Keeping An Open Mind Is Key To Successful Trading
Once you start learning to trade, you will see a great amount of emphasis on trading discipline. Coaching and trading programmes are often harping about keeping a tight focus on the current market activity. It’s extremely fascinating to learn how our brains work.
Trading requires one to find a trend or specific pattern, and while we are at it – our brains are constantly on the lookout for spotting emerging patterns, even if it’s a false breakout. As humans we often get stuck in our own ways. We end up constructing ideas and start anticipating the market will do what our profit motive wants us to see. We can completely lose the ability to grasp the market activity happening before our eyes.
I am – the two most powerful words in the world, for whatever we put after them becomes our reality.
We Are Prejudiced By Nature & Evolution
Neuroscience has started to uncover the underpinnings of prejudice in human brains. Research on the subject has revealed how survival skills are deeply rooted in our DNAs, and we often perform actions without conscious thinking, as our brains have been hard wired to do so.
The same automatic response phenomena usually occurs when you have an open position with the trend going your way and a minor deviation would make you panic and close the position. It’s therefore important to set yourself limits and trade within those limits and not to worry about small deviations and spikes. On the other hand, we could notice a false breakout and mistake it for an emerging trend. It’s how we have been programmed to think and react over centuries, so it’s extremely hard for an untamed brain to avoid something good/bad coming its way.
More is Less and Less is More In Trading
The big problem in today’s world is the vast quantity of information available to us, and the pace it is being created at.
How do we cope with it?
When trading, the same problem can be a huge hindrance to our success. It can overwhelm structured and strategic thinking. Trading requires you to be not too destructible, argumentative or opinionated. The supply of end-less trading tools and software are more trouble than help. I am not trying to discount all the useful tools and software out there, but for a newbie it’s the proverbial equivalent of ‘finding a needle in a haystack’.
If you start relying on too many tools and trend indicators out there – you will be left with no clear strategy to trade with.
We must remember, a ‘tool’ by definition is an aid to resolving a problem, and the user must know when to use it. Having said that, the tools that are considered really useful and essential to trading such as Oscilators, MVC or Bollinger Bands are limited to construct forecasts based on historic data. It is for the trader to know when to apply these tools, and how to make sense of the extracted data.
The reality is much more chaotic for those starting out with trading these days. How trading is being taught and promoted on a mass scale today – there isn’t enough emphasis on learning and education. A success formula might work for an expert trader but there are several hundred variations of the ways a market can move before you can identify that movement by a name and apply the right tools that can effectively offer you any help to further understand what the market is trying to do.
Do not be a slave to any tools or indicators. Instead, learn the basics like candlestick patterns or fractals
Can You Handle Pressured Situations
Knowing the fact that trading involves quick thinking and your tendency to make the right decisions can be further limited after losing a trade or two.
The best thing a trader can do when stuck in a bad position is to step back and take some time to re-evaluate their options. Also avoid revenge trading at all costs. The term revenge trading refers to trades you take immediately after failing trades to make up for the losses.
Avoid revenge trading at all costs.
Saying I don’t Know Can Be Very Tough
We have an innate desire to be smart thinkers, and traders do it even more so.
In an earlier post we discussed how trading and predicting go hand in hand, and since it requires smart thinking – the pressure of making the right predictions and decision is there from the onset. The moment you plan to be a trader – your would be consciously or sub-consciously acknowledging that smart thinking is going to become ‘the most important factor’ deciding your trading fate. If you are just starting out with little or no knowledge of trading – the combination can be lethal. The outcome is bound to be excruciating when you don’t know the trading rules and rely on a coaching programme which in reality turns out to be a nom de guerre of some automated scamming system.
If you start making a note of how many historic market predictions have been wrong that were made by trading experts. You will be amazed.
A study by a firm called CXO advisory Group analysed over 6,000 predictions made by stock market experts over several years. It found the overall accuracy at 47%
What do you make of such a deficit in accuracy amongst the experts? Smart people love to make smart-sounding predictions, no matter how wrong they may turn out to be.
When kids often make up a story about their journey into outer space – there is no real consequence. The price can be hefty if you believe some get rich quick scheme will earn you a life of riches you dream of.
In short… LEARN the trading rules.