I agree with most of that... However, I have some issues with IF, THEN systems... you can only go so far with a fully automated system. The market is dynamic and always changing... Personally, my results are waaaaay better with a "structure" that leaves me open to think, than something that takes 100% of the decision making process out. Every trader definitely needs a pre-determined risk management strategy.
my point is: do not try to learn something from the market. the purpose of learning is to avoid "mistakes" or "money loss", but money loss is unavoidable, no one can do many trades and there is no losing trade. if you already factor three possibilities into your trade (aginst you, no move, favor you). if against you, you get out with your defined loss, if favor you, hold it until the market says the move is over. i.e., a plan or possibility trading. every moment is opportunity, whether dip, or rally, consolidation. every moment of the market is new or uniqe.
You will not get a chorus of affirmation in this forum. I'll agree, however, that understanding your psychology and the cyclic nature of other market participants, is an important component for a profitable trader, in a variety of market conditions. Know yourself first.
Anybody who's actually making money knows trading is 90% psychological... ------------------------- What's the root cause of the psychological? Money. 90% = money management.
I Don't expect it... after all, 90%+ traders lose money, right? So, why would I want the herd to agree with me?
Good point... I think money management is tied in directly with psychology. If a trader hold a position too long because he's letting greed make his decisions, or if he closes to soon because of the fear of giving money back, that's mismanagement caused by psychology... If someone can look at the market from a purely technical stand-point, they'll be able to enter, manage, and exit trades without the extra emotion.
psychology is WAY over rated. Trading is a negative sum game. You are fighting slippage, commissions, self-education, fees, broker or personal errors, disruptive market events, various taxes, inherent risks of trading, your own time, etc. You can go to a casino, and have the greatest self control and calm. And you will still lose. The only one who MAY beat the house regularly is someone who is an expert, such as a card counter or poker player, at a game that is not completely chance (roulette wheel, eg). A true market outperformance edge is number one. No amount of studying will allow you to win, unless you have a quantifiable ability to make more than you lose, over a long time period Number two, is money/trade/portfolio management. Once you learn how to make money, you need to master the Risk:Reward nature of trading. Controlling leverage, stop losses, not overtrading, etc. help you KEEP your winnings Psychology wise, you can have the best psychology traits in history, but you will not be successful until you master an edge and proper management. I would far rather be depressed with a serious edge, than serene without one.
Kenny Werner's book is great. A student group of mine got to open for him when he played at my college a few months ago. To be so "Zen" he's one hell of a potty-mouth.
I wrote this assuming that was a given... I agree 100%, if you don't have a winning edge and a proper money management structure, then you might as well pack it up... The problem is that most people never stop looking for the perfect system and realize it's just a probabilities game. ... and to me, trading psychology goes waaaaaay past just happy thinking. I'm talking more from a mental performance standpoint.