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Why Your Trading Attitude Matters
12/28/2012 8:30 am EST
Your attitude toward trading makes a huge difference in your success. Here's how to develop the right psychology to make the most money as a trader, says Marc Principato.
Today we're talking about the always important question of trade psychology with our guest, Mark Principato. Mark, this is an area that I know you also view as very important. Tell us your thoughts.
Trader psychology. They say in this game it's 90% psychology, 10% everything else and in my experience I've never found anything more true than something like that. I mean it's a tough game, especially for short-term traders. Psychology is most important because decisions have to be made quickly and on very limited information.
What are some of the mistakes that you see people making in this regard?
Mostly overreacting, not having any structure, basically not using stops, hoping, going to hope mode, I hope this loss comes back for me, I want to be right, that sort of thing. Hurts people a lot.
Do you see overconfidence as ever being a problem with traders?
Yes actually that's a good one. It usually plagues the beginner. The absolute beginner just so happens to make a couple of dollars in the beginning and they say oh this is so easy. This is, I can't go wrong. That overconfidence is usually what wipes them out.
Well tell us your own experience and maybe from other people that you have seen. What are some steps to take to overcome some of these mistakes?
Well number one, structure. You have to have rules and guidelines but you can't be too strict at the same time. This fine balance requires some experience so as I was starting out, I mean it was a lot about education, learning and doing. Screen time they like to say. You have to spend a lot of time learning about the market behavior, experiencing different environments and building your experience over time. That's the best way. There's really no way around it.
So there's really no shortcuts?
No, not at all. I mean in the beginning you know you're going to take losses, you have to take your time, you have to give yourself time. A big thing people always bash their practice account. They don't waste your time with the practice account but you know what, I'm a big proponent of the practice account. If you're new and you have no experience, start with the practice account. Get a consistent system going. Get a consistent feel of the market behavior before you put anything real at risk and at least when you start with the real money, emotions will kick in but you will have an idea of what to expect. You'll have more control over your own behavior which is very important.
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