Psychology and Risk Management
• What to expect
• Risks
• Position sizing
• illusion of control
• Accepting critisism
• Paralyzed by fear
• Loss is a feedback, not a failure
• The flexible trader
• Focusing on the positive
• Short straddle
• The dynamics of greed
• The herd mentality
• Notes
Detailed Action Plans
We are accustomed to acting automatically and impulsively in our daily lives. For instance, when we drive, we instinctively make turns without giving it any conscious thought. Precursor for trading, But things weren’t always like that. When we initially started learning to drive, we carefully considered each step. When participating in sports, it is also valid. At first, each action required intentional, deliberate effort. You eventually developed the skill to carry out each action without much thought as a result of practise. However, beginner traders believe they can deal on the spot despite having acquired a variety of talents over their lives.
It might be challenging to trade on the spur of the moment when you first start out in trading. There are too many things to take care of, and without a tonne of experience, mistakes are inevitable. Precursor for trading, Making a particular plan of action when trading offers obvious advantages. Scientific studies demonstrate how action plans assist people in achieving their objectives. Numerous studies by Dr. Peter Gollwitzer, a professor of psychology at New York University, show the advantages of creating detailed plans that specify when, when, and how to carry out an action.
It might be challenging to trade on the spur of the moment when you first start out in trading. There are too many things to take care of, and without a tonne of experience, mistakes are inevitable. Making a particular plan of action when trading offers obvious advantages. Scientific studies demonstrate how action plans assist people in achieving their objectives. Numerous studies by Dr. Peter Gollwitzer, a professor of psychology at New York University, show the advantages of creating detailed plans that specify when, when, and how to carry out an action.
What does research on planning show? Dr. Gollwitzer makes the case that having plans makes it easier for people to recall what needs to be done explicitly in a review of pertinent studies on creating specific action plans. Instead than wasting time trying to remember what they are going to do, they just do it. They easily carry out their predetermined plans because they have already decided what to do and when. Second, studies have shown that having a strategy in place makes people more responsive.
A well-thought-out plan will enable you to react more quickly when favourable market conditions appear. Thirdly, people may more readily ignore interruptions and diversions when they have a strategy. They are better able to maintain self-control and concentrate more readily on the work at hand. Behavior plans are particularly helpful when attempting to react in high-stress circumstances, such as on days when the market action is difficult to predict. It might be stressful to trade the markets on a particularly turbulent day. Several choices must be taken immediately. However, the human mind is limited.
We are only able to focus on a certain quantity of information at once. But we can concentrate our limited psychological energy more effectively with a well-thought-out trading plan. When we have a plan, we can react quickly and with assurance. So, if you want to trade well, create a thorough trading plan and stick to it. Long term, you’ll be happy you did.