Showing posts with label Trading Psychology Fears and Emotions. Show all posts
Showing posts with label Trading Psychology Fears and Emotions. Show all posts

Sunday, July 7, 2013

Traders Should Remember These Points

Kill your greed 
Money comes in bunches 
There is never a shortage of opportunities 

Focus on proper execution 
Stay in control 
Stay calm and focused 

Always strive for emotional detachment 
Don’t compare yourself to others 
Never make excuses 

Cultivate independent thinking
Don’t believe the hype 
Isolate yourself from the opinions of others 

Always use stop losses 
Never add to a losing position 
Be ready for worst case scenarios 

The Story Of 2 Monks And The Power Of Letting Go - Successful Trader

I believed you have heard of many versions of the story about 2 monks. No? Let me refresh your memory, and explain to you how it is applicable to trading.
There were two Buddhist monks walking along the bank of a river, making their way to back to the temple.
As they were walking, they came across a beautiful lady standing at the side of the river. She stopped them and asked if one of them is willing to help her across the river. The junior monk did not bulge but the senior monk without any doubt, carried her on his back and across the river. The senior monk put her down on the other side and she thanked him profusely and hurried off. The junior monk was taken aback by the gesture but kept to himself. The senior monk returned and they carried on with the journey.
As they walked, the junior monk kept brooding about the incident until it was unbearable and broke the silence, “why did you carry that woman across the river? Knowing that our religion forbid us to touch women!” The senior monk replied peacefully, “I put her down a moment ago and you are still carrying her.”
Now back to you: Are you the junior monk? I believed at some point in time, we have this junior monk in us, such that we are not able to let go of the past, and let it affect our decision making and even our well being (since we will brood about it). Carrying emotional baggage is more tiring than carrying a physical baggage.
A successful trader is a senior monk, he will not carry the emotional baggage of a losing trade. He cut loss and move on with other trades. An amateur trader may cut loss but is emotionally affected by it. He will not be able to trade well subsequently and even worse, forgo the rule of cutting losses and end up with a loss bigger than what he can handle. The problem is no one likes to lose. But in this world, there is no 100% way of winning every trade that you made. Even Warren Buffett is wrong sometimes. If you cannot take the risk of losing, do not trade. If you want to trade, let go the fear of losing, and let go of the dejection when you lose.

Monday, June 3, 2013

5 Keys to Deal with Trading Psychology, Fears and Emotions

How comfortable are you dealing with uncertainty?

As volatility and uncertainty increases, so does fear. When our emotions run high, then our decision making process suffers.
It seems like the harder we try, the worse things get.

We start reacting to things instead of being proactive. Then we feel overwhelmed.

Does this sound familiar?
One of the hardest things to deal with is uncertainly.
We have strategies for managing our risk in most aspects of our trading. However, we seldom talk about or have strategies for the most crucial element, our Personal Risk.

Have you noticed the panic that is going on in the markets? Do you know people who have been a contributor to it? Do you know them intimately?
How do you manage your Personal Risk?
  1. Trade With a Clear Mind
    Do not make emotional decisions. Realize that emotions are emotions. What differentiates the successful traders from others is how we recalibrate our reactions to our emotions.
    I was watching an interview with a surfer. The interviewer asked him what he does when a big surf comes and he goes underwater. The surfer said it was simple. “If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.
    What does surfing have to do with trading? If you panic and operate from a place of fear, you could lose all of your capital. However, if you take a moment and think about your strategies, you can have much better results.
  1. Look at Your Portfolio Objectively
    Think about your portfolio as if you are looking at the portfolio of your best friend. How would you advise him/her?
  1. Limit Your Input
    There are a lot of conflicting points of view. If we want to listen to all of them, it becomes very confusing, and the confused mind does not make a decision.
    Instead of listening to everybody, pick the top 3 people that you respect and listen to them. This way, you can remain focused and have much better trading results.
  1. Be In Tune With the Markets
    Trade the markets as they are and not as you want them to be.
    If we are not in tune with the markets and don’t listen to them, we are going to be in a losing game.
    After all, hope is a lousy hedge.
  1. Be In a Supportive Environment
    It is important to listen to the people that we respect and are successful.
    There are traders whose spouse and/or friends have little or no risk tolerance. As a result, these traders allow the fear of their spouse and/or friends to become the boundaries of their success.
    Who are you choosing to surround yourself with?
Remember, not the most talented or skilled person wins the game. The game is won by the ones who can manage their Personal Risk and have a Mental Edge.