If you want to stir up a lively chat room, talk about fibonacci retracements, or Gann Lines or momentum oscillators. If you want to bring the conversation to complete silence bring up the psychology of trading.
Perhaps the term "psychology" itself is the culprit, as it evokes thoughts of mental insufficiency or the inference that somehow you, the trader, may be having thoughts that are incongruent with trading reality. Yet trading psychology may be the most important, and least discussed aspect of trading. The way you think directly impacts the effectiveness of your trading profitability, and I am not referring to technical knowledge.
Whether we, as traders, like to acknowledge the emotional side of our trading is a question few care to deal with in a coherent scheme. Of course, most traders will claim they remove their emotions in trading, and to a degree this must be true. I suppose the very best traders will claim they have very little emotional involvement in their trade selection and contract size management. That is the way it ought to be...trade like a robot.
Unfortunately we, as human beings, are not wired to ignore our emotions. Few can deny the satisfaction of a string of three or four highly profitable trades. Studies from several sources indicate higher level of endorphin as people successfully trade. Endorphin release causes a sense of euphoria and well being.
As I trader I find myself susceptible to a bad trade after several very good trades. I think, in my own mind, that I am on a lucky streak, or that I have a particular insight into that days trading action, or some other psychological phenomena which is simply not true. For me, I am more likely to make a bad trade after a succession of good trades. And I am not alone, several studies have verified this trend, this overconfidence that builds with each successive trade. Yet, I usually analyze the bad trade, and can clearly see it was not a good setup, and I was relying on my "winning" intuition when I took the trade...after all, I had been killing the market all day. Why would I fail now?
Books like:
Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology (Wiley Trading) by Brett N. Steenbarger
Trading for a Living: Psychology, Trading Tactics, Money Management by Dr. Alexander Elder
Essentials of Trading: It's Not WHAT You Think, It's HOW You Think by Larry Pesavento and Leslie Jouflas
These titles grace my trading library and I have dog-eared the book by Dr. Alexander Elder. If I find myself relying on emotions and/or emotional attachment to any trade I know it's time to shut the computer off.
Still, traders really don't want to discuss the mumbo-jumbo world of psychology and trading, not really. And it might well be the most important aspect of your trading life.
Perhaps the term "psychology" itself is the culprit, as it evokes thoughts of mental insufficiency or the inference that somehow you, the trader, may be having thoughts that are incongruent with trading reality. Yet trading psychology may be the most important, and least discussed aspect of trading. The way you think directly impacts the effectiveness of your trading profitability, and I am not referring to technical knowledge.
Whether we, as traders, like to acknowledge the emotional side of our trading is a question few care to deal with in a coherent scheme. Of course, most traders will claim they remove their emotions in trading, and to a degree this must be true. I suppose the very best traders will claim they have very little emotional involvement in their trade selection and contract size management. That is the way it ought to be...trade like a robot.
Unfortunately we, as human beings, are not wired to ignore our emotions. Few can deny the satisfaction of a string of three or four highly profitable trades. Studies from several sources indicate higher level of endorphin as people successfully trade. Endorphin release causes a sense of euphoria and well being.
As I trader I find myself susceptible to a bad trade after several very good trades. I think, in my own mind, that I am on a lucky streak, or that I have a particular insight into that days trading action, or some other psychological phenomena which is simply not true. For me, I am more likely to make a bad trade after a succession of good trades. And I am not alone, several studies have verified this trend, this overconfidence that builds with each successive trade. Yet, I usually analyze the bad trade, and can clearly see it was not a good setup, and I was relying on my "winning" intuition when I took the trade...after all, I had been killing the market all day. Why would I fail now?
Books like:
Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology (Wiley Trading) by Brett N. Steenbarger
Trading for a Living: Psychology, Trading Tactics, Money Management by Dr. Alexander Elder
Essentials of Trading: It's Not WHAT You Think, It's HOW You Think by Larry Pesavento and Leslie Jouflas
These titles grace my trading library and I have dog-eared the book by Dr. Alexander Elder. If I find myself relying on emotions and/or emotional attachment to any trade I know it's time to shut the computer off.
Still, traders really don't want to discuss the mumbo-jumbo world of psychology and trading, not really. And it might well be the most important aspect of your trading life.
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