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Tradingpsyhology

Jesse Livermore: Trading Lessons From an Iconic Trader● Jesse Livermore, a successful stock trader, built a fortune of $100 million in 1929. He operated independently, using his own capital and strategies. Livermore preferred trending stocks and used price patterns and volume analysis to decide trades. ● Livermore's Trading Principles (1) Trade with the trend A well-known saying is "The Trend Is Your Friend." Livermore preferred to trade stocks that were trending and avoided sideways market. (2) Get confirmation before entering any trade Hold off until the market shows clear signs before making a move. Being patient can lead to significant profits. (3) Trade with a strict stop-loss It is crucial to set a strict stop-loss for every trade, and it's important to know the stop-loss level before starting any trade. This approach can help a trader avoid significant losses. (4) Trade the leading stocks from each sector Livermore liked to trade stocks that were leaders in their industry. He thought this approach could increase his chances of winning. (5) Avoid average down losing trades He chose to exit the position rather than averaging it down. (6) Avoid following too much stocks It's quite challenging to monitor numerous stocks simultaneously. Focusing on a smaller number of stocks could lead to better trading opportunities.
Education
by NaranjCapital
Think in Probabilities Embracing Uncertainty Your Key To SuccessPicture this: You’re at your trading desk, eyes on the charts, heart pounding as the market swings unpredictably. Do you feel that fear creeping in? Now, imagine knowing that this unpredictability doesn’t have to scare you. Instead, it can be the key to your success. Let's dive into why thinking in probabilities and staying calm in the face of uncertainty can turn trading from a gamble into a calculated path to consistent success. Many traders struggle with uncertainty because they lack a solid, tested system. Trading randomly or without a proven strategy leads to anxiety and inconsistency. But once you have a reliable system that suits your lifestyle and mindset, and you fully understand your edge, you realize that while the outcome of each trade is random, the probabilities of your trading system will work out for you over time. The Role of Probabilities in Trading Trading isn’t about predicting the next big market move; it’s about understanding the odds and working them to your advantage. Each trade is a small part of a larger statistical framework, where the focus shifts from individual outcomes to the bigger picture. Why Is Learning To Think In Probabilities So Important For Trading Success? Reduces Emotional Bias : By thinking in probabilities, you understand that each trade is just one in a series of many. This helps reduce emotional reactions to individual losses or gains, such as revenge trading, doubling up on position sizing, or even smashing your new iPhone against the wall (been there, LOL). For example, if you know that your strategy wins 60% of the time, you won't be devastated by a single loss. You'll see it as part of the statistical outcome. Encourages Rational Decision-Making: Knowing your strategy has an actual edge helps you stick to your plan, even during losing streaks, and avoid impulsive decisions. To know your edge, you need to do plenty of backtesting and forward testing so you can gain confidence in the system. For instance, if you experience a string of losses, understanding that this is normal and statistically probable helps you remain disciplined and not deviate from your strategy. Builds Confidence in Your System : Confidence comes from knowing your strategy is backtested and has a proven edge over a large number of trades. This knowledge helps you stay disciplined and focused on executing your plan. For example, if your backtesting shows a positive expectancy over 1,000 trades, you can trust your system even when short-term results are unfavorable. Things That Have Helped Me Over the Years to Deal With the Uncertainty of Trading Finding or Developing a System/Strategy That Suits You : As humans, we are all different, and this is especially true in trading. Some people are happy to be in and out of the market fast (scalpers) and have the ability to make big decisions quickly under pressure. Others are slower thinkers and like to make decisions carefully, staying in the market for a longer period of time (swing traders). You need to find what you're best at and stick to it. If you have a busy life with work and family, maybe swing trading suits you. If you’re younger and not as busy, then perhaps scalping is your style. Playing Strategy Games and Games of Chance : This may not be something you've heard before, but I've met many traders, including myself, who have found that games like poker can really help your trading by teaching you to think in probabilities. Another game I love to play is chess, as it encourages you to think ahead, and I’ve found it has helped me in my trading over the years. Practicing Visualization : If you've ever read anything on the subconscious mind, you know it’s responsible for 95% of all your automatic behaviors, especially in trading. The subconscious doesn’t distinguish between what is real and what is imagined. This is why visualization is such a powerful tool to help you embrace market uncertainty. By visualizing yourself placing trades confidently, managing risks well, and handling outcomes calmly, you prepare your mind for real trading scenarios. This mental practice reinforces your belief in your system and prepares you for the market's ups and downs. Books That Helped Me Think in Probabilities Reading has been an invaluable part of my journey to understanding probabilities. Here are some books that have profoundly impacted my trading mindset: "Thinking, Fast and Slow" by Daniel Kahneman This book helped me understand how cognitive biases affect decision-making and how to overcome them by thinking more strategically. "Fooled by Randomness" by Nassim Nicholas Taleb Taleb's insights into the role of chance and randomness in our lives and the markets were eye-opening and changed how I view risk and probability. "Beat the Dealer" by Edward O. Thorp Although this book is about blackjack, Thorp’s exploration of probability and statistics offers valuable lessons for trading. "The Theory of Poker" by David Sklansky Sklansky breaks down the mathematics of poker, showing how to make decisions based on probability, a skill directly applicable to trading. "The Intelligent Investor" by Benjamin Graham This classic on value investing emphasizes the importance of long-term thinking and understanding market probabilities. "A Man for All Markets" by Edward O. Thorp This autobiography offers a fascinating look at how Thorp applied probability theory to beat the casino and the stock market. "Sapiens: A Brief History of Humankind" by Yuval Noah Harari Harari’s book provides context on human behavior and decision-making, offering insights into the psychological elements of trading. "The Signal and the Noise" by Nate Silver Silver’s exploration of how we can better understand predictions and probabilities is highly relevant to making informed trading decisions. "Superforecasting: The Art and Science of Prediction" by Philip E. Tetlock and Dan M. Gardner This book teaches how to improve forecasting skills through careful analysis and thinking in probabilities. Thinking in probabilities was a game-changer for me. It shifted my focus from trying to predict every market move to playing the long game. By embracing this mindset, I turned fear into confidence and uncertainty into strategy. Remember, trading isn’t about guessing the market. It’s about responding with a clear, composed mind. Trust your strategy, know your edge, and let the probabilities work in your favor. This approach transformed my trading journey, and it can do the same for you. Happy trading!
Editors' picks
Education
by TheFxAce
10
Mindset and Beliefs: The Foundation of Successful TradingAfter 16 years of trading, I have come to realize that mindset and beliefs are critical to achieving consistent success in the markets. Through personal experience and countless hours of market analysis, I've discovered that the psychological aspect of trading often makes the difference between consistent gains and recurring losses. Today we will explore how your mindset and beliefs shape your trading performance and provide practical exercises that I've personally used to develop a winning trading mentality. Understanding Mindset and Beliefs - The Role of Mindset in Trading Your mindset encompasses your attitudes, beliefs, and emotional responses towards trading. It influences every decision you make, from the trades you choose to enter to how you react to losses and gains. A positive, growth-oriented mindset helps traders navigate the volatile nature of the markets, while a fixed, fear-driven mindset can lead to poor decision-making and emotional trading. Reflecting Beliefs in Trading Results One of the most profound realizations I've had is that the market will reflect your limiting beliefs back to you in the results you achieve. If you have negative beliefs about money, success, or your self-worth, these beliefs will manifest in your trading outcomes. For instance, if you subconsciously believe you are not deserving of success or wealth, you may find yourself making decisions that lead to losses, reinforcing those beliefs. Key Beliefs for Successful Trading To become a consistently profitable trader, it's crucial to cultivate empowering beliefs. Here are the key beliefs that have transformed my trading journey: The Market is Neutral: - The market does not act against you personally. It moves based on the collective actions of all participants. Believing the market is neutral helps you stay objective and not take losses personally. Accepting Uncertainty: - Embrace the uncertainty of trading. Each trade's outcome is unknown and should be viewed as part of a probability game. Accepting this uncertainty reduces emotional reactions to market movements. Deserving of Success and Wealth: - Develop the belief that you are deserving of success and allowed to make money. This positive self-concept can shift your actions and decisions, aligning them with wealth creation. Focus on Process Over Outcome: - Successful traders focus on following their trading process rather than fixating on individual trade outcomes. This helps in maintaining consistency and emotional stability. Practical Exercises to Develop a Positive Trading Mindset These techniques are not just theoretical. They are exercises I have practiced over the years, transforming me from a consistently losing trader to a consistently profitable one. Self-Awareness Journaling - Objective: Identify and challenge limiting beliefs. Exercise: Step 1: At the end of each trading day, write down any negative thoughts or beliefs you had during trading. For example, "I always lose money on Fridays" or "The market is out to get me." Step 2: Challenge these beliefs by questioning their validity. Ask yourself, "Is this belief based on facts or emotions?" Step 3: Replace negative beliefs with positive affirmations. For example, "I am continuously improving my trading skills" or "The market offers opportunities every day." Frequency: Daily - This exercise helped me recognize and reframe the negative thoughts that were sabotaging my trading efforts. Visualization Techniques - Objective: Build confidence and a positive mental image of trading success. Exercise: Step 1: Sit in a quiet place and close your eyes. Step 2: Visualize yourself successfully executing trades. Imagine each step, from analyzing the charts to placing the trade and seeing it reach your target. Step 3: Feel the emotions associated with successful trading, such as confidence and calmness. Frequency: Daily for 5-10 minutes - Regular visualization has ingrained a sense of confidence and calm, enabling me to approach each trading day with a clear and focused mind. Cognitive Reframing - Objective: Change negative trading experiences into learning opportunities. Exercise: Step 1: Reflect on a recent trading loss. Step 2: Write down the negative emotions and thoughts associated with the loss. Step 3: Reframe the experience by identifying what you learned from it. For instance, "I learned the importance of setting stop-loss orders." Frequency: After every significant trading loss - By reframing losses as learning opportunities, I've been able to grow and improve my trading strategies continuously. Meditation and Mindfulness - Objective: Enhance focus and emotional regulation. Exercise: Step 1: Find a comfortable sitting position. Step 2: Close your eyes and focus on your breathing. Step 3: If your mind wanders, gently bring your focus back to your breath. Frequency: Daily for 10-15 minutes - Meditation has been a game-changer for maintaining emotional control and staying calm during volatile market conditions. My Transformation in Trading Mindset Early in my trading career, I struggled with a fixed mindset, believing I wasn't cut out for trading due to a few early losses. I often felt the market was against me and reacted emotionally to trades, resulting in a cycle of poor decisions and further losses. My beliefs about money, success, and self-worth were reflected in my trading results. The market seemed to mirror my negative beliefs back to me, causing me to lose money consistently. By incorporating the exercises above, I gradually shifted my mindset: Self-Awareness Journaling helped me identify and challenge my belief that I would never be a successful trader. I replaced negative thoughts with affirmations of continuous improvement and opportunity. Visualization Techniques built my confidence by allowing me to mentally practice successful trades, which in turn manifested in real trading scenarios. Cognitive Reframing turned my losses into valuable learning experiences, reducing my emotional reactions and helping me grow as a trader. Meditation and Mindfulness enhanced my focus and emotional control, helping me stay calm during volatile market conditions. Over time, I developed a more positive, growth-oriented mindset. I started to see losses as part of the learning process and focused on following my trading plan diligently. This transformation in mindset led to more consistent trading performance and increased profitability. The market began to reflect my new, positive beliefs back to me in the form of consistent trading gains. Conclusion Your mindset and beliefs form the foundation of your trading success. By developing a positive, growth-oriented mindset and challenging limiting beliefs, you can enhance your trading performance. The practical exercises outlined above provide a roadmap for transforming your mindset and achieving greater consistency and success in trading. Remember, the journey to mastering trading psychology is continuous. Stay committed to these practices, and you'll gradually build the mental resilience and confidence needed to thrive in the markets. These techniques have been instrumental in my journey from a consistently losing trader to a consistently profitable one. I believe they can do the same for you.
Education
by TheFxAce
10
Live Gold Trade Analysis: Catching the Breakout! Did I Miss It?Key Levels and Zones: 4hr LQZ (Liquidity Zone): Marked at around 2437.909 - 2440.000. This is a higher timeframe liquidity zone which often acts as a strong resistance or support level. 1hr TP 4 / LQZ: Marked at 2419.433. This level is a target point or liquidity zone on the 1-hour chart, indicating a significant level where price may react. 15M LQZ (Liquidity Zone): Marked at 2404.619. This is a key level on the 15-minute chart, suggesting an area where there is liquidity, and price may find support or resistance. LQZ 1hr: Marked at 2396.143. Another liquidity zone on the 1-hour chart, which acts as an important support or resistance area. Other Levels: 2390.821 2386.644 2379.627 Chart Patterns and Movements: The price has shown a significant rise recently, breaking through multiple levels of resistance. There is a noticeable ascending channel marked with blue dashed lines, indicating an overall uptrend on this timeframe. The highlighted blue zone around 2390.821 - 2396.143 indicates a previous consolidation or support area that has now been broken through. The most recent price action shows a pullback after hitting the 1hr TP 4 / LQZ level at 2419.433. Key Observations: The price is currently hovering around the 15M LQZ at 2404.619, which could act as immediate support. The significant rise and sharp move up might indicate a bullish momentum in the short term. The break above the blue highlighted zone suggests that the price might find support here if it pulls back. Potential Trading Strategies: Bullish Scenario: If the price holds above the 15M LQZ at 2404.619, consider looking for buying opportunities with targets at higher liquidity zones such as 2419.433 and beyond. A break above 2419.433 could further validate the uptrend, aiming for the next liquidity zones. Bearish Scenario: If the price fails to hold above 2404.619 and breaks below, consider looking for selling opportunities targeting the next support levels at 2396.143, 2390.821, and lower. Range Trading: If the price consolidates between 2404.619 and 2419.433, consider trading within this range, buying near support and selling near resistance.
OANDA:XAUUSD
by Adlercon333
The Psychology of Mass Behavior in Trading and How to Overcome Hello Traders, Understanding the psychology of mass behavior in trading is crucial for success in the markets. This post delves into key psychological phenomena and provides strategies to overcome these biases. Key Psychological Phenomena 1. Herd Behavior: Traders often follow the crowd without independent analysis. This can lead to bubbles and crashes. 2. Emotional Contagion: Emotions like fear and greed spread rapidly among traders, driving irrational market behavior. 3. Overconfidence and Optimism Bias: Traders overestimate their ability to predict market movements and believe they are less likely to face negative outcomes. 4. Information Cascades: Decisions are based on the actions of others rather than personal analysis. 5. Confirmation Bias: Traders seek out information that confirms their beliefs, ignoring contradictory data. 6. Availability Heuristic: Overestimating the likelihood of events based on recent news or experiences. 7. Loss Aversion: The pain of losses is felt more acutely than the pleasure of gains, leading to irrational decision-making. 8. Social Proof: Looking to others’ actions for cues in uncertain situations. 9. Fear and Greed: These emotions drive market movements, often leading to panic selling or speculative bubbles. How to Overcome These Biases 1. Risk Management: Implement strict risk management strategies, such as stop-loss orders and position sizing, to protect against irrational market moves. 2. Contrarian Investing: Consider taking positions contrary to prevailing market trends when there is a strong indication of herd behavior. 3. Diversification: Spread investments across different assets to reduce the impact of market volatility driven by mass behavior. 4. Continuous Learning: Stay educated about market psychology and remain aware of your biases. 5. Emotional Discipline: Develop a trading plan and stick to it, regardless of market noise. Meditation and mindfulness can also help maintain emotional balance. 6. Independent Analysis: Conduct thorough research and analysis before making trading decisions. Rely on your judgment rather than following the crowd. 7. Seek Feedback: Engage with a trading community or mentor to gain diverse perspectives and avoid confirmation bias. By understanding and mitigating the effects of mass behavior in trading, we can make more rational, informed decisions and improve our trading performance. Let’s strive to be mindful of these psychological factors and continue to learn and grow as traders. Happy trading!
OANDA:XAUUSDEducation
by efmarquez4
KOG - "Fail to plan, plan to fail" Traders, The market is designed to confuse retail traders, the reason for that is they know 95% of you enter these markets with no plan. You’re not aware of the levels, you’re not charting the pairs you trade, and you lack the basic skills to manage your money and your risk. You need to have a plan before you enter a trade, you need to have a strict set of rules, and everything should line up as much as possible before you take the entry. By the time new traders understand they need a plan, they’ve blown their accounts and blame the markets. Every trader, before they start their day needs to have a strict set of rules they abide by before entering the markets for a trade. There are many variations and most will have their own rules, but to start you off here are a few we set out for our traders. They're not uncommon, simple steps to take to keep you safe in the markets. Is the market ranging or trending? We have to adapt our trading style in accordance with what the market is doing. If it’s a trending market, we know we have a clear direction on the pair and we know the levels of the trend as well as the levels that are provided. We then add the target to this and now have a clearer understanding of where price may support or resist before continuing the trend. When the market is ranging, we adapt our trading style knowing that we’re going to experience a lot of choppy price action as well as extreme up and down swings. We plot the range, we add the levels, and we now have a clearer understanding of support and resistance as well as the range high and low. When the range breaks and confirms the break, you know whether you should be entering or getting out of a trade. Holding on to hope will kill your account and you will then blame the market. Are there key levels above or below? Key levels on a chart are really important to understand. You need to add the levels on the long term charts and the levels on the short term charts. This gives you an idea of where price may go before it either supports or resist the price. It also tells you whether price is going to continue in the direction if the key level breaks and the turns into either support or resistance. You can now plan, if the price continues into that level how much will my account be in drawdown, will I be able to hold, do I need to hedge, should I take the loss and switch direction. Holding on to your bias and hope will very likely kill your account, you’ll then blame the market. How much capital am I risking? You need to treat this as a business, no matter what your account size. Every day there are large institutions who want to take your money away from you, you’re in this market to take from them and give them as little as possible. You should have a risk model in place, am I going to risk a certain percentage of my account? Am I going to stick to a stop loss of a certain amount of pips? Am I going to have a risk reward that makes sense? Your stop loss and risk management plan is your best friend in this market, it allows you to limit the losses and live to trade another day. It also allows you to trade with a fresh mind everyday because you’re not holding on to hope. Traders fail because they don’t have a risk model, they then get stuck in a drawdown which doesn’t allow them to trade because they’re waiting the entries that are in drawdown to come back into the price range. Cut your losses early, if you’re wrong you’re wrong, don’t let your ego right checks your butt can’t cash! Holding on to losing trades with no risk model will likely blow your account, you’ll then blame the market. Are there any new events? News events can move the markets in a very aggressive way but will move the price into the levels that you should already have added to your charts. News brings volume and a lot of traders will use this to their advantage to either scalp or to get good entries on the pairs they trade. It’s best practice to not trade before the news releases unless you’re already in the right way of the market. “The trade always comes after the event”, wait for the price to be taken to the level they want to either buy and sell, wait for a confirmed reversal on the smaller time frames, once everything lines up, then look to take an entry. Trading news events comes with years of practice, it also takes a lot of discipline and the ability to manage risk, not only that but you have to be willing to switch your bias in an instance if you get it wrong. Most traders lack this experience, trade news events like it’s a normal day on the markets and then blow their accounts in one hit, you’ll then blame the market. Am I following my trading plan? “Fail to plan, plan to fail”. As above, you need to plan every single trade you take, make sure the market conditions are in your favour, make sure the price is at the right levels, make sure your risk model is in place, make sure you’re aware of the risks involved if it doesn’t go your way. By doing all of this and making a plan, you know what the worst case scenario will be, by knowing that you’re emotions and psychology won’t be affected that much and you will build your confidence. You’ll then develop your strategy and you’ll have a better understanding of what kind of ROI you can consistently make in the markets. Have the discipline to follow your plan and stick to it like a you’re a robot. Get used to taking losses, this is part of the game you’re in. Your wins just need to be bigger and you’re on your way to becoming a consistent trader. Most traders don’t follow their plan, they then blow their accounts and you’ll blame the market. Hope this helps at least some of you stay the right side of the markets and we wish you the very best in your trading career. As always, trade safe. KOG
FX:XAUUSDEducation
by KnightsofGold
12
Seeing others make profitable trades can lead to envyFor new traders, market decisions are often driven by emotions like fear and greed, rather than well-established trading strategies. While much has been written about this, there are other significant factors that influence traders' decisions: Social Pressure: Traders often make trades based on the opinions and actions of others, rather than their own strategies and the real market situation. This social influence can come from chat rooms, online communities, or social media, where opinions are frequently voiced by other inexperienced traders. Envy: Seeing others make profitable trades can lead to envy. This emotion pushes traders to make impulsive decisions, such as entering trades without proper analysis, hoping to replicate others' successes. Instead of waiting for their own signals, they act on impulse and lose control. Common Mistakes Among New Traders: Reacting to News and Opinions: Rather than following their own trading vehicle (strategy), novice traders often react to news or opinions from others. This leads to decisions that are not grounded in their own analysis. Overactivity: Many mistakes stem from the feeling of needing to always be active in the market. New traders see others trading successfully and feel pressured to do the same. This can result in excessive trading and taking positions without proper signals. Paralysis from Fear: When a genuinely good opportunity arises, traders who have been overly active may be too paralyzed by fear to act. Their energy is wasted on meaningless transactions, and negative emotions cloud their judgment. Impact on Trading Performance: Wasted Energy: Excessive, impulsive transactions deplete a trader’s energy and focus, leading to poor decision-making when real opportunities present themselves. Negative Emotions: Constantly reacting to others and not following a personal strategy can result in frustration and dissatisfaction, which negatively impact self-esteem and confidence in one’s trading vehicle. Loss of Control: Acting out of fear, greed, social pressure, or envy leads to a loss of control over trading decisions, causing more losses and missed opportunities. Key Takeaways for New Traders: Develop a Personal Strategy: Rely on your own trading plan and analysis. Stay Patient: Wait for your entries and avoid impulsive trading. Manage Emotions: Keep emotions like fear, greed, envy, and social pressure in check to maintain control over your trading decisions. Focus on Long-Term Success: Avoid excessive trading and focus on making informed, strategic trades. By being aware of these psychological factors and actively working to mitigate their impact, new traders can make more informed and rational trading decisions. ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. --- • Look at my ideas about interesting altcoins in the related section down below ↓ • For more ideas please hit "Like" and "Follow"!
BITSTAMP:BTCUSDEducation
by Crypto4light
Mastering the Trader Skillset: Building a Strong PyramidIn the dynamic world of trading, success hinges on a robust skillset. Imagine this skillset as a pyramid, with each level representing a crucial component that traders must master to achieve consistent profitability. At the base, we have Technical Analysis, followed by Risk Management in the middle, and Discipline and Patience at the top. Additionally, Automation plays a pivotal role, integrating seamlessly across the entire structure. Let's delve into each of these elements and understand how they contribute to a trader's success. The Base: Technical Analysis The foundation of the trader's pyramid is Technical Analysis. This involves studying price charts, patterns, and various indicators to make informed trading decisions. Mastering technical analysis is crucial because it: 1. Identifies Trends and Patterns: Recognizing market trends and chart patterns allows traders to predict future price movements, making it easier to enter and exit trades at optimal times. 2. Utilizes Indicators: Tools like moving averages, RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence), and Bollinger Bands provide insights into market momentum, volatility, and potential reversals. 3. Supports Strategy Development: Technical analysis forms the basis for creating and refining trading strategies, whether they are short-term or long-term. The Middle: Risk Management Sitting at the middle of the pyramid is Risk Management, a critical component that ensures long-term survival in the market. Effective risk management includes: 1. Position Sizin: Determining the appropriate size for each trade to limit exposure and avoid catastrophic losses. 2. Stop-Loss Orders: Implementing stop-loss orders to automatically close losing positions before they can significantly impact the trading account. 3. Diversification: Spreading investments across different assets or markets to reduce risk. By prioritizing risk management, traders can protect their capital and remain in the game, even during periods of market volatility. The Peak: Discipline and Patience At the pinnacle of the pyramid are Discipline and Patience, the traits that distinguish successful traders from the rest. These qualities are essential for: 1. Adhering to Strategies: Sticking to predetermined trading plans and strategies, even in the face of emotional challenges and market noise. 2. Avoiding Overtrading: Exercising restraint to prevent impulsive decisions and overtrading, which can erode profits and increase risk. 3. Waiting for the Right Opportunities: Having the patience to wait for high-probability setups, rather than forcing trades. Discipline and patience ensure that traders remain consistent and rational, avoiding the pitfalls of emotional trading. The Integrative Element: Automation Automation in trading acts as an integrative element that enhances every level of the pyramid. It involves using algorithms and trading bots to execute trades based on predefined criteria. Automation benefits traders by: 1. Eliminating Emotional Bias: Automated systems follow strategies without being influenced by fear or greed, ensuring objective decision-making. 2. Enhancing Efficiency: Automation can analyze vast amounts of data quickly and execute trades with precision, improving overall trading efficiency. 3. Consistence: Automated strategies maintain consistency in trading, sticking to the plan without deviation. By incorporating automation, traders can optimize their technical analysis, streamline risk management, and uphold discipline and patience. The trader skillset pyramid provides a comprehensive framework for achieving trading success. Technical Analysis forms the sturdy base, enabling traders to understand market behavior and develop strategies. Risk Management, positioned in the middle, safeguards their capital and ensures longevity. Discipline and Patience, at the top, are the hallmarks of professional trading, allowing traders to execute their plans effectively. Automation, interwoven throughout, enhances each component, providing a modern edge in the fast-paced trading environment. By mastering each level of this pyramid, traders can build a resilient and profitable trading career, equipped to navigate the complexities of financial markets with confidence.
Education
by Vestinda
Mastering Risk: Stop Loss in TradingTypes of Stop Loss Money Stop Definition: A trader sets a fixed amount they are willing to lose on a trade, for example, £20. Issue: This approach often leads to larger losses because it doesn’t align with market movements. Advice: Avoid using the money stop. Time Stop Definition: Used mainly by scalpers, this involves closing a trade if it doesn't move in the expected direction within a set time frame (e.g., 4-8 bars). Key Point: It requires discipline to adhere to the set time limit. Advice: Suitable for scalpers. Technical Stop Loss Definition: Based on price movements and market structure, this is the most effective stop loss for technical traders. Types: Initial Stop Loss: Set at the entry of a new position, usually at a momentum high or low. The trade remains valid as long as the price doesn't reach this point. Technical Trailing Stop: Used to protect gains on a winning trade. As the price moves in your favor, adjust the stop to a new structure point that, if reached, invalidates the trade.
Education
by Charts247TradingAcademy
HOPE TRADING: This is how you lose big money in tradingHope Trading: How Traders Lose Money in Trading This image shows how traders lose their money in trading due to hope. Hope is good but also you should believe in your analysis if your SL hits then accept that you are wrong now and should not hope in the wrong direction. In the world of trading, hope can be both a friend and a foe. While optimism is essential, relying solely on hope can lead to significant losses. Let's explore why: 1. The Power of Hope: - Hope keeps traders motivated and optimistic. - It encourages persistence during challenging times. - However, hope alone is not a winning strategy. 2. The Danger of Blind Hope: - Traders often cling to hope even when their analysis suggests otherwise. - Ignoring stop-loss (SL) levels due to hope can be disastrous. - Hope can blind us to market realities. 3. Balancing Hope and Analysis: - Believe in your analysis, but remain open to adjusting your strategy. - If your SL is hit, accept that you were wrong and cut your losses. - Avoid hoping for a miraculous turnaround. 4. Risk Management: - Set clear risk limits and stick to them. - Use SL orders to protect your capital. - Hope should never override risk management rules. Remember, hope is valuable, but it must be grounded in sound analysis and risk management. Thanks Happy Trading
NSE:RELIANCEEducation
by Shaiv_Market
Here are 12 crucial insights every trader should keep in mindIn the fast-paced world of trading, where every tick of the clock can mean profit or loss, mastering the art requires more than just luck or intuition. Whether you're a seasoned veteran or just dipping your toes into the market waters, understanding some fundamental principles can make all the difference. Adaptability is Paramount: In the ever-evolving landscape of financial markets, rigidity can be a trader's worst enemy. Markets are influenced by a myriad of factors, from economic indicators to geopolitical events, and they can shift direction swiftly. Successful traders understand the importance of remaining agile, ready to adjust their strategies in response to changing market conditions. This might involve switching trading styles, altering risk management techniques, or even completely reversing positions based on new information. The ability to adapt is not just a skill but a necessity for thriving in the unpredictable world of trading. Quality Over Quantity: In the pursuit of profitability, it's easy to fall into the trap of chasing every potential trade opportunity. However, experienced traders recognize that success is not measured by the sheer number of trades executed but by the quality of those trades. Rather than spreading themselves thin across multiple positions, they focus their efforts on identifying high-probability setups with favorable risk-reward ratios. This disciplined approach allows them to maintain consistency and avoid unnecessary losses associated with impulsive trading decisions. Stick to Your Strengths: The trading arena is vast and diverse, offering countless strategies and approaches. While it may be tempting to experiment with new techniques, seasoned traders understand the importance of sticking to what they know best. By honing their skills in a particular trading style or asset class, they can develop a deeper understanding of market dynamics and recognize opportunities that align with their expertise. This doesn't mean being stagnant or closed-minded but rather embracing a strategy that plays to their strengths and maximizes their chances of success. Learn from Mistakes: Mistakes are an inevitable part of the trading journey, but they can also serve as valuable learning opportunities. Rather than dwelling on losses or repeating the same errors, successful traders approach each setback as a chance to grow and improve. They meticulously analyze their trades, identifying patterns of behavior or market conditions that led to unfavorable outcomes. By keeping detailed records and maintaining a journal of trades, they can track their progress over time and make adjustments to their strategy accordingly. Patience Pays Off: In a world where information moves at the speed of light and markets can react in an instant, patience is a virtue that can't be overstated. Successful traders understand that waiting for the right opportunity is often more profitable than chasing every price fluctuation. They exercise patience and discipline, refusing to enter trades until all criteria of their trading plan are met. This approach not only reduces the likelihood of impulsive decisions but also increases the probability of success by focusing on high-quality setups with optimal risk-reward ratios. Trade Wisely, Not Desperately: Desperation is the enemy of rational decision-making in trading. Whether driven by fear of missing out or a desire to recoup losses, impulsive trading can lead to disastrous consequences. Seasoned traders maintain a cool head and adhere to their trading plan, even in the face of adversity. They understand that forcing trades out of desperation is akin to gambling and prioritize long-term success over short-term gains. By staying disciplined and trading only when conditions are favorable, they avoid the pitfalls of emotional trading and preserve capital for future opportunities. Stay Grounded: Market euphoria can be a dangerous sentiment, clouding judgment and fueling irrational exuberance. Successful traders remain grounded in reality, avoiding the temptation to get swept up in hype or hysteria. They approach each trade with a clear mind and objective analysis, unaffected by the emotions of the crowd. By maintaining a healthy skepticism and focusing on empirical evidence rather than speculative fervor, they can navigate volatile markets with confidence and composure. Read the Market, Not Just the News: While staying informed about market news and economic developments is essential, successful traders understand that price action is the ultimate arbiter of market sentiment. They pay close attention to how prices react to news events, recognizing that market sentiment can often diverge from fundamental analysis. By reading the market's response in real-time, they can identify potential opportunities or threats that may not be immediately apparent from headlines alone. This nuanced understanding allows them to make informed trading decisions based on price action rather than speculation. Look Beyond the Headlines: Major news events and economic indicators can often trigger significant market movements, but their impact may be short-lived or already priced into the market. Successful traders look beyond the headlines, focusing on the broader context and underlying trends that drive price action over the long term. They understand that market sentiment is influenced by a complex interplay of factors, including investor psychology, market structure, and macroeconomic trends. By considering the deeper implications of news events and anticipating market reactions, they can position themselves to capitalize on emerging opportunities and mitigate risks. Know Your Comfort Zone: Emotional stability is essential for maintaining consistency and avoiding costly mistakes in trading. Successful traders know their emotional and financial limits, trading within their comfort zone to prevent fear or greed from dictating their decisions. They size their positions accordingly, ensuring that potential losses are manageable and won't disrupt their overall trading plan. By staying within their comfort zone, they can approach each trade with confidence and objectivity, regardless of market conditions or external pressures. Embrace Your Unique Style: While there's no shortage of trading strategies and methodologies, successful traders understand that there's no one-size-fits-all approach to trading. Instead of blindly following the crowd or adopting the latest fad, they embrace their unique style and tailor their approach to suit their personality, risk tolerance, and market outlook. Whether it's day trading, swing trading, or long-term investing, they focus on strategies that play to their strengths and align with their objectives. By embracing their individuality and staying true to their convictions, they can navigate the markets with confidence and consistency. Trade with Conviction: Confidence is a cornerstone of successful trading. Whether entering a new position or managing an existing trade, successful traders approach each decision with unwavering conviction, based on thorough analysis and a clear understanding of their strategy. They trust their instincts and remain steadfast in their convictions, even in the face of uncertainty or adversity. By trading with conviction, they project confidence to the market and instill trust in their own abilities, fostering a positive feedback loop of success and self-assurance. In conclusion, trading is both an art and a science. While there's no guaranteed formula for success , mastering these fundamental insights can significantly improve your odds in the dynamic world of trading. Stay adaptable, stay informed, and above all, stay true to your strategy. Happy trading!
Education
by Vestinda
What to Do If You Are Losing in Trading? Have you ever been in the following situation? You pick a trading strategy, you make nice profits and then, for some unknown reasons, you start losing. You take one trade after another and the strategy stops working. That is a very common thing that happens will every trader. I am trading for more than 9 years, and you know what, this year I got a trading week when I got 4 losing trades in a row. In this article, I will explain to you what to do in such a situation and how to deal with losses. So here are the trades that I took. I shorted EURJPY, EURNZD, GBPJPY and USDCAD. I bought AUDJPY. All the trades a rule based, they were strictly taken in accordance with my trading strategy. AUDJPY, EURJPY, EURNZD, GBPJPY trades closed in a loss and USDCAD closed on breakeven. It is a l osing streak of 4 trades. Does it mean that a trading strategy doesn't work anymore? What 90% of traders do when they face the situations like that, they start trading with a new strategy. They win, they face a losing streak and the cycle repeats. The truth is that there is no trading strategy that does not lose occasionally. Losing streaks are the part of the game. For the last 5 years, my strategy shows 64% average win rate. It means that among 10 trades, the first 4 can be the losing ones and the 6 remaining can be the winners. It is the game of statistics. Now, imagine the potential distribution of winners and losers in 100 trades. If you know that your strategy is historically profitable , if you back tested that, and it proved its efficiency what you should do, you should keep trading that. The more losses you face, the higher is the probability that the winning streak is coming. Each losing trade will increase the chance that the next one will be finally profitable. With so many years of trading and faced various drawdowns and losing streaks, what I learned is that if you keep trading your strategy, if you keep trusting that, the market will always give you a chance to recover. But if you stop, if you drop the strategy once you face a losing streak and pick a new one, you will simply miss the winning streak. Repeating that cycle at the end of the day you will lose everything. That is the hard truth about rule-based trading. ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
3
Trader makes money, not the system (p.3)Continuation of previous text... . Traits of the best traders . The best ones are very independent. I haven't met anyone who relies on the opinions of others in making decisions, especially opinions published on forums on the Internet or in the press. There's a saying that Wall Street is the kind of place where people come in Rolls-Royce cars to listen to the opinions of analysts who come by subway. I probably don't need to add what happens to their money in such a situation. Many of the best even trade against "the rest," often treating, for example, news and analysts' opinions as signals to trade against them. Let me give you an example - there are a lot of articles in the media that gold continues to rise and you can make money on it beats record highs... In a while "gold machines" appear, where you can buy gold bars. Banks start selling physical gold to their customers.... People are in a buying frenzy. But let's look at the situation from the side... Watching the volume, we see that there is a lot of turnover. Literally "everyone" is buying, even those who have never invested in anything. Someone is selling this gold to them, because the turnover is high and the price does not move up - a sign that the demand is balanced by the supply of gold. Hence the conclusion that someone is selling, and selling a lot. The question is who, since "everyone" is buying? If this market of "retailers" saturates then... there will be no more buyers. Because, as you might expect, the biggest ones are selling, the professionals who bought "cheap" and are now selling "expensive" - to all the small investors. And to drive demand among them - they use the media. I know that when you hear about it for the first time it is hard to believe - but if you see it for the fiftieth and hundredth time you will change your mind. Buy cheap and sell high - the eternal mantra of good investors . Experienced investors buy when no one else is buying and sell when "everyone" is buying, because they know that demand will be exhausted in a while. Most small investors buy when it's expensive because someone has told them they'll make money and sell cheap because someone scares them that it will drop further. Give it a boost 🚀 and drop a comment so we know to publish more for you. Chect the footer. Cheers! Follow: www.tradingview.com
Education
by drSwierk
2
Trader makes money, not the system (p.1)Let's start today with an excerpt from an interview in which we cover the important topic "It is the trader who is profitable, not the system". You'll see with examples how results depend on what's going on in a trader's head, so you'll look at your own results from a distance and see that they may in your case depend on deeper things than you've so far thought, on more factors than just the system itself. I once spoke with an excellent trader about balance in life and the role of mental and physical fitness in trading. He said that it is the trader who is profitable, not the system. What I mean is that many times it turned out that two traders having the exact same system achieve completely different results. So different that one can be very profitable and the other have losses. Let's start with the fact that in order to compare two traders with the same system we have to keep in mind the situation when they learn the system more or less the same time. Once we assume that they started from the same point and learned more or less the same way, we can begin to answer the question of why their results differ to the extent that one has good profits and the other has losses. So let's get to the substance. Note that any entry into the market requires a series of observations, analysis and decisions. Observation is simply watching the market. At this point, your brain begins to analyze the situation. As a result of the analysis, you can decide to take a position. You determine the size of the position for entry, wait and enter the market. This is another sequence of thought and decision-making. Then you manage the order. In a nutshell, we can say that it's a series of zero-one decisions on whether to stay in or exit the market. And eventually the closing of the position follows. Now the most important thing - note what happens during this process. Your mind sees, analyzes and makes decisions. This is a complicated process. This process is different in each trader. And it is the reason why one trader makes money and another does not - even if they have the system mastered to a very similar degree. This, in turn, can be checked on a simulator or by asking to identify signals on a demo. Meanwhile, in the real world, psychology comes to a head. Stress, glass ceiling, beliefs, various factors that make them, for example, make different decisions when managing a position. Even if they see the same thing. Their brains analyze the situation differently, taking into account extrinsic, non-market factors. Take two traders seeing the same signal and trading the same system. Example 1 The first trader just had a series of losses. This made him nervous and conservative. Seeing a small correction, he starts to worry about profit, he would like to close this order on the upside even a small one, so he leaves the market. The second trader has not had such experiences and nothing oppresses him, so he is able to calmly wait until the TP. Example 2 The first trader thought about his goals for a long time, counted how much he should "earn" per month in the market to be able to live comfortably from trading, created a plan based on this, divided into monthly goals. Currently he chooses the best orders according to the system, he looks at the market as a place where he can earn to achieve his goals - from this perspective he has distance from every single order. Hence, it's easy for him to get to TP, because he doesn't have the pressure to run away with anything from the market right now, right away. He knows that if not today, he will achieve his goal tomorrow, or in a week - so if that's the case, why not now? He sets SL and TP and calmly waits. The other trader doesn't have specific long-range goals, he has some trading plan, but he doesn't quite take it seriously. That is, he has no inner conviction that its implementation is something very important. As a result, his psyche is dominated by a shorter perspective - to earn as much as possible today and this week. Hence his level of "nervousness" is higher - because he has the conviction that every pip ("every dollar") counts. If you look at him from the side - he makes a lot of "quick" trades, while the first trader chooses them more carefully. His market entries also last shorter. In the long run - it turns out, however, that trader 1 has better results and greater mental comfort. To sum up - both traders have different perspectives, one treats trading as an opportunity to achieve his goals and tries to follow the plan, the other just wants to "make money". As a result, their mental processes are different, each of them makes different decisions at the same moments, as their thought (decision) processes differ. The different life goals of traders make their psyche work differently during the course of a gamble and because it pursues different goals. When you have set long-term goals - they stabilize the psyche and help you keep your distance from the trade, yourself, the market. That is, trading the same system, both will see the market differently? No, they will both see the same thing, but their brains will analyze it differently, because a particular decision-making process serves DIFFERENT PURPOSES. As a result, there are two different decision-making processes going on in their heads. And this is the main reason for the situation that one earns and the other loses. To the first, goals gave a long-term perspective, to the second, the lack of goals anchored in the psyche gave a focus on the present moment and "what he will earn today." In addition, the first knew that he needed to rest and maintain his mental form, so he couldn't sit in front of the platform all day. Hence, more comfort, better decision-making and, as a result, better results. Example 3 The third example is obvious: one trader has a low risk tolerance and quickly runs away with small profits. The other tries to get to the TP. The same system, but again two people execute it differently, because they make decisions using different criteria. That's why it's the trader who is profitable and not the system, because two people will trade the same system in different ways due to the fact that they have different things in their minds, pursue different goals, from different perspectives. I don't know a single two traders who trade the same way with the same system. Don't assume that by learning someone else's system you will have the same good results as the author of that system. Assume that you will have better! :) Give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
1
Why Traders Often Fail and How to Turn the Tide in Your FavorAs a day trader, I understand the allure of making your mark trading financial instruments. The idea of making quick profits and essentially being your boss can be incredibly enticing. However, the reality is that day trading is more challenging than it may seem. The statistics are alarming - the majority of day traders lose money. But why is that? Today, I will delve into the truths behind why day traders often fail and provide you with methods to begin turning the tide in your favor. So, let's get started and uncover the not-so-secret secrets to successful day trading. The Alarming Statistics of Day Traders Losing Money It's essential to begin by acknowledging the harsh reality that day trading is NOT a guaranteed path to riches. Studies have shown that a significant percentage of day traders end up losing money. Depending on which study or report you look at, the deck is stacked against the average day trader, with 70-90% of traders losing money within the first year of trading. That's a tough pill to swallow for anyone who wants to pursue day trading as either a full-time gig or a supplemental means of generating income. So, how does one stack the odds in their favor to become a successful trader? Understanding the Psychology of Day Traders There are three factors contributing to the high failure rate among day traders. Those factors include but are not limited to mindset, psychology, and discipline. I want to break these down for you so we can take a look at where most traders go wrong. Mindset: One may believe that mindset and psychology are the same, and though they are connected, they are not the same. In trading, mindset plays a crucial role in shaping a trader's attitude toward the market. A trader's mindset encompasses their beliefs, perspectives, and overall mental framework towards trading, risk, and uncertainty. Traders often have short-term sights set on finding unicorn gains or high win rates with little thought on a fundamental foundation to build upon for long-term growth. Having a strong and disciplined mindset is essential for navigating the complexities of the market, as it fosters critical traits such as patience, adaptability, and a long-term growth-oriented outlook. A resilient mindset can help traders weather the inevitable ups and downs of the market, maintain discipline in executing their trading strategies, and stay focused on their long-term goals. Ultimately, a positive and disciplined mindset can contribute significantly to a trader's ability to navigate challenges they will inevitably face. Psychology: Day trading can be an emotionally intense endeavor, and many traders fall victim to their emotional state. Emotions such as fear, greed, and hope, as well as cognitive biases, play a crucial role in shaping day-to-day trading decisions. For instance, the fear of missing out (FOMO) can prompt impulsive trading, while the aversion to realizing a loss can lead to holding onto losing positions for too long. Day traders must recognize and control these emotions to improve their chances of success. If you let your emotions best you, you will end up giving your money to someone who keeps those emotions in check. Overcoming psychological hurdles such as these is essential for making rational trading decisions. Additionally, being aware of cognitive biases like confirmation bias and recency bias can help traders avoid making decisions based on flawed reasoning. Understanding and managing these psychological factors is vital for maintaining discipline, especially in the face of market volatility and uncertainty. Discipline: I feel like discipline is wildly overlooked in the world of trading. There is so much toxicity bred in the field by so-called gurus who tell you trading is so simple and that massive gains are just around the corner. That is not the case in the realm of trading or any skill you hope to master. Olympic athletes do not wake up one day being the masters of their respective sport. They spend years practicing their skills with the highest level of discipline imaginable. Is trading the Olympics? No, but the principle is the same. If trading is a lifelong skill that you want to acquire, then you must commit to self-discipline in your approach to trading. So, from here, where do we start? How do we turn these three pillars in our favor and become successful in the long term? Lack of Proper Risk Management One of the primary reasons why day traders lose money is their failure to implement proper risk management strategies. Our brains are not wired to embrace loss; our minds will make every mental backflip to avoid it. This is why traders often let losers run rampant and cut their gains short. Think back to any of your previous trades. Did you justify staying in a losing trade based on some afterthought? An example justification could be, "This price can't go any higher; look how overbought XYZ stock is!" Additionally, day traders often need to pay more attention to potential profits and pay attention to potential losses. This can lead to reckless trading decisions and a failure to cut losses when necessary. With so much focus in the industry on winning, many overlook the discipline of being a great loser. Could you let that last sentence sink in for a second and give it some deep thought? Day trading inherently involves the risk of loss, and without a solid risk management plan in place, traders are essentially gambling with their money. It's essential to set clear risk limits, determine the maximum amount of capital you are willing to risk on each trade and stick to your plan. Implementing Effective Risk Management Strategies Now that we understand the importance of risk management, let's explore some practical strategies that day traders can implement to protect their capital and improve their chances of success. Use stop-loss orders: A stop-loss order is a predetermined price at which you will automatically exit a trade to limit your losses. By setting stop-loss orders at strategic levels, you can protect yourself from significant losses and maintain your risk management plan. A critical aspect of stop-losses is that they need to be a one-way street. It's okay to move a stop-loss up as a trade moves in your favor. However, never push your stop-loss back or make it wider after your trade has been initiated. This is only setting you up for long-term failure. Think of it this way: allowing a stop loss to do its job is like subjecting yourself to paper cuts compared to letting losers run, which would be akin to taking a slash from a sword. Which do you think you would better withstand in the long term? In a previous article, I highlighted different methods for setting stoplosses. I will link that article below this one, as I highly recommend you read it if you have further questions on how to set a stop-loss. Though that is only half the battle, the real challenge comes with maintaining discipline and respect for that stop-loss on every trade you take. Size your positions appropriately: It's crucial to determine the appropriate position size for each trade based on your risk tolerance and the specific trade setup. Avoid risking a significant portion of your capital on a single trade, as it can have devastating consequences if the trade goes against you, especially if you do not heed the previous advice of a disciplined stop loss. Never risk more than you are willing to lose! Diversify your portfolio: Only a few people want to day trade forever; it is a stepping stone for building wealth that you can diversify and let grow. However, if you have the capital early on to spread your investments across multiple stocks or assets, you can reduce the impact of a single trade going wrong. Diversification helps to mitigate risk and increase the likelihood of positive returns over the long term. The Importance of Having a Solid Trading Plan How do we implement discipline and solid risk management in our daily trading? We turn to the often underutilized trading plan. Day trading without a well-defined trading plan is akin to sailing without a compass. A trading plan serves as your roadmap, guiding you through the ups and downs of the market. It outlines your entry and exit strategies, risk management rules, and overall trading approach. Without a solid plan, day traders are more likely to make impulsive decisions based on emotions or market noise. This is where your discipline can help keep your emotions in check. When creating your trading plan, consider the following elements: Define your goals: Please be sure to determine your financial goals and the timeframe in which you aim to achieve them. This will help you stay focused and avoid chasing unrealistic profits. This is where you formulate your mindset and build your long-term foundation. Choose a trading strategy: Select a trading strategy that aligns with your risk tolerance and trading style. Whether it's trend following, breakout trading, or any other approach, make sure to thoroughly back-test and validate your strategy before implementing it. Set realistic expectations: Understand that day trading is not a get-rich-quick scheme. It requires dedication, continuous learning, and patience. Set realistic expectations and avoid succumbing to the allure of overnight riches. By having a well-defined trading plan and sticking to it, you can significantly increase your chances of success in the challenging world of day trading. Learning from Past Mistakes and Analyzing Trading Data One of the most effective ways to improve as a day trader is to learn from your past mistakes and analyze your trading data. It's essential for you to keep a detailed record of your trades, including entry and exit points, profit or loss, and any relevant notes or observations. By reviewing your trading data, you can identify patterns, strengths, and weaknesses in your trading strategy. This process allows you to make data-driven adjustments and refine your approach over time. Additionally, learning from your mistakes helps you avoid repeating them in the future. Practicing Patience and Emotional Control Patience and emotional control are two crucial qualities that successful day traders possess. The ability to wait for the right opportunities and avoid impulsive trading decisions can make a significant difference in your overall profitability. Day trading often involves rapid market movements and fluctuations, which can trigger emotional responses. It's essential to remain calm and composed, sticking to your trading plan and strategy. Emotions such as fear and greed can cloud judgment and lead to irrational decisions. By practicing emotional control, you can make rational and objective trading choices, increasing your chances of success. The Path to Success in Day Trading Day trading is undoubtedly challenging, but it's not an impossible endeavor. By understanding the truths behind why day traders often fail and implementing effective strategies, you can turn the tide in your favor. However, you should know that this is not an overnight ordeal. There are no shortcuts worth taking and endless hours of practice to achieve the feat of becoming an elite trader. Remember, day trading requires discipline, risk management, and continuous learning. Develop a solid trading plan, analyze your trading data, and practice patience and emotional control. By doing so, you can navigate the unpredictable waters of the financial markets with confidence and increase your chances of achieving long-term success as a day trader. Good luck and happy trading!
Education
by LeafAlgo
3
Discipline is NOT the most important thing in trading!Virtually all experts agree that discipline is the most important trait of a trader. All of them, except for me A closer look at this popular opinion has shown that it is wrong. One trait is much more important than discipline, and it is evident in the best traders. At first glance, it seems clear that discipline is the most important in trading because there will be no results without it. Thus, a trader must be disciplined and must execute entries and exits correctly and on time. Ask any expert and trader what is the most crucial trait in trading, and 95% of them will tell you that discipline is the most important. I firmly believed this, especially since this is what the authorities in the industry say—starting with Mark Douglas' book "The Disciplined Trader". Logically thinking, strengthening discipline should lead to better and more stable results. I found exercises that help with this. Many traders started to use them, but the effects were not as good as I expected. Even worse, sometimes the discipline just disappeared—despite adequate effort and exercise! We didn't understand why this was happening. Here are three short stories of traders that led me to solve this puzzle. Trader 1: He is undoubtedly disciplined, has proven it thousands of times and has made millions in the market. One day, after being particularly emotional in the market, he cannot get back into the market. Reducing his positions to a minimum does not help. The discipline that accompanied him for years is gone. He is not able to withstand the pressure. I asked myself: what happened to his ironclad discipline? Why did it suddenly disappear? Trader 2: He sees the signals building up but is unable to join the market. He knows how important discipline is, and he knows he could make an impressive profit. But he is unable to break even. He has previously proven himself to be disciplined, dutiful and hardworking because he has consistently built a large business. Now he can't stand the pressure of the market. What is the reason? Trader 3: He identifies the signals well and opens the trade correctly. Moments later, the problem begins. He loses confidence, stops "understanding the market", fear and hesitation appear. He runs away from the position. If he could maintain discipline (he knows it is essential), he would make money. But he can't. Again the question arises - why? Under the pressure of the market, discipline crumbles like a house of cards. In the past, simply strengthening it often did not lead to any improvement. But, slowly, we began to understand that we need to look deeper in search of something more. Working in consulting taught me one thing: if you want to understand something - research the best. Find out how these traders differ from the average and what makes them successful. And when you know that - you can start teaching others. So I tested it, and it was a huge step forward. It turns out that the best traders are different Especially the "crème de la crème." A study of several hundred institutional traders gave me great insight. The traders themselves indicated what qualities a narrow group of the best of them had. The members of this elite were indeed different. They were able to maintain discipline under almost any conditions (unlike the rest). They stuck to their plans, executed them despite obstacles, turmoil, often chaos in the markets. Others were not able to - emotions consumed them. The best traders had a different approach to situations that caused strong emotions. They tried to cope with them, using several techniques to reduce their emotions. The others focused on avoiding such events. The best traders were not as concerned about failures as the others. They recovered more quickly from losses, whether in a single session or over more extended periods. When the day was good, the elite had more entries than the rest, who gave up once they had executed their plan. Whatever was going on, the best traders focused on their projects and tasks and ran them. It was simple, but the others could not do it. The results of the best were more significant and stable. They had no trouble increasing their positions when there was an opportunity, and emotions didn't take away their logical thinking. Once I gathered plenty of such research and analysis, I began to grasp what this was all about. The best traders were able to perform even under prolonged pressure. It didn't affect their thinking and acting the way it did the others. The best were just tougher - they had a much stronger psyche than the rest. Then it became apparent that pursuing discipline as a critical trait for a trader does not make much sense. Instead, you need to build other characteristics, focus on the best traders and teach that to others. In short: the best traders are much tougher mentally - they have more resilience than the so-called mental toughness. Nevertheless, mental toughness is the most important because discipline on the market under pressure simply does not exist without it. Without mental toughness, you will not be able to maintain discipline in the marketplace. Without it, discipline under pressure simply does not exist. If you have a discipline problem in the marketplace, then 99% of the time, it's not a discipline problem at all! Traits of the supreme traders, the true elite. The traits that institutional traders have pointed out in their best peers can give us more light on what they are like and what to develop in ourselves. Below I will discuss some of these traits and how to develop them in yourself. I have spent over 15 years as a consultant. I prepared and implemented many corporate training and development projects; I helped people develop the necessary qualities and skills. The ability to react quickly to emergencies. Making good, sober decisions in the conditions of surprise, the pressure of losses, chaos on the market and around. Markets can be volatile. The best traders consistently outperform the others in reacting appropriately to situations that cause the others to panic. The best can stay focused despite the obstacles, distractions and emotions around them. The best can respond quickly and advise others on getting out of a difficult situation. These skills can be developed. Read more about this below. Discipline that doesn't fade under market pressure "Everyone has a plan until they get hit hard in the face," says Mike Tyson. There is a difference between the average trader and the elite. The best continue to execute their plan even when they get walloped by the market. A situation that would completely break down an average trader in case of the best one will cause at most a temporary emotional reaction, followed by sober action. This is the critical difference. The best traders remain disciplined despite emotionally charged events, sudden news and high volatility. Research shows that they use different strategies to manage their emotions, are more confident in themselves and their abilities in pressure situations. These skills can be built and strengthened in anyone. The ability to focus under pressure. The ability to refocus when something unexpected happens Focus is needed to execute the intended plan no matter what is going on around you. For example, a simple mistake when opening a position size can result in a position ten times larger than intended. The best traders are not distracted; they know what to do when to do it and how to do it. They know what to do, when to do it, and how to do it. Such focus is essential because others can't do this and need time to calm down. Sometimes even half a day is wasted because of uncontrollable emotions. In a moment of intense stress, most people find concentrating next to impossible. Stress shuts down thinking and focus. The stress response is a rapid automatic mobilization of muscles for action: fight or flight. Here, thinking would only get in the way. Therefore it is eliminated. Our minds and bodies have worked for thousands of years in this manner, and we cannot change it. However, you can learn to reduce the level of this reaction by applying techniques used by the best traders. Aggressiveness When talking about a trader's aggressiveness, we have two things in mind: Following the best moves to maximise, e.g. by so-called pyramiding (adding more positions to a profitable move). The ability to join the market in a controlled manner with a much larger position based on the best signals and moves. Both skills require experience, market knowledge and intuition. The best traders may have the same systems as the others, but they can use them much more, to the maximum. Just this one element puts their performance on a whole different level. In both cases, the pressure is much greater, and it takes much mental toughness to stand up to it. A bank trader placed a large position. The market moved against him, he loses over a hundred million dollars at one point, but he did not leave the market. This situation meant that he had to explain himself not only to local management but also to the head of the bank. He did so. He patiently explained what factors led him to invest so much. He had to manage not only his emotions but also the emotions and fear of his superiors. He succeeded, and the position ultimately made a considerable profit. Experience, emotional maturity and intuition The experience that traders talk about has two aspects. The first is the ability to apply knowledge about the behaviour of markets practically. The second aspect is emotional maturity - practical knowledge and the ability to manage one's emotions Here the best ones are very different from the rest. They are prepared for their emotional reactions, face them and act on them. Weaker ones avoid emotional situations, run away from emotions, e.g. leave the trading room to calm down. The best traders never avoid emotions. They have many strategies for dealing with emotions that may arise and those that are already there. When it comes to intuition, it is the sum of accumulated experience from hundreds, sometimes thousands of hours spent observing news, markets and price behaviour. However, you need to exclude strong emotions because they block the intuition mechanism to access this level. How do you develop these traits? In the face of new research, many traders will want to strengthen their psyche to have better results, work lighter and feel less stress. The simplest way to improve your performance is to emulate the best. In corporate consulting, we have used a simple, effective method: find the best and teach others what they do for you if you want a good result. From here come some practical tips. Controlling the stress response itself I would start building mental toughness by learning to reduce the stress response itself. This modern approach teaches the trader what the stress reaction looks like and how to control it. Then, no matter what happens - the trader will be able to fend off the building stress. The benefit is immediate - chaos, volatility, even panic all around will not take away your sobriety of thinking, focus and discipline. We cannot predict many situations that cause strong emotions: news, statements of important people, disasters, or terrorist attacks. As a result, markets will go into "panic mode." Regardless, a trader with a position in the market, controlling emotions will not make stupid mistakes. And the best will go even further, because as one trader told me, "panic markets are the most predictable". I know that when others are panicking, he will take advantage of strong movements to the maximum. Controlling focus despite distractions Another element of training would be learning how to focus (and refocus when something distracts us). Equally important is the ability to maintain a long focus in situations of noise, emotion and chaos around us. The key question here is - focus on what? There may be many answers (because traders have different tasks). However, the most important one is: focus on the execution of the plan. The plan should be prepared in advance, and it should be executed in a situation of pressure and emotions. We think best and soberest when we are not under pressure. Separating planning and execution is a step toward good decisions and good plan execution. The best traders have good, well thought out plans. Of course, weaker traders have plans too, but they often abandon them under the impact of events. The best traders don't do this. Instead, no matter what happens, they try to stick to their plan because they know it's the best they can do at the time. Elite military units are known for their legendary mental toughness, much less their careful planning and mission preparation. Navy Seals operators know just what to do in each situation despite the often deadly threat. They know because they have practised it many times, planned and executed. During a mission - they focus on what they are currently supposed to do. Their psychologist sums it up this way: "Professionals focus on the process and amateurs focus on the outcome." That goes for any type of professional. "Professionals focus on the process, and amateurs focus on the outcome." Changing the attitude towards losses to that of the best is the third element necessary in training. Strong reactions to losses can permanently damage the psyche, so it is worth knowing how the elite traders deal with this problem. I devoted much attention to this during my interviews with traders while gathering material for my book. I identified the five most important "best practices" that the best traders have. They include preparing for a "big loss" as a preventive measure, being indifferent to the outcome and sticking to their process (always mandatory), trading within their "comfort zone with losses", and treating losses as a step forward. For the best, at least one of these practices is always used and sometimes several simultaneously. This approach to losses protects the psyche. In my opinion, this is just as important as protecting capital. I have seen many traders bounce back after losses because they have good trading skills, but they cannot. Their psyche doesn't allow them to. Sometimes you can do something about it, and sometimes you can't. As a result, losses have ended the careers of many market stars. The training should lead traders to find a suiting solution that will allow them to approach losses as a necessary part of the game calmly. I am thinking here of a kind of "buffet", on which we will put the methods used by the best and let everyone choose and test what suits him. And he'll keep doing it until something works. Strengthening, stabilizing self-confidence I would see learning to maintain and boost confidence as the fourth element. It helps with hesitation when opening and leading a trade. Such sureness is one of the most direct ways to increase mental strength quickly. From time to time, the best traders also need a boost. At the level of cash they are handling, hesitation can lead to substantive losses, which in turn lead to trouble on the mental side. Self-confidence can be built in several ways, and the simplest is to recall situations when we succeeded. At the same time, it is advisable to maintain a balanced approach, as overconfidence always leads to losses. Every top trader I've talked to has mentioned this very thing. How do you get past the glass ceiling level where stress builds up strongly? You can have a great system that beautifully identifies perfect entries. However, when you start making more money, you are in for an unpleasant surprise. The so-called "glass ceiling" - the size of the order, at which suddenly stress will strongly increase. The pressure, of course, leads to losses. Traders solve this differently; most often, they reduce the position size to what they find comfortable. However, this severely limits profits. Stress on larger positions also blocks opportunities for advancement. Often a fund will require a trader to have experience trading much larger positions than they are currently capable of. We have found some techniques that can deal with this problem. But that's a story for another time. Give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
Suicide because of loss. A story that didn't happen.This is a story about how a good friend of mine lost over 700.000,- in 9 hours. And about the importance of the role of YOUR psyche in trading. Some time ago, a fellow trader phoned me. Let's call him Tom. He traded occasionally, and by day was the CEO of a small company. We arranged to meet. It supposed to be an ordinary friendly conversation. There was no indication of what I was yet to hear... - You know, actually, I have another matter - here Tom suspended his voice. - Last week I lost more than half a million in the market. I'll admit that I was surprised. I knew he was making money in the market but I didn't think he was trading such amounts. Losing that kind of money for an occasional trader is no small matter. Therefore, before talking to him, I repeated to myself 23 ways to deal with losses (gathered from various sources, including a group of the world's best traders I had interviewed at one time). I was anxiously awaiting the meeting, I have had various traders with big losses but such a situation not yet. A loss of this magnitude, even more - in about 9 hours, can seriously shake the psyche. I have seen situations where people were on the verge of suicide, others were not able to sit down to the market for months, still others are haunted by remorse for years. The issue is as serious as possible. At the meeting Tom told me what happened... For several months he watched an outstanding trader who was able to grow his account 10 times in a month. At some point he decided that it was not difficult, deposited about 30 thousand and traded for a month. He took more than 670 thousand out of the market by putting 19 positions. Last night he decided that he would try to make it two million. He hoped there would be a move that would allow him to do so. He sat down around two in the morning and put 3 positions. Each for more than 40 lots. A few minutes before eleven the next day, they were all automatically closed at a loss. The account was cleared to zero. As he told me later, these entries were outside the system. To my surprise, Tom did not seem at all concerned about the loss! I questioned him in detail about the incident looking out for any signs of trauma, or at all remnants of a severe experience. I found nothing. There was not even a lowering of mood! Tom, as usual, was in a good mood. Intrigued, I began to inquire why he was not concerned about such a loss! I was sure she had meant something to him. It must have! True, he was the CEO of the company, but he didn't earn that much in it to be able to forfeit 700,000 in one evening. Tom responded to me with something that gave me food for thought for a long time and that I want to share with you: - This is virtual money. As long as you don't cash them out anything can happen to them. It's a virtual entity, it can disappear as quickly as it appeared. Only when you have it in your bank account does it become real, but until it does - it's just a row of numbers. That's how I've always approached the markets. It's just numbers, nothing more. Here he surprised me again. I encountered such an approach for the first time. For all the traders I have worked with so far, money mattered. Always. The depth of what Tom told me at the time didn't come to me until a few months later. In a nutshell, I can describe it this way… Each of us has some image of the importance of money in life. We bring this image to the market. A big loss (as well as a big gain, I've had such cases) can throw a person off balance for days, years or permanently. The essence of the problem is that the loss causes pain. This pain can be almost physical and can last for weeks or even months. There are traders who go through months of hell because of losses. On top of that, there are problems related to, for example, the judgment of the environment and the immediate family. I knew that the best traders are very tough and mentally resilient. This is one of the secrets of longevity in the market and the huge fortunes they build. Mental toughness is something I have been studying for many years, in the case of top traders it is outstanding. Here I came to understand that mental toughness has many forms, and the lack of response to very difficult experiences can be due to a different perception of the situation, a different value system or a different value scale. Tom is certainly very mentally tough, this I must admit. The story described is an example of how different traders approach markets and money differently. The way one thinks about money determines the psyche's reactions to profits and losses, and consequently the mental load. As long as Tom treats trading as a game of numbers he will be calm about the outcome. Neither profit nor loss will shake him. I'm sure I'll tell you more about this in other articles, because mental toughness is a little-known topic, and yet it's one of the pillars of success not only in trading, but... everywhere. Give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
Emotional rollercoaster in trading. Which stage are you at?"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor." - JESSE LIVERMORE Consider a trader named Jon, who began Forex trading with high hopes of significant profits. Jon had a solid understanding of technical and fundamental analysis, and on paper had developed a profitable trading strategy and system. However, he was not prepared for the psychological challenges of the stock market... Phase 1: Overconfidence and initial successes In the beginning, Jon executed a few trades that turned out to be very profitable. This initial success boosted his confidence to the highest level. He began to take larger positions, thinking he had a natural talent for forex trading. His overconfidence led to impulsive decisions and excessive risk taking. Phase 2: Reality check Because Forex can be very volatile, Jon soon scored a series of losses. He became anxious and stressed, and began to act chaotically and in a hurry. He opened riskier and riskier trades, and wanted to trade. Losses chased losses. His emotional state worsened, affecting his personal and professional life. Phase 3: Seeking help and education After significant losses and emotional turmoil, Jon realized he needed help. It was natural that he started by changing to another system, then another and another, and... Still without better results, he turned to trading psychology. He learned about typical emotional traps, such as fear, greed, trading with a vengeance "to trade," lack of discipline, and poor mental toughness. He also sought support from mentors. He learned that top-earning traders put 90% of their efforts on psychology. Similarly, in the richest trading funds - they spend huge money on psychological departments and programs to support traders. He sought knowledge on how they do it. Phase 4: Developing emotional resilience Jon gradually began to implement strategies to build mental toughness and manage his emotions. He learned to accept losses as part of trading, stick to his trading plan, beyond emotionally managing risk and capital, and avoid making impulsive decisions. He also practiced mindfulness and relaxation techniques to reduce stress while trading. Phase 5: Consistency and long-term success Over time, Jon's mental strength improved significantly. He was no longer driven by emotional ups and downs. He built discipline and learned to maintain it, and began to manage risk and capital effectively. As a result, his performance stabilized and he began to make steady profits, gradually building more and more capital. This is a typical trader's path, and reflects the typical challenges and experiences that many traders encounter in their "trading life." Unfortunately, in most cases it does not end so positively. Traders are unable (unwilling) to jump from 3 to 4. While it is the mastery of one's psyche that is often the key to long-term success in the forex market. And you, do you like to lose or make money? "Just as professional athletes work on their body and psyche, traders should start to learn about their strengths and weaknesses and create something like a mental gym or gym for themselves. The idea is to be technically better and mentally stronger. If I were to point out a few mental qualities of the best traders it would be the ability to focus in situations of chaos and volatility, the ability to stick to the plan despite everything, the ability to manage one's reactions to highly stressful situations (like special forces). In one sentence... Current traders face a simple choice: either strengthen their psyche and increase their market advantage, or many of them face losses and abandonment of their profession." - Dr. Dariusz Swierk If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
What are emotions in trading? Where do they come from?We have two channels with which we perceive the world. The first (customarily attributed to the left hemisphere) is the analytical channel - the stream of thought, we usually think is rational. The second (customarily attributed to the right hemisphere of the brain) is the emotional channel. We perceive what is happening around us emotionally. We can better understand the role of both channels when we turn to simple evolutionary biology. Thinking allows us to understand the world: to seize opportunities and avoid threats. Emotions and feelings tell us what is an opportunity and what is a threat. In other words, emotions give meaning to the events we perceive. In the vast majority of people (that's evolutionary biology again), the emotional channel is stronger. People who are completely emotionless are considered cold or even impaired. Strong emotions usually turn off the rational channel, because the primary function of emotions is to identify a threat, "turn off" thinking, redirect blood from less important organs (including the brain) to the muscles, initiate a hormonal response: prepare the body to fight or flee. The same way emotions work in trading. What is emotional trading, emotional investing? The problem begins when the emotional channel begins to strongly dominate the thinking channel. This is when actions occur that traders later say "I don't know how I could have done that". This is how the rational channel sums up thinking and acting under the influence of emotions. But... it just works that way. Strong emotions usually turn off the rational channel, because the primary function of emotions is to identify a threat. Strong emotions are triggered by a strong threat. The emotional reaction triggers a hormonal response which cuts off thinking, pumps blood to the muscles, injects cortisol and adrenaline (we become stronger, tougher and more resistant to pain). It's a survival mechanism - our body prepares to fight the threat or run away. Here you don't need to think, you need to be strong, fast, fit and resistant to pain. Thanks to this, as a species we have survived and dominated the planet. The problem arises when we have this reaction in front of the computer and strong emotions cut off our thinking, while we need a sober judgment of the market situation (a good rational channel) because we are not preparing to fight a tiger or a bear just to re-analyze a position in the market when something unusual has happened. How the best traders control emotions in trading The best traders have both channels functioning well even in the most difficult situations. This means that even under the influence of strong or even very strong emotions in trading, the best traders are able to make good decisions. The best traders are helped in controlling their emotions in trading by several important things: experience proper preparation ability to manage emotional reactions in trading Most of the best traders are able to act efficiently despite their emotions, and even treat them in some cases as a source of information about what other market participants are feeling, e.g. during a market panic. A trader may feel strong emotions in trading, e.g. fear, but will still correctly execute many entries in a row in a market panic. Here, traders who work alone are easier - they can cut themselves off from emotional news, TV and just don't read incoming news. Traders who work in trading rooms find it more difficult, because the atmosphere of panic is shared by everyone. How to control emotions in trading? The best tools to control such situations have special forces. Soldiers there are systematically put in life-threatening situations and they have to act soberly and precisely. The training that the best troops undergo includes breath regulation, process management (I'll explain in passing) and, of course, preparation in real life, simulation and visualization for whatever may happen during a mission. For a trader, there are situations that are critical, just as for soldiers - a few wrong emotional decisions can wipe out capital built up over many months. That's why - breath work, good preparation, awareness of risks and knowing how the stress response works (and inhibiting it) are techniques worth learning. The best traders work on their mental resilience using, among other things, military methods of working with stress (I write more about this in my Top Investor training here, I also describe the exercises used there). And one more thing - special forces soldiers have a much stronger psyche (mental toughness in other words), as do the best traders. And this is also worth working on. What emotional challenges do you have? Let me know in the comments. I will prepare options for solutions. If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
Improve your decision-making process in tradingThe trader's decision-making process is one of the most important concepts in trading for me. Why? Results depend on a good process. So what is a trader's decision-making process? Generally speaking, these are all the thought processes, analytical processes and decisions you make from the initial analysis ("idea") to the closing and analysis of a position. The entire thought process that goes on in your head. This approach came to my mind, even imposed itself when I thought about how AI in trading would make decisions - the best possible ones. Then the same principles were already obvious in application to traders. And still later it turned out that the best traders have specific elements of the decision-making process, practically absent in other traders. That's enough history, now what came out of it... What is a trader's decision-making process? A trader's decision-making process (or the decision-making process in trading) consists of two components: rational (analytical) and emotional. The more experienced the trader, the more importance he attaches to the emotional component - but in a specific sense. This does not mean that emotions dictate to the trader what to do. Very experienced traders treat their emotional state as an additional source of information, and are able to "stand by" and hear the voice of intuition above and beyond the emotional noise. To quote one experienced trader: "If I feel pressure in this situation it means that others in the market also feel it. The one who can withstand it better will win." What does a trader's decision-making process consist of? Let's break down your decision-making process into components. 1. It starts with analyzing the markets and choosing an instrument (specific stocks, specific currencies from the available pool - for example). What factors drive your choice, why did you choose this instrument and not another? Here we have the first decisions. On what basis do you make them? This is important, because if you start thinking about how to improve your decision-making process in order to have better results - you will understand that... perhaps it is possible to choose better. I'll state how the best do it: they learn to choose the best inputs from those available to them. In the sense that if they specialize in a certain sector of companies - they choose shorts or longs with the best views of profits. Of the many opportunities that are available, they try to choose the ones with the best prospects. The best traders try to choose only the best opportunities from among what is available in the markets they trade. They don't trade on everything. What does this mean for you? It means that you can, and even need (!) to work on your criteria for selecting an instrument, so that you choose the one on which you will find it easiest, on which you will earn the most (potentially). The selection criteria may be different for different Treders. In the case of AI systems, their development goes something like this: searching for the best opportunities from what is available. At the same time, it will take a fraction of a second to search, for example, five thousand companies in this regard. And from this vastness, the system will select, for example, 100 for further analysis and trade. I mention this to begin to slowly make you aware of what analytical and decision-making power you are dealing with, because you won't jump over it. But let's get back to the decision-making process. 2 We have selected for example, the best companies, what next? Let's assume that we want to enter the market, as long as the criteria are right. And here comes another question: where, among the selected companies, are the best situations? A simple example: we want to trade longs on companies with good fundamentals. Our selection factor at this stage of the decision-making process may be volume behavior. We are concerned with entering such movements, where volume is clearly increasing - which suggests that the interest of buyers is growing. At this stage we will rank the selected companies according to the best situations of increasing volume. Somewhere the volume is too low, somewhere it is too high, and the price is not rising much (which is not the best option). So we have several companies with the best situation at this stage. In this example we used volume, but we can analyze more elements: candlestick formations, Fibonacci levels, MACD, CCI and thousands of other indicators. We can also use confluence of indicators and situations, for example, the price reaches the average 200 from the top, is close to resistance and at the Fibonacci 62% level. Here several things meet at once, it can be an interesting decision-making place. With several combinations to choose from, ask yourself which indicators are best for your purposes? 3. Now it's time to decide how much capital you will invest. A trader's decision-making process is a series of analyses and decisions. Each distinct element of the decision-making process you can improve, address from different sides, analyze and improve according to different criteria. This gives you the opportunity to improve your results - improving one by one each element on which these results depend. How does the trader's decision-making process differ between experienced and novice traders? According to a study of institutional traders - less experienced traders use emotion avoidance strategies in the same situation. This makes a difference and a barrier for beginner and intermediate traders. The best traders are able to withstand a lot of long-term pressure by entering into it consciously, while less experienced traders at some point succumb and run away from the same position. Both groups of traders differ in experience, but not only - they differ in their strategies for dealing with emotions while trading. Because it turns out that not only experience matters. Studies show that traders with very high trading experience (e.g., more than 20 years) and not using strategies for working with emotions like the best traders - have poorer results. To give just one example: getting to the TP - due to the pressure of the markets, traders often run away from positions, emotions, the pressure on the psyche is too strong. The psyche is the filter through which all decisions pass. And it can disturb each decision and each step - from the initial analysis to the execution of the entry. The way you handle your emotions in trading allows you (or not) to survive chaos, volatility, uncertainty and panic, allows you to continue to enter the market when others have long given up, opens new doors to results. Proper handling of emotions is essential to a trader's correct decision-making process. A recipe for improving trading performance with the help of a trader's decision-making process In short: break down the way you make decisions into components. Learn as much as you can about how you can improve each of them. That's not everything, of course, but that's all you need to start with. In the future, I'll write more about the next steps and the best practices you can use there (click follow to get notified). If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Education
by drSwierk
What are the traits of the best traders?This article is hugely important, especially for traders outside the funds. The basis is to observe the best traders, specific behavior when they are successful. Interestingly, the same behavior is observed in the most outstanding athletes, businessmen, members of elite special units. The best of the best, when they are successful - they want to be even better. That's why - they don't stop educating themselves. They continue to learn about their strengths and weaknesses and work on them. They continue to train, research, develop technical skills - in our case, knowledge of markets, new analytical methods, new sources of advantage, new strategies, indicators and tools to facilitate their work. Professional development has become a lifestyle for them, something they do regardless of success or failure. The success they enjoy is certainly rewarding, but it is also contextual, an (inevitable) by-product. Interestingly, they often derive more satisfaction from this effort than from the success itself: in the market, in business, or from completing a very difficult mission. For them, learning, developing, overcoming themselves is a way of life, a passion that consumes them, a blessing that brings them success and a curse that consumes virtually all their time. In short - their secret is passion Passion enlightened, by that I mean that you know your strengths and weaknesses well and work with specifics. And if we're talking about specifics, we're also talking about measuring results, states, progress. But that's a story for a completely different article, which I'm sure will be written at some point. What are these qualities of the best traders? The trump card of the best trader consists of 2 parts, and in order to systematically make money you should have both. technical psychological Technical advantage - I understand it as all the skills and knowledge that make up your trading system. Do you know what exactly your advantage is? To show the extreme advantage I will use the example of the best traders. Everyone else has some kind of advantage "between" the best and the weakest (who do not have these qualities at all or at a very low level). What creates the advantage of the best traders? Access to unique knowledge, preferably before everyone else. Knowledge of companies' plans, new products (which is unavailable to others), especially in the case of stocks. The ability to reliably estimate the performance of companies before they are published Knowledge of political changes and their impact on markets Use of alternative data Taking advantage of market formations that pay well and that others don't know about. To this we can add: knowledge and ability to use technical analysis finding specific entry points and methods using formations that others have overlooked or using what is known, but in your own unique way How to build an edge in trading? The advantage of the best traders is usually built from several things at once. It can be a hybrid of several things, for example, they can use their knowledge of company movements, identify entry points through technical and volume analysis, and execute the entry itself through an automated system that makes great use of liquidity. The advantage of the best traders can come from better tools, e.g. to build positions, to maximize positions (there are some in the largest funds) improve performance and simplify life. You will find your advantage if you answer the question: on what basis do I make decisions about the choice of an instrument (company, commodity, currency...)? Some systems are based on fundamental analysis, macro analysis, company analysis, supply and demand analysis (e.g. commodities), then we have technical analysis, price and candlestick formations and a host of indicators. You will see your advantage (or lack thereof) when you ask yourself, what is unique about your system? You may answer that you are using, for example, well-known price formations, triangles, flags or similar. However, this may mean that you are doing the same thing as everyone else. There is nothing wrong with that if you are trading on a small scale, privately or as a hobby. However, if you are or want to be a professional trader this is not enough. Formations, elements of technical analysis sometimes work and sometimes not. If something is repeated over and over again, large traders will enter the market and use the accumulated orders for their own entries (stop hunting is an example) and your advantage will disappear sooner rather than later. A pattern that worked very well will suddenly cease to exist. The best traders not only know exactly what their advantage is, but also go to great lengths to improve it. This article is not intended to give you a ready answer of what to do and how to do it, but rather to point out a problem that could cost you a lot in the future. You should, like the best traders, know exactly what your trading advantage is and build on it. If you don't know that, I hope I patted you on the shoulder and told you that you fell asleep at the wheel. Nothing bad has happened yet, but you've already fallen asleep. So what is your advantage? Let us know in the comments! If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Education
by drSwierk
Trading BTC : Dunning Kruger Effect 🐸Hi Traders, Investors and Speculators 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher. 👩🏫 Have you ever wondered what it takes to be a good and profitable trader? Have you wondered how long it will take before you would have mastered the art f trading? Myself and Dunning Kruger will let you in on a little secret - the journey of pretty much every person that has ever started trading is explained in the chart above. The Dunning-Kruger effect, in psychology, is a cognitive bias whereby people with limited knowledge (in a given intellectual or social domain) greatly overestimate their own knowledge or competence in that domain relative to objective criteria or to the performance of their peers or of people in general. This happens in trading all the time. In fact, we probably all started there if we're being honest . So - What causes the Dunning-Kruger effect? Confidence is so highly prized that many people would rather pretend to be smart or skilled than risk looking inadequate and losing face. Even smart people can be affected by the Dunning-Kruger effect because having intelligence isn’t the same thing as learning and developing a specific skill. Many individuals mistakenly believe that their experience and skills in one particular area are transferable to another. Many people would describe themselves as above average in intelligence, humor, and a variety of skills. They can’t accurately judge their own competence, because they lack metacognition, or the ability to step back and examine oneself objectively. In fact, those who are the least skilled are also the most likely to overestimate their abilities. This also relates to their ability to judge how well they are doing their work, hobbies, etc. The Dunning-Kruger effect results in what’s known as a double curse : Not only do people perform poorly, but they are not self-aware enough to judge themselves accurately—and are thus unlikely to learn and grow. So how can we prevent ourselves from falling into this trap? Here's a few things to keep in mind: To avoid falling prey to the Dunning-Kruger effect, you should honestly and routinely question your knowledge base and the conclusions you draw, rather than blindly accepting them. As David Dunning proposes, people can be their own devil’s advocates, by challenging themselves to probe how they might possibly be wrong. Individuals could also escape the trap by seeking others whose expertise can help cover their own blind spots, such as turning to a colleague or friend for advice or constructive criticism. Continuing to study a specific subject will also bring one’s capacity into a clearer focus. 💭Practice these habits to ultimately escape the double curse: - Continuous learning. This will keep your mindset open to new possibilities, whilst increasing your knowledge over time. - Pay attention to who's talking about what. Is the accountant talking about bodybuilding? - Don't be overconfident. This is self explanatory. I hope you enjoyed this post today! Please give us a thumbs up 👌 _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
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Education
by CryptoCheck-
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Checklist: Challenges that even the best traders face (part 2/2)Challenge: Inner Strength - Uncertainty. Uncertainty is also a weakness that must be eliminated. It is the negation of "inner strength." An investor or trader who is uncertain about himself, his skills or his system is an investor who suffers systematic losses. Remember, however, that both overconfidence and overconfidence lead to losses. Mature traders are in an intermediate state, neither weak nor arrogant - they are attentive and alert, ready to react to the situation. Challenge: Inner Strength - Learning self-discipline. Any experienced trader you talk to will tell you that discipline is critical to their performance. I once read a study that traders who return from vacation have trouble disciplining themselves for a short time. This made me think that if self-discipline can be weakened by a vacation, perhaps it can be strengthened? From there it was only a step to looking for methods on how to do it. With help came modern brain research, neurophysiology and, again, special forces methods. How does a discipline learn the best? Most often through difficult experiences. Severe losses and mental transitions that force them to stick to rules and certain behaviors. A bank trader who started on his own account when asked how he learned discipline answered: Thru trial and error, I found whenever traders diverged from their routine they have the tendency to become sloppy and that usually is a sign of an impending losing streak and I have the scars to prove it. If you lose in three days the earnings you've worked six months for, you won't do certain things again. Meanwhile, difficult experiences are not the only way to learn discipline - just a rather arduous and risky way. I'm not just talking about the financial losses that are the inevitable consequence of a lack of discipline. I'm talking about something more serious - your psyche may not be able to withstand the strain. After a loss, you may want to trade back and, as a result, lose all your capital. I know traders who lost fortunes and left the markets. For some, the markets have damaged their psyche and they are unable to return. They would like to, but are unable to. That's why it's better to follow the right path, that is, not to expose the psyche to either too much loss or too much gain. Both can put a heavy strain on the psyche. Challenge: Inner Strength - Resistance to market pressure After learning self-discipline, we have building resilience to market pressure. The idea is that when entering the market with an order, traders feel different emotions and it is necessary to know what to do with them. For example - soldiers train shooting, but only on the battlefield it turns out whether they can act under pressure or not. That's when emotions and stress turn on, sometimes so great that it prevents action. I remember a story, probably from the Civil War, when it turned out that during a battle soldiers literally didn't know what they were doing. Back then, rifles were loaded with powder poured through the barrel. After the battle, many rifles were found loaded several times in a row. Soldiers loaded and did not fire. The record holder loaded the weapon more than 21 times! A trader needs mental toughness "in the heat of battle" in the market. Otherwise he won't get far. Challenge: the glass ceiling Let's go further. Another important element hitherto inaccurately known was the glass ceiling. This is the level of cash handling at which stress suddenly increases a lot. I have seen this in many traders, for example, one started with very small accounts and had this level at about $1,000. He was not able to break through, he was reaching and losing due to stress. The other, also a beginner had it at about 20 thousand. He felt severe stress, so he came up with his own way of managing cash. He started with a few thousand and when he got to 20 he would withdraw, leaving a few thousand. This gave him a comfortable trade and quite reasonable earnings. Challenge: Reacting to losses and... profits The next challenge is the reaction to losses and profits. This is actually one of the central themes in trading, along with stress, the glass ceiling and taming market uncertainty. This is where all the trader's skills come together. What we currently know: we have three areas of dealing with losses. Within them we have 23 methods, including basic and advanced methods, I will cover some of them in the future. Challenge: Zona For professional traders, a key element in their success is a state of mind, the so-called "zona." This is a state in which you are, on the one hand, focused and, on the other, fascinated by the subject of what you are doing. "Zona" is not specific to trading, it is specific to the human mind. Recall when you let yourself get caught up in a very interesting movie, book, something you were doing with distinct pleasure and satisfaction. Your senses are then sharpened, your concentration increases and everything goes as it should. It took us quite a while to understand two key things - where it comes from and what hinders it. We will address zonation in more detail later. Challenge: Correct decision-making process If you have it then your analytical skills harmonize with your decision-making skills, you make quality decisions. This is the most advanced level, where thoughts, feelings, emotions converge. Here the signal from the system should be made very and well, the execution must be of high quality and it is the product of high quality decisions. This may sound a bit esoteric, the topic originated as part of the management of quality policy in investment funds. An incentive system that does not burn out the best traders can later be based on HQT. 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Education
by drSwierk