Building Trader's Psychology

[veluri1967]

Trading is hard because you have to operate in a state of not having to know, even though your analysis may turn out at times to be "perfectly" correct. To operate in a state of not having to know, you have to properly manage your expectations. To properly manage your expectations, you must realign your mental environment so that you believe without a shadow of a doubt in the five fundamental truths discussed in above post.

===============================================================================


THREE STAGES OF DEVELOPMENT OF A TRADER

===============================================================================

The first stage is the mechanical stage. In this stage, you:

1. Build the self-trust necessary to operate in an unlimited environment.

2. Learn to flawlessly execute a trading system.

3. Train your mind to think in probabilities (the five fundamental truths)

4. Create a strong, unshakeable belief in your consistency as a trader.

===============================================================================

Once you have completed this first stage, you can then advance to the subjective stage of trading. In this stage, you use anything you have ever learned about the nature of market movement to do whatever it is you want to do. There's a lot of freedom in this stage, so you will have to learn how to monitor your susceptibility to make the kind of trading errors that are the result of any unresolved selfvaluation issues.

===============================================================================

The third stage is the intuitive stage. Trading intuitively is the most advanced stage of development. It is the trading equivalent of earning a black belt in the martial arts.

===============================================================================

We will go through three trading stages step by step in order to become trading tycoons.

Cheers.

 

[ranger123]

Sir, after reading all your postings here only, I think we all fellows should repectfully calling you BABA VELURIJI.:thumb:

You are writing wonderfull postings and we all fellows are benifiting from it a lot so please continue to guide us.

Thank you.

 

[veluri1967]

Sir, after reading all your postings here only, I think we all fellows should repectfully calling you BABA VELURIJI.:thumb:

You are writing wonderfull postings and we all fellows are benifiting from it a lot so please continue to guide us.

Thank you.

I am still learning. Hope you understand the difference between learning and learned. Calling me....BABA......no way.

Thanks, anyway, for finding my posts interesting.

 

[alroyraj]

Also Pls advice how to get rid of the sense of over confidence and arrogance after winning a trade.

Veluri if I may answer this one (In all humility...).
Good question. One way is to view how you can improve,that way you can avoid thinking that you have done it perfectly. there is always things we can improve on,say like how we could ride a right call but cut short our losses.It is easy and dangerous to get over confident and blow the profit in the very next trade the same day,when we lower our entry criteria.
Improvements like increasing the quantity when we are sure again subject to a positive expectancy of higher probability.
The market does not do anyone a favour nor have we won the war merely a single battle .

 

[veluri1967]

You should never look at any trading system, indicator, or market analysis method as providing you with anything more than an edge in understanding what might happen in any given trade. The most brilliant trader in the world is dead meat if he holds many heavily margined long positions in stocks and the market crashes 1,000 points.

Always be prepared to be wrong. Being wrong is part of odds game and has to be factored into your overall strategy trading plan. Take your lumps and move on. Winning traders do not become depressed when they lose, nor do they become euphoric when they win. They just work through their numbers and structure their strategy so that when all the wins and losses are tallied, they come out way ahead.

One of the things that differentiates a great quarterback from a mediocre one is his ability to throw brilliantly immediately after getting sacked. The same goes for trading.

Remember, most of what happens in the markets is not predictable so it is foolhardy to trade on the basis of predictions. It is best to gain an understanding of all the technical factors that might affect a market's direction at any given moment and cautiously step into a market when a confluence of those factors occur at the same time. It is impossible to quantify all these factors such that they can be assimilated into a mechanical trading system.

Who said shares print repetitive patterns? Anything can happen with this scrip? Up or Down? What is your edge? That matters the most!

 

[jagankris]

Thanks Veluriji for hitting hard that "Uncertainity is the only certainity in capital markets".

 

[veluri1967]

THE MECHANICAL STAGE

The mechanical stage of trading is specifically designed to build the kind of trading skills (trust, confidence, and thinking in probabilities) that will virtually compel you to create consistent results. Consistent results means a steadily rising equity curve with only minor draw downs that are the natural consequence of edges that didn't work. Other than finding a pattern that puts the odds of a winning trade in your favor, achieving a steadily rising equity curve is a function of systematically eliminating any susceptibility you may have to making the kind of fear, euphoric or self-valuation based trading errors.

Eliminating the errors and expanding your sense of self-valuation will require the acquisition of skills that are all psychological in nature.

The skills are psychological because each one, in its purest form, is simply a belief.

Remember that the beliefs we operate out of will determine our state of mind and shape our experiences in ways that constantly reinforce what we already believe to be true. How truthful a belief is (relative to the environmental conditions) can be determined by how well it serves us; that is, the degree to which it
helps us satisfy our objectives. If producing consistent results is your primary objective as a trader, then creating a belief (a conscious, energized concept that resists change and demands expression) that "I am a consistently successful trader" will act as a primaiy source of energy that will manage your perceptions, interpretations, expectations, and actions in ways that satisfy the belief and, consequently, the objective. Creating a dominant belief that "I am a consistently successful trader" requires adherence to several principles of consistent success. Some of these principles will undoubtedly be in direct conflict with some of the
beliefs you've already acquired about trading. If this is the case, then what you have is a classic example of beliefs that are in direct conflict with desire.

Technique is simple: Try as hard as you could to stay focused on what you were trying to accomplish and, little by little, de-activate the conflicting belief and strengthen the belief that was consistent with your desire.

At some point, if that is your desire, then you will have to step into the process of transforming yourself into a consistent winner. When it comes to personal transformation, the most important ingredients are your willingness to change, the clarity of your intent, and the strength of your desire. Ultimately, for
this process to work, you must choose consistency over every other reason or justification you have for trading. If all of these ingredients are sufficiently present, then regardless of the internal obstacles you find yourself up against, what you desire will eventually prevail.

Cheers.

 

[dinugokul]

hi,
whts the Purpose of Deliverable quantity in NSE india?Can we calculate the movement of share using deliverable quantity?thanks in advance

 

[jagankris]

THE MECHANICAL STAGE
Cheers.

Thanks a lot Veluri ji .Thanks button not enabled.

 

[kevin_shah]

Hey guys ...
Thoughts on some differences between an Amateur Trader and a Professional Trader
had surfing on internet , found out interesting differences

When fall
Amateur = Doesn't stand up early, keeps licking wounds, keeps criticising market and operators
Pro = Stands up, takes a note of what and why, sees gaps in method-application-discipline
===========================
Get Thrill
Amateur= from wining trades
Pro= from winning strategies and method
===========================
Work motto
Amateur= Bleed during trading hours, Rest during non-trading hours
Pro= Sweat during non-trading hours
===========================
Indiscipline
Amateur= is forgettable
Pro= is unforgiveable
===========================
Control
Amateur= is boring
Pro= is survival kit
===========================
Entry and Exit
Amateur= decided by emotions and gut feel
Pro= decided by method / signals
===========================
Amount of bet
Amateur= decided by pocket
Pro= decided by clarity and confidence in trading opportunity
===========================
Weakness in trading
Amateur= try to cure it
Pro= don't trade in weakness areas
===========================
Risk
Amateur= Blind Gamble
Pro= Calculated risk
===========================
Patience
Amateur= only while losing
Pro= when profiting (till exit signal)
===========================
Trading Style
Amateur=complex and flashy
Pro=simple and dull
===========================
Trading as
Amateur=a hobby and pass-time
Pro=a business
===========================
Aim
Amateur=to become rich
Pro=to remain rich

Hope ...amateurs (like me) realize this and improve on their trading
Thanks