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Trading Psychology Articles |
Written by Jim Wyckoff |
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Don't overtrade. If you are trading several markets and not having any success, cut back to trading one or two markets. You can follow fewer trades more closely and document your success or failures more easily. Plus, your trading account won't be drawn down so quickly. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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I used to do an exercise in the Peak Performance 101 workshop entitled "Getting What You Want". The exercise starts out with a question: If you could have anything in the universe, what would it be? Perhaps your answer might be $10 million dollars. However, the exercise doesn't end there. It just triggers another question: What would that get you? So to carry our example forward, you'd now ask, "What would the $10 million dollars get you?" Perhaps you might answer, "Security… I'd feel secure in my retirement." |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Many mental health professionals define an "uncertain" condition as being stressful. Uncertainty occurs because of too much information or because of too little capacity. The very fact that we cannot deal with available information is stressful. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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In my peak performance training with traders, I give a strong psychological slant to the concept of self-sabotage. Self-sabotage typically occurs when one lacks the discipline to act in one's own best interest. For example, when you have dessert, knowing it's taboo because you are trying get healthy, you might call that self-sabotage. Or perhaps you know you need to exercise and you really feel good when you do so, but somehow you just feel lazy and want to skip the exercise period. Self-sabotage occurs in trading in many instances: |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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Hank Pruden’s theory of "Behavioral Finance" proposes that human flaws are consistent, measurable and predictable, and being aware of and utilizing this phenomenon can benefit a trader. "For the better part of 30 years, the discipline of finance has been under the thrall of the random walk\cum efficient market hypothesis. Yet enough anomalies piled up in recent years to crack the dominance of the random walk. As a consequence, the popular press has been reporting the market behavior," said Pruden. One of these new methods discussed is "behavioral finance." |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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If you are willing to accept total responsibility for your investment results, you will realize that you are the most important factor in your trading or investment success. If you have done that, you are way ahead of the crowd. |
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Trading Psychology Articles |
Written by Brett N. Steenbarger |
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Although I do not maintain a private practice of counseling/coaching for traders, it is perhaps inevitable that traders would contact me for assistance after reading my book on The Psychology of Trading. Once in a while I take on a project of working with a group of traders because of the opportunity to push the envelope and use psychology to improve their trading performance. In the past few years, I would guesstimate that I have gathered personality questionnaire data and assisted over one hundred traders. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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If you're in the market, one of biggest obstacles you'll face is the wall of losses. It's fairly difficult dealing with the markets if you are not willing to lose. It's almost impossible. It's like wanting to be alive, but always wanting to breathe in and not willing to breathe out. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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People get exactly what they want out of the markets. Most people are afraid of success or failure. As a result, they tend to resist change and continue to follow their natural biases and lose in the markets. When you get rid of the fear, you tend to get rid of the biases. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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One of the advantages we have as traders is that we do not have to trade. And it costs nothing to not trade. So the common solution is to only take a position in outstanding trades. And these are usually either trades that are moving strongly in your favor before you enter or trades that are so highly undervalued that you are getting an investment at a small fraction of what it is worth. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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So what does this have to do with trading and success? I've noticed that the people who are really successful in many, many fields start some sort of program of self improvement. I have mentioned many of those in past tips and the Artists Way is one of them. They move into what they love to do and as they commit to it (because they love it) all sorts of things happen to make it work for them |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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I have had many readers through the years--most of whom were less-experienced traders--tell me that at some point in the future they planned to quit their day jobs and trade futures full-time. While their optimism was certainly positive from the standpoint of eagerness to learn about a truly fascinating business, it is also probably unrealistic that they will ever make a good living as a full-time futures trader. At the end of this feature I have a few questions that may help determine if you are ready to attempt to join the elusive rank of "full-time" trader. But first, I want to present you with some straight facts. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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I was recently approached by a top hedge fund about profiling the best traders in the world. Profiling really refers to finding those psychological characteristics that will best predict success. And I believe that I'm one of the world's experts in that area since we have a huge database of psychological profiles of traders. I've been testing traders since 1982 to help them discover their strengths and weaknesses. The instrument that I've developed, The Investment Psychology Inventory, does an excellent job of that. |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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A main tenet of success in futures trading is the ability to accept losing trades as part of the overall trading process. This is not an easy undertaking--especially since many futures traders tend to be of a more competitive nature in the first place. Traders certainly don't have to enjoy losing trades, but they must accept the fact and move on. Those who can't accept the fact that losing trades are a part of futures trading usually don't stay in the business very long. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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The sixth key quality is that they all have a business plan to guide their trading. I've been talking about the importance of this plan for years. Most companies have a plan to raise money, but you need such a plan to help you treat your trading like a business. I've done a complete teleseminar on this topic and also a prior workshop. You can learn more about these on my website, plus future tips will also be about this topic. |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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No short-term trading system is perfect. However, having and using a system is critical for short-term trading success, say Howard Abell and Bob Koppel. "A successful short-term trading system must be profitable, consistent, and personal--conforming to the unique psychological and methodological needs of the individual," they said. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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What most people don't realize is that at any given time 4-5 people might go long a position and another 4-5 might go short or unload a position. Each of them can have different systems and different ideas, and all of them can make money. They might have different ideas about the market, but they trade it because they've figured out that it is a low risk idea. And a low risk idea is one that I define to be an idea with a positive expectancy, that's traded at a position-size level so as to survive the worst case contingency in the short run so as to realize the long-term expectancy. In addition, they all have common characteristics, some of which I'll discuss later in this week's tip. |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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The ultimate goal of a futures trader should be to have overall trading success by being profitable. There is no single-best path one can take on the destination to trading success and profitability. However, there are a few general trading tenets to which all successful traders have subscribed. One such trading tenet is "losing your ego" when trading futures. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Jack Schwager's primary conclusion after writing the first two Market Wizard books is that great traders all have developed systems that fit who they are. I tend to agree that that's one of the secrets to success. Chapter 4 of the new edition of my book, Trade Your Way to Financial Freedom presents my revised 14 step model for designing a system that fits you. While I cannot do justice to the model in a short tip, what I can do is list some of the criteria you might want to think about in order to design a system that fits you. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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"What's a reasonable goal for me as a trader? Can I make a living trading? Can I make millions trading? Is that reasonable for a former professional?" “I'm aged 46, and I'd like to move into full time trading. I've accumulated about $200,000 in cash. What is possible for me given my age and goal to become a full time trader?" |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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The attitude of the individual trader (part of the important aspect of trading psychology) plays a huge role in success (or failure) in futures trading. For a trader to become successful, he or she must enjoy the "process" of futures trading. I have a few questions below that will help determine whether you are a good candidate to become a successful trader--if you don't feel you already fit into that category. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Fasting is actually your body's way of cleansing itself. When you think about humans living with nature, they had to deal with the seasons. During the growing season there was plenty of food, but in the winter months there was nothing. People could only eat what they had managed to preserve and save from the growing season. So naturally there was probably a lot of fasting. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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If you've been practicing our vitamins for your soul tips for the last six weeks, you've probably seen some major changes occurring in your life. Must of the change may be non-trading related, but overall, I believe they'll help you immensely as a trader because they'll help you lighten up. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Two months ago, I attended a self-improvement workshop given by someone that I considered to be very loving. Most of the workshop involved people bringing up problems and he would very lovingly help them release the problem. That was great, but I noticed that certain people would bring the same problem up over and over and over again. In fact, one person, who might be described as a "starving actor," had been to over ten of these workshops and he was still bringing up trivial stuff – almost as if he'd accomplished nothing. Nevertheless, the workshop guru laughed with him and gently took him through a release of his problem. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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When I first went through A Course In Miracles, I made a commitment to follow my bliss. Joseph Campbell stated in his remarkable series The Power of Myth that following your bliss is essentially following God's path. And that seemed great to me: do what gives me joy, and my life would work better. |
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Trading Psychology Articles |
Written by Adam Rosen |
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There has been much said about the psychology of trading and the necessity that we manage our emotions with every gain and loss. Emotions tend to rise to the surface during times of uncertainly as we are faced with an unexpected situation or crisis. How would we feel to win the state lottery worth over $10 million? It is easy to say, we would feel very surprised and in fact ecstatic. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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I've been practicing taking my vitamins for a while, and I'm noticing a lightening and expansion in myself. I think it is wonderful and I thoroughly encourage you to follow these ideas yourself. For example, I went with my wife to a place of great beauty. We spent a lot of time hiking, meditating, and being with nature during the week. My concerns seemed to melt away as a result. It was probably the most relaxing vacation I've had in a long time despite some "apparent" external pressures that were bothering me a lot before I left. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Our first two vitamins have included 1) Focusing on the Moment and 2) Making Yourself Laugh. Both of these involved doing things that cause you to lighten up. This week we'll change directions slightly and focus on some vitamins that help you discover who you are. This month I'd like to suggest a third vitamin that if something bothers you, give it to God; |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Giving vitamins to your soul might not have a direct, noticeable effect on your bottom line. However, these vitamins could prevent a disaster and they certainly will make you a lighter and happier person. Lighter and happier people usually make better traders and investors. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Giving vitamins to your soul might not have a direct, noticeable effect on your bottom line. However, these vitamins could prevent a disaster and they certainly will make you a lighter and happier person. Lighter and happier people usually make better traders and investors. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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If you think about the essentials of life, the body can live without food for at least a month. You can do without water for several days, but you can only do without air for a few minutes. Air is absolutely essential for life, so why not promote it. Many of the ancient meditation techniques involve the breath and it is not without good reason. Dr. Harry Goldbatt found that rat cells deprived of oxygen easily developed malignancies while normal cells did not. Athletes, who get much more oxygen, only have a cancer rate that is 1/7th the rate of the average American. |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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At some point in nearly everyone's trading timelines, they wonder how their trading successes (or failures) compare with those of other traders. Wondering just how well you stack up to other traders in the industry is a natural curiosity and a human psychological tendency. However, actually knowing the success or failure rates of others doesn't do a lot to move you farther down the road of where you want to be regarding trading success. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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If the project is mission critical, then you need to allocate human and capital resources to it. Let's make the assumption that your idea does seem to be mission critical. Let's say that your mission is to open a hedge fund with a target of at least $250 million under management and some friends are asking you to manage their money. In order to have large amounts of money under management, you need to produce above average returns with very little risk. For example, a system that would help you achieve this mission would be one that would earn 15-25% each year with no more than one or two losing months each year. If you have such a system in place, then accepting client money would probably be useful. If you don't have such a system in place, then client money would probably be a major distraction. Let's say you have the system in place, and you decide to accept money. |
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Trading Psychology Articles |
Written by Jim Wyckoff |
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I am not a big casino gambler, but I have been at the venues in Las Vegas and Atlantic City, as well as in other casinos worldwide. I have observed a myriad of gamblers at the poker, black jack, roulette and craps tables. An interesting characteristic among gamblers is exhibited to me time and time again. It is this: The gamblers who appear to have money they can afford to lose usually are the ones who can win. The gamblers who appear to be using their rent or grocery money (or what I call "scared money"), and really should not be gambling, are usually the ones who lose. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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You probably have some specific goals in your trading. And if you don't, then I'd suggest that you develop some. But if you do, you might need some discipline to help you meet those goals. As a result, I thought I'd focus this week's psychology tip around helping you to better keep meet your goal. Here are several ideas that may help you to continue your meeting your goal throughout the entire year. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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You probably have some specific goals in your trading. And if you don't, then I'd suggest that you develop some. But if you do, you might need some discipline to help you meet those goals. As a result, I thought I'd focus this week's psychology tip around helping you to better keep meet your goal. Here are several ideas that may help you to continue your meeting your goal throughout the entire year. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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I'd like to center this tip around some concepts that you must master as a trader. First, you need a strong initial evaluation of yourself and what you needed to do to improve your own performance. Let's look at it this way. Suppose you are in the middle of the desert. There are no roads, but you do have a map indicating where you are to go. However, what's missing is some indication of where you are now. And remember that you are in the middle of the desert. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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What most of us really want are mental states such as joy, love and freedom. To have those states, you need to merely step into them. They have nothing to do with what you have or do. Instead, they have everything to do with being. To raise the quality of your life, you need only look around you and rejoice. Are you having fun? Do you feel lighter? Are you experiencing more pleasure in the simplest things? |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Imagine that you are "Infinitely Wealthy." That means that if you stopped working today, your passive income would be enough to live on for the rest of your life at your current lifestyle. What would you do? Would you continue to do the same work? Would you work to earn more passive income so that you could raise your lifestyle? Well, suppose you did that and your lifestyle was now ten times as affluent as it is now. Now what would you do? More of the same? Perhaps you'd now work to give to others or to charity? |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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I'm going to write the next few tips on topics that might press your buttons. They'll help you find your hotspots and help you discover how you sabotage yourself. I've been reading a wonderful little book by Jerry Stalking entitled, Laughing with God. In that book the following dilemma is brought up, and here I'm going to rewrite the conversation to make it pertinent to trading/investing. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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These trading tips will help you get yourself in the best possible condition mentally to perform at a peak level. They are not necessarily new, but they are critically important. So whether you've heard them before or not, now is the time to employ them into your trading and your life. Both will improve as a result. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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The Business-Owner Trader Owns the Systems. Let's look at the person who takes the next step - they treat their trading business as a group of systems. They make these systems as automatic as possible, and then they train other people to run them. You cannot be a perfectionist and develop automatic systems. However, you can develop such systems and free yourself. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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In the past I have made the suggestion that if you've been working on the Peak Performance Course and reading Trade Your Way to Financial Freedom, you probably have many ideas for how to improve your trading. There is probably no good reason not to spend a month (or six months) developing a good business plan and implementing many of these ideas. So what is stopping you |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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These trading tips will help you get yourself in the best possible condition mentally to perform at a peak level. They are not necessarily new, but they are critically important. So whether you've heard them before or not, now is the time to employ them into your trading and your life. Both will improve as a result. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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One of the least productive things you can say in furthering your market research is "It didn't work." I frequently give my clients research assignments, telling them a great area in which they can do research. I might see them again four months later and find out that they are working on something entirely different. When I ask them about the research area in which I had directed them, the response is usually "It didn't work." |
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Trading Psychology Articles |
Written by John Forman |
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People make all kinds of excuses as to why they cannot get involved in investing or trading the financial markets. In this article, some of the most prominent are debunked. "I don't have time" Despite being one of the most frequently heard, this is probably the most pathetic excuse for not trading there is. Why? Because the availability of technology and information in the modern day means that we can operate in literally any time frame we want. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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Most people make a big deal out of market prediction. They think they need to be right 70% or better in order to "pass" the exam that the market gives them. They also believe that they might get an "A" if they could be right 95% of the time. The need to predict the market steps from this desire to be right. People believe that they cannot be right unless they can predict what the market is doing. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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"Nothing is exact. You can never know how it will really turn out. Instead, trading is very much a game of discipline, of being in touch with the flow of the markets, and of being able to capitalize upon that flow. People who can do that can make a lot of money in the markets. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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It's possible for traders to tap into one of three general attitudes when they approach the market. The first attitude is one of pessimism; the second is one of randomness and/or neutrality; and the third is one of empowerment. The first attitude never works. The second attitude seldom brings us much success, while the third attitude, when properly done, guarantees success. |
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Trading Psychology Articles |
Written by Dr. Van K Tharp |
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When you are marching toward some goal, like trading excellence, you might do so by overcoming obstacles. When your focus is on problems you have, such as the lack of funds or limited resources or limited knowledge, you are probably going to generate feelings of guilt, anger or frustration in yourself. Little is usually accomplished from such mental states. You feel stuck and your orientation toward “stuckness” tends to persist. |
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