our confidence and activate the correct beliefs to trade consistently profitable)
"Instead of controlling our surroundings so they conform to
our idea of the way things should be, we can learn to control ourselves. Then we can perceive
information from the most objective perspective possible, and structure our mental environment so that
we always behave in a manner that is in our own best interest."
Much more will follow! Please discuss!
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