The Psychology Of Trading

This is as important as the rules set-up. You have to master trading psychology before you can become a successful trader. You should pay as much attention to managing your emotion, patience, fear and greed as trading techniques itself

Managing Trading Psychology
 - The market doesn't care if you want or need to make money or if you are right or wrong
 - All traders have emotions and make mistakes
 - Setting Expectations
 - Accepting Losses
 - Managing Fear and Greed

Setting Expectation
 - Trading is NOT a Get-Rich-Quick scheme
 - Set realistic expectations
 - Over-rated my abilities
 - Reality vs Vision
 - Don't build decision today on what I hope to be tomorrow
 - Need to perform = Stress
 - Focus on the process of trading rather than $$ goals
 - Remain in my circle of competence
 - Take it slow and steady

Accepting Losses
 - Loss is part of trading
 - Plan for string of losses
 - Good trading =/= profitable trading
 - Losses =/= Loser
 - The outcome of every trade is always uncertain
 - Stop trading or trade less if necessary
 - Practice, practice, practice
 - Jesse Livermore: Losses is paying for information

"If you trade well, there is no losing trades, only trades that make money and trades that give you information to make money later"
 - Brett Steenberg, author of "The Psychology of Trading"

Managing Fear and Greed
 - Avoid chasing stocks ("miss the boat" mentality)
 - Think abundance
 - A few wins don't make you great
 - Understand the price and market
 - Manage your risk within your equity
 - Know your entry and exit before the trade
 - Plan the grade and trade the plan
 - Associate with like-minded traders

"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. The will die  poor"
 - Jesse Livermore, How To Trade In Stocks

Trading By The Rule
 - Ask yourself the following questions:
    - Do I have a winning formula?
    - Have I really tested it to know it's winning?
    - Do I have the needed confidence?
    - Am I executing for formula faithfully?
    - Am I truly tracking each and every trade to know I am following the formula?
    - Do I have the confidence in my ability to follow through?

Nice Things to Have
 - A trading mission statement
 - A trading plan
 - A trading journey
 - Risk managements system
 - Monthly/Yearly performance review

Review the items at least once a year

Common denominators of a successful trader
 - The desire to be successful
 - The confidence that they could win over the long run
 - Discipline to follow a given methodology
 - Taking trading seriously
 - Rigid risk control
 - Patience to wait for opportunities (Persistence)
 - Acting independent of the crowd
 - Accepting losing is part of the game
 - Loving what they are doing

Key Point Summary

Summary Of Trading Psychology and Risk Management
 1. No one can predict what the market is going to be tomorrow
 2. All systems have drawdown
 3. You must be clear in your trading plan
 4. Focus on the task
 5. Plan for losses
 6. Be an independent thinker
 7. Plan the trade and trade the plan
 8. Manage your risk well
 9. Understand your psychology profile
10. Keep your risk small at all times
11. Trade less after series of losses
12. Know your exit