A Little Psychology...

Well, it’s been a while since my last post (been busy with repairing the shack I called home this past year, moving out, working on stuff for the Trading Pitt, etc.) but I decided now is a pretty good time to think about where our head needs to be at as traders, especially in markets that have been as wild as the ones the world’s been experiencing lately.

I’ve spent a good chunk of today reading Andrew Menaker’s blog (which can be found at http://www.andrewmenaker.com/ideas/blog/), and he always offers great self-evaluation ideas and food for thought.  One of his latest post talks about the need to be right.  This need is kryptonite to a trader.  The feeling of being correct is almost like a high for some people, and they constantly need to feel it.  Problem is, most of the best traders aren’t even correct half the time.  So to be successful, it’s absolutely essential we can deal with being wrong and don’t let our predictions dictate whether or not we are profitable.

Think about everything that’s been going on in the markets lately.  The nauseating roller coaster we’ve been on has opened the door for everybody to provide their opinion on what will happen next.  Many have been wrong, some have been right, some haven’t had a clue what’s been going on.  This is exactly the type of situation where we all need to be flexible as traders.  Use of if/then statements is absolutely key.  Sure, you always want to do a thorough analysis that provides you with a good idea of where the market might go but you need to have a Plan B if it doesn't go as planned.  As Menaker says, there is "a subtle but critical difference between anticipation and prediction." Traders who anticipated moves but ultimately took what the market gave them profited during the past two weeks; traders who made unwavering predictions got sauced.

Another great little post from Menaker's blog talked about trading the market or your P/L.  Its been said a million times but tons of traders, especially beginners, still struggle with it.  We CANNOT trade worrying about how much money you make or lose.  I'm still working on this concept myself.  I can't tell you why, but most of us (especially beginners) trade differently when we know we've lost money or are losing money.  The best way I've learned to deal with this is to completely remove your P/L from the screen.  Obviously, we still need to respect daily stop out and tolerance limits, but hiding your P/L allows you to concentrate more on price action and objectively make and manage our trades.   Try it if you don't believe me, I can guarantee that you will feel a lot more relaxed and confident when your not worried about your account.  

School will be starting up for me in about two weeks, so I'll be back to trading live during the days.  I hope to start doing a chart of the day and posting video reviews of my trades as often as possible.  I hope everyone has a great, relaxing weekend!