Trading Is Such a Psychological Task!
The activity we call trading, whatever the type of securities we might focus on, requires not only a sophisticated understanding of technical tools of analysis and interpretation,250-622 but also a very high level of psychological fortitude in order to properly implement those tools under uncertain and oftentimes adverse conditions. Nowhere else are we so much at the mercy of our hopes and fears as in trading the markets. Even though I understood this concept at a relatively early stage in my trading development, it didn't become truly a clear concept until I taught one of my first Pristine Trading Laboratories several years ago.
On the last day of the Lab, all the attendees were trading live accounts (with restricted position size). This raised the stakes, as the human emotions of fear and greed will make their apparition (something that doesn't happen while paper trading). While holding an interactive trading session, I would call an entry into XYZ stock, with enough anticipation so that all the students would have time to evaluate and enter an order. All the students had similar technology (Same PC's), similar trading platforms (Mastertrader), similar dexterity at using the basic order entry features of the platform and similar knowledge of the trading tactics (Having attended Trading The Pristine Method Part 1 (TPM1)). All of a sudden, the entry into XYZ materialized. Logic dictates that all the students should obtain similar results, right? Not really! In fact, the results of all the students were so disparate, that it pushed me to think this through. While evaluating the trades at the end f the day, it was clear to me that some deeper force was at play here. That evil force at play was each trader's psychology.
Here's what happened. If I called250-265 a profitable trade, some of the students ended up making more money than me (Anticipated the entry because of their greed). Some would make less money (since they waited to get "additional confirmation", thus entering late). And some others lost money (by entering too late) or didn't even trade the idea (because they had experienced losses and were "afraid" to have another loser). If the trade happened to be a losing one, the opposite would be true, with some losing more than me, some losing less, and some even making money!
These experiences confirmed to me the fact that psychology occupies a very large part of the trading equation. The Psychological factor, that can be controlled and properly channeled through the use of a sound-trading plan, will dictate many of our results. So why not eliminate the ST0-093psychological factor from the equation? Some might say that the systematization of trading takes care of eliminating emotions, therefore keeping the psychological factor away from the equation. This is a subject we'll explore in a future commentary.
On the last day of the Lab, all the attendees were trading live accounts (with restricted position size). This raised the stakes, as the human emotions of fear and greed will make their apparition (something that doesn't happen while paper trading). While holding an interactive trading session, I would call an entry into XYZ stock, with enough anticipation so that all the students would have time to evaluate and enter an order. All the students had similar technology (Same PC's), similar trading platforms (Mastertrader), similar dexterity at using the basic order entry features of the platform and similar knowledge of the trading tactics (Having attended Trading The Pristine Method Part 1 (TPM1)). All of a sudden, the entry into XYZ materialized. Logic dictates that all the students should obtain similar results, right? Not really! In fact, the results of all the students were so disparate, that it pushed me to think this through. While evaluating the trades at the end f the day, it was clear to me that some deeper force was at play here. That evil force at play was each trader's psychology.
Here's what happened. If I called250-265 a profitable trade, some of the students ended up making more money than me (Anticipated the entry because of their greed). Some would make less money (since they waited to get "additional confirmation", thus entering late). And some others lost money (by entering too late) or didn't even trade the idea (because they had experienced losses and were "afraid" to have another loser). If the trade happened to be a losing one, the opposite would be true, with some losing more than me, some losing less, and some even making money!
These experiences confirmed to me the fact that psychology occupies a very large part of the trading equation. The Psychological factor, that can be controlled and properly channeled through the use of a sound-trading plan, will dictate many of our results. So why not eliminate the ST0-093psychological factor from the equation? Some might say that the systematization of trading takes care of eliminating emotions, therefore keeping the psychological factor away from the equation. This is a subject we'll explore in a future commentary.
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