Info!! When Trading Psychology Problems Only Won't Larn Away

As nosotros saw in the final post, the starting betoken for addressing psychological problems inward trading is making certain that the methods you lot are utilizing actually do render you lot amongst positive expected value.  I of late spoke amongst a frustrated trader who was making money, losing it, making it, in addition to and thus losing.  He couldn't sympathise why he couldn't sustain his gains.  It turned out that he was making piece of work of trendlines that were promoted past times an online trading service.  The guru running the service pronounced that at that spot was a "strong edge" inward placing trades based upon these lines, but when I questioned, the trader acknowledged that he had non independently verified this edge.  When I conducted a quick backtest, the signals based upon the lines displayed random frontward returns.

The trader's problems had aught whatsoever to do amongst psychology.  The psychological discomfort was the upshot of the problem, non the cause.  All the attempts inward the Blue Planet to stick to his plan, ameliorate his mindset, hear to his feelings, command his feelings, etc, etc, etc would non own got helped him.

This should e'er hold upward the zero hypothesis--the base of operations case--for a trader experiencing distress in addition to behavioral problems, specially if those do non demo upward inward his or her non-trading life in addition to if an border had non been soundly established previously.  The kickoff hypothesis is that at that spot is no edge--and you lot involve affirmative prove to turn down that hypothesis.  It is your methods, non your psyche, that involve working in addition to reworking.

Only subsequently establishing the soundness of what you're doing should piece of work on psychology in addition to performance own got front end stage.  An analogy would hold upward a golfer who runs into a string of pitiable scores.  If the mechanics of the swing in addition to the mechanics of putting own got non been mastered, there's niggling sense inward using visualization exercises to foster a winning mindset.

A related hypothesis is that the border that in ane trial was introduce is instantly no longer operative or has changed.  If the golfer is playing inward rainy conditions, that may dictate a alter inward swing in addition to a alter inward each approach to the hole.  If traders uncovering themselves inward depression volatility conditions, that may dictate a alter inward the trading of momentum-based patterns.  Edges are dynamic, requiring frequent adjustments past times traders.

Once you lot own got identified in addition to verified patterns inward markets that capture your agreement of what makes markets move, whatsoever problems you lot mightiness own got inward implementing the trading of those patterns mightiness hold upward psychologically driven.  Here, the cardinal is determining whether employment patterns inward your implementation are caused past times emotional or behavioral factors that demo upward every bit problems inward other parts of your life, or whether the problems affecting your trading are indeed unique to the trading context.

Many problems that impact trading are non specifically trading-related.  For example, a somebody amongst delicate self-esteem or a somebody amongst pitiable emotional self-control volition uncovering these problems impacting their theatre unit of measurement lives in addition to personal relationships, non but their trading.  In such cases, piece of work on those problems needs to happen exterior of trading in addition to good every bit during trading hours.  There are research-backed psychological techniques for the peachy bulk of these issues, every bit I lay out inward in many weblog posts.

Trading problems that won't seem to larn away are unremarkably trading problems non beingness properly addressed.  By looking deeply into the root causes of pitiable returns, nosotros tin ship away figure out what is going wrong--and that's the kickoff footstep inward setting things right.

Further Reading:  

Diagnosing Your Trading Problems

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