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

March 5 Stock Stab Scan and Market Update
Thu, Mar 5, 3:21 PM ET, by Corey Rosenbloom

Stocks stabbed at the lows with more sharp rallies today, as we’ve seen over the ...

March 4 Repeat Day Market Update and Stock Scan
Wed, Mar 4, 2:11 PM ET, by Corey Rosenbloom

Today’s session is playing out identically to yesterday’s session, with the early down-move and the ...

Bull Trap and Target Level Update for Copper JJC
Tue, Mar 3, 12:11 PM ET, by Corey Rosenbloom

What looked like a possible bullish breakout devolved today into a trap as Copper buyers ...

March 2 Reversal Market Update and Trending Stock Scan
Mon, Mar 2, 1:31 PM ET, by Corey Rosenbloom

After forming a base support level, stocks rallied sharply this morning and continued a short-term ...

Yes Stocks can Still Fall Market Update and Trending Stock Scan Feb 27
Fri, Feb 27, 2:11 PM ET, by Corey Rosenbloom

Strangely, stock prices can actually fall and today’s session so far is a very similar ...

Three Strong Country ETFs Joining the US at New Highs
Fri, Feb 27, 1:11 PM ET, by Corey Rosenbloom

As we chart the US S&P 500 (and related ETFs) flirting with more all-time highs, ...

Feb 26 Market Can Actually Fall Update and Stock Scan
Thu, Feb 26, 2:41 PM ET, by Corey Rosenbloom

Can you believe the market can actually fall? I didn’t either! Nevertheless, today’s session is ...

Feb 25 Continuation Market Update and Stock Scan
Wed, Feb 25, 1:11 PM ET, by Corey Rosenbloom

So far, today’s session followed the “opening gap weakness, intervention bullish strength rally later” pattern. ...

John Carter Webinar Tonight! How to Generate Consistent Trading Results
Tue, Feb 24, 1:51 PM ET, by Corey Rosenbloom

I wanted to invite you to a free educational webinar from long-time trader (and clear ...

Feb 24 New Highs Market Update and Stock Scan
Tue, Feb 24, 1:41 PM ET, by Corey Rosenbloom

After the recent sideways consolidation, stocks continued their short-squeeze driven rally and “All Clear” breakout ...

9 Stocks Breaking Strongly to New 52 Week Highs Today
Tue, Feb 24, 11:51 AM ET, by Corey Rosenbloom

As the S&P 500 extends its breakout to new highs – along with the powerful ...

Buying Apple AAPL on Breakouts to New Highs
Mon, Feb 23, 2:51 PM ET, by Corey Rosenbloom

Apple (AAPL) shares broke strongly to new all-time highs today, leaving some traders thrilled and ...

Feb 23 Flat Market Update and New Stock Scan
Mon, Feb 23, 1:51 PM ET, by Corey Rosenbloom

After a powerful short-squeezed breakout to new all-time highs, stocks traded flat to start the ...

John Carter on Simple Strategies for Consistent Account Growth
Sat, Feb 21, 8:11 AM ET, by Corey Rosenbloom

Have you seen John Carter’s newest educational video? Entitled “Why I Trade Options for Consistent ...

Feb 20 Midday Market Update and Stock Scan
Fri, Feb 20, 2:11 PM ET, by Corey Rosenbloom

Today saw a repeat event where the morning started with a quick sell-off yet buyers ...

Feb 19 Weak High Market Update and Daily Stock Scan
Thu, Feb 19, 1:21 PM ET, by Corey Rosenbloom

Surprisingly, the weak new price highs continued with another stab at the upper level again ...

Feb 18 Reversal Market Update and Trending Stock Scan
Wed, Feb 18, 1:11 PM ET, by Corey Rosenbloom

Over the last couple of sessions, as I highlighted to members last night, stocks continued ...

Six Power Trending Stocks to Start the Week
Tue, Feb 17, 12:51 PM ET, by Corey Rosenbloom

As we begin this holiday week fresh from our vacation, let’s highlight six “Power Trending” ...

Feb 13 Bullish Breakout and Trending Stock Scan
Fri, Feb 13, 1:21 PM ET, by Corey Rosenbloom

As logically expected and as I highlighted to members last night, stocks continued their short-squeeze ...

Updating Amazon as it Breaks Higher and Higher
Fri, Feb 13, 12:11 PM ET, by Corey Rosenbloom

Amazon (AMZN) continued its upward pathway following the recent trend reversal and breakway gap. Let’s ...

Feb 12 Breakout and Short Squeeze Update with Power Stock Scan
Thu, Feb 12, 2:11 PM ET, by Corey Rosenbloom

The Short-Squeeze Breakout game-plan triggered this morning and the expected breakout impulse thrust price toward ...

Feb 11 Range Reversal Market Update and Stock Scan
Wed, Feb 11, 3:41 PM ET, by Corey Rosenbloom

Markets STILL are never boring! Today’s action again reminds us of that fact. A rangebound ...

Trading Crude Oil with Divergences into Key Levels
Tue, Feb 10, 11:41 AM ET, by Corey Rosenbloom

How can momentum divergences help your trading style? Simple – by providing early warning signals ...

SP500 Still Playing the Range Ping Pong Game
Tue, Feb 10, 11:11 AM ET, by Corey Rosenbloom

We’re still waiting on your breakout, Mr. Market. ...

Feb 6 Reversal Market Update and Bull Bear Stock Scan
Fri, Feb 6, 1:41 PM ET, by Corey Rosenbloom

Markets are never boring! That’s for sure. What started as a strong, bullish session has ...

Eight Stock Stocks Gapping and Trending Higher Feb 6
Fri, Feb 6, 12:31 PM ET, by Corey Rosenbloom

Intraday traders often scan for stocks that are strong and likely to get stronger so ...

February Market Structure and Trend Reference Charts for Gold Oil Stocks Dollar
Wed, Feb 4, 3:11 PM ET, by Corey Rosenbloom

Let’s step outside the noise and view a broader picture of the reference charts for ...

Feb 4 Trending Stock Scan and Market Update
Wed, Feb 4, 2:21 PM ET, by Corey Rosenbloom

Buyers extended their dominance today, though they’re meeting resistance with divergences, suggesting their bullish swing ...

Feb 3 Big Reversal Update and Bullish Stock Scan
Tue, Feb 3, 2:31 PM ET, by Corey Rosenbloom

After a lengthy positive divergence into support developed yesterday, buyers (unwilling to let the stock ...

Detailing Deflation: A Flyby of 8 Declining Commodity Charts
Mon, Feb 2, 2:51 PM ET, by Corey Rosenbloom

You’ve probably heard the increased discussion about “Deflation” in the global economy, but what does ...

Feb 2 VSpike Market Update and Trending Stock Scan
Mon, Feb 2, 2:11 PM ET, by Corey Rosenbloom

Stocks continued their sell-swing, yet we’re seeing a similar intervention or V-Spike Pattern that played ...

Amazon AMZN Bullish Surge from Big Divergence on Support
Fri, Jan 30, 1:41 PM ET, by Corey Rosenbloom

Amazon’s (AMZN) solidly earnings beat expectations yesterday, resulting in a breakout and stock surge higher. ...

Quick Lessons from Divergences and Reversals in MannKind MNKD
Thu, Jan 29, 5:31 PM ET, by Corey Rosenbloom

A reader asked me to take a look at MannKind (MNKD) and I wanted to ...

Jan 29 Reversal Update and Trending Stock Scan
Thu, Jan 29, 2:31 PM ET, by Corey Rosenbloom

After the Fed Day Wednesday, stocks simply traded down to the lower support of the ...

Surging Prices and Obvious Trend in US Treasuries TLT
Wed, Jan 28, 3:31 PM ET, by Corey Rosenbloom

It’s no longer a “stealth” movement but a blatant, obvious development that Bond/Treasury prices have ...

Average Annual Normalized VIX Futures Term Structure, 2004-2014
Wed, Jan 28, 8:11 AM ET, by Bill Luby

One graphic I post periodically that never fails to generate a great deal of interest ...

Caterpillar CAT Shatters Support: Updating New Trading Levels
Tue, Jan 27, 12:21 PM ET, by Corey Rosenbloom

Caterpillar (CAT) shares shattered support at the $85.00 per share level on an earnings miss ...

Plotting the Current Range and Planning the Future SP500 Breakout
Mon, Jan 26, 3:21 PM ET, by Corey Rosenbloom

What goes up must come down, and in the market, what goes sideways must break ...

Jan 26 Recovery Market Update and Trending Stock Scan
Mon, Jan 26, 2:51 PM ET, by Corey Rosenbloom

Stocks stalled after surging from the QE intervention announcement in Europe. However, today’s session saw ...

The Year in VIX and Volatility (2014)
Mon, Jan 26, 8:11 AM ET, by Bill Luby

This is the seventh year in a row I have offered a retrospective look at ...

Top Posts of 2014
Sun, Jan 25, 5:51 PM ET, by Bill Luby

Since I launched VIX and More some eight plus years ago, I have devoted one ...

Support, A Breakout, and Missing Out in Netflix NFLX
Fri, Jan 23, 12:21 PM ET, by Corey Rosenbloom

If you didn’t catch Netflix (NFLX) off the critical support level, and now the breakout ...

Jan 22 Euro QE Market Update and Stock Scan
Thu, Jan 22, 3:21 PM ET, by Corey Rosenbloom

Like the expected knee-jerk reaction, stocks rallied on news that the European Central Bank will ...

Jan 21 Intraday Update and Big Trend Stock Scan
Wed, Jan 21, 2:51 PM ET, by Corey Rosenbloom

What levels are important in the market right now and which stocks are the top ...

Eight Top Intraday Trending Stocks for Jan 20
Tue, Jan 20, 4:41 PM ET, by Corey Rosenbloom

Which stocks topped our algorithmic list of strongest (and weakest) intraday trending stocks today? Let’s ...

Four Strong Trends Kicking off 2015
Tue, Jan 20, 4:11 PM ET, by Corey Rosenbloom

As 2015 continues, we’re seeing persistent trends develop across key markets. Let’s take a look ...

Jan 16 Stock Scan and Reversal Market Update
Fri, Jan 16, 3:31 PM ET, by Corey Rosenbloom

After yesterday’s Swiss Franc surprise (see the “Aftermath Update” post from this morning), the US ...

Documenting the Damage on the Swiss Franc Fallout
Fri, Jan 16, 1:41 PM ET, by Corey Rosenbloom

I wanted to highlight the ‘damage’ or intense price movement on select FOREX pairs because ...

Trade Planning off the 2000 Key Level in the SP500
Thu, Jan 15, 4:11 PM ET, by Corey Rosenbloom

It’s time once again to plan our intraday and swing trades off the key inflection ...

Jan 14 Selling Market Update and Trending Stock Scan
Wed, Jan 14, 1:51 PM ET, by Corey Rosenbloom

We have yet another sell session in motion, let’s take a moment to highlight key ...

  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 over 1000 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.