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Modest and Realistic Goals

July 22, 2022 by Learningsharks

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

Rohan feels let down by his life. He sees his existence as a consolation prize, a series of compromises that ultimately fall short of what he wants. He longs to be wealthier. He has a fantasy that all of his problems might be resolved if he can make significant trading profits. I’ll get the admiration and acceptance I’ve always desired. Maybe I’ll meet an interesting, brand-new person who will fulfil all my demands for love and contentment. If only I could generate enough revenue to cover all of my expenses.

Ever had a rohan-like feeling? Have you ever fantasised about experiencing a string of enormous successes and having all your issues resolved? Even if it’s fun to periodically imagine that you’ll make a few million dollars trading the markets, it’s doubtful that this will actually happen. Without enough investment capital and in the majority of market conditions, it is difficult to make that type of money. That way of thinking will ultimately make you discouraged. It is imperative that you recognise these poor ideas and create more reasonable and achievable objectives.

In setting goals, it’s important to have realistic expectations. Trying to make huge profits quickly is unrealistic; modest goals are more realistic, and thus, more satisfying. Yet most novice traders reject modest, achievable goals for ones they can’t possibly achieve. Since their expectations are often unrealistic, they fail quickly, feel disappointed, and just give up. Examples of unrealistic goals are trading with an insufficiently funded account that can’t possibly cover drawdowns or fees and commissions. They may also trade with unreliable trading strategies and expect to make a profit even as new market conditions make their methods obsolete. It’s not only impossible to achieve unrealistic goals, it creates a great deal of stress, which itself can produce trading errors. Setting more realistic expectations eases some of the pressure and helps you build up sound trading skills.

A common misconception among new traders is how long it takes to build a profitable business. For instance, many believe they can trade profitably in a matter of months, when experienced traders stress that such consistently lucrative trading may take several years. And achieving it is difficult. Although it takes a herculean effort, many inexperienced traders believe it only requires a little. For instance, individuals could believe that treating trading more like a pastime than a professional business will allow them to trade profitably. They overestimate how competent they are. They have an overly confident belief in their own abilities and skills, which they do not yet possess. Never underestimate a person’s propensity for arrogance.

Finally, it’s crucial to keep your expectations realistic. Novice traders, like Stan, who hopes to find happiness through trading, believe they will make more money than they can reasonably expect, or that when they make significant gains, all of their issues will be resolved. They could think that their partners will adore them more (or they will find the ideal romantic partner). They are confident that they will receive the respect and acclaim they have been seeking their entire lives. But these hopes hardly ever come true. And even when they do, one’s expectations aren’t met. Trying to motivate oneself by daydreaming about these prospective benefits is probably going to fail in the end. By setting attainable goals, you’ll be the only one who succeeds in being profitable.

Waiting for the Payoff

July 22, 2022 by Learningsharks

Psychology and Risk Management

Are you prepared to put in a full day’s work and receive zero compensation? Most people who are used to working a 9-to-5 job would respond, “No way, are you kidding?,” if you asked them. But if you are a genuine, active trader, you must recognise that there will be many days when you won’t make any money.

You could choose to work for no immediate reward for a number of different reasons. For instance, market conditions might not be ideal, and if you try to trade in such circumstances, you might potentially lose money. On another day, you might be too worn out, anxious all the time, or plain miserable. You could make trading mistakes that have long-lasting effects if you trade with a mindset that is less than ideal. Sometimes all you need to do is observe the markets to ascertain what is happening and the state they are in. To keep ahead of the pack, you might also want to read up on new trading strategies at other times.

Other times, instead of focusing on making money right now, you need to pay close attention to learning new techniques and developing new talents. Many people perceive their typical blue- or white-collar occupations considerably differently than seasoned, aggressive traders do. Being able to intuitively sense the markets and recognise when to push themselves and when to back off and wait for better times is a necessary talent for this creative career.

Many people find it difficult to tolerate spending time that doesn’t immediately result in an immediate benefit. The majority of people are accustomed to receiving hourly, weekly, or monthly pay. But you have to approach things differently when you’re in the trading business. You cannot concentrate on earning a consistent income. Think about what would happen if you rigidly believed you needed to earn Rs 2000 per day in profit. It’s possible that you would work for a good eight hours most days without making a profit.

You might start to question how you’d accomplish your goals in the final 30 minutes of the session if you operate under the idea that achieving the RS 2000 target is very essential for every single day. As a result, you might feel pressured to finish the session on time, no matter what. You can take low probability setups or trade erratically when under duress. You might incur significant losses as a result, which you would have to make up the next day. You can experience a loss of Rs 2000 rather than a gain of Rs 2000. That day, it would have been best for you to stay out of it.

You must use your imagination and free thought when working in the trading industry. While researching the markets after-hours, you can push yourself to the maximum, but during trading hours, you need to maintain composure and be receptive to your gut instinct. You must adapt to the state of the market while using your skills to make money. Those gains can be very large at times. You won’t produce anything else at other times. But everything is OK. What happens on any individual day is not important; what counts is your overall profitability. Don’t be irritated or dissatisfied if you have days when things don’t seem to be going your way.

They Say it Couldn’t be Done

July 22, 2022 by Learningsharks

Psychology and Risk Management

For six months, Jim has been trading. He had Rs 5,000 to start, but now he just has Rs 1,500. He’s beginning to worry, now. He’s angry and frustrated. I believe it is difficult to trade and make a life, he says to his friend Jason. I’ve put in six months of labour, but I’ve lost money. I haven’t earned anything. I don’t think it’s possible to trade profitably.

Any of this familiar to you? Jim is suffering from a condition that many beginning traders experience. He had high expectations for quick success, but trading has more drawbacks than he anticipated and cannot handle. He’s frustrated because success has eluded him. Profitable trading is challenging, in fact. The general consensus among professionals is that less than 20% of people who attempt trading will have long-term success.

You need to be upbeat if you want to be a good trader. You must firmly believe that if you work hard enough, success will eventually come to you. That does not imply that you should adopt a pessimistic outlook. That doesn’t mean you should try to downplay how challenging and demanding trading is or that you should be frightened to tackle such issues. Instead, you must be willing to accept and meet the obstacles. You must recognise them and take decisive action to address them. It’s challenging to accomplish this.

The more your financial resources, the more likely it is that you can find long-term success. In order to learn how to trade and obtain the experience you need to perfect your trading skills, you must also put in a lot of time in the beginning. You won’t be able to accomplish your objectives by pretending that you don’t need to fulfil these requirements. You won’t be able to give up easy. You must possess the ability to persevere in the face of unfathomable challenges. And you must not give a damn what people think. You must respond, “Maybe it can’t be done, but I’m going to do anything I can to see whether I’m one of the few who can,” if they claim it’s impossible.

Don’t Forget to Take a Break

July 22, 2022 by Learningsharks

Psychology and Risk Management

Reality is arbitrary. In the same way that there are various mental or emotional states, there are several states of reality. For instance, the outlook for the future can be dim after a string of failures. On the other hand, you might feel joyful and even omnipotent following a string of significant victories. Which then is the real reality? Answering this question is challenging. It can be useful to think about different realities, some of which are more suited to optimal trading than others.

Making money is a necessary reality. Your account will lose all of its value if you don’t make enough profitable trades. Even though this is a truth of trading, pressuring yourself to make a transaction after a winning deal can really cause you to pass out from stress. It is advisable to forget about this truth while trading the markets. The more you can avoid concentrating on your past performance and keep your attention on your present experience, the better. The better you trade, the more carefree you get.

But you must mentally distance yourself from everything if you want to switch to a peak performance attitude. You must allow your thoughts to unwind. Slowing down your thinking is necessary. You must occasionally step away from the trading industry’s competitive environment. Everyone has their own strategy. Some people meditate. Others exercise in the gym until they have exhausted all of their pent-up energy and are completely relaxed. Additionally, a lot of folks get massages to unwind physically. The secret is to force your mind to switch to a different world by shaking it.

Here’s a technique that can really jolt your head in the right way. You can spend two minutes submerging your body in warm water (hot but not boiling, ideally at a professionally run spa), after which you can plunge into a pool of cold water. All your thoughts are focused on adjusting to the heat when you submerge your body in a hot pool of water. It hurts a little, so you have to keep your focus to keep from springing out. It helps you concentrate on it. Actually, all you can think about is how you’re going to deal with the immense heat around your body. You soon start to feel meditative.

You’re at ease and a little disoriented. Repeat the procedure several times to achieve complete relaxation. You’ll be in a brand-new world. Adapting to this new reality can be a revitalising experience psychologically.

You’ll view things objectively. You’ll realise that your trading endeavours and the high standards you strive for are just one part of who you are. Having this insight might be comforting after a hard trading day. You’ll keep in mind that despite the pandemonium, there are alternative realities. But more significantly, you’ll feel at ease and reenergized to take on the strains and tensions of the markets.

Inherently stressful is trading. Even if we attempt to prevent it, when it comes to money, our ego is frequently on the line. It’s vital to mentally disconnect from everything. Whether it’s through meditation, physical activity, or a trip to a tropical island, it’s important to change your reality, get some rest, and recharge.

Realistic Optimism Keeps You Grounded

July 22, 2022 by Learningsharks

Psychology and Risk Management

A little-known commerce company has just been launched by Rohan and Himanshu. I sense it, Rohan declares. We’re going to get rich quick. We’ll be flush with cash by this time next year. Himanshu responds, “I don’t think so. That need a miracle. You’re such a pessimist, Rohan remarks. Why are you so depressing? Himanshu asserts, “I believe we will succeed. However, I don’t believe it will happen immediately. It will require patience and a great deal of effort! The realism Rohan is. He is aware that they will eventually earn enormous profits, but he does not hold out hope that a miracle will take place. You will have to overcome countless obstacles if you want to become a successful trader.

Although optimism is necessary, realism is perhaps more crucial. Overly pessimistic people, like Rohan, set themselves up for failure. You can take unneeded risks or feel especially let down when you experience the seemingly constant disappointments that come with trading.

If you want to outperform the market and become a successful trader, you must persevere through numerous disappointments and make trade after trade. To be able to get back up after falling and be eager to tackle each obstacle requires a particular kind of person. Dr. Martin Seligman has conducted research on how optimism encourages people to persevere in the face of obstacles. For instance, optimists outperform pessimists in terms of academic performance, electoral success, and professional success. Optimists outperform pessimists in all of the occupational groups he’s researched, from elite winning athletes to traders on the trading floor.

What is their trick? It’s in the way they justify failures or setbacks. The blame is not placed on them. They don’t think that enduring personality attributes determine success or failure. Instead, they justify defeats as the product of unimportant, manageable circumstances that are unrelated to them individually. They think they can overcome a setback if they are persistent enough. A positive way of thinking is something you must practise if you want to be a successful trader. As a trader, you will encounter far more losers than winners, therefore it will need perseverance to keep going until you discover a string of profitable transactions. But everything you do, avoid placing the responsibility on yourself. Think not, “I’m a loser.”

Instead, concentrate on how you can make a firm decision to alter both how you respond to and the external circumstances. You’ll advance considerably.

Despite this, being pessimistic has benefits. Despite having negative feelings the most of the time, studies have shown that pessimists are better at assessing their level of control over particular situations. Being occasionally pessimistic may be advantageous since pessimists tend to make more realistic judgements. While optimism may make you feel fantastic, pessimism allows you to assess whether your plans, objectives, or ideas are realistic. Traders are infamous for having excessive confidence, especially beginners. Terrance Odean, a behavioural economist, claims that new traders frequently overtrade and have overly high expectations.

Realistic expectations when it comes to trading are essential for survival. While optimism aids in overcoming obstacles, a healthy dose of scepticism will keep you grounded in reality. It can be helpful to reconsider your trading strategy before putting it into action, for instance. Have I considered every unfavourable circumstance that could undermine my plan? Have I properly controlled my risk? Do I have enough money to accomplish my financial goals? Have I allotted enough time to learn how to trade profitably?

Long-term survival depends on asking yourself these kinds of questions and making sure you have the answers. To become a successful trader, one must overcome a number of actual challenges. Sugarcoating the truth can only temporarily improve your mood. You’ll eventually come to realise the grim facts. The best course of action is to confront the challenges head-on rather than setting oneself up for failure. Making a realistic action plan with sub-plans to get around the seemingly infinite obstacles helps keep you grounded even if it initially seems overwhelming. You’ll be one of the select few traders who succeed in the long run since you’ll have an optimistic yet practical plan for turning into a successful trader.

Getting Ready to Trade

July 22, 2022 by Learningsharks

Psychology and Risk Management

Trading is difficult. It tests the bounds of your abilities. And if you don’t carefully manage your risk, the results of a poor decision could be devastating. You must ensure that you are prepared to trade before you risk your pride or your money in order to survive. Without the right attitude or tools, you wouldn’t attempt to climb Mount Everest, so why try to trade when you’re not ready? It’s best to avoid the marketplaces until you are fully prepared until you are rested, at ease, and well-equipped. Here are some fundamental things to think about before you start trading seriously.

Before the markets start, it’s vital to do some research and restrict your trading options. Since they have traded the same vehicles for years, some seasoned traders may argue that they don’t need to prepare for the markets, but it’s crucial that new traders understand the value of planning ahead. Knowing your specific trading vehicles before you enter the markets is a sign of good preparation. It’s helpful to choose precisely what you will exchange because there are so many options that it can be overwhelming.

If you limit your emphasis to a few key deals, you’ll discover that you’ll make more money. (Trading every opportunity is not necessary to be profitable, and attempting to do so may frequently overwhelm you to the point where you won’t make any trades.) Not to mention creating and following a thorough trading plan. Make sure you take into account every last detail (for example, entry strategy, exit strategy, and risk control). Don’t put off developing your trading plan until the last minute. Get ready early.

It’s crucial to prepare for any potential negative forces that can work against your trading strategy. Just like a mountain climber must prepare for terrible weather, traders must prepare for situations that could adversely affect market behaviour. Make sure, for instance, that you have taken into account key market occurrences like interest rate changes, earnings reports, mergers and acquisitions, or the status of ongoing legal processes. These events can quickly ruin your trading strategy because the general public is often persuaded by them. So be on the lookout for them and be prepared to adjust your plans if you do.

Be sure to psychologically prepare yourself. Trading is hectic, demanding, and emotionally draining. In order to vigilantly attend to the numerous sources of incoming information necessary to take swift and decisive action, your mind must be operating at full speed. You must practise having the appropriate frame of mind. Make sure that significant stressors don’t enter your consciousness. In your free time, deal with pressures and settle old disputes. Don’t undervalue the impact that these psychological influences may have on your perspective. They may obstruct your immediate experience as you put on trades if you don’t take care of them beforehand.

The need to prepare physically is equally crucial. It’s crucial to keep in mind that even though you might spend the most of your day sitting in front of a computer screen, this somewhat sedentary activity nevertheless requires physical stamina. You’ll have a tendency to act impulsively if you don’t have the physical stamina to carefully monitor your trades since you’ll be too exhausted to keep up with the fast-paced activities. Make sure you receive the appropriate nourishment and activity. You’ll not only increase your physical endurance to handle the demands of trading, but you’ll also release tension. Trading is difficult. Exercise on a regular basis helps to prevent the buildup of stressful feelings.

Take Credit for Your Efforts

July 22, 2022 by Learningsharks

Psychology and Risk Management

Successful traders gain money. The degree to which you are profitable as a trader ultimately determines your success. It is simple to feel as though nothing has been accomplished or that your efforts have failed if the results of your efforts are unsuccessful. However, concentrating only on a trade’s results can be off-putting, particularly if you feel like you aren’t making any progress. Even if part of your efforts don’t directly result in a profit, you still accomplish a lot as a trader even though earnings are vital. Pat yourself on the back for everything you do as a trader, regardless of whether it results in a profit, as it is crucial for your self-esteem and wellbeing.

In a conventional job, you work 40 hours per week and are paid for it. Even though the living can occasionally be tedious, there is a feeling of security. You as a trader are unsure of the exact amount you will make from your trading endeavours. It’s tempting to use your account balance as the only benchmark for your success. You’ll feel quite pleased if things are going so well that your equity is increasing. However, if you are having a bad day, you’ll feel frustrated and a little let down. You can feel disappointed in yourself or your loved ones. You can feel as though you are in a rut or stationary.

Giving oneself a mental reward for all your hard work is one approach to stay positive. You could even compile a list. Record your accomplishments as you complete them so that you may look back on the list at the end of the day and be proud of your accomplishments. Make a note of it, for instance, if you scan 20 charts. Add any newsletter articles you’ve read to the list. Making a list of things you’ve finished and rewarding yourself for them won’t necessarily replace making deals that are successful, but it will help you feel accomplished. You’ll feel like you’re moving forward, particularly during those periods when you just can’t seem to turn a profit.

Back On the Right Course

July 22, 2022 by Learningsharks

Psychology and Risk Management

Have you ever been furious or frustrated without understanding why? Maybe you were simply keeping an eye on a position when the market abruptly changed direction, and when it did, you saw half of your potential profit disappear. An ordinary occurrence like this one would have been tolerated, but it wasn’t. You experienced threats, upset, and fear for an unknown reason. Without prior notice, it seemed as though a centrifuge of emotions grabbed over. It simply passed you by. You weren’t ready for it. You didn’t know why you were so horribly agitated, but all you knew was that you became disoriented and were unable to concentrate on sticking to your trading strategy. You were unable to think coherently. You were lost in a fog.

Why do we overreact when it’s not necessary? We often let our expectations dictate how we feel. We respond emotionally and impulsively when our expectations don’t line up with what really occurs in the markets. Although it’s in our nature to want to win, the markets aren’t always on our side. When we are taken off guard, our first instinct is to assume that the markets have been unfair to us. When something doesn’t go the way we expect it to, we become irate. However, trading is a career where you should operate under the premise that things won’t always go your way.

Even if certain trading events could not go your way, you shouldn’t let this aspect of trading depress you. A poor trade or an unexpected loss will depress you if you are caught off guard. But if you prepare for such things, you’ll remain composed and at ease, prepared to move swiftly to correct the issue.

It’s essential to prepare for bad things to happen rather than reacting emotionally and impulsively. Expecting things to go your way is unrealistic. If you think that something bad like this should never happen, you’ll be frustrated and angry when it does. Furthermore, you won’t be able to take significant action if you are too irate and frustrated. You won’t be able to react to potential issues right away.

You need to remain cool and consider how to take evasive action to protect yourself rather than getting upset, frustrated, or distracted. If you foresee a difficulty, you can calmly come up with a different solution and implement it.

Setbacks and unfortunate occurrences are a part of trading the markets, and without the right perspective, such setbacks may be crippling. The proper mindset is essential for traders. You won’t be mentally caught off guard if you actually expect disappointments and unfavourable circumstances. Instead, you’ll be able to recover fast, engage in fresh profitable transactions, and ultimately win out.

Developing New Trading Ideas

July 22, 2022 by Learningsharks

Psychology and Risk Management

Any seasoned trader will tell you that developing novel, creative trading ideas is the key to long-term profitability. Finding winning tactics is challenging. And then, after all the bother of creating a successful trading strategy, it abruptly fails. Finding fresh tactics and possibilities is essential to staying ahead of the competition; else, your overall revenues will noticeably fall. Here is a fundamental three-stage approach for coming up with and evaluating fresh ideas: brainstorming, planning, and arguing against the evidence.

The objective of the brainstorming step is to generate as many fresh trading strategy concepts as you can. Be honest with yourself and let your thoughts flow. Don’t be reluctant. There is no such thing as a stupid concept, so live by that maxim. Consider the actions you would take if anything were feasible. The aim at this point is to generate as many ideas as you can, even if some of them are implausible. Avoid placing restrictions on yourself. You risk preventing an original thought from entering your consciousness if you suppress your creative urges.

The objective of the planning step is to improve your possibly creative concept. It’s time to transform your concept from a hazy notion into a specific strategy. Consider how you will carry out the strategy and make an effort to iron out all the details. Think imaginatively, yet realistically. What practical steps can you take to put your idea into practise? What omens or clues point to the ideal market circumstances for putting your proposal into practise? What is a reasonable profit goal for your concept? How do you plan to reduce your risk? What is your plan of action? The strategy will be easier to follow if it is more comprehensive. It will also be simpler for you to gauge its prospective profitability.

You must take the devil’s advocate role in the last phase. You’ve described a workable idea, now it’s time to think about what’s wrong with it. This is a crucial phase. It has been claimed that brilliant trend-setters are those who can tell the difference between a truly original concept and a wishful thinking. It’s essential to have a critical eye. At this point, it’s helpful to think that the majority of trade concepts are “poor ideas,” and that you must consider every scenario in which your plan might go awry. Even the most rationally sound proposition can fall short on the market. What evidence do you have that your plan will be successful? What presumptions did you use to formulate your plan? Are they logical? What could possibly go wrong?

Losses can be avoided with a skeptic’s mindset, thus it’s crucial to identify every mistake and either fix the strategy or abandon it.

You may create cutting-edge trading methods that will keep you profitable in constantly shifting market conditions by using this three-stage technique of brainstorming, planning, and critiquing.

Closing the Gap

July 22, 2022 by Learningsharks

Psychology and Risk Management

Do you ever feel like your chances of making money on the trading day are slim? You simply sit there, frustrated, and gaze at your devices. In situations like these, having a positive outlook can give you new energy. When you approach trading with an upbeat perspective, you’ll be prepared to look for new opportunities to make a profit. Mark Douglas, a trading expert, claims that traders should work to narrow what he terms the “reality gap.” According to Douglas, “there is a vast disparity between what is conceivable from the trader’s personal perspective and what is achievable from the market’s standpoint, which is nearly anything.” What traders believe they can extract from the markets is constrained by their expectations. The possibilities, though, are numerous.

Successful traders keep going despite what seems like never-ending defeats. Rare individuals possess the ability to bounce back swiftly from a difficult fall and eagerly take on another possible obstacle. Dr. Martin Seligman has researched the benefits of having a positive outlook on life. He has researched a variety of occupational groups, including dealers on the trading floor and elite, successful sportsmen. Being optimistic is a key predictor of success. Pessimists struggle at work, perform worse academically, and lose more elections than optimists do.

The way people view events in their lives has an impact on their optimism. People that fail attempt to comprehend why they failed. People who are pessimistic think that they have a permanent personality flaw that causes them to fail. They believe that their failure is an indication of a persistent and stable weakness in their aptitudes. For instance, they become overly sensitive during a particularly difficult trading day. Others can trade on a day like this, but I’m so untalented that I’m stuck, they may reason. There is no hope. I’ll never be successful as a trader. But it’s crucial to keep your spirits up when you feel defeated.

Robert Koppel recommends establishing an optimistic mindset by repeating specific uplifting concepts in “The Mentally Tough Online Trader.” It helps to tell yourself, “I believe I will be a successful trader,” when you’re feeling depressed. I think my trading will produce amazing profits. Every day’s performance is, in my opinion, new. You can take on the markets and sort through available market opportunities until you identify a workable strategy to turn a profit by thinking these encouraging, upbeat thoughts.

If you want to be a good trader, you must adopt an upbeat mentality. It will take tenacity to persevere until you find a run of profitable trades since as a trader, you will come across far more losers than winners. It’s easy to feel discouraged and like your options are limited. A positive approach, though, can enable you to overcome the disparity between your low expectations and the abundance of market chances.

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Modest and Realistic Goals

Psychology and Risk Management

Waiting for the Payoff

Psychology and Risk Management

They Say it Couldn’t be Done

Psychology and Risk Management

Don’t Forget to Take a Break

Psychology and Risk Management

Realistic Optimism Keeps You Grounded

Psychology and Risk Management

Getting Ready to Trade

Psychology and Risk Management

Take Credit for Your Efforts

Psychology and Risk Management

Back On the Right Course

Psychology and Risk Management

Developing New Trading Ideas

Psychology and Risk Management

Closing the Gap

Psychology and Risk Management

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