When coming across the research of Dr. Itiel Dror, who teaches at the School of Psychology at the University of Southampton in England, one can find his work on decision making which is particularly relevant to trading.
The important take-away from this research is that many of the factors that influence performance, even among expert performers, are situational and not part of fixed personality traits. What we perceive and how we respond are greatly influenced by the environment. A full understanding of a trader’s performance requires an appreciation of the specific situation in which the performance was embedded.
– Time Pressure Affects Risk Taking – Under time pressure, individuals are more conservative when they face less risk, but more risk-taking at higher levels of risk.
– Emotions Affect Pattern Recognition – Increased negative emotionality led raters to identify more patterns in ambiguous situations.
– Contextual Information Affects the Judgments of Experts – When you provide leading information to experts, their subsequent judgments change to fit the prior information.
– Perception is Far From Perfection – What we perceive is greatly influenced by our mental states, the information we’ve already stored and organized, and the meanings we impose upon ambiguous situations.
– Primacy Effects – What we see first biases our perception and affects our subsequent performance.
To win consistently, you must have control over emotions. The game of negotiation becomes easier when played in the abstract, so we will benefit if we work for example in points or ticks and not in US dollars or Euros. It is convenient to segregate the “real world” finances from our trading account. We must maintain cash reserve to live and to continue to negotiate.
People feel most comfortable in a congestion or a consolidation area, but this may be the most dangerous place to be. So it would be logical to conclude that trading outside the comfort zone shall be the safest and correct one.
Risk management is often one of the areas that rookie traders tend to overlook which is why 95% of traders fail.
A trader knows that it doesn’t matter if he need to fit the bill for a jackpot because in the long run he has a statistical edge.
Trade risking only a small portion of your total equity and look for higher risk-reward propositions.
To help you to improve your risk management use the ActivTrades SMARTCALCULATOR.
A great tool which will help you to quickly identify risk and reward of a potential trade. Simulate different trade scenarios by changing the leverage, or one of the Trade Info elements to understand your potential profit and loss, margin requirements, swaps and more. Look up the pip value and the risk/reward ratio, both crucial components of any risk management strategy.
Most professional traders accumulate the “beans” the market gives them. It is good to add profitable trades quickly and consistently, accepting that what counts is the aggregate of the net results of the negotiations and that in the end is not the analysis that counts, but the daily equity curve of our trading account. Thus, we must realize that the initial analysis is only a starting point for moving in the right direction. From there, it’s really a matter of seeing what the market is willing to give. The truth is the price level at which negotiates an asset in the given moment, regardless of what we would like to see.
Trading education is often taken lightly. However, due to the complexities of the market, new investors must review all tools at their disposal to improve their understanding of this profit opportunity. Whether one is a novice investor or an experienced trader in another market, it is essential to examine all tools available for self education. The knowledge and skills required to achieve consistent performance are very broad, so the relevant experience and achievement of sufficient aptitude, becomes very difficult, especially when such experience does not always result in financial returns at the beginning of your career .
Join this Summit, where various financial experts will equip you with essential strategies and the trading psychology needed to start or enhance your trading.
After the Summit, all attendees will receive access to a free 2-week online trading course worth £495.
Allow yourself to receive valuable education and help to achieve your goals with ActivTrades.
For those interested just click here.
The most fundamental difference in the conditions of Demo and Live trading is the change in thinking, attitudes and motivations of the trader and his ability to mentally flip into responsible and challenging process of working with a real capital.
Don’t miss this webinar from ActivTrades, by Malte Kaub, Managing Director at the Traders’ Leadership Council in London.
Date: 14th May
See how other traders have successfully managed the transition: Click here
Don’t miss this webinar from ActivTrades, on 2nd April with a professional private financial trader with great experience. Improve your results, watch to the Webinar and learn with the best to spot the best opportunities.
Guest Speakers: Paul Wallace
Time:19:00 – 20:00 (UK Time)
Check this out: Click here