Education - Psychology RSS Feed

Trading Psychology - Greed & Fear

Andrei Pehar, Sr. Currency Strategist — Fri, 16 Jan 2009 08:08:00 EST

Besides all of the fundamental and technical factors a trader must keep track of
in order to be successful, there is another area which is often overlooked �themselves.

Personality, Emotions and the Psychology of the Trader By Abe Cofnas

Abe Cofnas (LEARN4x.Com L.L.C) — Fri, 18 Apr 2008 03:38:00 EST

Every trade you enter refl ects a personal judgment you are making. Recent research shows that particularly in forex trading a great deal of psychology is involved. Some of the factors that enter into a decision to trade are rational factors resulting from a great deal of analysis. Personal attitudes about risk, reward, and self-esteem are also important.

The Psychology of Trading: The Market as Mass Mind by Joseph Trevisani

Joseph Trevisani (FX Solutions) — Wed, 20 Feb 2008 14:36:00 EST

What is the purpose of the foreign exchange market, or any market for that matter? It seems like a simple question with a simple answer, to permit participants to sell and buy commodities, equities or futures and to exchange one currency for another. But such a simple statement covers a world of complexity. If two parties wish to conduct an exchange, of one currency for another or of an equity or bond for a sum of cash the first question that arises is at what rate or price should the transaction take place? In a retail environment the price is predetermined by the seller and is rarely changed.

Coping With Risk and Uncertainty By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:37:00 EST

How do you cope with the risk and uncertainty that are built into markets, and are you coping effectively? In this and my next article, I will be tackling these important questions.

Explaining Market Success By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:32:00 EST

Numerous books have been written on the topic of trading success. Nevertheless, it is unclear how expert traders obtain their expertise. Several explanatory models are implicit in market writings:

Being Right and Making Money Are Not Equivalent By Van K. Tharp, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:21:00 EST

At investment conferences, the hottest speakers are those who provide information about high probability entry techniques. If you say, "Trade with the odds on your side" and show someone a technique that is right 75% of the time, you�ll get a large audience. Yet most techniques of this nature usually have big losers and may not even have a positive expectancy. Nevertheless, being right 75% of the time is all is takes to get people to trade them.

Behavioral Patterns That Sabotage Traders � Part II By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:14:00 EST

Consider the following psychological scenarios:

A student needs to pass an anatomy course final exam in order to successfully complete his first year in medical school. Because his first several exams were on the borderline between passing and failing, the course grade entirely rides on the final. As the time approaches for the big test, the student finds himself increasingly worried about the test�particularly when he misses questions from his practice exams. The worry interferes with his sleep, which in turn makes him even more concerned that fatigue will prevent him from doing well. By the time he takes the exam, he is tired and nervous and misses many questions, often by second-guessing right answers.

Behavioral Patterns That Sabotage Traders � Part I By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:11:00 EST

Although I do not maintain a private practice of counseling/coaching for traders, it is perhaps inevitable that traders would contact me for assistance after reading my book on The Psychology of Trading. Once in a while I take on a project of working with a group of traders because of the opportunity to push the envelope and use psychology to improve their trading performance. In the past few years, I would guesstimate that I have gathered personality questionnaire data and assisted over one hundred traders.

Overcoming Market Panic By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 15:04:00 EST

When I was a beginning trader, I naively believed that a 100-share trade was no different from a 10,000 share one, since both could be executed with the same entries, exits, and money management. What I failed to appreciate is that the risk of any trade or investment affects our ability to evaluate it calmly, rationally, and objectively. A head of a brokerage firm, which offered free simulated trading to new traders, once told me that 80% of the traders made money in the (very realistic) simulations, but only 20% were successful once they traded real money. The difference, he observed, was the emotional impact of having actual money on the line.

Trading as Mental Warfare By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 14:54:00 EST

Writings on the psychology of trading commonly view emotional conflicts and reaction patterns as impediments to successful trading. Accordingly, they advocate various therapeutic and self-improvement exercises to remove these obstacles. In this article, I propose a very different perspective: trading as a military activity, rather than a psychological one.

When to Play By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 14:33:00 EST

In a game of Texas Hold�em, each player receives two cards initially. Then the betting begins. After that round, the dealer uncovers a set of three cards. These cards, called the flop, are available for use by all players to create the strongest possible hand. Then another round of betting commences. Next, for all who decide to stay in the game, a single card�the turn�is uncovered. This, too, is available to all players. After yet another round of betting, the final communal card�the river�is turned over. At that point, there is a showdown and the strongest hand takes the pot.

How to Take a Loss By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 14:29:00 EST

There are quite a few books written on how to make money in the market. Some of them are even written by people who have made money as traders! What you don�t see often, however, are books or articles written on how to lose money. �Cut your losers and let your winners run� is commonsensical advice, but how do you determine when a position is a loser? Interestingly, most traders I have seen don�t formulate an answer to this question when they put on a position. They focus on the entry, but then don�t have a clear sense of exit�especially if that exit is going to put them into the red.

The Three Vices of Trading By Brett N. Steenbarger, Ph.D.

Brett N. Steenbarger, Ph.D. — Wed, 07 Nov 2007 14:19:00 EST

The following is a short article that summarizes several of the psychological pitfalls that interfere with accurate pattern recognition. My hope is that traders can focus on these three �vices� as mental preparation prior to entering the markets. One of the best ways of becoming an observer to your negative behavioral patterns�rather than a trader lost in those patterns�is to periodically take your emotional temperature. That means standing back and asking yourself: Am I falling prey to one of the vices below? Remember, observing and interrupting your patterns are the first steps in altering them! Your patterns lose control over you as you become better at not identifying with them. When you become an observer to your patterns, you are separating yourself from them. What great progress that is!

Getting In Psychological Shape To Trade Forex by Abe Cofnas

Abe Cofnas (LEARN4x.Com L.L.C) — Sun, 17 Jun 2007 05:13:00 EST

What makes Forex trading challenging to people throughout the world and to those in a wide range of professions is the fact that it requires a total combination

of skills. One must apply strategy and tactics that weave together economic

analysis and technical analysis to Identify trading opportunities. Adding to

the challenge, is the need to tame emotional factors that will affect your trading.

Personality, Emotions, And The Psychology Of The Trader

Abe Cofnas (LEARN4x.Com L.L.C) — Fri, 15 Jun 2007 12:32:00 EST

Tracking Your Confidence Level

Every trade that is entered reflects a judgment one is making. But how confident are you that the trade is an excellent one? Most people can�t answer the question because they are not really evaluating their trades. The ability to improve your trades requires a basis for self auditing your own performance. An effective way of doing this is by applying a rating system.