SECTION#4： COMMON STUMBLING BLOCKS
Here are a few standard psychological stumbling blocks you’ll encounter.
The earlier you can identify them, the sooner you can move beyond them. So go through the list below and acquaint yourself with these obstacles.
Failure To Adjust Perspectives
Many successful professionals from other fields find trading to be a challenge. This is because successful trading requires significant adjustments to your mindset. Trading is different, primarily because it involves putting your ego aside and thinking in terms of probabilities. These are no mean feats when your hard-earned cash is at stake.
Watch this interview with Mark Douglas on Mind over Market. He does a great job of drilling in the probabilitic nature of the markets. With Fooled by Randomness. Nassim Taleb brought the discussion of randomness from the academic world onto a bestseller list. James clear has an excellent summery here.You won’t find it hard to relate the points to your trading experience. Shift away from your need to preserve your self-image. Read this article by trading psychologist Rande Howell.
Every trader goes on this chase at some point. Some never stop. You have to be willing to take the good with the bad. This short piece by Charlie Bilello explains this with a simple moving average strategy. How about changing the definition of Holy Grail? On FXSTREET, Simon Cotterill argues that consistency is the real Holy Grail of trading. My take on the perfect trading setup.
Failure To Recognize Cognitive Biases
We are biased. We just don’t realize it most of the time.
Go through this list of cognitive biases, and spot them in your trading behavior.
The Challenge Of Small Accounts
Small accounts cannot make big money. Too many retail traders ignore this and end up ruining their accounts.
SECTION#5: PRACTICAL STEPS TO BUTTRESS YOUR MIND
In the previous sections, our focus was on understanding the correct trading mindset.
In this section, you’ll learn concrete steps you can take to improve your trading psychology.
Keep Solid Trading Records
Rationalizing is a considerable drawback for traders who want to improve. And its insidious nature makes it all the more dangerous. To counter rationalizing, keeping accurate trading record is essential. The right trading journal solution will guide you through the record-keeping process. It will also facilitate post-trade analysis to ground your trading expectations.
For a discretionary trader, keeping reliable records can be challenging. Go through this guide for an overview of best practices.
Meditation
The first step of improving your trading psychology is to be aware of the things that can go wrong with your thoughts.
Mindfulness is an effective way to improve your awareness. To get start ed,try Headspace, an app for guided meditation.
Breaking Bad Habits And Honing Consistency
Becoming aware of your emotions and biases is the first step to enhancing your trading prowess.
This means that you can now recognize your bad habits.
The next obstacle features your frustration over your inability to break bad habits.