Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  

  • Other news: News from PR Newswire
| More

Trader Psychology: Fortune Favors the Disciplined Mind

Thu, Jul 2, 10:09 AM ET, by Jason Stapleton

I am constantly amazed at the caliber of people who end up knocking on my door looking for answers to their trading woes.  They are engineers, doctors, small and mid-sized business owners.  They are by all accounts the best and brightest the world has to offer.   

Yet most of these same people are losing money hand over fist in the markets and can't seem to understand why.  They are smart, well educated and yet frustrated by their lack of success in this one area of their lives.  Since they obviously posses the intelligence to grasp the concepts necessary for success, their natural conclusion is that they must lack some "insider knowledge", some secret that will unlock the puzzle and drag them from the foggy mist of confusion into the bright light of trading clarity.
But alas, there is no secret.  No magic formula.  No concoction of indicators and oscillators that will open Pandora’s Box and magically transform you from unprofitable into profitable.  There is no magic system, SO STOP LOOKING FOR IT!  Get out of the trading forums and chat rooms.  Stop spending your free time buying books with titles like, "Learn how I turned 200 dollars into 20 million in just 3 Years."  If someone offers to provide you the "secret" to making millions for the low, low price of only $99.95 run for the hills.  These are scam artists praying on your emotions.  These are the same emotions that are causing you to lose money each day in the markets.  These men are a cancer to your success, and nowhere are they more prevalent than in the forex market.
I firmly believe the key to success is rooted in emotional self-control.  For years I struggled as a trader, constantly looking for the "holy grail" that would turn me into a winner.  I spent thousands of dollars on books, seminars and trading courses.  Then, to add insult to injury I lost tens of thousands in the markets before I finally came to the realization that the answers to my trading problems were not external.  It wasn't the fact that I didn't have the "secret system”.  I had to admit to myself that I could have had a multi-million dollar system and I would have lost money with it.  I had no self control.  I put trading plans together that I never followed; made promises to myself I never kept.  My trading days were spend hovering over a computer, hanging on every tick in the market praying it would move in my direction.  Does any of this sound familiar?  If it does, congratulations, you are no different than 90% of traders in the market today. 
Read this very closely.  This is very important.  90% of traders lose money in the market not because they don't know what to do.  They lose money because they don't have the emotional discipline to do what they know they should.  If you have a basic understanding of technical analysis you can devise a trading plan that is 80% as effective as the best trading programs ever devised.  The question becomes, will you have the discipline to follow it. 
So maybe you're thinking, "Ok, Jason.  I'm sold.  So tell me how to get control of my emotions."  First, the simple acknowledgement on your part that your problems are your own and not the result of some external force puts you light years ahead of most aspiring traders.
Second, breaking bad habits is a process.  That's why weekend seminars are rarely effective.  Psychologists will tell you it takes 15-30 days to break an old habit and 15-30 days to install a new habit.  If you have to do this for several bad habits you've been harboring it's easy to recognize the dilemma.  Our goal should be to remove as much emotion as possible from our trading, allowing us to focus on consistency.
We do this by eliminating as much subjectivity from our trading plan as possible.  I am still amazed at how many traders who cannot clearly define the method they use for entering and exiting the market.  As you design you’re trading plan, think of it as if you were trying to tell a computer how to do it.  You must be specific.  Words like "sometimes" are never a good thing.  I advise using an "IF", "THEN" syntax.  IF the market does X, THEN I do Y.  We do this every time, without question. It doesn't matter if our last 3 trades have been winners or losers.  The method for making decisions does not change.
By doing this we create a clear set of rules to test our ideas and determine how effective they might be.  We then conduct both back testing and forward testing to work out any kinks in our plan.  What we are left with is a clearly defined trading plan and enough historical testing to feel confident trading the system real-time in the markets.  I call it "doing the hard work on the front end".  Traders who follow this simple procedure are amazed at the confidence they gain in their trading plan, and how much easier it is to stay disciplined through the inevitable draw downs.
I almost feel bad cutting things off here.  Naturally we have not even begun to scratch the surface of trader psychology and the steps necessary to control our emotions.  But I hope I have given you some good ideas to help get you started off on the right foot. 
Until next time, good luck and good trading.    

SDI Glossary: "price" Definition
This Article's Word Cloud:   THEN   These   They   amazed   computer   control   days   discipline   does   doing   effective   emotions   every   feel   follow   from   good   habits   have   into   light   lose   market   markets   million   money   much   never   plan   praying   secret   some   success   system   tell   testing   that   their   they   this   time   traders   trading   very   were   what   will   with   would   your

| More

August 27 Big Trend Rally Update and Stock Scan
Thu, Aug 27, 2:31 PM ET, by Corey Rosenbloom

The bounce continued! The relief rally propelled stock prices higher, breaking free from a Triangle ...

New Color Structure and Value Area Reference Chart for SP500
Thu, Aug 27, 11:41 AM ET, by Corey Rosenbloom

During volatile times, it’s often helpful to step back to get a broader, simpler perspective ...

August 26 Bouncing Market Update and Big Stock Scan
Wed, Aug 26, 3:21 PM ET, by Corey Rosenbloom

Eventually this market has to rally, right? We’ll see – continue focusing on our key ...

Today's Midday Update is Very Different than Yesterday's Aug 25
Tue, Aug 25, 2:11 PM ET, by Corey Rosenbloom

While yesterday was another powerful sell (liquidation) session in the market, today sparks a sudden ...

Third Biggest and Second Longest SPX Peak to Trough Pullback Since March 2009
Mon, Aug 24, 8:51 PM ET, by Bill Luby

Nary a pullback goes by without at least a handful of requests to update my ...

Last Two Days Are #5 and #6 One-Day VIX Spikes in History
Mon, Aug 24, 6:11 PM ET, by Bill Luby

Many readers have commented that one of their favorite of my regular graphics is the ...

Four Strong Dow Stocks Shattered by the Selloff (But Bouncing Back)
Mon, Aug 24, 2:11 PM ET, by Corey Rosenbloom

Until recently, four leading stocks in the Dow Jones Index were trending stably, comfortably higher ...

Apple AAPL Big Drop into Bigger Buy Support Target Update
Mon, Aug 24, 1:11 PM ET, by Corey Rosenbloom

Apple shares (AAPL) declined with the technology sector and of course broader market recently, though ...

Start the Week with a Monthly Perspective of the Stock Market Collapse
Mon, Aug 24, 11:31 AM ET, by Corey Rosenbloom

Friday, we discussed a “Weekly Chart Perspective of the Retracement” so let’s take a moment ...

Aug 21 Steep Selloff Market Update and Stock Scan
Fri, Aug 21, 3:11 PM ET, by Corey Rosenbloom

The Steep Stock Market Retracement continues with a breakdown under yet another support level (2,045) ...

Weekly Chart Perspective on the Steep Stock Market Selloff
Fri, Aug 21, 1:21 PM ET, by Corey Rosenbloom

Given the negative divergences in momentum, volume, breadth, and market internals – along with the ...

Downtrending Collapse Market Update and Daily Stock Scan
Thu, Aug 20, 4:21 PM ET, by Corey Rosenbloom

Stocks continued the bearish action, breaking away from the midpoint level of 2,100 toward the ...

Extreme Reward but High Risk for Leveraged Inverse Crude Oil DWTI and DTO
Wed, Aug 19, 12:41 PM ET, by Corey Rosenbloom

How would you like to buy a stock – or ETF – that tripled in ...

Weak Stock WalMart WMT Breaks to New Lows in Downtrend
Wed, Aug 19, 11:31 AM ET, by Corey Rosenbloom

Wal-Mart (WMT) continues to appear on our stock scans as a “Weak Stock Getting Weaker,” ...

Strong Trending Home Depot HD Surges to New Highs
Tue, Aug 18, 1:31 PM ET, by Corey Rosenbloom

We love the concept of “Strong Stocks Getting Stronger,” and Home Depot (HD) continues to ...

A Key Make or Break Level Here for Russell 2000 and IWM
Tue, Aug 18, 11:21 AM ET, by Corey Rosenbloom

The Russell 2000 Small Cap Index has shown relative weakness to the S&P 500, but ...

August 17 Range Reversal Update and Trending Stock Scan
Mon, Aug 17, 3:21 PM ET, by Corey Rosenbloom

The broader consolidation continued as price reversed strongly off support this morning. What levels are ...

Yes We Really Are Still Within a Simple Trading Range
Mon, Aug 17, 12:11 PM ET, by Corey Rosenbloom

We begin the new week at the midpoint of our broader trading range rectangle in ...

Aug 14 Big Stock Scan and Intraday Range Update
Fri, Aug 14, 4:11 PM ET, by Corey Rosenbloom

After a volatile Wednesday, stock prices settled into a welcome trading range consolidation to end ...

Buying and Trading Levels for Amazon AMZN
Fri, Aug 14, 2:31 PM ET, by Corey Rosenbloom

What levels are key for traders in (AMZN) now? Based on these levels, what ...

August 13 Stock Scan and End of Day Market Update
Thu, Aug 13, 4:31 PM ET, by Corey Rosenbloom

Yesterday’s rally continued into today’s session though price fell shy of the full touch of ...

Big Reversal Market Update and Super Stock Scan Aug 12
Wed, Aug 12, 3:21 PM ET, by Corey Rosenbloom

Well we should never refer to the market as boring! Today’s session saw a surprise ...

August 11 Breakdown Update and Big Stock Scan
Tue, Aug 11, 4:11 PM ET, by Corey Rosenbloom

The market continues to trade within a well-defined trading range and the last two sessions ...

The Sugar Sweet Downtrend of 2015
Tue, Aug 11, 10:11 AM ET, by Corey Rosenbloom

Sugar’s slide continues in one of the most persistent and stable trend structures. Let’s take ...

The Thrilling Exciting Nonstop Great Trading Range of 2015 Simply Continues
Mon, Aug 10, 12:11 PM ET, by Corey Rosenbloom

How are you doing within the Great Trading Range of 2015? One of the first ...

Six Dow Jones Stocks at Fresh New 52 Week Lows
Thu, Aug 6, 1:51 PM ET, by Corey Rosenbloom

Not all is well with the Dow Jones Industrial Average. While some stocks are getting ...

Updating the Trading Range Levels in the SP500
Thu, Aug 6, 1:21 PM ET, by Corey Rosenbloom

The 2015 Trading Range continues for the market as prices fell once again to challenge ...

August 5 Surge Market Update and Trending Stock Scan
Wed, Aug 5, 3:41 PM ET, by Corey Rosenbloom

Despite a strong morning rally, price fell back toward the 2,100 level, continuing our range ...

A Dynamic Drop into Support for Strong Trender Disney DIS
Wed, Aug 5, 2:11 PM ET, by Corey Rosenbloom

Not to be outdone by Apple’s (AAPL) big gap into support yesterday, strong trending stock ...

August 4 Big Mover Stock Scan and Market Update
Tue, Aug 4, 3:31 PM ET, by Corey Rosenbloom

Stocks tested their lows as an ongoing consolidation (range) environment continues. What levels are we ...

A Big Drop and Breakdown for Apple AAPL into Target
Tue, Aug 4, 11:31 AM ET, by Corey Rosenbloom

Apple (AAPL) shares entered distribution mode with a breakdown under support and the 200 day ...

What Two Breadth Charts are Saying about the Current SP500
Tue, Aug 4, 10:11 AM ET, by Corey Rosenbloom

Is a reversal developing in the stock market? Let’s listen to the message from two ...

Start of August Update and Trending Stock Scan
Mon, Aug 3, 3:21 PM ET, by Corey Rosenbloom

Though buyers attempted a bounce-rally up off 2,100’s key support level, they failed as the ...

Key SP500 Trendline Planning Levels to Start the Week
Mon, Aug 3, 11:21 AM ET, by Corey Rosenbloom

Short term traders benefit from taking a moment to view the larger picture of ongoing ...

July 30 Bounce Market Update and Trending Stock Scan
Thu, Jul 30, 2:41 PM ET, by Corey Rosenbloom

Buyers bought a downside swing this morning, resulting in a price swing back to the ...

Planning Levels for Buying Facebook FB at Support
Thu, Jul 30, 11:51 AM ET, by Corey Rosenbloom

Is this the spot to buy Facebook (FB) shares? Let’s update our daily chart levels, ...

PreFed Price Level Planning on SP500 Dow and NASDAQ
Wed, Jul 29, 3:31 PM ET, by Corey Rosenbloom

As we head into today’s Federal Reserve announcement, let’s quickly update our key levels on ...

July 27 More Selling Market Update and Big Stock Scan
Mon, Jul 27, 3:51 PM ET, by Corey Rosenbloom

Stocks continued their sell-off toward lower support targets, and that’s where we begin today’s update. ...

Traders Should Watch this Level in Netflix NFLX
Mon, Jul 27, 11:51 AM ET, by Corey Rosenbloom

After a price surge and gap higher, Netflix (NFLX) shares are retracing in an ongoing ...

Simple Support and Resistance Grid for MannKind MNKD
Fri, Jul 24, 3:21 PM ET, by Corey Rosenbloom

A couple readers have asked me to chart MannKind (MNKD) – a low priced but ...

July 24 High Activity Market Update and Stock Scan
Fri, Jul 24, 2:51 PM ET, by Corey Rosenbloom

With many stocks gapping, gold surging, and stock plunging, there’s a lot to cover in ...

July 23 Selling Market Update and Big Stock Scan
Thu, Jul 23, 3:51 PM ET, by Corey Rosenbloom

After a small morning bounce off support, stocks continued falling along the sell pathway from ...

July 22 Market Update AAPL Gap and Daily Stock Scan
Wed, Jul 22, 3:11 PM ET, by Corey Rosenbloom

So far, we’re seeing a repeat of yesterday’s morning weakness, afternoon stability, and rally into ...

July 21 Stock Scan and Sell Swing Market Update
Tue, Jul 21, 2:51 PM ET, by Corey Rosenbloom

The logical and expected sell-swing (retracement) developed against a background of resistance and divergences. However, ...

Finally a Pullback - Charting ES and YM Stock Futures
Tue, Jul 21, 11:41 AM ET, by Corey Rosenbloom

Is this the pullback we’ve been waiting for? Let’s do a quick morning update of ...

July 20 Bull Market Continues Market Update and Stock Scan
Mon, Jul 20, 3:11 PM ET, by Corey Rosenbloom

The short-squeeze and bullish price surge continues in the stock market at the same time ...

Bear Trap Trigger Puts Price on Path to All Time Highs for Apple AAPL
Mon, Jul 20, 11:41 AM ET, by Corey Rosenbloom

After springing a Bear Trap, Apple (AAPL) shares pivoted and trapped the short-sellers, placing price ...

July 17 Flat Market Update and Big Mover Stock Scan
Fri, Jul 17, 3:11 PM ET, by Corey Rosenbloom

Despite the strength of technology leaders Google and Facebook (among others), the S&P 500 is ...

To See a Bear Market, Look to Gold Not Stocks
Fri, Jul 17, 2:41 PM ET, by Corey Rosenbloom

Gold prices slid to new lows today in an ongoing downtrend and bearish money flow. ...

Quad Market Money Flow Grid for Oil Gold Dollar and Stocks July 16
Thu, Jul 16, 3:41 PM ET, by Corey Rosenbloom

Let’s take a moment to update our mid-month Money Flow Grid for our four main ...

  More articles:  1 2 3 4 5 6 7 next »


Trader Psychology: Fortune Favors the Disciplined Mind | Self Directed Investor | Copyright © 2008 - 2015, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: -- a subscription-based online social networking forum of serious individual investors. | -- videos appearing on SDI are produced by Market News Video. | -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.