Psychological/Mental Pitfalls of a Trader - Oliver Velez

[Stock trendy]

Trading reflects Mirror image of a person.. most of us are in denial of reality
Emotion is just a word but how difficult to over come it.. that is the nature of human
and this core natural instinct is most critical when it comes to trading.. we can not be consistently stable emotionally.. i guess we as a traders fail because of emotional instability.

 

[DanPickUp]

Trading reflects Mirror image of a person.. most of us are in denial of reality
Emotion is just a word but how difficult to over come it.. that is the nature of human
and this core natural instinct is most critical when it comes to trading.. we can not be consistently stable emotionally.. i guess we as a traders fail because of emotional instability.

So then the next question would be: From which corner comes those emotional instability?

Is it from the "To be unsure about trading strategy knowledge" corner or is it from the corner of not being sure about "Knowledge about TA or FA in trading" or is it even from the corner of "Being afraid to lose money in trading" or any other corner.

Here you may have to say some more words about it as all of the mentioned reasons are build up on slightly different kinds of emotions.

 

[Smart_trade]

So then the next question would be: From which corner comes those emotional instability?

Is it from the "To be unsure about trading strategy knowledge" corner or is it from the corner of not being sure about "Knowledge about TA or FA in trading" or is it even from the corner of "Being afraid to lose money in trading" or any other corner.

Here you may have to say some more words about it as all of the mentioned reasons are build up on slightly different kinds of emotions.

Traders have to be emotionally stable. Emotional instability is sign of speculators who have no control of the outcome of their bets.

Traders will never have emotional instability if :

1) They have a good knowledge of how the prices ,markets and trends move.

2) They believe beyond slightest of the doubt in their subconcious mind that the method they trade definately puts odds in their favour.

3) They have practiced the trading craft so much that it becomes a second nature for them. Imagine if you teach theory behind a square drive to a new batsman and he is taken to play a test match, he will be unstable....but if the same square drive comes from Tendulkar or Lara, it is a confident shot...because these batsmen have practiced that shot hundreds of times and when they see the set up for that shot, it just flows naturally....nothing can make them instable.......it is the practice and the talent behind the craft which makes one stable and confident.

It is my experience that traders spend too much time in methods hopping but they dont practice the trade entry, management and exit to perfection. If they spend more time on perfect execution of 3-4 set ups which they like , we will have many more stable, confident and profitable traders.

Just my 2 cents ....

Smart_trade

 

[DanPickUp]

Dear ST

Thanks to jump in for ST (Stock trendy) and for your informative, very personal post.

As an add on to your post and to expand it a bit in the direction of "How To Overcome the Fear of "Pulling the Trigger", I like to post an interview which I found nice to listen too. Nothing we have to be absolutely surprised about what is told, but the talk beside the short advertisements (we have to overhear when listen to such kind of interviews) make sense, is true and all the times informative.

Dr. Brett Steenbarger, Dr. Doug Hirschhorn and Dr. Gary Dayton talk about there experience they faced on the mentioned subject:

http://www.traderinterviews.com/wim...ngleFree.php?file_to_play=Pulling-the-Trigger

If any one has a problem to listen to the interview, read it here:

http://www.traderinterviews.com/free/Pulling-the-Trigger.php

I personal agree with your post. If traded with that healthy mental background, we also should not get tempted to think we are married with any position we have in the market. That shows, at least for me, that a trader is strong in his mind, can take a loss and is able to change his mind accordingly to market behavior.

Option strategy trader not necessarily need that talent as we implement a strategy which usually is not for a short time and most of the time only has to be adjusted once a day, depending what kind of strategy I choose.

Finally: We are all human beings and I would say we always will bring in some kind of emotions in our trades, of what ever reasons it will be. The trick surely is to accept that and not to let the feelings over run our mental strengthens we build up by what are nicely explained in the three points in your post. Just my two cents and circle closed

Good trading

DanPickUp

 

[Vertigo_1985]

I think few of the big reasons for failing in trading would be unreal expectations and not knowing the requirement of the job.
Most of traders enter thinking it's easy and they will be millionaires or billionaires in no time(thanks to all the hype), dreaming of all the luxury they can afford.
To be an engineer you have to pass and exam, same for medical, architect or any other profession. But for trading ?? nothing ...just open an account and you can start trading to be next Warren or Jhunjhunwala.
But this isn't a get rich quick scheme and they realize it after burning their mental and physical capital. Most leave at this time and only few who realize what needs to be done and are ready to work on it make it.
Your attitude determines whether you will survive here or not. Everything about you reflects in your trading, be it your technical knowledge, execution ability or your inner self. Either you can accept that it's you who needs to work upon himself or blame everything else. Someday the reason of your failure would be the markets moving too fast or your mood or your finger slipping or wrong tip but one thing will be same i assure, the "PAIN" you will get. You can either accept and start working on urself or keep repeating your mistakes till market kicks you out.

We spend 4 years or more to be an engineer or doctor, but how much time and capital are we ready to spend on trading without expecting any income ?
Such learning period with proper guidance is absolutely necessary to make learning faster and to avoid learning the hard way( sadly most traders learn the hard way ).

Trading is simple but noway easy and to know that it's simple isn't easy too.

Regards

 

[jatin_the_great2003]

I think few of the big reasons for failing in trading would be unreal expectations and not knowing the requirement of the job.
Most of traders enter thinking it's easy and they will be millionaires or billionaires in no time(thanks to all the hype), dreaming of all the luxury they can afford.
To be an engineer you have to pass and exam, same for medical, architect or any other profession. But for trading ?? nothing ...just open an account and you can start trading to be next Warren or Jhunjhunwala.
But this isn't a get rich quick scheme and they realize it after burning their mental and physical capital. Most leave at this time and only few who realize what needs to be done and are ready to work on it make it.
Your attitude determines whether you will survive here or not. Everything about you reflects in your trading, be it your technical knowledge, execution ability or your inner self. Either you can accept that it's you who needs to work upon himself or blame everything else. Someday the reason of your failure would be the markets moving too fast or your mood or your finger slipping or wrong tip but one thing will be same i assure, the "PAIN" you will get. You can either accept and start working on urself or keep repeating your mistakes till market kicks you out.

We spend 4 years or more to be an engineer or doctor, but how much time and capital are we ready to spend on trading without expecting any income ?
Such learning period with proper guidance is absolutely necessary to make learning faster and to avoid learning the hard way( sadly most traders learn the hard way ).

Trading is simple but noway easy and to know that it's simple isn't easy too.

Regards

I agree with u Vertigo. Practice makes a Human perfect. Same thing happens with me. I study abt TA, gain confidence and begin to trade in market. But the moment i see my position going opposite to my direction, i become Panic and exit out with loss, later which i find(almost everytime) my position have turned to a profitable trade if i wud have holded my position. So now, i am simply concentrating of controlling my emotions/panic as this is wat matters.

I saw a motilal ostwal ad in which the analyst says "Emotions are for Actors, Investors need Knowledge". I really like this quote so much that i keep on saying this thing to myself every now and then. But the bottom line is, I am still in the Panic phase and working on it.

 

[Vertigo_1985]

I agree with u Vertigo. Practice makes a Human perfect. Same thing happens with me. I study abt TA, gain confidence and begin to trade in market. But the moment i see my position going opposite to my direction, i become Panic and exit out with loss, later which i find(almost everytime) my position have turned to a profitable trade if i wud have holded my position. So now, i am simply concentrating of controlling my emotions/panic as this is wat matters.

I saw a motilal ostwal ad in which the analyst says "Emotions are for Actors, Investors need Knowledge". I really like this quote so much that i keep on saying this thing to myself every now and then. But the bottom line is, I am still in the Panic phase and working on it.

Hi Jatin,
A lot and lot of patience is needed to become a successful trader. Just follow your plan religiously, do practice and proper review. If you do this for enough time along with some psychological work you will succeed. Just hang in there and trust yourself.

BTW what do you trade ?

Regards

 

[jatin_the_great2003]

BTW what do you trade ?

Regards

Hi Vertigo,

As a beginner/novice/amateur trader, I am emphasizing more on learning and making my concepts clear rather than trading. But along with tat, I am back-testing my strategy in Cash segment with strictly few selected stocks only.

 

[Vertigo_1985]

Hi Vertigo,

As a beginner/novice/amateur trader, I am emphasizing more on learning and making my concepts clear rather than trading. But along with tat, I am back-testing my strategy in Cash segment with strictly few selected stocks only.

Yeah, i agree first spend some time in building strong fundamentals, it will make your job only easier. Any book on psychology you are reading ?

 

[SEVEN STAR]

Trading any financial components comes under High Risk category.
If one lock his Money ..say one lack of Rupee in any National Bank On FD the annual return is about 8.5 to 9% per year. i.e. Rs.9000/- in a year is safe investment and less return.
Now a person bring in same amount in to stock market and trades.. first lured by unlimited potential..due to this exception to earn many-fold return in shorter duration ultimately shatters all dreams of a trader.
To Trade a mega Nifty approximately 30k.. is required, in a trade if one gets profit of Rs.500 is about 1.5% return just compare the no risk return annuly from a bank FD and trading return from stock market..Now the question is
will any one close the trade for the day with profit of Rs. 500/-( this is an example i sited) .
1. Proper and thorough learning every aspect of Trading Before start as a professional trader.
2.Do not keep bring in money and resume your trading on every attempt went for lose.

3. Find some other way where your talent and Fiance can be used for better return and satisfaction.
4.Many agreed Trading is addiction hence one have take control of it, before it is too late.