I see so many traders worrying about their psychology and treat it as an issue that needs to be resolved, the psychology will come when you have learnt to trade, true it needs to be addressed, but you will never be able to address until you have the right trading methods.
It’s like if you’ve got a 30yr old Mini, with smoke spluttering out the back and it’s misfiring, and the wheels pointing in the wrong direction, you’re not going to have any confidence in it reaching your destination, you will worry all the way and do some rather poor driving and the chances are it will break down on the way and you’ll never get home.
BUT, if you’ve got a brand new Porsche straight from the garage, plenty of driving experience, you are going to have all the confidence in the world and you will drive perfectly and you will get there.
Same with trading, you got a crappy system, you’re going to crash and burn and you will never have the confidence, but if you’ve got the top of the range methods, you’re going to have the confidence and get there safer, quicker and smoother.
Nice analogy, I’ll go with that. Just remember brand new cars can break down randomly, so nothing is guaranteed. Also make sure to fill up with petrol (ie take time out from trading), go for regular MOT and servicing (review your strategy) and most importantly, don’t EVER go ever the speed limit (trade TOO much) otherwise you’ll get a ticket (make serious losses) or even get banned (lose everything) …
I agree PPF, 'though even within that it is really a two part problem: having an effective system, and then genuinely believing that it is effective. Poor execution can still ruin a good system, and can often be down to psychology. I’ve seen people say that they have faith in their system, and I think that they have believed it, yet they still sometimes can’t resist tinkering. Like fitting an aftermarket sports exhaust to that new Porsche, then finding that it overheats the engine and ruins everything!
100% agreed.
That’s what most Newbies get, they get to drive the old Mini :59: Not only one, but one after another. They will get tired of this and quit after a while, most of them never get to drive the new Porsche. But those who hangout long enough may eventually get an opportunity to own the new Porsche :59:
If I had the system I use now when I was starting out, I could had been a consistently profitable trader from the start.
But I had to drive the old Mini. Now, as I have experience and trading physiology needed, as I’m consistently profitable, will I ever choose to drive the old Mini, never. As I know even with experience it will be a tough task. I would rather save my money to buy the Porsche.
Most people driving a normal car will have just as much money as someone driving a porsche. Insurance companies will charge much higher premiums above the price of the car because accidents are likely to happen in flashy cars. Better to drive a VW - safer.
Don’t you feel like if you traded whatever system you’re using now, but when you first started out, you might not do well? For me at least, the psychological aspect of trading is like 70% of the game. System is 30%.
If you put Schumacher in a mini and a 16 year old student driver in a porsche, set them up racing downhill on pike’s peak. Schumacher will still win (profit), and the youth will be off a cliff (blown account.). Likin these analogies?
When a trader(Driver) loses a trade(ride), the first thing that can come to their mind, would probably be that he must be using the wrong system(car). The trader might even regret taking the trade however sometimes the nature of the mistakes done can come from the inner self just like the mistakes we make in life. There is just about five percent of consistent top traders whose ultimate aim is to achieve constant profits. These top traders learn from their mistakes. They treat their mistakes as an experience they could learn from. They realize that they could have another chance of making it better.
The Psychology of trading is a subject not often discussed and dealt with. Traders usually keep themselves busy in finding a system that works for them. Finding the right system is indeed important however understanding the psychological aspects and barriers should not be neglected.