Your special topic for today is Trading Psychology.
Your time starts now.
Question: How can you overcome your most debilitating psychological trading barriers?
My Answer: Go out and get another job. We’ve discussed this before. And I don’t mean stop trading. I just mean add some other revenue streams into your bread winning basket. If trading is your only source of income, you are going to be under pressure every month to make money. No matter what the market conditions.
And with this will come a lack of discipline such as not using stops. Trading too big. Or exiting trades too early or too late, to name a few. Confidence can be lost very quickly.
Imagine being able to stay focused on your trading strategy, without the added burden of worrying about your bills each month.
Question: What is one simple strategy to bring more mental calmness to your trading?
My Answer: Back testing. Whether it be systematic back testing or manual back testing, it doesn’t really matter. I’m a discretionary, rules-based trader, so any back testing I do is manual. Neither is foolproof. Yet if the strategy you are applying can prove it works on past data, then it will give you a degree of confidence that you may have an edge.
Two great books in my library that I can recommend for the discretionary trader are:
- Encyclopedia of Chart Patterns by Thomas Bulkowski
- Technical Analysis of Stock Trends by Edwards & Magee
Question: How can I remain confident and focused?
My Answer: Stay educated and formally monitor your results. There is tonnes of good literature around. We’ve mentioned a couple in today's newsletter. And tracking your results is essential to keep objectivity with your trading. It also provides confidence on whether your trading strategy is producing the desired results or not.
The Chartist members have free access to our comprehensive ‘Share Trade Tracker’. It provides them with a better way to record, track and analyse their trading data. And you don’t need to be a technical expert to use it. Take a look at our quick video HERE
Trading should never be viewed as a simple exercise of typing up a strategy then pulling the trigger. And mastering your psychology is more than meditation and turning down the noise.
It’s also about building confidence by having the right business structures in place. Staying educated. And maintaining, tracking and reviewing what you are doing, to ensure that it’s working.