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PSYCHO TRADER

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					The Psychological Trading Guide
       for Psycho Traders

               By
        Jimmie Richardson
                          CONTENTS:



A FEW PRESUMPTIONS

CONDITIONING

BEHAVIOR

THE G/F EXPERIENCE

MARKET EMOTIONS

SUGGESTIONS FOR IMPROVING TRADING DISCIPLINE

TRADING IN THE ZONE




2
                A FEW PRESUMPTIONS ON TRADERS:

1. A WORKING KNOWLEDGE OF THE MARKETS
      (UNDERSTANDS TRENDS, SUPPORT/RESISTANCE, FUNDAMENTALS)


2. A RISK/REWARD AND MONEY MANAGEMENT SYSTEM
      (HOW MUCH CAN I TRADE)
      (HOW MUCH AM I WILLING TO LOSE)


3. A WORKING STATEGY, SYSTEM OR EDGE
      (A SET OF RULES THAT TRIGGERS BUY OR SELL)




              9O% OF ALL TRADERS DO NOT SUCCEED

       99% OF THE 10% THAT DO, PRACTICE GOOD DISCIPLINE




3
CONDITIONING



YOU WERE RAISED WITH YOU PARENTS MIND SET AND VALUES

IT’S NOT YOUR FAULT



EXERSICE #1 For whom the bell tolls.

EXERSICE #2 Thank you sir, may I have another.




4
     Behavior Quiz for Traders
     Inspiration comes slowly and quietly.
     Brenda Ueland
     Question 1
     Attila was one tough Hun -- until he ran into somebody even tougher. And now, a pop quiz:
1.   What date do you get when you add 400 to the last three digits of your phone number?
2.   When was Attila finally defeated?


     Question 2
     Anchoring. Loss aversion. On to the next quiz:
1.   Give high and low estimates for the average weight of an empty Boeing 747 aircraft. Choose numbers far
     enough apart to be 90 percent certain that the true answer lies somewhere in between.
2.   Now give high and low estimates for the diameter of the Earth's moon in miles. Again, choose numbers far
     enough apart to be 90 percent certain that the true answer lies somewhere in between.



     Source: Business 2.0 by Gary Belsky



     http://www.turtletrader.com/behavior2.html




     5
                            THE G/F EXPERIENCE

    Greed and fear are supposed, together with herd instinct, to be the three main
    emotional motivators of stock markets and business behavior, and one of the
        cause of bull markets, bear markets and business cycles.[citation needed]

                      http://en.wikipedia.org/wiki/Greed_and_fear




Fear and Greed in Financial Markets:
A Clinical Study of Day-Traders_
    Andrew W. Loy, Dmitry V. Repinz, and Brett N. Steenbargeryy

The results from this experiment confirm and extend those of Lo and
Repin (2002) and Steenbarger (2002)|we find a clear link between
emotional reactivity and trading performance as measured by normalized
profits-and-losses (normalized by the standard deviation of daily
profits-and-losses). Specifically, the survey data indicate that
subjects whose emotional reaction to monetary gains and losses was more
intense on both the positive and negative side
exhibited significantly worse trading performance, implying a negative
correlation between successful trading behavior and emotional
reactivity.


http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.145.9549&rep=rep1&type=pdf




6
    http://club.ino.com/trading/2010/07/self-control-and-discipline/




7
Suggestions for Improving Trading Discipline
The following are guidelines that can be used for improving discipline. They will
require action and thorough implementation:
   1. Make a schedule. Keep trading signals up to date, be prepared for when
       the big move comes and don’t try to trade too many markets
   2. Stick to decisions. Good traders work in isolation and make commitments,
       not letting other people (e.g. brokers, other traders) influence their
       decisions
   3. Learn from losses. Losses are expensive tuition to avoid repeating the
       same errors
   4. Stick with the Trading System. Some traders quickly switch from one
       trading system to another. This is one of the worst forms of discipline.
       Traders should stick to their trading system to give it sufficient time to
       perform.
   5. Know when to exit. It is important to have an objective measure of when to
       terminate a given trade, whether the trade is profitable or not.
   6. Take a break when needed. Traders need to be self-aware and when
       mistakes are made as judged by a string of losses, to take a break, recoup
       energies and remake commitments.


 Read more at Suite101: Importance of Discipline in Trading Markets: Self-
            control is Key to Running a Stock Trading System
Successfully http://investment.suite101.com/article.cfm/trading_discipline_
                     in_stock_markets#ixzz0vZGVFWC0


    http://investment.suite101.com/article.cfm/trading_discipline_in_stock_markets




8
      J.R’s Reverse Psycho Trading Discipline Rules

    1. There is no Holy Grail ( stop looking)

    2. Have a written trading plan.

    3. Trust your knowledge and your plan.

    4. Never void your plan.

    5. Always have a stop.

    6. Always have a target.

    7. Review your past trades, (wins and loses.)

    8. Do your own due diligence. (never give or take tips)

    9. FOCUS ON THE TRADE NOT THE PROFIT/LOSS.

    10.    KISS




9
The following is pasted on my home monitor, it is taken from
“Trading in the Zone” by Mark Douglas :



1. Anything can happen.

2. You don't need to know what is going to happen next in order to make
money.

3. There is a random distribution between wins and losses for any given set
of variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one
thing happening over another.

5. Every moment in the market is unique.


I AM A CONSISTENT WINNER BECAUSE:

1. I objectively identify my edges.

2. I predefine the risk of every trade.

3. I completely accept risk or I am willing to let go of the trade.

4. I act on my edges without reservation or hesitation.

5. I pay myself as the market makes money available to me.

6. I continually monitor my susceptibility for making errors.

7. I understand the absolute necessity of these principles of consistent
success and, therefore, I never violate them.




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