The 4 most Dangerous emotions in trading (and life)

Greed, Fear, Hope, and Regret.

    These are four psychological states of emotions that drive most individual decision making in any market( and life)in the world.   

    According to me, most traders in market focus too much on the market technicals or fundamentals(on others opinions and views in life) and not enough on their own pshycology, own  views,own interests( people build interests on how other thinks about him/her not on how he/she think). 

1.Greed: is commonly defined as an excessive desire for money and wealth.

     In trading terminology, it can specifically be defined as the desire for a trade to provide an immediate and unrealistic amount of profit. When greed sets in, all a trader can focus on is how much money they have made and how much more they could make by staying in the trade.

 

2.Fear : is probably the most powerful of all human emotions.

  When traders become afraid, they will sell a position regardless of the price. Fear leads to panic, and panic leads to poor decision making. Fear is a survival response. People have been known to jump off of buildings during market panics

3.Hope: is a feeling of expectation and desire for a certain thing to happen.It’s an individual’s desire to want or wish for a desired event to happen.

        Hope may be the most dangerous of all human emotions when it comes to trading. Hope is what keeps a trader in a losing trade after it has hit the stop. Greed and hope are what often prevent a trader from taking profits on a winning trade

4.Regret: is defined as a feeling of sadness or disappointment over something that has happened or been done, especially when it involves a loss or a missed opportunity. If you miss a winning trade, then you must move on to the next potential trading opportunity.

    Finally we humans cannot dwell without emotions .we cannot eliminate these emotions( in both trading and life), but we can control them by knowledge, experience, by setting right mindset, using our discretion based on situations, risk and money management etc… we should not let our  emotions control us,we need to control our emotions .

Inspiring story of a lady trader from hyderabad

 
At 28, a paraplegic, she makes her living from the  markets.
     Sujata Burla's life took an ugly turn on June 9, 2001. On a pilgrimage to Shirdi, where the Sai Baba temple in Maharashtra is located, from Hyderabad, she met with an accident.
     Four months later, the doctors and physiotherapists treating her told her she could not walk for the rest of her life. The accident had turned her into a paraplegic. It meant Sujata was immobile below the shoulders. She was just 21. 
  To read her complete interview visit http://www.rediff.com/getahead/2007/sep/20pras.htm

Types Of Risks

Taking no risk is the biggest risk.
 The amount of risk one takes in the markets (and in life for that matter) is in direct proportion to how much one wants to achieve or profit.

  Foolish Risk:

Also known as the desire of something for nothing, laziness and irrational hope. 

 It’s a pointless gamble, an emotional decision as well as a sucker play – a roll of the dice –

a toss of a coin.

   Calculated Risk:

To use one’s mind to visualize possibilities, to work things out logically – to reach a conclusion -  and then to act with strength and confidence – that’s what makes the human mind superior to all other species that dwell on this planet.

Trading profession v/s other professions

  According to me  trading is just like any other profession like Medicine, Law, Teaching and Engineering . It is all about skill development. But unlike trading, these professions have an advantage. We can always conceal our failure and mediocrity there. We can always put the blame on others and situations .We rarely suffers due to our mediocrity and inefficiency. Our client or our employer always suffers. Just think about this for a moment. How many people you know, excel in their chosen professions?

    Finally think about how much money we need to spend on education to land up in a good profession. We may need to spend several lakhs to become a specialist doctor. How much we need to spend for an engineering degree and a reputed MBA?. Here in trading, people are not willing to spend on education and pay tuition fee to the market. Everybody wants to mint money from day one.

    There are no short cuts. Select a method with an edge and get yourself trained. Be ready to pay some tuition fee( loss during learning phase) to the market to be consistently profitable for financial and pshycological freedom.

So many are doing it, we can do it.

How to learn day trading?:according to me

               If you are ready to take a little effort, you can learn it really fast.

1. Gain the basic knowledge of markets: what are stocks,futures,options,commodities,forex?, what are the     core concepts of working of stock markets? how and how trade them? etc etc........ the questions goes on your mind and know the answers for all... how to know answers? simple " google". open demat and trading account from a broker( do some research to select a suitable broker for u )

2. Based on the knowledge you gain select  what to do investing or trading? or which segment stocks or    F&O or commodities etc...... or may be any script (ex; nifty or crude oil ...) i mean select what to do and on which to do?

3.  Select a method for trading, u can develop ur own method by ur knowledge and studing historical charts or in web so many method for all time frame are available.
   Select  the style of trading (scalping or day trading or swing trading or positional etc) and chart timeframe on which you are comfortable(1 minute ,2m,or 15m or 30m etc),do ur own reasearch .

4. Backtest   the method on historical charts to check how efficient and how it works. do paper trade the method on ur selected script and timeframe for some days or months untill u gain confidence , repetition is the mother of  learning any skill.. make changes if needed. prepare a trade plan that is consitent and comfortable to u.

5 Go live with minimum lot size, record and review trades and learn lessons from mistakes.
  practice a lot for consitency and Win More, Lose Less

6 Review ur performence for consistency, prepare a trade plan with all loopholes corrected

7 Go on increasing ur lot size  and repeat the process of record ,review and learn lessons from mistakes.

 This is just my view, use ur discretion and  u can ask me , i will try my best to help if u have doubts .
 Don’t worry if you cannot invent  You can always do Reverse Engineering use "google".

How different traders and investors define the structure of the markets

       Once upon a time, there were six blind men. The blind men wished to know what an elephant looked like. They took a trip to the forest and with the help of their guide found a tame elephant. The first blind man walked into the broadside of the elephant and bumped his head. He declared that the elephant was like a wall. The second one grabbed the elephant’s tusk and said it felt like a spear. The next blind man felt the trunk of the elephant and was sure that elephants were similar to snakes. The fourth blind man hugged the elephant’s leg and declared the elephant was like a tree. The next one caught the ear and said this is definitely like a fan. The last blind man felt the ail and said this sure feels like a rope.
      Thus the six blind men all perceived one aspect of the elephant and were each right in their own way, but none of them knew what the whole elephant really looked like. 
       Here blind men are market participants(traders and investors). Elephant is market(stocks,F&O,commodities,forex etc.... and their price movements.)

Mission Statement

     My mission as a trader is to be consistently profitable  wait patiently till the trade opportunity arrives, to execute the trade without hesitation on price action confirmation being well aware of the trouble areas, to cut the losses short and allow my winners to run, to focus on the process rather than on money, and to accept the end result without emotions.
     Main aim of this blog is to only share my knowledge , view and discretion of my understand of basics and pshycology of markets(stocks,futures and options,commodities, forex etc...) .
 see the Disclaimer below ( at end of the home page).

     I will be posting my views and thaughts that will be related to Trading (markets) and philosophy & pshycology of trading and life and may be sometimes my analysis and trades and rarely on farming