We are having a debate within the office and would like to get some feedback from traders here on ET. What percentage of trading do you feel is Psychology and what percentage do you believe is technique?
Without a proven method, all the psychology in the world won't help you. Once you do have a proven method, then psychology becomes huge IMO
This is an extremely difficult question to answer. Imo, it is 90% technique. But what I have concluded is that it is very unwise to downplay the psychology. However, the psychology I have in mind may not be what you are thinking of. The psychology I am talking about is the kind that only rich people have. I have seen countless numbers of rich kids from Highland Park (a very affluent Chicago land area) come into the markets, and many of them do well. There is a very care free (although no less serious) connection to money. It is a strange thing, but coming from a background where you have been conditioned properly about money, makes a huge difference. It is not money, it is chips, and if you lose it, don't worry, it is not your college education, only a small part of your inheritance. This attitude carries over in your confidence over many things. On the contrary, poor people that come to markets most have had to overcome the magic that money held over their peers and parents. It is definitely not chips. I am not sure I am being clear. Psychology as a factor in success once you treat money as chips in trading is almost of no importance. Getting there, it is 90% important over technique. If you can't put on a great trade because you are scared and have insecurity issues, your technique is worthless.
I understand Nitro's point, and I'd agree also on a fundamental level. The above is what I most agree with. It took me years of observing and participating to recognize a core set of patterns. All throughout, I was miserable. Once I got started to see the same themes replayed over and over, focus switched to knowing when to hold through the pain and knowing when to cut a loser and run (letting winners run and taking profits is really not too tough for me).
Psychology is 90%. You can have an edge and getting more winners, if your losers are big you'll still be net negative.It's a lot more mental than technical, it's a game of patience, both in letting your winners run and cutting your losses... I guess psychology may not be the word - a predefined plan of action with set rules for EVERY trade (stoploss, profit target) would be it...
I agree with nitro completely. I am not sure why but as soon as a read this thread I thought of Charles Barkley and his golf shot, obviously psychology plays a role. Hope the link will work. http://www.youtube.com/watch?v=s50K65PNeBU
The problem with discussing the impact of psychology is that one needs some context, or framework from with to judge. In whatever field of endeavor you participate, try to make acquaintance with ONE skilled person and you will see what I mean. As an example I have walked around a golf course with Tiger Woods (as part of the gallery). I have been close enough to hear his comments and watch how he plays, how he makes decisions, and how he reacts to conditions and to other players. I can tell you this....watching a very skilled person perform changes your perception of the importance of psychology. 1. They have the skills down. They are past that point where there is any question but that they can execute with great skill. 2. They can execute with discipline in almost any condition. In other words, they can control their emotions 3. They are aggressive. They "go right after" their competition. They will steamroller right over you if you let them. 4. They let you know that they "expect" to win....I have seen them comment to others that this is "their course", "their game", "their tournament" and its only a matter of time... I can tell you this...the experience of watching up close how a successful person works, performs, whatever you want to call it, will change your opinion of how important psychology is....once you get to a certain level...the only real difference between competitors IS psychology. Good luck
I noticed this too when i was in college. A lot of the class was made up of students from east coast prep schools. They weren't any smarter than anyone else but they were not afraid to try things and would take more chances. They also never ended up in a cubicle.