Understand behavioral science and psychology to boost your consistency

An Inspirational Story: How Can One Become Part of the 1%?

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Here are some of the key lessons from someone who did it not once, but three times. If you want to be part of the 1% you have to do the following:

1. Be mentally tough. Learn to get over your fears. What happens when one is afraid? You retreat, you hold back, you dither, you procrastinate. Worse, you become more prejudice, or even take on extreme forms of hate. You miss out on opportunities, you become a prisoner of your irrationality. So learn to ask a simple question when you are uncomfortable with something, what have I got to lose?

2. Live within your means. Don’t be an idiot.

3. Learn how to make money, not how to save money. You will never save your way to riches. Again, this doesn’t mean you need to be an idiot with money!

4. Learn how to scale yourself and the business. This means learning how to delegate, how to motivate others and recruit great talent to do works you don’t know how or can’t.

5. Learn all the time, I read 10-20 books a month.

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10 Essential Trading Rules of Professional Traders, Especially Number 2!

Have you ever wondered how professional traders see the market differently?

How do they continue to make exceptional returns day after day, while 90% of retail traders lose money on a daily basis?

Here are my top 10 trading rules I developed, after over 10,000 hours of trading professionally, and I hope that this will help you take your trading to the next level.

Good luck! 😀

Professional trading 4

1. Always be disciplined

  • Follow your plan and rules
  • Do not be swayed by your emtions to act otherwise
  • Do not create excuses to break the rules – this time is NOT different

2. Plan the trade, trade the plan

  • Always cut your losses according to plan
  • Always cut your profits run according to plan
  • Separate your planning from your execution

3. Expect losses

  • Losses are part of trading – accept them. This will reduce emotional resistance when the time comes to do so.
  • Do not take a trade unless you are willing to accept the risk (possibility of loss) that accompanies the trade
  • Accept that you willlose money on some trades
  • Take your losses easily when they come
  • Do not be stubborn and bend your rules

4. Manage your emotions

  • When i doubt or unsure, get out!
  • Always analyze objectively
  • Clear all positions to have a neutral frame of mind
  • Do not act based on greed or fear

5. Focus on trading well

  • The goal of a trader is to make the best trades
  • Money will naturally follow
  • If you focus on money, emotions will get in the way and you will not be able to make the best trades

6. Do not overtrade

  • Be patient. Do not rush into a trade.
  • Do not trade when there are no good setups
  • Do not try to be in the market all the time
  • It is better to miss a boat, than to leave on one full of holes
  • One good trades is better than three bad trades
  • “There is a time to go long, a time to go short,and a time to go fishing.” – Jesse Livermore

7. Trade what you see, not what you think

  • Don’t concern yourself with why things are happening
  • Observe what is happening, and act on it
  • Ignore the noise – tips, rumours, news, speculations, etc
  • Anticipate the future, but trade in the present
  • Markets are never wrong, opinions are

8. The trend is your friend

  • Don’t enter just because it looks “overbought” or “oversold”
  • Don’t try to catch a falling knife
  • The easiest money is made trading with the trend
  • Make sure you have an edge before you enter the market
  • Put as many factors in your favour as possible

9. Do not repeat your mistakes

  • Keep good records of your trades and thought process
  • Analyze your mistakes, then move on
  • Do not make the same mistake again
  • Continuously improve yourself

10. Have realistic expectations

  • Do not try to make stellar returns overnight
  • Aim for small consistent returns over a period of time
  • Do not expect to become an expert overnight
  • Trading takes time to build experience

Download free e-book: The 7 Best-Kept Secrets of Professional Traders

For more tips on how to take your trades to the next level, download a free copy of “The 7 Best-Kept Secrets of Professional Traders”.
http://synapsetrading.com/resources/the-7-best-kept-secrets-of-professional-traders/

Trading Psychology | The Cheetah and the Trader – How to Go for the Kill

The cheetah, while the fastest animal on the African plain can outrun any of the prey it feasts upon, always chooses to go for the young, weak, or sick. Once identified, he attacks with laser-guided focus and effectiveness. It is only then that the kill is likely. This is the epitome of a professional trader. Be the cheetah.

The Cheetah and the Trader - How to Go for the Kill

The Cheetah and the Trader – How to Go for the Kill


 

Here are some common questions I get from people:
“Sometimes I can’t find good setups in the market, should I trade the less optimal setups or should I look for more different stocks to trade?”
“The setup I learnt from xxx course was working fine a few months back, but it doesn’t seem to be working now. Should I continue using it?”

 

So, how do we go for the kill?

Hence, a good trader cannot keep relying on the one same setup. Rather, he needs to know the basic form of a setup, so that from there, he can create a wide variety of different setups that are best suited to the current market situation. That is why we teach a variety of setups (and certain proven variations), leaving them the core skills to tweak setups to adapt to any market situation.

Trading Psychology | Maslow’s Hierarchy: Trading Self-Actualization

Some of you might have heard the term before, but are not really sure what it means. So what exactly does self-actualisation mean?

Maslow's Hierarchy: Trading Self-Actualization

Maslow’s Hierarchy: Trading Self-Actualization

The term originally came from Maslow’s hierarchy of needs, which represents the things people strive for as they grow and evolve. As we progress from basic needs like food and shelter to more complex ones like esteem and knowledge, what awaits at the top is self-actualization.

Simply put, it is reaching your full potential, and in the context of trading, it means being able to become the “ideal” trader which you envision.

If you’re been trading for many years, you should have acquired many different skills and experience. But are you putting these to good use? How is it possible for you to reach your full potential?

The key lies not in using everything you have learnt, but rather in knowing what is not essential. Once you learn to think in essentials, you will realise that you will have to discard most of what you have learnt, and focus on the 10-20% that works. Clinging on to old baggage will slow your progress.


Now, I want you to visualise a circle. Label this circle “Current Reality”. This circle represents what you are currently like – your habits, your style, your results, your skill level, and your attributes. Take some time to do some self-reflection, and figure out what is wrong.

Next, visualise another circle which partially overlaps the first circle. Label this circle “New Reality”. This circle represents what you want to become, and is a blueprint of the “ideal” trader which you have envisioned, and embodies all the essential attributes of such a trader.

The overlapping region is the zone of self-actualization. 


Let me give you an analogy. If you want to lose weight or get fit, the “Current Reality” could be someone who does not exercise and eats unhealthily, while the “New Reality” is picture of the gorgeous body you saw in some health magazine. The zone of self-actualization is then simply the series of steps you take to bridge the gap between dreams and reality.

Insanity is doing the same thing over and over again, and expecting different results. This means taking the time to learn from your mistakes. The bottom line is, if you want different results, something has to change.

Trading Psychology | Regret Aversion Bias – Would You Rather Be Right, or Avoid Being Wrong?

People exhibiting regret aversion avoid taking decisive actions because they fear that, in hindsight, whatever course they select will prove less than optimal. Basically, this bias seeks to forestall the pain of regret associated with poor decision-making. It is a cognitive phenomenon that often arises in traders, causing them to hold onto losing positions for too long in order to avoid admitting errors and realizing losses.

 

Regret Aversion Bias - Would You Rather Be Right, or Avoid Being Wrong?

Regret Aversion Bias – Would You Rather Be Right, or Avoid Being Wrong?

 

Regret aversion also makes people unduly apprehensive about taking positions after a string of losses, as they feel instinctively driven to conserve, to retreat, and to lick their wounds. This might cause them to hesitate most at moments that actually merit aggressive behaviour.

This can also affect a person’s response to winning positions. For example, traders might be unwillingly to sell an in-the-money position despite negative signals, choosing to cling on to it because they fear that the stock might continue to soar even higher once they sell it.

People who are regret-averse try to avoid distress arising from two types of mistakes, (i) errors of commission and (ii) errors of omission. The former occurs when we take misguided actions, while the latter arises from misguided inaction, that is, opportunities overlooked or foregone.

The other danger comes from “herding behaviour” where traders simply try to follow the crowd, since following the mass consensus diffuses responsibility and hence the potential for future regret.

What is the best solution for this?

“I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret, so I split my retirement plan contributions 50/50 between bonds and equities.” – Harry Markowitz, father of Modern Portfolio Theory