Trader's Edge - SUMMARY

I've heard it said that the human mind is incapable of NOT thinking of something. Whether or not it's absolutely true, it's at least challenging to banish something from your mind that you're thinking about. For example, if I say, "Don't think of the color BLUE." The color blue is probably the first thing to pop into your mind. Try it... don't think of the blue sky; don't think of the color of bluejeans, or someone's blue eyes. The most simple way to accomplish NOT thinking of something is to focus on positive thought. In other words, if you don't want to think of blue, then think of red. Think of the color of a red stop sign, or a nice candy apple red 1966 Mustang. With your focus on that, the last thing in your mind is blue. At least until I brought it up again.

What does all this have to do with trading? When I initiated a series of posts having to do with finding our psychological edge as traders, I addressed these edges as emotions; BUT I focused on the negative emotion. This post is intended to right all of that. It's a summary of the concepts, and it also addresses each emotion in it's positive form, which really gives us the right thing to focus on and develop. After all, if trading psychology is at least as important as trading mechanics (and most happen to think it's far more important), then no matter how good your mechanics, they can be consumed and overwhelmed by poor psychological controls.

COURAGE: My first post on the topic was about Courage - well okay, I might have called it Fear. The point is simply that Fear can cause us to change our otherwise well thought-out plans. Courage on the other hand is what we need to develop to stick to the plan and take the trades that we planned to take.

PATIENCE: The next emotion to consider is Patience. Patience is one of the greatest challenges of traders; after all, we're traders therefore we trade. Great traders plan for a setup and wait for the right time. We sit and wait, only engaging the market according to our terms.

PERSISTENCE: Being a good trader means persisting during difficult times. Goodness knows we will encounter plenty of them. Part of persisting means developing a plan that allows us to last during draw-downs. They will occur. Part of it is pure psychology. It entails developing the discipline to be true to our trading plan and style even in the face of losses, without giving up.

DETACHMENT: I addressed this emotion by talking about the negative aspects of Greed, which can cause us to alter our trading plan and discipline in an effort to garner yet more profits. Not a bad intent, but sometimes the very things that caused us to achieve the first profits are better left intact. It takes a certain degree of Detachment to step back from the excitement of a few profits and make cool, rational decisions.

STABILITY: It's easy to get caught up in the emotion of the market. The market is made up of people, and people are emotional creatures. They feel good when the market is up, and bad when it's down. It's important that we don't let the market pundits, recent wins and losses, or recent news impact our mood, let alone our trading decisions... easier said than done. Here are some things to think about.

CONFIDENCE: Doubt is a predecessor to Fear. It's when we start losing confidence in our ability to trade well that we fall prey to altering our decisions based on Fear rather than logic. Doing things to bolster our Confidence in the trades we take is preventative medicine and will keep us trading according to a well designed plan.

INTROSPECTION: As this post indicates, Introspection is self-observation. There are many ways for us to be successful as traders, but not any way is best for everyone. In other words, knowing yourself well enough to know what trading style, limitations, and strengths you have, is critical to getting the best out of who you are.

LEVEL-HEADEDNESS: This post, labeled Exuberance, is all about how easy it is to get caught up in the excitement of trading and forget this is a business. As a business, there are certain fundamental best practices that are good advice for everyone wanting to trade full-time or part-time... even the SnapTrading Working Stiff.

Good Trading...