There is an extremely famous psychology paper written by Daniel Kahneman and Amos Tversky named ‘Judgement Under Uncertainty: Heuristics and Biases’ (psiexp.ss.uci.edu) (Kahneman won a Nobel Peace Prize in 1992 for his work in the field, specifically on prospect theory) which explores the decision making process. As trading requires decisions to be made...
When you lose a trade 1- Do not increase your trade size after a loss. 2- Take responsibility for the loss. 3-Train your reaction to losing trades. Don’t be too harsh on yourself 4-Accepting that trading is an activity that requires a certain amount of time and effort, but doesn’t always provide something to show for them. When you win a trade 1- Do not...
"1. Perspective. The interpretation of any indicator should not be based on short-term trading patterns; the longer term implications should always be considered. 2. Objectivity. A conclusion should not be drawn on the basis of one or two reliable or favorite indicators. The possibility that these indicators could give misleading signals demonstrate the need...
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Forward testing your strategy : After you have made up your mind about what and how you are going to trade, there are 2 options, backtesting and forwardtesting. The benefits of backtesting is that you gather a lot of data about your trading plan in a short amount of time. The drawback however is that there is very little involvement or emotion in it. In...
1. As a novice trader, one of the biggest mistakes you can make, especially after having had a number of successful trades, is thinking you know what you are doing when you actually don´t. This will be the cause of every trading error you have the potential to make. 2. It takes absolutely no skill at all to place a winning trade. It does to consistently do...
1. Trading is not a get rich quick scheme. It is a normal investment that gets traders return on capital. Have you ever met a trader making double-digit percent return per month on a consistent manner? Trading professionally with proper money management would likely get you a return of few percents a month. From my personal experience a 3-5 percent return on...
There are several things you can do to prepare and condition yourself mentally to get trading emotions under control and to stay focused on simply making one good trade after another. This topic is about one of those things you can do. Its not the most important thing, nor is it the only thing. But it is the most fun thing. I talk about food for the soul. I talk...