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Trading is not an easy profession to master, and just as it is important in competitive sports or performance arts, psychology is the key to success. Trading psychologist, Brett Steenbarger of Brett Steenbarger.com lists five important principles that will lead you to the right path. Here are five important principles that pertain specifically to achieving a successful trading psychology. Principle #1: Trading is a Performance Activity Like the playing of a concert instrument or the playing of a sport, trading entails the application of knowledge and skills to real time performances and this is a core idea. Success at trading , as with other performances, depends upon a developmental process in which intensive, structured practice and experience over an extended time yield competence and expertise. Many trading problems are attributable to attempts to succeed at trading prior to undergoing this learning process.
Even fundamental, common-sense trading rules can often elude traders, especially newer ones, so they always bear reinforcing, as Marc Principato does here. Recently I was going through my trading notes, and I happened to come across a trade that I documented a while back. And after looking it over, I realized it can serve as a good lesson to present to newer traders who may not realize that they are also making this costly mistake. Somewhere in our learning curve, we have all done the old "let's move the stop away from the market because I know this market is going to bounce as soon as I get stopped out" trade. Or worse, we have done the "I will use a mental stop, so I don't get shaken out all the time" trade. My worst trade, as it turns out, is actually a 3-pip winner.
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One of the most fascinating, and to me unnerving, results to come out of a lot of recent psychological research is just how much of our behavior is subject to unconscious influence. I for one and I think most people like to believe we are acting deliberately when in fact we often are not. This article will focus on a phenomenon referred to in research as priming. Consider the following sometimes very large effects:
What separates the small percentage of successful traders from the rest? Successful traders have a mind-set that allows them to operate in an environment of uncertainty and ambiguity. Many traders have a strategy that could be profitable but they get in their own way.
Why you need to understand psychology of expertise The primary challenge for novice trader is of building expertise. To become a better trader you must have a good understanding of psychology of expertise acquisition. What is an expert.
Therapy is no doubt a helpful tool when you have problems to overcome, and one of the primary strategies therapists use to uncover and solve your issues involves identifying common behavioral patterns. But you don't always need a therapist to recognize and correct an unhealthy pattern in your life. Here's a primer for how you can solve the problems that don't require professional help.
For the past few months now, I have spent a great deal of time focusing on emotions while trading. You see a great pattern, a fantastic setup, yet you have fear or are hesitant to pull the trigger, only to aggravate the feeling when you see what a great trade it would have been only “if I had”. A few weeks ago, I stumbled on a fantastic interview video of Mark Douglas called “Mind Over Market”. In this interview, Mark goes over some very important lessons and particularly how to emotionally and psychologically approach the markets. A few very important notes I have taken while watching this video:
Research now shows that the lack of natural talent is irrelevant to great success. The secret? Painful and demanding practice and hard work