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This was a question asked on Quora “How Should One Prepare Emotionally For Trading?” Below is my answer.See the original answer here and follow me on Quora here
Q: How Should One Prepare Emotionally For Trading? Some years ago I met a trader that told me that the less important part of trading is the technical and fundamental analysis, the most important is your emotions and your emotional preparation. At the time I didn’t believe in that, nowadays, I think that he is completely right. If traders use discretionary ways to trade, they can change subconsciously their perception of price action and fall in their own mind traps. He told me that spent 2 years of his life training his emotions, but I don’t know exactly what he have done.
A: Your friend was right in saying emotions are the most important part of trading. To take a quote from Lao Tzu “ To conquer others is easy to conquer yourself takes true strength”. It will be relatively easy in the beginning to learn strategies, read charts etc., but controlling your emotions will take time.
Some people think trading emotions has to do with just winning and losing, like you get upset after a losing trade or something of the like, which happens but the serious trader emotions come from self doubt, second guessing yourself and panicking. This is where traders struggle. Unlike other careers when you make a mistake the boss just yells at you. In trading when you make a mistake you see the consequences of your actions unfold right in front of your face in the form of a financial loss. It can be tough to do all the homework and research then finally pull the trigger on a trade and within 30 seconds you are down 300 bucks. This is where you will need to remain calm and believe in your process. It will be the times that you are tested and pushed to what you think are your emotional limits that you will you truly understand who you are as a trader and it will be those moments that define your success level
My advice: Start with small position sizes, worry less about making money and more about executing your game plan and not making mistakes. If you do this the money part will take care of itself. It takes a little time to understand how stocks behave and during that time the last thing you want to do is blow up your account. Also, GET TRAINED! One big problem with traders is they enter a market place with no training and no experience and expect to compete with seasoned traders. That doesn’t work in any other career so why would trading be different. It doesn’t mater what your previous career was either. The market doesn’t care if you are a rocket scientist or a burger flipper when you place a trade. There is no reward for past accomplishments or glorified degrees from pricey universities.Sure it may cost you a little upfront to get the right training but it will save you a world of hurt in the long run and may be the deciding factor to weather you survive or not. Everyone who decides to trade has an equal shot a success. Those who get trained, stay disciplined and continue to grow will become rich. Those who think they are owed something will be broke.
Doug
PS: here is a video I did not long ago explaining the learning curve of a trader
Doug
Watch Some Of These Video Lessons And See More Rants.
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When you know more you do more.
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