Module 12

Innerworth — Mind over markets

"Innerworth — Mind over markets" is a collection of newsletters on trading pschology published by Marketwise, a US stock broking firm, between 2002 and 2007. Zerodha acquired the publishing rights to the entire series in 2019 and made them available to readers in India.

Issue
1. Introducing ‘Innerworth – Mind over markets’

Most people start trading the markets lured by the prospect of making easy money. But anyone with experience will agree that the stock markets are probably the toughest place to make easy money. You n ..

2. Accurate Perceptions of Loss and Risk Aversion

Emotions often drive investment decisions. Trading lore is replete with examples of how fear and greed influence the masses to buy and sell at the wrong time. Similarly, behavioral economists have foc ..

3. Accepting Criticism

Novice traders are infamous for needing to be right. This natural, human tendency is so powerful that novice traders engage in unproductive trading behaviors to avoid admitting that they are wrong. Th ..

4. Trading Capital: Size Matters

How much capital does one need to start trading? Every person who is new to trading asks this question. It’s often the first question that pops up at trade shows and in trading-school classes. B ..

5. Action Oriented and Winning

Trading isn’t easy. Indeed, the odds are against you. But if you succumb to hopelessness, you’ll never become a winning trader. You have two choices: You can wallow in self-pity or you can ..

6. Focus on the Action, Not the Prize

It’s easy to falter while trading. Suddenly, you get distracted, panic, and make a trading error. When trading with an optimal mindset, in contrast, the winning trader is focused on his or her i ..

7. Detailed Action Plans: A Precursor For Trading Success

In our everyday lives, we are used to doing things reflexively, on the spur of the moment. For example, we don’t consciously think about making a turn as we drive; we just do it automatically wi ..

8. A Trading Fable

Did your parents read you fables as a child? Fables are often fanciful and improbable tales that have a lesson to teach. Here’s a thought-provoking trading fable. Once upon a time, there was a n ..

9. It’s Easier to Face Fear than Avoid It

Jack fantasizes about becoming a profitable trader. He dreams of big wins and of amassing a great deal of wealth. In the back of his mind, he imagines that if he were wealthy, he could have a life ful ..

10. Regret: A Powerful Emotion You Must Face

When trading the markets, one often faces actual harm: If you bet a lot of capital on a single trade, and it goes against you, you lose it. The harm isn’t imagined; the actual loss of money is p ..

11. The Unconscious Drive to Fail

Ask traders about their reasons for trading, and most will tell you, “I want to make huge profits.” Although most traders get into the business to make a significant return on their money, ..

12. False Consensus Effects

Suppose you decided to go long on Sears.  How many other investors would agree with your decision?  When people are asked such a question, they tend to over-estimate the number of people who will ma ..

13. Making Sense of it All

Social psychologists are often fond of saying that people are “lay scientists.” Like formal scientists, they try to understand their world. They make hypotheses and test them. Rather than ..

14. Fear of a Sudden Turn of Events

You have several positions open and things have been going well for the past few months. Suddenly, there is yet another interest rate hike right on the heels of a month of bad weather and natural disa ..

15. Refuting Core Beliefs: A Remedy for the Fear of Failure

Our outlook and expectations dictate how we approach trading. For example, if we are extremely fearful, we will be reluctant to take risks, and at an extreme, we may even be afraid to even put on a tr ..

16. Paralyzed by a Fear of Failure

Jack has just made five losing trades in a row. His confidence is shaken, and now he is reluctant to make another trade. He thinks, “Why should I try again. I’ll just lose again. If I lose ..

17. Getting Worked Up For Nothing

Jack’s been trading for the past five years, and he has put in a heroic effort. He worked two jobs to build up enough capital to trade and have a realistic chance of success. He spent nights and ..

18. Loss is Feedback, Not Failure

Like any challenging endeavor, trading requires a “thick skin.” One cannot be easily hurt by criticism. One must be completely open to criticism of any kind so that changes to one’s ..

19. First in Line and Ready for Action

There’s security in numbers. Have you ever looked at a school of fish in an aquarium? They stay in a big clump because if a bigger fish is nearby and ready to eat one of them, a single fish is l ..

20. The Flexible Trader

The winning trader is flexible. Flexible traders have a carefree attitude when it comes to executing a trade. They don’t over-think their strategy. They do their homework, develop a reasonable t ..

21. Flexible and Open to Possibilities

Winning traders are flexible. They look at a trade from different angles and they are not afraid to explore every possibility. They know they may be wrong, but being wrong doesn’t bother them. I ..

22. The Flexible and Disciplined Trader

Flexibility and discipline go hand and hand. In their book, “Electronic Day Traders’ Secrets,” Friedfertig, West, and Burton argue, “Discipline is saying ‘I’m wrong ..

23. Be Flexible Enough to Stand Aside

It is vital for one’s survival to know when to stay out of the markets. There are times whey you should stand aside and wait for the right moment. Not only can market conditions change, but also ..

24. Peak Performance Trading

Seasoned traders frequently describe moments when they trade in a peak performance state. There are various names for it: “trading in the zone” or “flowing with the markets.” B ..

25. The Fly and the Tree

Flexibility is key when you’re a trader. One must be able to look at a trading problem from multiple perspectives in a calm, rational, and insightful way. Have you ever noticed that when you are und ..

26. Focused on the Trade

When you have put on a trade, it’s essential to stay focused on monitoring it. You must be able to accurately perceive the signals that indicate the market is going against you, and you must act ..

27. Concentrate On the Trade

When you’re trading the markets it’s necessary to concentrate on the trade. You cannot let your attention sway. You can’t impulsively make a mistake. We are often distracted, however ..

28. Focusing on the Positive

When trying to meet the challenges of trading, it is often easy to obsess about what you are doing wrong until you start to feel that you’ll never master the markets. Rather than focus on what y ..

29. Knowing when to Fold

The most challenging aspect of trading is finding a trading strategy that will work reliably. The possible strategies are endless. Some traders carefully backtest historical data and try to find a str ..

30. Following your Passion

Successful people are passionate about what they do. They aren’t concerned with the outcome, but with the process of achieving the outcome. That said, it would be nice to avoid worrying about ou ..

31. Forward Thinking

The famous psychotherapist Fritz Perls once noted that people feel anxious and fearful when they worry about, and mull over, their past mistakes or worry about the future. A peak performance mindset i ..

32. The Right Frame of Reference

Many novice traders are frustrated when they start trading. It’s common to hear a novice trader complain, “I don’t know what’s going wrong. I study the markets every chance I g ..

33. Trading offers Freedom

When trading the markets, there’s a constant need to make profits. You can easily start feeling that there’s too much to do and not enough time to do it. If you’re like most traders, ..

34. Free and Easy Trading

Throughout the day you make everyday decisions that mean little to you. You drive your kids to school and along the way, you make a host of decisions about which route to take, where to turn, or when ..

35. Free Up Psychological Energy by Relieving Stress

There are limits to the psychological energy you have available to devote to trading. And this limited energy is diminished when you let too many issues remain unresolved, lingering in the back of you ..

36. Organize your Workspace and Relieve Stress

Trading the markets is a stressful occupation. The markets are unpredictable and chaotic. No outcome is a certainty, and many times, when it seems as if you know where the market is going, you discove ..

37. Market Frustration: Stay Calm; It’s not Personal

Tom had been going long on a stock trade for two months. He expected a product announcement to boost the price a few points, but nothing happened. Despite rave reviews of the product and high demand, ..

38. Building Up Frustration Tolerance

Setbacks are the rule rather than the exception when it comes to trading. Discovering reliable trading strategies is a challenge, and frequently, a promising strategy produces a loss. Losses and other ..

39. Fear of Success: Is it relevant for Traders?

Psychologists studied “fear of success” in the 1970s and this topic received a great deal of attention in the popular media. Today, some trading websites have had discussions as to whether ..

40. Take Responsibility and Take Control

The prominent psychologist Dr. Julian Rotter noted that there are basically two ways to understand and interpret events in one’s life: One can attribute the cause of events to internal forces, s ..

41. The Mindset of a Professional Gambler

Many members of the “established” investment community are quick to point out that investing is not gambling. To the general public, gambling has many negative connotations. When professio ..

42. Closing the Gap

Do you ever start the trading day feeling that there’s little chance of making a profit? You just stare at your screens, stuck and disappointed. It’s at times like these that an optimistic ..

43. Developing New Trading Ideas

As any seasoned trader will tell you, the key to long-term profitability is a flair for devising innovative, new trading ideas. Winning strategies are hard to find. And after one goes through all the ..

44. Back On the Right Course

Have you ever found yourself frustrated or angry, but didn’t know why? Perhaps you were innocently monitoring a position and the market suddenly turned, and when it did, you watched half of your ..

45. Take Credit for Your Efforts

Winning traders make profits. In the end, the bottom line as a trader is the extent to which you are profitable. If your efforts don’t produce a profit, it is easy to feel as if you have accompl ..

46. Getting Ready to Trade

Trading is challenging. It pushes your skills to the limits. And unless you manage your risk carefully, the consequences of a wrong move can be fatal. It’s vital for your survival that you make ..

47. Realistic Optimism Keeps You Grounded

Jack and John have just started a small trading business. Jack says, “I can feel it. We’re going to make a fortune. By this time next year, we’ll be rolling in money.” John cou ..

48. Don’t Forget to Take a Break

Reality is subjective. There are different states of reality in the same way that there are different states of mind or different states of emotion. After a series of setbacks, for example, the world ..

49. They Say it Couldn’t be Done

Jim has been trading for six months. He started at $5,000, but he only has $1,500 left. He is starting to get worried. He’s frustrated and upset. He tells his friend Jason, “I think it is ..

50. Waiting for the Payoff

Are you ready to work all day and make absolutely no money at all? If you ask most people that are accustomed to working a 9-to-5 job, they would say, “No way, are you kidding?” But if you ..

51. Modest and Realistic Goals

Stan is disappointed with his life. He views his life as a consolation prize, a series of concessions that fail to meet his desires in the end. He wishes he had more money. He fantasizes, “If I can ..

52. Clear and Specific Goals

Trading can be tedious at times. Day in and day out you have to look for market opportunities, and once you find them, you have to put your money and a little bit of ego on the line, and suffer the co ..

53. Setting Goals for the New Year

With the New Year upon us, it’s time to make plans for the future, and set exciting new goals. Goals can be motivating. When we think of where we want to go next in our lives, and when we formul ..

54. Goal Setting Enhances Motivation

The goals we set often dictate our motivation level. In his book, “The Mentally Tough Online Trader,” Robert Koppel (2000) argues, “Setting goals is imperative for the trader to enha ..

55. Go For It

When your money is on the line, you can’t help but act cautiously. You don’t want to impulsively gamble with your account, dig yourself into a financial hole, and need to work twice as har ..

56. The Golden Mean: Real Trading Phenomenon or Just Wishful Thinking?

If you’ve spent any time around trading, you’ve probably run into the Golden Mean. You may have seen it represented as Fibonacci lines on a price chart. The Fibonacci sequence is a string of numbe ..

57. Putting Up a Good Fight

The outcome of a trade is never a sure thing. There’s always an element of chance. When going long, for example, all indicators may suggest a strong and solid trend, but it’s possible that ..

58. A Good Mood Is More Important Than You Think

Have you felt under extreme pressure while putting on a trade, and found that you just couldn’t think straight? You questioned your trading plan, and suddenly, you hesitated at a critical moment dur ..

59. The Dynamics of Greed

In the movie “Wall Street,” Gordon Geckko argues, “Greed is good.” Greed can motivate you to strive for perfection and keep you persisting in the face of adversity, but greed h ..

60. Don’t Be a Grinch: Relax and Seek Out Balance

“How the Grinch Stole Christmas” by Dr. Seuss is a parable of modern life. The Grinch sneaked into town and tried to ruin everyone’s Christmas by stealing the presents and materialis ..

61. Grounded and Objective

On Thursday, tech stocks took a dive. Mark lost $5000 on his AAPL position alone. It’s Friday morning, but he still feels guilty. He can’t get the losses out of his mind. He has been tryin ..

62. A Guidebook for Work Productivity

Trading is a demanding profession. If you are a novice trader seeking consistent profitability, you have your work cut out for you. Many people are attracted to trading, but few actually become profit ..

63. Conquering Guilt and Moving Forward

In the trading profession, profits are hardly a sure thing. Even the most seasoned trader makes a big mistake occasionally and pays the price. Professional traders at large financial institutions, for ..

64. Working Through Guilt and Moving On

Last night, it all seemed so simple. You had a trading plan all worked out. The stock should dip to $50 around noon. You would patiently wait, buy it, and sell when it hit 52 later in the trading day. ..

65. Guilt: Protection Or Distraction

Jack just abandoned his trading plan and ended up making a losing trade. He thinks, “Why did I do it again? Why can’t I stick with my plan?” He feels guilty. He’s kicking himse ..

66. Going With Your Gut

Seasoned traders aren’t afraid to go with their gut instinct. After years of experience, an astute trader’s gut is the unconscious integration of all essential market information, the mini ..

67. Cold, Hard Facts: Look Honestly and Make Adjustments

When it comes to evaluating your performance, there are times when there is no substitute for studying the cold, hard facts. In the end, the bottom line is unavoidable: If you are not profitable acros ..

68. A Good Hard Look at the Facts

Have you ever made a small losing trade and thought, “It’s all right. I’ll win on the next one.” The next trade comes along, and you lose. And then the next one is a loser, and ..

69. Commitment to Trading: Why It’s So Difficult

You’ve been told time and again that a strong commitment is vital to long term trading success. We’ve all seen the adverse consequences of people who are not committed to their goals, in o ..

70. Head-and-Shoulders Pattern is a Psychological Map

While charts show a financial instrument’s price history accompanied by volume, they are also exciting reflections of human behavior. And because they reflect basic human nature, they can be used as ..

71. A Healthy Approach to Trading Success

“Those who find trading intrinsically satisfying, enjoyable, and meaningful will put in the necessary hard work and achieve high performance levels.” ..

72. Having, Doing, and Being: Which State of Mind Drives You?

Making profits as a trader is often a matter of trading in the proper state of mind. Trading expert Dr. Van K. Tharp, author of several best-selling books on trading psychology and head of the Van Tha ..

73. The Conscious Member of the Herd

Do you ever just feel as if you are going through the motions, acting without thinking? Are you surprised that you react emotionally, selling prematurely when you meant to hold out a little longer? Or ..

74. The Herd Mentality

Have you ever watched a herd of cattle as they graze in an open field?  It’s quite remarkable. The cows seem content as they eat the grass and stand in a scattered formation.  Then, suddenly, ..

75. Pulling the Trigger Decisively

Do you have trouble pulling the trigger? How many profitable trades have you missed because of this affliction? Why do you hesitate? If every trading idea that popped into your head turned out to be p ..

76. Hesitation: A Plethora of Reasons

Humans have a tenacious need to protect their assets and avoid risk. This is especially true for novice traders. It took a long time to build up sufficient capital to trade seriously, and it’s u ..

77. Trading in a Higher Psychological Sphere

Top-notch traders trade in a higher psychological sphere. Trading is a peak experience where everything seems to click. Winning traders trade in the zone. They reach a psychological state that is inhe ..

78. The Highly Motivated Trader

Jim is a novice trader who is deeply frustrated and ready to give up. He’s read all the trading books, followed all the trading “gurus,” and worked tirelessly day after day. Despite ..

79. Everything Seems Obvious In Hindsight

Do you remember your first impressions of trading? Perhaps you were young and had a strong desire to achieve early success, but if you were like most people, you had unrealistic expectations about the ..

80. The Benefits of Hindsight

Have you ever planned a trade that seemed a sure winner, yet we’re surprised to find it had failed? A plan could look great when you think of it, but after it fails, and you had time to think ab ..

81. The Future Is Never Certain

When trading the markets, uncertainty is often a fact of life. Consider the plight of Jack who tried to add as much certainty into his trading as possible. He decided to invest in a solid retailer. Co ..

82. Using the Success History Search To Cultivate a Winning Attitude

Making profits is often a matter of thinking and feeling like a winner. In their book, “The Mental Edge,” Kenneth Baum and Richard Trubo (1999) argue that tapping into your history of succ ..

83. Don’t Dig the Hole Deeper

Bill has had a bad day. He’s down $1,000. He thinks, “I can’t end the day down $1,000. I’ve just got to make that money back by the end of the day.” He continues to trade ..

84. Trading From Home: Avoiding the Traps

Jim was tired of commuting to work in two hours of rush hour traffic every day. He thought, “If I could only work from home and avoid the stress and monotony of driving day in and day out, IR ..

85. High Hopes

Can an ant move a rubber tree plant? Perhaps it can if it has “high hopes.” This image exemplifies the eternal optimist. The power of positive thinking, if only we could muster enough of i ..

86. Next Time You Get a Hot Tip…Beware

Few things appeal more to our sense of greed than a hot stock-tip. Sometimes it comes in the form of a phone call: “I’ve got a buddy who works for Ajax Widgets,” the tipster will tell you, “an ..

87. It’s How You Play the Game That Matters

The old saying, “It’s not whether you win or lose but how you play the game” is especially relevant to trading. Many novice traders work under the assumption that winning is all that ..

88. A Humble and Modest Approach

It’s exciting to win. Trading is challenging. It requires well-honed skills and rock-solid confidence. After a winning streak, it’s easy to get a “swelled head” or a big ego. W ..

89. Winning Traders Are Humble

It is important to reward yourself for a job well done. We feel pride after making a significant achievement and are especially proud when the achievement has increased our social status. Pride can be ..

90. The Humble Trader is the Winning Trader

Trading can be frustrating at times. You put in a heroic effort, but it doesn’t always pay off in the way that you had hoped. When you finally do win big, you naturally want to celebrate. You ma ..

91. Humility

Why are folks initially attracted to trading? For many, it’s the money, especially the prestige and status that money can bring. But seasoned traders warn that when money, riches, respect, or an ..

92. Striving for an Ideal: Art or Science?

Many trading books describe the ideal trader as disciplined, a rule follower who devises a trading plan and sticks with it. Trading requires a certain kind of discipline, however. Not just any kind of ..

93. Idealism: Dare to Dream

Dreamers are often exalted because they dared to achieve the seemingly impossible, but unless one’s dreams match specific and realistic actions, little becomes of them. Without well-defined plans, a ..

94. Striving for Ideals

When you look at the best and the brightest, it’s often necessary to merely admire them rather than actually become them. Not everyone can be the best and the brightest, but it’s nice to k ..

95. How Much Are You Making?

Tim asks, “So how much money are you making?” His friend James timidly replies, “I’m doing all right.” Tim boasts, “Wow, I’m making so much money today. This market is so ..

96. Intuition: It May Be Illogical But It’s A Trader’s Most Valuable Asset

If only humans were more like machines. In theory, the ultimate trader would act like a robot, analyzing market data with unfailing accuracy, devising a trading plan, and executing it without flaw. Bu ..

97. The Power of Positive Imagery

Have you ever had those days, or weeks, where you just couldn’t get on a winning streak? Perhaps you are a novice trader trying to break into the field, and wondering if you’ll ever become ..

98. It’s Not Personal

Have you ever lost big on a few trades and thought, “I need to win it all back right now”? When this happens, your emotions start to take hold. You may even start thinking about seeking &# ..

99. Acting On Impulse

Why do so many traders abandon their trading plan? Is it their personality, an inherent pitfall of the trading profession, or temporary insanity? A host of factors may contribute to a lack of discipli ..

100. Controlling Your Impulses

Winning traders have learned to control their impulses. They are calm and relaxed. They are not riddled with self-doubt or self-reproach. They can make trades intuitively and effortlessly. And they sh ..

101. Impulsive Trading: Possible Causes and Cures

A common complaint of novice and master traders alike concerns the ability to maintain discipline and self-control. Whether it is prematurely abandoning a trading plan or putting on a trade just to ge ..

102. Impulse Control Strategies

The most serious malady facing many novice traders is a lack of discipline. Rather than sticking with a trading plan, many novices lose control. They impulsively abandon their plan and often pay the c ..

103. Impulse Buys

Have you ever had a hard day and had to stop off at the grocery store to buy a loaf of bread and a gallon of milk? As you stand in the line that never seems to end, you glance at magazines, look at th ..

104. Facing Temptation With Discipline

Looking at your screen can be much like looking at a slot machine, and stopping yourself from dropping a dollar in the slot and pulling the handle. You must restrain yourself from making an impulsive ..

105. Increasing the Odds of Success

Trading is one profession where you often find yourself working against the odds. Not just anyone can walk in off the street and start making consistent profits. It takes practice, skill, and proper m ..

106. The Independent Minded Trader

Market action is driven by fear and greed. Masses of market participants follow each other to their doom. It’s a fact. If it weren’t true, winning traders couldn’t take advantage of herd instinc ..

107. The Independent and Confident Trader

Trading isn’t a profession where the top performers follow the crowd. In some professions, it’s vital to be able to astutely identify what everyone else is doing and follow them. But trade ..

108. Independent Minded and Carefree

Novice traders are often puzzled by their inability to put on winning trades. Everything seems plausible in the planning stages of a trade, but when it comes time to execute the trading plan, they cho ..

109. Striving for Independence

The entrepreneur, the corporate CEO, and the top-notch trader are all viewed as exemplars of independent thinkers. They go their own way, go against the status quo, and are unyielding individualists. ..

110. Information Anxiety

Do you ever have a nagging feeling that no matter how hard you try, there’s no possible way that you can keep up with everything around you? If the answer is “yes,” you may be suffer ..

111. In the Mood

Jason is in a rut. He feels as if his trading performance is lacking, although he’s relatively new to trading. He is easily upset. Even the slightest setback gets him down. He wonders, “Wh ..

112. Discovering Your Inner-worth

John and Jay are both novice traders, but their approach to trading is markedly different. John is drawn to trading for profits. He fantasizes about achieving great wealth and imagines that when he am ..

113. Looking Inward For Your Mental Edge

Jim is a master trader. He manages a multimillion-dollar hedge fund and has made substantial profits for the past five years. He drives a Mercedes and lives in a beautiful home in the affluent part of ..

114. Mastering the Inner-game

If we had a crystal ball, trading would just be a matter of buying at a bottom, holding the stock as the price continued to rise, and selling near a top, right before the masses sell in a state of pan ..

115. Appreciating Your Inner-worth

Jake is attending a party at his brother’s house. Old family friends are freely spreading gossip. Many are bragging about their recent accomplishments, and showing off their latest prizes. As a ..

116. Putting the Trade in the Right Perspective

As a novice trader, Jack has just put on his tenth trade. He’s still new to trading, but he is optimistic that he will be successful. He wants to succeed. He thinks, “I want to prove that ..

117. Insufficient Justification

A common problem among traders and investors is the tendency to sell profitable trades prematurely and hold losing trades unnecessarily.  Once we have held a losing trade for a long time, we have a s ..

118. Stay in the Moment

Existential psychotherapists point out that people experience fear and anxiety when they think about, and regret, their past mistakes, or when they worry about an uncertain future. The antidote: Exper ..

119. Buy on Weakness, Sell on Strength: An Example of a Contrary Approach

Many investment psychology books tout the virtues of thinking independently and acting like a rugged individualist: “Don’t follow the crowd. Be a contrarian.” It’s often useful ..

120. The Intuitive Mind

Ever see a pattern emerge, and instinctively trust your gut instinct even though your logical mind told you otherwise? Sometimes it works, but other times your intuition may fail you. Scientists are f ..

121. Trusting Your Intuition

Many people who begin trading think of it in purely mathematical terms: If the ultimate multiple regression equation could be devised, one could simply put in the inputs and get the outputs. And the o ..

122. Trusting Your Intuition Part 2

Seasoned traders have learned to trust their intuition. Do you? How do you observe the world and gather information about it? Do you just want the facts and the specific details and none of that ̶ ..

123. Using Your Intuition

Skillful traders know how to use their intuition to make quick, conclusive decisions. There are times when going with your “gut” instinct can be shrewdly accurate. There are also times, though, wh ..

124. The Intuitive Trader

Stan and John have been following a stock and trying to anticipate the pivot point. Stan declares, “After looking at the troughs and moving averages over the past 30 periods, the facts indicate ..

125. When Intuition Fails

Trading can be fast-paced. The astute trader knows how to make quick, intuitive decisions. Seasoned traders have learned to trust their hunches. They have extensive experience with the markets, and as ..

126. Investing in Yourself

Are you putting time and money into honing your trading skills yet wondering how to justify it? As a novice trader, you may often wonder if it will be worth the time and effort in the end. Honing your ..

127. Getting the Job Done

Do you ever make big plans for the trading day, but fall short of your expectations? Maybe during the off-hours, you decide to make a dozen trades, but when you get down to actually doing the work, yo ..

128. An Action-Oriented Approach

Jim is a novice trader who has had three straight losses. He thinks, “I’m such a failure. I can’t stand losing. I’m disappointed. I just don’t want to think about it. I t ..

129. Be Adaptive

It’s often bantered about among short-term traders (traders that are flat the majority of nights), whether, one should “have an opinion”.  Many traders will say that they don’t have an opinio ..

130. Addicted to Trading

Winning traders have a passion for trading. They love what they do. They may even get a little thrill when they put on a trade. But there’s a huge difference between loving what you do and tradi ..

131. Transformed Through Adversity

You see your true self when you hit rock bottom. What do all newbie traders fear? Blowing out their account and having to start over, it is a fear that haunts them. But ask any seasoned, profitable tr ..

132. Affirm To Win

Trading can be exhilarating. When you see a trading plan come to fruition, you cannot help but feel a little special. There are those times, however, when you feel frustrated and disappointed. You reg ..

133. What Is a Good Company?

In choosing a stock to trade, many traders try to identify a “good” company, but what actually is a “good” company? Many times a “good” company is merely based on a ..

134. All By Myself and Loving It

As a trader, the bottom line is the amount of money you make on your trades and pocket. It doesn’t matter how you go about doing it, and it doesn’t matter how long it takes you, or how har ..

135. You Don’t Need To Be Perfect To Win

If you’re driven to succeed, in all likelihood, you are an overachiever. And as an overachiever, you strive for perfection. The need for perfection can go too far, however. I’m all for str ..

136. Alternative Rewards: A Way to Keep Trading During Setbacks

All animals, even humans, need a reward before they act. Why does something if you can’t get something out of it? Our strongest motives are to satisfy physical needs, such as hunger. When an ani ..

137. Driving Ambition

Winning traders are driven by a strong motivation to achieve. Trading coaches and seasoned traders have observed that the most profitable traders are those who decided early in life to chase success. ..

138. A Must Trade: Sometimes It’s Better To Stand Aside

A dream. Pure hope. A winning lottery ticket. These images capture what the masses think of trading. They don’t take it seriously, and in the past couple of years, they think anyone who trades is wa ..

139. Analysis Paralysis

John has been looking at a profitable trade setup all day. He has tediously studied indicator after indicator, even though many are redundant and converge. He continues his search, nevertheless. He ir ..

140. Anticipating Outcomes

Our emotions are closely tied to our expectations. If we expect to receive love and affection from our spouse after a long, stressful drive through an extra 60 minutes of rush hour traffic, we are ups ..

141. Avoid a Potential Disaster: Anticipate Earnings Reports

When you ask most short-term traders if fundamental analysis ever plays a role in their decision-making, they usually roll their eyes. For the most part, this indifference is justified, particularly f ..

142. Don’t Be Caught Off-Guard: The Art of Anticipation

How do you react to unanticipated events during the trading day? When you are trying to put on a position, are you upset when you can’t get a complete fill? When your DSL line goes down, do you ..

143. Keeping Up Appearances: A Dangerous Activity

Have you ever been at a party and felt a need to impress others. Many see trading as an exciting profession. It’s a glamorous job. Traders are seen as rich and powerful. People like to hear abou ..

144. Getting in Sync with the Market

Professional athletes practice extensively in preparation for a game. It’s critical to be well prepared, ready to perform at your best, and ready to take care of anything that may come your way. ..

145. Don’t Get Too Attached

Jim has just purchased 500 shares of a hot new company he’s liked for years. In a calm and rational manner, he notes that a set of momentum indicators suggests the price will keep moving upward. Des ..

146. The Automatic Trader

The winning trader has an intuitive feel for the markets. To trade profitably one must execute a trading strategy under ideal market conditions. If market conditions don’t match the strategy, th ..

147. Dare To Be Average

When you put your money on the line, there’s a strong need to seek out perfection. Many novice traders believe they can get everything just right. They believe that they can locate infallible in ..

148. Avoid Denial: Confront Unacceptable Ideas

Many people think the best way to cope with unacceptable ideas is to pretend that they are irrelevant and just don’t matter. It seems easier to deny the unpleasant or unacceptable than acknowled ..

149. The Background Factors That Throw Us Off

Trading requires intense concentration. As easy as it sounds, it’s psychologically difficult to monitor trade and to prevent yourself from acting on impulse. The reasons for impulsive behavior a ..

150. One More Thing in the Back of Your Mind

When you have a psychological conflict, it’s in your best interest to resolve it as soon as possible. As an old saying goes, when you ignore a conflict, “it’s just one more thing in ..

151. When You Fall Off the Horse

At first, if you don’t succeed, try, try again. And when you fall off a horse, it’s wise to get back on. Are these sayings appropriate for trading? In some ways they are, but in some ways, ..

152. Getting Back Up

It’s not the number of times you fail that matters. It is all about getting back up after you’ve been knocked down. Ask any successful person and you’ll find that he or she has exper ..

153. Emotional Baggage: How to Unload It

Bob’s been trading for the past year. He’s still a novice, but he has made hundreds of trades. He’s going long on Intel today. He has a plan. He has managed his risk. This trade is j ..

154. Happy Traders Seek Out Balance

Trading is a challenging business. Only the most skilled traders can make a living as an active, full-time trader. Trading experts suggest that novice traders approach trading the same way that studen ..

155. Balanced Optimism

A reality of trading is that a trader must doggedly make trade after trade, yet may often face loss after loss before realizing a win. Trading requires persistence in the face of seemingly constant se ..

156. Beaten But Still Hanging In There

Carl has dreamed of being a winning trader since he was a teenager. He tracked the market in high school and started trading stocks in college. But he has blown out twice in the last five years. He wo ..

157. Beat Stress Before It Beats You

Did oil prices ruin your trading plans this week? Adverse events, such as foul weather in the Gulf, are just one of the many sources of stress an active trader must contend with. If you’re not c ..

158. Who’s Behind the Curtain?

If you haven’t seen the “Wizard of Oz,” you are in for a treat. It is a great movie on multiple levels. The climax occurs when the heroine, Dorothy Gale, reveals that a great wizard is only a co ..

159. Appreciating the Beauty of the Markets

Have you ever had one of those days where you wished you had stayed in bed rather than executed your first trade of the day? Perhaps you excitedly put together a trading plan the night before only to ..

160. The Best Laid Plans

A common complaint of novice traders is that they just can’t seem to stick with their trading plans. Many novice traders develop a viable trading plan only to abandon it impulsively. What goes w ..

161. Don’t Be Afraid To Be Yourself

There isn’t one right way to trade the markets. It’s tempting to emulate your favourite “Market Wizard,” but in the end, it’s essential to match your trading style to your personality. Some ..

162. How Accurately Do You Track Your Performance?

Jim and Sam, two part-time online investors, are discussing the performance of their stock portfolios at lunch. Jim inquires, “How well did you do last year?” Sam with assurance declares, ..

163. Getting Ready for the One Big Moment

Winning traders make consistent profits. One way to trade consistently is to minimize psychological pressure, and the best way to do that is to minimize risk to the point that the potential financial ..

164. The Big Picture

Jim is focusing on a big trade that he’s just put on. He has 25% of his trading capital on the line, and he feels it would be a disaster if he doesn’t see a substantial profit. He can̵ ..

165. Taking Big Risks

Why would anyone want to avoid success? ..

166. The Big Win

The most prudent way to make money trading is to work at it consistently, and through hard work and persistence, make steady profits. ..

167. Paying Your Dues

The great trader Jesse Livermore blew out his account more than once in his illustrious career. It’s scary to think about, but if you want to become one of the few who reach the top in this busi ..

168. Fighting Boredom

These days, few traders find it profitable to scalp or trade intraday anymore. Most traders prefer to make swing trades, but swing trading can be boring at times. Depending on your total capital, it i ..

169. Don’t Overwork: Take a Break

Trading the markets can be a mix of excitement and stress. It’s exciting to put on trades. It’s a thrill. You feel energized and thrive on the action. But it’s also stressful. You ..

170. Breaking Away From the Herd

As evolved as we want to think humans are, there are times when people can act as mindless as a herd of cattle. It may not be all the time, but there are times when you wonder if people are thinking a ..

171. The Breakeven Point

Once a trade is entered, there are two possible outcomes: on the light side it can make money; on the dark side, it can lose. Between the light side and the dark side is the breakeven point, and becau ..

172. Out with the old and in with the new

“Old habits are hard to break.”  “It’s hard to teach an old dog new tricks.”  These sayings have a grain of truth to them. It’s often difficult to abandon old way ..

173. Looking on the Bright Side

Winning traders approach trading scientifically. They develop hypotheses, devise sound trading plans, and test out their theories by executing a trade and seeing what happens. It’s very systemat ..

174. A Brutally Honest Look

Trading is challenging. Many are drawn to trading, but few last very long. It’s difficult to face the cold, hard fact that trading is difficult. Many novice traders need to win. They are hoping that ..

175. Easing the Burden of Decision

Is there anyone who does not feel at least a twinge of nervousness when he or she initiates a trade? It’s quite natural to feel butterflies when one’s bid or offer is hit – even for someone who ..

176. Hustle and Bustle Trading

Many people these days feel pressure to perform. We don’t believe that we have the luxury of taking our time to patiently learn a profession, like trading. Instead, we must do things quickly. No ..

177. Stranded But Profitable

If you were lost and alone on a desert island, with only a satellite connection to monitor market activity and place your trades, you would probably trade more profitably. What about the emotional sup ..

178. Staying Calm Under Pressure

Many trading days are full of chaos and stress. Sometimes we are in a bad mood, while at other times, the markets don’t seem to cooperate with our trading plans. It’s natural to crack under the pr ..

179. Maintaining a Carefree Attitude

The proper mindset can go far to improve one’s trading results.  Successful traders have a carefree attitude when it comes to trading.  They have little difficulty executing trades. They don’t s ..

180. Carefree and Easy

In the Mark Twain classic, Tom Sawyer convinced his friends that whitewashing a fence was fun, rather than tedious, hard labour. The moral of the story: What we see as work depends on our perspective. ..

181. Cautious Optimism

Dan’s been tracking IBM for five months. He knows the price pattern by heart, its ups and downs, and the conditions that precede and follow each new trend. Now it’s just a matter of psycho ..

182. The Centered Trader

Profitable traders have full control over their emotions. They don’t allow emotions to interfere with their concentration. They focus on the markets, and through focused concentration, they can ..

183. Motivated To Change

Are you the kind of trader who makes mistake after mistake, yet can’t figure out why you just can’t change? Perhaps you don’t follow your trading plan. Maybe you set your stops too c ..

184. What Do You Do When the Markets Change?

Be a rugged individualist. Think independently. Take the contrary position occasionally. Anticipate changes in market conditions, and be ready with alternative plans.” These are common, yet some ..

185. Classic Chart Patterns: Know How to Use Them

Technical analysis and short-term trading go hand in hand. The revelation that one can make huge profits by looking for reliable chart patterns that repeat with unfailing regularity has raised many tr ..

186. Accepting the Chaos

A butterfly flaps its wings …a hurricane strikes miles away. According to Chaos Theory, a seemingly irrelevant action can precipitate, and contribute to, a major event. The right set of factors come ..

187. Clear and Immediate Payoffs

“As a trader, I face failure almost every day. It can be stressful, but at least the objectives are clear: make profits. And they are immediate. I don’t have to make a sales pitch and wait ..

188. At Least You Know What to Expect

It’s hard to become a consistently profitable trader. You’ve got to put in long hours, and many times, your hard work doesn’t pay. But when you become a seasoned trader, the situatio ..

189. Facing the Cold, Hard Facts

One of the greatest struggles novice traders face is monitoring their progress carefully. Beginning traders have not yet developed the skills to trade profitably in a variety of market conditions. Und ..

190. The Big Comeback

Despite all our best efforts, it’s hard to pick ourselves up after a fall. You’ve heard it time and again: Traders must learn to expect losses, take them in stride, and recover from them. ..

191. Appreciating Your Comfort Zone

Trading in a peak performance state of mind enhances performance. When you enter this state of consciousness, it is easy to become lost in the flow; your full attention is focused exclusively on the m ..

192. Going All the Way

So you’ve decided to become a trader. You’ve decided that you want to master the markets and take home huge profits. You’re not the only one. Each day, hordes of would-be traders tur ..

193. Matching Commitments To Expectations

The number of profits you can expect to make is directly related to the amount of commitment you devote to trading. ..

194. Commit to Trading Success

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth, the ignorance of which ..

195. Comparisons Can Be Harmful To Your Ego

Unless we keep up with our neighbours, we feel like a failure. Throughout our lives, we have been taught to compete. We habitually compare ourselves to others and try to beat out our peers. As childre ..

196. The Detrimental Comparison

Jim has been trading for six months. His performance isn’t spectacular, but it isn’t too bad either. He’s made a decent return. But Jim isn’t satisfied. He’s been reading ..

197. Keep to Yourself and Trade Independently

Have you ever been tempted to go into a chat room and brag about how well you did on a good trading day? Perhaps you called up a buddy under the guise of giving emotional support when what you really ..

198. The Competitive Spirit: Learn to Tame It

Throughout our lives, we are told to foster a competitive spirit. We compare ourselves to others, inspire ourselves to do better, and try to beat out our peers. As children playing sports, we are advi ..

199. Drawn to Complexity: When Keeping it Simple is Better

In the mid-1980s, Steve Wozniak, the creator of the Apple II computer, was asked about the future of computing. Interestingly, in hindsight, he said he thought people were making too much of the home, ..

200. Complex and Always in Flux

Alan Greenspan, in his opening remarks at the August 29, 2003 symposium sponsored by the Federal Reserve of Kansas City, said, “Uncertainty is not just an important feature of the monetary policy la ..

201. Full and Intense Concentration

Your ability to concentrate fully and intensely can mean the difference between consistently taking home huge profits and barely staying above water. It’s vital that you pay attention to multipl ..

202. The Art of Concentration

You can be highly motivated to trade, have limitless capital, and a foolproof trading strategy, but if you don’t devote your full concentration to the trade that you have on at the moment, you’ ..

203. Self-confidence: A Prerequisite for Financial Success

Top-notch traders don’t follow the crowd. They lead it. They anticipate what the masses are doing, and capitalize on how they are mindlessly swayed by the current mood of the markets. Seasoned t ..

204. The Confident Trader

Joe tells his friend, “I’m staying out of the markets for a few days.” “Why?” asks Tom. “I can’t trade under these conditions. I’m going to wait for the markets to change,” answers J ..

205. The Self-Confident Trader

The self-confident trader is decisive. He or she carefully plans a trade, patiently waits for the ideal market conditions, and executes the trade effortlessly and flawlessly. There is no self-reproach ..

206. Pleasant Moods Reduce Confirmation Bias

Whether you are a long-term investor or a short-term trader, you must look through reams of information, such as charts, analyst commentaries, and financial statements, to arrive at an astute decision ..

207. Don’t Be Afraid to Go Your Own Way

Jim asks his friend, Marty, “Where have you been? I’ve been waiting for 15 minutes. They are ready to give our lunch reservations away.” Marty nervously replies, “Sorry Jim. I ..

208. You Can Go Your Own Way

Sergeant Friday on the 1950s television drama “Dragnet” was fond of sticking to “just the facts.” Many police officers look at the world from a strict rule-oriented point of vi ..

209. The Consistent Trader

The winning trader is a consistent trader. A winning trader puts on trade after trade in a free-flowing, carefree manner. Profits pile on with each trade. Trading consistently means approaching each t ..

210. The Quest for Consistency

Two keywords you often hear in trading are consistency and discipline. A winning trader makes consistent profits. Here’s what that means. In contrast to seasoned traders, novice traders’ e ..

211. Don’t Catch a Bad Mood

Winning traders are eternal optimists. They must be to survive. Markets are constantly changing. What works in one market doesn’t necessarily work in another. You can’t complacently expect ..

212. Contagious Behavior of the Mass

People have a natural affinity to follow others. It can be very adaptive at times. If you see someone slip on an icy sidewalk, for example, it would be wise of you to start walking slowly and carefull ..

213. Contagious Moods: Don’t Catch a Bad Mood

Traders who are independent-minded see the most profits. It is hard to go it alone at times. There are times when it is difficult to avoid following the crowd. Humans are risk-averse and they feel mor ..

214. Overcoming an Emotional Vulnerability to Losses

It can be said over and over again, “Don’t let your net worth determine your self-worth,” but it is little solace to those people who have spent their entire lives letting their succ ..

215. Don’t Let Your Profits Define Your Self-Worth

Winning traders cultivate feelings of inner-worth. It doesn’t matter how poorly they do in the markets, they feel that their life has value; their mere existence in the world makes them feel ful ..

216. Going Your Own Way

In the past two weeks, the markets have been choppy. One moment it seems that prices are tumbling; the next moment, they seem to recover. And then some new earnings reports come out and prices decline ..

217. Breaking Away From the Masses

Don’t follow the crowd! You’ve been warned over and over. It seems easy, but it’s harder than it looks. We are all familiar with the rebel, the person who breaks all the rules and is ..

218. The Courage to Follow Your Gut

The most profitable trading strategies are innovative. You cannot merely follow the crowd or think conventionally if you plan to make profits in the market aftermarket. You have to sift through inform ..

219. Controlling Your Impulses

When your money is on the line, it’s difficult to remain calm, rational, and in complete control. What happens if you lose? How will you recover? It’s natural to become consumed with self- ..

220. Self-Controlled and Profitable

Self-control is often the key to trading success. Masters of the market are disciplined. They don’t sporadically act on a whim. They develop specific trading plans and follow them. Trading is la ..

221. Self-Control: A Limited Resource

Trading requires discipline. A trading plan is of little value if you abandon it prematurely. The disciplined trader executes a plan and controls his or her emotions until the plan comes to fruition. ..

222. Coping with Uncertainty

The markets are often chaotic and uncertain. It is often unclear what will happen next. The astute trader is aware of this uncertainty and takes steps to prevent it from adversely influencing trading ..

223. Learn the Rules Before You Decide to Break Them

Seasoned traders warn, “Be sceptical of everything you hear as a trader.” It is advice worth listening to. There are many so-called trading experts who claim they are on your side, but the ..

224. How Do You Talk Trading?

If you are a part- or full-time trader, you may have enjoyed the attention this wild and woolly occupation brings at social gatherings and events.  Many are interested in trading and find you interes ..

225. Coping Gracefully

Whether you’re a novice or seasoned trader, there are days when you face setback after setback: Adverse events go against you. You make a trading error. You misread the markets. The possible setback ..

226. Coping Skillfully To Achieve Success

The markets are often unpredictable and uncertain. Some people collapse under the pressure, while others thrive on it. What’s the difference between a trader who gallantly fights the stresses an ..

227. The Courageous Trader

Winning traders are courageous. They show courage when they risk their money, and face the possibility of losing it. They show courage when they follow their convictions, and possibly let their pride ..

228. Cracking Under Pressure

Whether it is trading or playing sports, when the pressure is on, many of us crack under the strain.  Consider the Olympic performances of Sarah Hughes and Michelle Kwan in the 2002 Winter Olympics. ..

229. Your Creative Potential

The creative trader stays ahead of the crowd. Many traders are conformists. They look toward the masses for confirmation of their decisions. If the crowd is buying, they buy. If the crowd is selling, ..

230. Creative, Winning Trading Plans

There are times when your success depends on thinking outside the box. In a strong bull market, where the masses are ready to invest, it’s easy to ride the wave and take advantage of the trend. But ..

231. A New Creative Idea

The winning trader stays ahead of the crowd. In ever-changing market conditions, it’s vital to think of new, innovative trading ideas. But it isn’t always easy. There are times when you fe ..

232. Behavioral Finance: A More Credible Field

In this column, we often summarize research studies from the emerging field of behavioural finance.  In contrast to traditional finance and economics, which tries to look only at concrete indicators ..

233. Maintaining a Crystal Clear Perspective

There are times when our judgment is cloudy. Perhaps we want to win so badly that we optimistically see trading opportunities that aren’t there. At other times we may be so stressed out, busy, a ..

234. The Cynic and the Realist

In the trading business, it’s prudent to take everything you hear with a grain of salt. Our field is full of false prophets who claim they can make you rich quickly and easily. Realistic sceptic ..

235. For the Love of Data

Some people like facts and figures; others prefer trusting their intuition and looking for artistic expression in the trading realm. But the profession is big enough for all kinds of traders. Each typ ..

236. Matching Expectations To Skill Level

Traders often walk a tightrope between overconfidence and a lack of confidence. On the one hand, the overconfident trader may take unnecessary risks and make trades on impulse. But at the other extrem ..

237. Decisive and Responsible Trading

To those who want to take home big profits, trading isn’t a hobby. It’s a serious business. If you want to make profits consistently, you must have respect for your trade. You must treat e ..

238. Taking Quick, Decisive Action

When trading the markets, making a quick and decisive decision can be difficult. There are many sources of information to sift through, and many times, you don’t actually know if you’ve made a goo ..

239. Decision-Making Biases: A Primer

Our common-sense approach to decision making often works quite well, but there are times when we arrive at decisions that are just plain wrong. This has led some psychologists, such as Amos Tversky an ..

240. Decision Making Styles

When it comes to trading decisions, everyone has their own style. Although styles change as one gains more experience, each trader has his or her own natural style. Some people are intuitive while oth ..

241. Realistically on the Defensive

When playing a formidable opponent, it’s wise to take a defensive stance. An NFL quarterback uses shoulder pads and a helmet to make sure he has protection in case he gets sacked. The players on ..

242. The Cautious and Deliberate Trader

Even when you’re a short-term trader, making one quick, astute decision after the next, it’s necessary to plan carefully and act cautiously and deliberately. Consider the case of Andy, a novice tr ..

243. Trying to Stay Detached

Winning traders approach the markets with a detached, unemotional, and rational mindset. As much as you’ve heard us say it time and time again in this column, though, it probably doesn’t h ..

244. Stay Detached and Impersonal: It’s Not Always About You

Stan’s been in a long losing streak for the past three months. He has a severe drawdown. He’s worried and a little scared. He’s been trading for two years, and during the first six m ..

245. Don’t Take It Personally

Seasoned traders stay detached, but novice traders often have trouble achieving this ideal, objective and rational mindset. For example, they take trading losses, and subsequent drawdowns, personally. ..

246. Detached and Objective

Winning traders are objective and detached from the ongoing market action. They don’t stare at their screens and allow their emotions to move up and down with how well their trades are doing. Bu ..

247. Diary of Your Thoughts

Have you ever made a dumb mistake? Perhaps you knew you should have used a protective stop before leaving for two days to take your children on a road trip. You may have thought, “I’ll sto ..

248. Stop Kicking Yourself For Making An Obvious Mistake

John is kicking himself right now. He just made an unexpected losing trade and he feels especially down. He expected to make a killing, and he was looking forward to winning and celebrating big. He th ..

249. Winning Traders Are Disciplined

The difference between a seasoned, winning trader and a novice, unprofitable trader is the ability to muster unwavering self-control in response to chaotic, ever-changing markets. Trading is a serious ..

250. Dynamics of Discipline

The winning trader is a disciplined trader. Basically, that means outlining a definite trading plan and following it. But people differ in terms of their ability to maintain extreme self-control and d ..

251. Maintaining Discipline

The winning trader is a disciplined trader. Discipline means controlling impulses and controlling emotions. As many novice traders can tell you, however, maintaining discipline is often easier said th ..

252. Increasing Discipline and Self-Control

Winning traders are disciplined. They control their impulses and feelings, and this allows them to execute a trading strategy effortlessly and flawlessly. The disciplined trader is decisive. The undis ..

253. Discipline Takes Practice

Trading is a profession where you must make a plan and stick with it, but even seasoned professionals find it difficult to maintain discipline. They sell earlier than they had planned, ignore stop-los ..

254. Discipline and Self Control: Monitor It and Increase It

You’ve probably heard it countless times: “Discipline is a key factor in trading success.” Discipline is mentioned in almost every trading book and in the title of many. Why is disci ..

255. The Quest for Discipline

Trading with discipline is one of the greatest challenges for traders. It’s common to hear novice traders say that they just can’t help but abandon their trading plan. It’s understan ..

256. Maintaining Discipline: When Past Choices Influence Future Decisions

Traders and investors have difficulty “letting their profits run.” When you see your investment increase in value, it’s hard to avoid selling early to lock in profits. But not every ..

257. The Disconnected Self

The winning trader looks at a trade objectively. One’s self-esteem and identity are not on the line. All that is on the line is mere money, an abstract, meaningless stake. A common saying to hee ..

258. False Hope

In “The Disciplined Trader,” Mark Douglas suggests, “Execute your losing trades immediately upon the perception that they exist. When losses are predefined and executed without hesit ..

259. Extreme Patience

Did you invest in stocks during the rally earlier this year and now regret your decision? If you are a short-term trader, you may want to just accept the loss and close the position, but longer-term i ..

260. Building On What You Do Best

A goal of every trader is to consistently earn substantial profits. It’s hard to achieve this goal, however. The only way it can be done is through persistence and practice. Many are drawn to tr ..

261. They Say It Couldn’t Be Done

At a family reunion, Jake meets his second cousin for the first time, Ron, an insurance agent. Ron asks Jake, “What do you do for a living?” “I’m a trader,” says Jake pro ..

262. The Drama of the Markets

The number of psychological theories to explain human behaviour seems endless. It’s as if every psychologist wants to propose his or her own theory, and convince the rest of the psychological co ..

263. The Drawdown Mentality

It’s hard to come back when you’re down. Trading is easier when you are ahead of the game. There’s no pressure to make up losses. You feel free and creative, ready to take a risk. Bu ..

264. Don’t Make a Drawdown Even Worse

Stan’s been in a slump. He’s made very few winning trades in the past month. He’s starting to question his skills as a trader and wondering if he will ever return to profitability. H ..

265. Just Drop It and Move On

It’s wise to learn from your mistakes. There’s no sense in making the same mistake twice. Despite the wisdom of this sage advice in everyday life, however, it may not work very well for tr ..

266. Are You Preparing For a Crash?

The market seems to be going down. Is it time to think about gloom and doom? Perhaps. At least some market analysts seem to think that the masses have lost confidence in the economy, and these percept ..

267. Developing Your Psychological Edge

At Innerworth, we focus on teaching traders to cultivate their psychological edge. But some have asked us whether or not we have been overstating the importance of psychological issues. They ask, aren ..

268. The Efficient and Successful Trader

How much time do you spend preparing for the trading day? Do you spend hours scouring the markets for a winning trading opportunity? Do you watch hours of commentary or read all the major financial ne ..

269. Taking It One Step at a Time

Sam tells his best friend, “I want to be an expert trader. I want to be able to handle anything the markets throw at me.” This is a nice sentiment, wanting to be a trading virtuoso who can ..

270. Slowing Building Up True Self-Confidence

Overconfidence is a curse for the novice trader. When people first start trading, they want to do nothing more than win. And in their quest for profits, they may take unnecessary chances and pay the p ..

271. A Big Ego Boost

Traders are notorious for their overconfidence. They trade beyond their skill level and comfort zone and pay for it. It’s understandable, though. Who doesn’t want to win, and win big? For ..

272. The Big Ego: Knowing When To Control It

A big ego reflects an exaggerated view of one’s abilities. We’ve often said in this column that such a mindset can be fatal for trading, where accurate and realistic perceptions of one’s ski ..

273. Combating Ego Shock

Sam has been monitoring a position for the past week. He bought at $50 and had a target of $52. For the past week, the price moved according to plan. Sam was feeling good about his progress. He had be ..

274. Motivating Emotions

The stereotype of the ultimate trader has many of the same traits as Mr Spock on “Star Trek.” Mr Spock looks at events logically and objectively and follows a rational plan when approachin ..

275. Emotion Control Isn’t Emotional Suppression

Jack suddenly slammed his mouse against the wall. He was angry. He had been monitoring a trade, ready to take a quick profit, when other traders’ actions impacted the price and unexpectedly thwa ..

276. The Emotionally Controlled Trader

Winning traders aren’t influenced by their emotions. The nature of trading demands an objective, logical approach. If one experiences extreme elation after a win and extreme disappointment after ..

277. Emotional Influences on Trading Decisions

Market decisions are often driven by fear and greed. When we are afraid of potential losses, we sell. When we are greedy, we buy. Behavioural economists argue that it’s a little more complicated ..

278. Building Up Your Emotional Resilience

Many traders experience an emotional rollercoaster. They euphorically celebrate their wins, but soon face despair as their losses mount. Emotion control is one of the most complex issues a trader must ..

279. A Time and Place For Emotions

Winning traders are extremely disciplined. They astutely study the markets, devise a trading plan, and follow it. They control their impulse to abandon their plans prematurely, and they don’t allow ..

280. Emotions in Context

When you put your money on the line, it’s hard to avoid getting a little emotional. Novice traders may be especially prone to experience a roller-coaster ride of emotions, feeling euphoric after ..

281. Emotions and Trading

It has often been said that the investing behaviour of the masses is driven by fear and greed. Emotions are powerful, and when people are a slave to their emotions, their actions are often irrational ..

282. Do the Ends Justify the Means?

In this cutthroat world we live in, we often follow the motto, “The ends justify the means.” Blind ambition, self-sacrifice, and extreme self-control are valued. If you can work tirelessly, wait l ..

283. Enjoying the Trading Experience

Jim is a hard-working father with two children. He loves his wife and enjoys the time he spends with his children. But when it comes to his job, it’s not the centre of his life. It’s just ..

284. Your Proper Trading Environment

The markets are chaotic and unpredictable. If you’re not careful, you can be unduly influenced by the sense of uncertainty. Depending on your personality, you may be easily swayed by the market ..

285. Genuine Self-Esteem: The Key to Independent Thinking

Successful traders are independent-minded. They don’t seek out the opinions of others. They don’t question their skills. They trust their intuitions and live by their own standards. Such c ..

286. Win or Lose: You Are A Winner Every Day

Have you ever spent the day making trade after trade and gotten nowhere? You may have wondered why you woke up that morning or even bothered trading that day. Perhaps there have been a few days where ..

287. Fighting the Boredom

Trading can be an exciting profession. It’s exciting to think of how much money you can make, and how that money can change your life. Some traders enjoy anticipating how a trade will turn out, ..

288. Expanding Your Psychological Limits

Your mind has limits. You can only attend to and process a limited amount of information. Psychologists view the mind as analogous to a computer. Long-term memory is similar to a hard disk in that an ..

289. Getting Even With the Markets

Trading decisions are frequently influenced by fear, hope, greed, and regret.  But, sometimes decisions are motivated by anger.  After a losing trade, you’ve probably heard people say, “ ..

290. Set Realistic Expectations

Trading requires that you keep your emotions under control. You can’t be extremely disappointed or fearful. Extreme emotions can be distracting. They not only drain precious psychological energy ..

291. Accepting a Potential Loss: A Skill to Develop

Tim tells his trading coach, “I’ve been trying to follow that old adage, ‘Trading is a profession where you should go in expecting to lose,’ but it just doesn’t help. I d ..

292. Learning By Doing: The Benefits of Gaining Real World Experience

Many novice traders were successful in other professions before embarking on a trading career. Since they were successful in their previous occupational goals, they approach trading in much the same w ..

293. Getting the Job Done

Do you ever make big plans for the trading day, but fall short of your expectations? Maybe during the off-hours, you decide to make a dozen trades, but when you get down to actually doing the work, yo ..

294. Don’t Deliberate; Just Do It

James is considering whether to implement one of two trading strategies. Both strategies offer good odds of success, but James doesn’t want to make a rash decision. He wants to carefully conside ..

295. Trading With Discipline

Top-notch traders have unwavering discipline. Expert trader John Hayden notes, “Without discipline, you will be unable to master your ego, create empowering beliefs, have faith, and develop conf ..

296. Justified versus Unjustified Wins

Jack is a novice trader celebrating his latest win. “I’ve just made a big profit on trade by pure chance,” Jack says in an excited tone. “I went long on a stock, expecting it t ..

297. Riding the Wave Works…Sometimes

Hannibal Smith on the “A-Team” was fond of saying, “I like it when a plan comes together.” A couple of weeks ago in this column, we used Apple Computer’s (AAPL) product a ..

298. Keep It to Yourself

In the movie “Broadcast News,” Tom, the future star network anchor, asks Aaron, the under-appreciated correspondent, “What do you do when your life exceeds your dreams?” Aaron ..

299. The Art of Knowing

If you’re an eternal optimist, you hate bad news. But the bad news is relative. What is bad news to some is mere information, and possibly good news, to others. (For example, if you were going l ..

300. Acknowledge Limitations But Think Positively

Jimmy complains to his best friend, “It’s impossible to trade the markets profitably. They are rigged. I don’t have enough capital. The markets are so volatile that I can’t get in and out to t ..

301. Consider All Possibilities

Trading is one of the most unpredictable and chaotic professions that one can pursue. This disarray and chaos produce stress. If you don’t take appropriate precautions, for example, you can look ..

302. Seeking Learning Goals

Setting well-defined goals are essential for achieving high levels of performance. Specific goals are the best. They allow for direct feedback. You know exactly where you stand. It may not always be a ..

303. Goal Setting: Don’t Set Performance Goals Too High

Sam started trading almost three months ago. He’s read that it’s important to set specific goals and try to reach them. He thinks, “I’ve got to set my expectations high, otherw ..

304. Learning From Past Mistakes

Losses and setbacks are a fact of life. It is necessary to experience setbacks and recover from them in order to achieve success. The trader who has never experienced a severe drawdown, or blown out h ..

305. Accepting Inconsistency and Uncertainty

Jack can’t seem to force himself to make a trade. He is just too afraid. He is afraid to lose. He wants certainty but the kind of reassurance he is seeking just can’t be found when trading ..

306. Letting Go of the Past

What are your worst losing trades? Do they haunt you? It may be difficult at times, but it is often necessary to forget about the past and think only of tomorrow. Sure, it is important to learn from y ..

307. Psychological Limits of the Mind

Don’t overestimate the amount of information your mind is capable of processing.  Over the past 40 years, cognitive psychologists have shown that the mind has limits, and you should be aware of the ..

308. The Little Things That Get In The Way

A common complaint of novice traders is that they can’t stick with their trading plan. They wonder why, and after they think about it long enough, they come up with fanciful explanations. For ex ..

309. Living With Reality

If you’re like most traders, you expect to win. You put your time and energy into finding high probability setups, and after all the studying, searching, and theorizing, when you think you have ..

310. Thinking of the Big Picture

Many novice traders have difficulty facing a cold, hard fact about trading: You can’t get rich overnight. You’ve got to just take it one day at a time, and make a relatively small amount o ..

311. Losing Your Money and Objectivity

Has a close friend ever confided in you about a losing trade? Perhaps he or she risked a little too much capital on a bad trade. Maybe he or she forgot to use a stop-loss, and then fruitlessly hoped a ..

312. Cutting Your Losses

Winning traders cut their losses early. Indeed, they work under the assumption that they will see many more losing trades than winning trades. Knowing how to take a loss in stride and to just move on ..

313. The Complex Emotions of Loss

Jim has just taken a big risk and lost. He has been watching a stock for the past month and it’s been going down. But today an earnings report was released. Yesterday, Jim had a strong hunch that ac ..

314. Taking a Loss: Getting Over It Isn’t Always Easy

To your surprise, you’ve just lost $1,000. Naturally, you feel guilty and angry. You wish it didn’t happen. You try to justify it: “It’s just the tuition you pay to become a ma ..

315. Learning How to Take a Loss

Humans are risk-averse. We don’t like losses, and we’ll do almost anything to avoid taking them. Losses are painful, and there’s a strong need to seek out pleasure and avoid pain. It ..

316. It’s Just a Loss, Isn’t It?

Everyone likes to win, but is a need to win merely an attempt to avoid losses? Success requires facing setbacks nonchalantly, but there may be some traders who imbue losses with great psychological sy ..

317. Turning a Loss Into a Gain

Jim has had five losing trades in a row for a total loss of 25% of his account balance. He could feel defeated, pout, or get angry, but instead, he’s excited about his future prospects. ThatR ..

318. Don’t Let a Setback Get You Down

If you want to become a winning trader, you must be willing to face loss after loss without letting it get you down. Upon facing a loss, our first inclination is to feel disappointed, but how you reac ..

319. Rekindle Your Hidden Passion for Trading

After months of trading in a slump, Jake tells his best friend, “I think I want to quit the trading business. Why am I doing it? There must be a better way to make a living.” Have you ever ..

320. The Lottery Mindset

Do you ever dream about winning the lottery? There are actually people who have such good luck that they repeatedly enter contests and win. They win so often that if they wanted, they could count on w ..

321. Trading for the Pure Love of the Game

Why do you trade? What motivates you? To many traders, the answer is obvious. We trade to make money. Many traders, however, say that they would trade even if they merely earned a livable wage. For ex ..

322. When Low Probability Setups Seem Attractive

“I’ll worry about it later.” When trying to deal with the fact that we must eventually cope with an onerous, unpleasant event, such statements help us get through life. We often put off things w ..

323. Enduring Success

Becoming a winning trader isn’t easy. Few make it, and of those who achieve profitability, few realize enduring success. There are numerous stories where traders put in a heroic effort and are r ..

324. Don’t Make the Odds Even Lower

“How many novice traders succeed?” asks a would-be trader of a group of seasoned experts. “Of the 40% who last about a year, only one or two become consistently profitable,” an ..

325. Money Management and the Big Picture

Sometimes traders run hot, but sometimes they run cold. The factors that influence this fluctuation in performance are varied. As a trader, you may have a bad day or week. Or market conditions may not ..

326. Staying Calm Through the Ups and Downs

Many novice traders ride an emotional rollercoaster, feeling euphoric bliss after a win, but overwhelming disappointment after a loss. Experienced professional traders, however, stay calm and relaxed ..

327. The Dangers of Anthropomorphizing the Market

Don’t let creative journalists or analysts convince you into thinking about the market as a marathon runner: “Every bull market has to pause and get its breath once in a while before it sprints hi ..

328. Staying Ahead of Market Moods

Markets go up; markets go down. It shouldn’t matter much, but many novice traders find that their own personal mood fluctuates with the markets, moving from extreme euphoria as the markets soar ..

329. Another Martha Story

We’ve been bombarded with stories about Martha Stewart all weekend. The media can’t seem to let up. If you haven’t heard, Ms Stewart was found guilty of giving false statements to go ..

330. Media News and the Behavior of the Masses

As a short-term trader, your goal is to stay ahead of the crowd and let their money flow from their pockets into yours. The better you can anticipate the behaviour of the masses, the better you’ ..

331. Sharpening Your Mental Edge

The markets often present a barrage of information. Sometimes it is just too hard to attend to all of it. And you not only have to attend to it, but think about it, and make decisions based on it. You ..

332. Remember to Celebrate: You Deserve It

The markets are closed on Monday. What are you going to do? Hopefully, you are taking the day off. Whether it is “A Wonderful Life,” “A Christmas Carol,” or “How the Grin ..

333. Mean Reversion: When Prices Fail to Meet Expectations

In studying the genetic influences on height, Sir Francis Galton compared fathers and sons. He reasoned that fathers’ height should predict sons’ height. It didn’t. Indeed, taller fa ..

334. A Quiet and Meditative Place

Do you ever feel the pressure to perform? If you are making a short-term trade during a hectic trading day, you may have trouble controlling your emotions. You may have a trading plan clearly spelt ou ..

335. Moving Beyond Mediocrity

Working a typical 9-to-5 job can be monotonous. Many people just try to make it through the day. They can’t wait for their shift to end. Some work settings are viewed as especially mundane. For exam ..

336. It’s About You and No One Else

Throughout our lives, we look toward others to define ourselves. As children, parents and teachers tell us whether or not we are doing well. Significant others offered praise when we met their expecta ..

337. Increasing Mental Capacity

Trading can be a complex activity. A broad range of information must be studied and integrated. Not only do you need to keep up on possible news and factors that may impact the market action, but you ..

338. The Disciplined Mindset

You’re in the midst of a perfect trade. You entered where you had planned, and you know when to exit. All you have to do now is wait for the price to reach 53 and sell. But it’s not moving ..

339. Minimizing the Impact

Are you tired of facing setback after setback? Traders must be thick-skinned to keep trading over the long haul. It’s common to get knocked down hard and have to quickly pick yourself up and tac ..

340. Matching Your Trading Goals To Your Skills

Performing with a peak performance mindset requires a close match between your overall profit goals and your skill level. But many traders under- or over-estimate their trading abilities and pay a pri ..

341. Fear of Leaving Money on the Table

During the trading day, there are often opportunities to make huge, profitable trades. The trouble is finding them! Some traders are so obsessed with looking for the ultimate opportunities that they s ..

342. Appreciating the Moment

Have you ever lost yourself in a trade? You focus intensely on your screen and wait for the ideal time to enter. You’re fully attentive as you continue to watch your screen as the price creeps u ..

343. Building Mental Momentum

When you’re under a great deal of pressure, it is easy to choke. You feel the stress, and when you’re on edge, it is difficult to make decisions or to look at your current trading predicam ..

344. It’s For the Money

Have you ever picked up a magazine, like “GQ” or “Vanity Fair,” and glanced at the ads? Glossy, well-photographed pages show fast cars, fashionable clothes, and the latest electronic gadgets, ..

345. Mood Repair: How To Do It and When It Works

Winning traders are disciplined. Discipline means controlling impulses and fighting the urge to abandon your trading plan prematurely. Maintaining discipline is often easier said than done, especially ..

346. Mood Repair: How To Do It and When It Works

If you want to be a winning trader, you must be optimistic, and truly believe that you can win if you set your mind to it. Trading is a tough business. You have to make trade after trade, and many tim ..

347. Getting Motivated and Ready to Go

Ben runs a trading room with would-be traders. Some of his members can’t wait to trade. They love the game. But other traders are rushed. They say, “All I want to do is learn how to trade, ..

348. Motivating Images

In contemporary society, we are bombarded with media images. We see luxury cars, designer clothes, and exotic vacation spots and picture how blissful we would feel if we had these prizes. If we could ..

349. Trading in a Higher Psychological Sphere

It seems so easy: Find a good setup, place a bet, close out the trade and take home the profits. It may seem simple, but trading profitably and consistently eludes most traders. Trading experts note t ..

350. Take Time to Recover

Jack has had a bad day. Nothing seemed to go right. Every decision he made seemed to lead to ruin.  He bought at every top and sold at every bottom. At the end of the day, he just couldn’t rela ..

351. Don’t Hesitate, Move On

Trading demands decisive action. Executing a successful trading plan often requires that one make a quick decision when optimal market conditions present themselves. But it is often hard to make such ..

352. Taking on Greater Levels of Risk

Who doesn’t want to be a brilliant trader? There are those elite “Market Wizards” who have a rare talent for making huge profits in a field where few can excel. It’s understandable why anyone ..

353. Learning To Let Go

If you’re like most traders, you struggle with losses. Your emotions play tug of war in your mind. Losses are a fact of trading, however. Even the best setups and the most reliable methods are n ..

354. The Multi-faceted Self Concept

Kyle has just embarked on a new trading career. He’s excited and he can’t wait to master the markets and make the huge profits he’s been dreaming of. He confides to a friend, “ ..

355. Fighting Murphy’s Law

While trading the markets, there are times when Murphy’s Law says it all: “Whatever can go wrong, will go wrong.” Does this sound a little too cynical? Perhaps, but only if you submit to pessimi ..

356. Don’t Be So Grandiose

A confident, optimistic attitude is required to achieve lasting success as a trader. Even solid, reliable trading strategies are fallible, and one is bound to face losses. And for the trader without t ..

357. The Natural Born Trader

If pushed to do so, most trading experts can delineate the characteristics of the ideal trader: intuitive, yet also logical and objective; spontaneous, yet disciplined; genuinely confident and open to ..

358. You Don’t Always Need To Be Right

A common belief among novice traders is that one always needs to be right.  Many believe that a trading strategy must always produce a profit.  Although it is true that a long losing streak can wipe ..

359. A Fresh Start

Have you ever been stuck in a rut? All you can think about is how behind you are and how hard it will be to come back: “I haven’t made enough winning trades. What am I going to do? I’ll never ma ..

360. A Brand New Day

Sometimes trading with a winning edge is a matter of being able to identify those key moments when you don’t have it. As much as we would like to always trade with a peak performance mindset, it ..

361. Giving Into the Markets

When your money is on the line, you have a strong need to be in complete control. The desire for total control is so powerful that when we aren’t in control, we start to delude ourselves into th ..

362. Seeing a Creative New Idea

The creative process is somewhat of a mystery, even to scientists who study it. There are a few common characteristics that all creative persons possess (such as an openness to a variety of internal a ..

363. Accepting the Uncertainty of the Markets

Jack is an engineer turned trader. He was the valedictorian of his college graduating class and was a successful engineer for about a decade until his company was bought out. He decided to pursue trad ..

364. The Mindset of the Short Term Trader

Have you ever talked to people who traded stocks in the 1970s? Many say, “I learned my lesson a long time ago. I put my money in the markets and lost it. Never again.” In the 1970s most in ..

365. The News of the Day

What are the latest headlines? Do they impact the markets? Well, it depends. On Monday, October 17, 2005, here were some of the headlines that may have impacted you. GM reached a tentative agreement w ..

366. Plans for the New Year

Are you going to make any New Year’s resolutions for 2006? Whether it is a personal or professional resolution, here are a few tips for making your New Year’s resolutions a reality. Not to ..

367. Trying Not to Care

Trading is much like playing a sport. You’ve got to find the right moment, and when it happens to come along, you must act decisively. You can’t choke; otherwise, you’ll miss a major trading opp ..

368. Nothing to Lose

Jack has an optimistic attitude. He seems fearless. When asked why he is so optimistic, he says, “I have nothing to lose. I’ve acknowledged the risks upfront, accepted them, and now, I can trade w ..

369. What’s Next?

Have you been making plans for the coming year? Have you been trying to make sense of where you’ve been so far? It’s useful to ask and answer a few key questions: Where have I been? Where ..

370. Objectify the Trade

When you’ve got a big trade on, it’s hard to control your emotions. It is difficult to forget that real money is on the line and that losing your stake is quite possible. Humans naturally ..

371. Don’t Take It Personally: Objectify

Jim is a novice trader who is down $3,000 for the day. He thinks, “That’s a lot of cash. I could pay my living expenses for the entire month with that. I need to win it back right now.R ..

372. Finding Objectivity in the Face of Uncertainty

Profitable trading requires an objective view of the markets, but humans are easily biased. If prices were based solely on fundamentals, anticipating market prices would be a simple matter of measurin ..

373. Objective and Unemotional: The Ideal Mindset

One of the biggest mistakes amateur traders frequently make is letting their emotions influence their trading decisions. For example, the typical novice puts on a trade that is too large, and may not ..

374. It’s Not Personal: Staying Detached and Objective

The ultimate way to trade is with an objective, logical mindset. But when your money is on the line, it’s hard not to allow your emotions to influence your decisions. When you are fearful and un ..

375. Remembering the Obvious

Traders are notorious for making the same mistakes over and over again. They abandon their risk limits. They sell earlier than their trading plan dictates or hold on to losing trades too long. It̵ ..

376. Accentuate the Obvious

In his book “All Too Human: A Political Education,” former political operative George Stephanopoulos describes the motivating forces in the “War Room” of the Clinton presidenti ..

377. Overconfidence: Old Habits are Hard to Break

Overconfidence is one of the most prevalent psychological problems traders face.  We’ve covered many different ways that traders can be overconfident in past columns: Overconfidence may reflect ..

378. Flexible and Open to Change

The markets can be uncertain, and one of the best ways to cope with uncertainty is to remain flexible and open. How do you react to change? Does it frighten you? Do you fall back into old habits or do ..

379. Open to All Possibilities

As with any challenging endeavour, the better you perform, the more will succeed, and as a trader, the more profits you’ll realize. How do you increase your performance? How does one change? The ..

380. Winning Traders Are Flexible

How flexible are you in your everyday life? When you are in a new city, do you worry about getting lost or do you just go your own way and assume that somehow and someway you’ll eventually get b ..

381. Don’t Self-Sabotage: Think Optimistically and Take Advantage of New Market Opportunities

There was no January Effect in 2005. No steady increase in prices on the last days of the year. Things looked a little gloomy at the end of the year. The last day of trading for 2005 seemed to be a do ..

382. Persistence In the Face of Uncertainty

Trading is rough business for many reasons. First, success is not assured. Second, even when one attains success, it may be fleeting. The odds are against you as a trader, and only a select few can co ..

383. Unrealistic Optimism and Misperceptions of Risk

An on-going controversy among psychologists concerns the benefits of optimism.  Some psychologists argue that optimism is always beneficial, while other psychologists point out that extreme levels of ..

384. Cool and Organized

Trading can be fast-paced. As an active trader, you must sift through a barrage of information, from media reports to earnings statements to unexpected national events. It’s hard sometimes to ma ..

385. The Origins of Self-Sabotage

In formulating his psychoanalytic theory of personality, Sigmund Freud postulated two biologically deep-rooted instincts as the driving forces behind all human behaviour: life instincts and death inst ..

386. Coping with Uncertainty

When your money is on the line, there’s a natural inclination to desire complete control. You want perfect information and guarantees that every trade you execute will be a winner. Humans are ri ..

387. Don’t Overanalyze: Just Trade

When your hard-earned money is on the line, there’s a strong urge to be extremely careful. After all, if you should make a mistake, you could end up taking a huge loss, or worse yet, you could f ..

388. Learning to Defeat Past Learning and Instincts

Are you having trouble mastering the markets? Do you have trouble taking losses? Do you react to potential losses with fear or regret? Do you find that you can’t seem to methodically execute tra ..

389. Overcoming Big Setbacks

Ever make a slew of losing trades and just feel like giving up? Perhaps you were just panicking for no good reason. You may have merely fallen for a pessimistic attitude that was enough to put you in ..

390. Walking the Tightrope Between Confidence and Overconfidence

A winning trader is confident. It’s essential to have the proper amount of confidence, however. If you are under-confident, you’ll never be a winning trader, but if you are overconfident, ..

391. Handling Unexpected Success and Controlling Overconfidence

You can’t trade the markets unless you have self-confidence. Trading is a field where you’ll see setback after setback, and the only way to pick yourself up quickly and fight back is to ha ..

392. Confident But Not Over-Confident

When it comes to trading the markets, nothing is certain. How do you cope with uncertainty? Many traders are overconfident. Rather than face the possibility of losses due to market uncertainty, they f ..

393. Overconfidence, Risk, and Rewards

A widely popular belief in the field of behavioural finance is that investors are “overconfident.” They put on risky trades that don’t pay off, and in the long run, end up with a low ..

394. Overconfidence: The Behavioral View

You’ve been watching a stock for three hours and you tell yourself, “It seems to match perfectly to the first two waves of an Eliot Wave pattern.  I’ve seen this before and I’ ..

395. Overconfidence: Cognitive Information Processing

Overconfidence is ubiquitous among traders.  There are several explanations for overconfidence, depending on the psychological theory one uses to understand it.  We’ve looked at overconfidence ..

396. Controlling Overconfidence

You’ve been watching a stock for three hours and you tell yourself, “It seems to match perfectly to the first two waves of an Eliot Wave pattern.  I’ve seen this before and I’ ..

397. The Benefits of Under-Trading

Stan has been looking at his screen for the past 20 minutes. He is a little tired and bored. He wants some action. He figures, “I might as well buy a few shares of the QQQ. It is bound to go up ..

398. Overtrading and Bad Ideas

Have you ever sat looking at your screen for an hour and had no idea what to do? In the back of your mind, you start to think, “I should be doing something.” As an active trader, you may b ..

399. Your Own Worst Enemy

Do you ever wonder if you secretly want to fail? It’s hard to believe, but some people do want to fail. They may not want to do better than their parents, and secretly, they set themselves up fo ..

400. Finding Your Own Style

Jake is worn out. He has made trade after trade all day. After a solid six hours of searching for opportunities and executing the trades he had developed before the open, he now can barely think strai ..

401. Working on Your Own Terms

Traders have the freedom to work for themselves and on their own terms. Yet many traders have trouble remembering this fact. In a competitive world where most people define their self-worth based on h ..

402. In Your Own Time and On Your Own Terms

We’re always in a rush these days. There’s too much to do and not enough time to do it. That’s the credo most people live by during these uncertain and stressful times. Many novice t ..

403. The Calm, Perceptive Trader

When your money is on the line, it’s hard to avoid feeling a tinge of fear with every minute you’re in the trade. Some traders crack under the pressure. They panic and lose the ability to ..

404. Dealing With Panic

Have you ever been caught off guard in the midst of a trade? In an instant, you may lose control of your emotions? It may not happen all the time, but it does happen. Consider the basic scenario. You ..

405. In a State of Panic

Jake thought that he had it all figured out. He would buy 500 shares of a stock when the price hit 50 and sell when it reached 51. Maybe it wasn’t the most thorough trading plan but it was a pla ..

406. Paradox of Control

When your money is on the line, it’s natural to feel uncertain and a little cautious. You don’t want to lose it. You want to take every precaution possible to protect yourself. But there&# ..

407. The Paranoid Trader

Jack confides to his trading coach, “I think I’m paranoid. When I put on a trade, I feel as if the market is out to get me. It’s a problem. I’m always on edge. I feel as if I n ..

408. Holiday Parties: Stay Humble and Quiet

It is the holiday season, a time to spend socializing with family and friends. It’s tempting at those holiday parties to discuss how well your trading is going, but you may want to keep it quiet ..

409. Passion in Everyday Life

In Mitch Albom’s “The Five People You Meet In Heaven,” the main character, Eddie, spent his life as a maintenance worker at a seaside amusement park repairing the rides, and ensuring ..

410. Money Isn’t Everything

There are numerous examples of people who quit high-paying jobs to follow their passions. A lawyer may open a café to fulfil a dream. A CEO of a corporation may retire early to pursue a new career as ..

411. Following a Passion for Trading

Why do people trade? The obvious answer to this question is, “For the money.” It may be a no-brainer to some, but to the seasoned trader, the answer isn’t always so obvious. When one ..

412. It’s Not the Money, But the Challenge

Why do you trade? Most people would think it’s obvious. It’s for the money, right? What many winning traders know, however, is that money is a poor motivator in the end. It’s much mo ..

413. Conquering Passivity

Winning traders take decisive action. The decisions you have to make to put on winning trades are crucial to success. Where do you enter? When do you exit? How much risk will you take on? Each of thes ..

414. Overcoming the Past

We are sometimes the victims of our past experiences, but it doesn’t have to be that way. Mastering the markets requires one to make trade after trade. Many times traders are executed flawlessly ..

415. Patience is a Virtue

In trading, timing is everything. Winning traders are patient. They know how to control their impulses so as to act decisively at the opportune moment. Rather than acting on a whim, they carefully dev ..

416. The Winning Trader is the Patient Trader

Jack has just put on a $1,000 trade, which is 10% of his trading capital. He feels he needs this trade to be a winner. He needs to see a huge jump in his account balance. He’s been trading for a ..

417. Waiting Patiently For Your Financial Dreams To Come True

If you are like most people, you want to make a fortune, and you want to make it now. It is a reasonable wish. Who wouldn’t want to make enough money to make all their dreams come true? But such ..

418. Flow and the Peak Performance Mindset

Many seasoned traders say that cultivating a peak performance mindset is the key to trading profitably. For example, there are moments when everything just seems to click. A trader is in tune with the ..

419. You Don’t Need to Be Perfect

Every time you make a trade, you put money on the line. To the seasoned trader, money is just abstract “capital.” It loses some of its significance. But to a novice trader, money represent ..

420. Reach for the Sky, But Don’t Overdo It

If you’re like most traders, you are in this business to make money, big money. In all probability, you are ambitious, independent-minded and ready to take on the world. With this ambition usual ..

421. Making a Change and Making It Stick

The New Year is a time to renew commitments, make big changes, and live next year as if it is a new beginning. But changes are hard to make. Despite the best-laid plans, it is difficult to make perman ..

422. Staging A Comeback

Life is often mundane. It can be drudgery, getting up early every morning, dealing with the hassles of everyday life. And when you are worn out and fatigued, facing the trading day can seem like climb ..

423. The Anatomy of Persistence

Trading is a profession where one must not give up in the face of adversity. “You’ve got to go into the trading day expecting to lose,” is what some seasoned traders warn. It’s ..

424. The Ideal Trader Personality: Finding the Right Blend

The ideal trader personality style consists of a combination of experience, skill, knowledge, discipline, and intuition. The problem with ideals, however, is that they sometimes exist only in our imag ..

425. Viewing a Single Trade from the Right Perspective

When trading the markets, it often easy to make a big deal about nothing. We believe in the “must trade,” a trade we think we have to make, and unless we do, we feel that we missed out on ..

426. Pessimistic Biases

Joe tells his trading coach, “I’ve been paper trading for six months, and I’ve been right 85% of the time, but I still have trouble pulling the trigger. It’s the 15% of the tim ..

427. Pick Yourself Up and Move On

Are you having a bad day? Has media coverage spoiled your trading plan? Perhaps you are just feeling a little off? When you encounter an unexpected setback, you can feel beaten down. You might be temp ..

428. Don’t Plan to Fail

If you’re like most traders, you’ve made trades that you have regretted. Perhaps you misjudged the markets or acted on impulse, but all you knew, in the end, was that you lost money, and y ..

429. Taking the Plunge

Many amateur, online investors can’t wait to make trades and a lot of them. Most of the trades are unprofitable, though, generating commissions for the brokerage and providing sources of profits ..

430. Trader as Pollster

To some extent, fundamentals drive prices, but in the end, the price of a stock or commodity is largely a matter of opinion. Opinions consist of “soft” data, data that is messy, flimsy, an ..

431. Considering All Possibilities

Jim has just made nine winning trades in a row. He feels as if he has his methods down and can trade profitably under any market condition. Some might say that Jim is a little overconfident. He’ ..

432. It Makes Sense When You Think About It, Doesn’t It?

We have a strong need to make sense of our past. The thinking goes something like this: If we can make sense of our past, we could predict our future. This kind of thinking is especially true in tradi ..

433. Power and Control

One way to cultivate a winning mental edge is to have an accurate perception of what you can and cannot control. There’s a powerful human desire to believe that one can have complete control ove ..

434. The Difference Between What Should Happen and What Does Happen

Two common sayings worth following are “Accept what the markets give you” and “Don’t impose your will onto the markets.” As a dominant species, humans are used to control ..

435. Self-Control Takes Practice

Maintaining self-control and discipline is one of the most essential skills required for financial success. There are many ways that traders, especially novice traders, can lose self-control. They may ..

436. Preparing for Losses

Whether you are a novice trader facing one of your first losses or a seasoned professional experiencing a severe drawdown, no one likes to lose. Losses hurt, psychologically and financially. Although ..

437. Under Pressure

It’s an hour after lunch and you find yourself staring at your screens, frozen, unsure of what to do next. You feel the pressure to perform. You haven’t made a winning trade all week. The ..

438. Too Proud to Think Clearly

Pride has been the downfall of many traders. Pride is a powerful emotion. We feel pride after making a significant achievement, and we are especially proud when the achievement has increased our socia ..

439. It’s the Process that Matters, Not the Prize

The focus on the Olympics should remind us that it isn’t the prize that matters, but the process of how you won it. Olympic athletes practise most of their lives to perform at their best at that ..

440. Your Mood May Bias Your Estimates of Success

Winning traders look at their odds of success objectively. Decisions are best made in a cool, calm and rational manner, but research studies have demonstrated that probability estimates are often bias ..

441. Thinking in Terms of Probabilities

Successful traders think in terms of probabilities.  Rather than looking at the outcome of a single trade by itself, they view it as merely one outcome among a set of outcomes.  They believe that ov ..

442. The Unbridled Quest for Profits

Trading is a tough business. Less than 5% of those who attempt trading realize enduring success. With those odds, it’s not surprising that novice traders feel they must devote 100% of their time ..

443. The Proper Mindset

The winning trader is not beleaguered with anxiety, conflict, and indecision. The winning trader trades freely and effortlessly. Traders are similar to star athletes who perform at their best, or musi ..

444. A Little Extra Protection Goes a Long Way

It is a muggy day and Skips can’t seem to do anything right. He has fumbled around all morning. He didn’t sleep well last night. He’s tired, and he is tempted to just quit for the day, drink ..

445. Psychic Income

Are your profits down lately? Has the novelty and excitement of trading worn off? Are you looking for reasons to stay in the business? You might want to consider how much psychic income you make from ..

446. The Extra Weight of Psychological Baggage

In a deep discussion with his trading coach, Jack confides, “I win sometimes, but when I lose, I lose big.” His coach asks, “Why are you putting on big trades? Do you see a high prob ..

447. The Masses Can Be Right…Sometimes

There are times when trading profitably requires an accurate gauge of mass opinion. It can be useful to find out what the masses think and follow them. Well, sometimes it’s useful. The dynamics of a ..

448. For the Pure Love of the Game

In systematic studies, psychologists have discovered that peak performers have a true passion for what they do. Whether it’s art, sports, or business, the folks at the top are not primarily moti ..

449. A Little Extra Protection Goes a Long Way

It is a muggy day and Skips can’t seem to do anything right. He has fumbled around all morning. He didn’t sleep well last night. He’s tired, and he is tempted to just quit for the day, drink ..

450. Trading With Purpose

Have you ever fallen out of bed early in the morning and just wanted to crawl back under the covers to avoid facing the stresses and strains of the markets? Perhaps you’ve been making trade afte ..

451. Putting Up a Strong Defense

When the defensive linemen go out onto the playing field, they make sure they have helmets, facemasks, shoulder pads and other protection. The opposition is often formidable and there’s no reaso ..

452. Quick Decisions

Trading is fast-paced. The markets can move rapidly, and it is sometimes necessary to react quickly and correctly. Depending on your experience and natural inclinations, however, making the right deci ..

453. Rambo Trader

Did you ever watch those old Rambo movies where he was able to think quickly on his feet and perform remarkable feats? It was more cartoon than reality, but we often hold ourselves up to such fanciful ..

454. Beliefs About Randomness: Do They Impact Profits?

As you trade, do you ever just think, “It’s all just random, why even bother trying at all?” If you passively think you have no control, you may end up making less money according to ..

455. Psyched Up and Ready For Action

Bill went to bed early last night, woke up early, and is excited about starting the trading day. It’s a cool, sunny day, and Bill can’t help but feel rejuvenated. After a quick run, he can ..

456. Thinking Realistically, Even If It Hurts

One of the biggest obstacles to achieving a goal is having an unrealistic plan, a plan that is unlikely to work even with luck on one’s side. It may seem a little cynical, but trading is a profe ..

457. Realistic Levels of Commitment

When you execute a trade, you can’t let your confidence waver. It’s just like when a professional athlete tries to make a winning play. He or she can’t suddenly lose faith and back o ..

458. The Utility of an Optimistic Outlook

Common sense tells us that prudent decision-makers are realists, rather than people who deceive themselves into believing that false perceptions are actually true. The markets are one place where the ..

459. Realistic Goals, Realistic Profits

Earl just quit his job. He’s going to trade full time. But his wife is sceptical. “How are we going to survive? We need to have $100,000 a year to maintain our standard of living,” s ..

460. Optimistic Yet Realistic

Trading isn’t easy. The winning trader must continually search for trading strategies that will produce a profit, and it seems that after one strategy is discovered, it stops working, and the se ..

461. Calm, Relaxed, and Ready to Trade

Winning traders are calm and relaxed. They don’t put unnecessary pressure on themselves, stress themselves out, and then crack under the pressure. They don’t believe that they must succeed ..

462. Realistic and Ready to Trade

The human mind is capable of vast abilities. When you are relaxed late at night, sitting in a hot tub, and dreaming of what your future might be like, it’s easy to imagine that you are a super-t ..

463. The Need for Reassurance

Trading is risky. There are times when you have almost no evidence to put on trade but your gut instinct. For some traders, gut instinct is enough validation to put on a trade. Others, however, need m ..

464. Rebuilding Momentum

It’s inevitable. There’s a point where even a seasoned, master trader faces a losing streak. The difference between a seasoned trader and a novice, however, is that master traders know how to get ..

465. Reduce Stress During the Trading Day

Stress is ubiquitous in modern life. Trading is especially stressful. How stressed out are you during the trading day? Do you have a short fuse? Do you find yourself getting a little more frustrated o ..

466. Conditioned Reflexes

Novice traders describe a common ailment: “I don’t know what it is, but I can’t stick with my trading plan. I try to stay calm, but when I see the price fall, I panic. I close my pos ..

467. Controlled and Relaxed

Have you ever had a bad day when nothing seemed to go right, a day where it seemed as if every decision you made was wrong? Perhaps you bought at every top and went short at every bottom. Or you panic ..

468. Making A New Beginning

At the end of the year, it’s tempting to examine the events of the past year, learn what you can from them, and start the New Year feeling that you can tackle anything the New Year throws at you ..

469. Mean Reversion: Missing Expectations

In his study of genetic influences on height, Sir Francis Galton compared the height of fathers to the height of their sons. He reasoned that if height did have a genetic basis, fathers’ height ..

470. Regaining Poise, Focus, and Profitability

Have you had one of those days where nothing went right? Perhaps you thought that Monday’s malaise would drag into Tuesday but unexpectedly saw the markets surge. Perhaps you were a little unpre ..

471. The New Year: A Time for Psychological Renewal

For many, New Year’s Day is a time of psychological rebirth. It is time to forget our past defeats and get ready to focus on new challenges. But for some people, it’s hard to put aside the ..

472. Disappointment and Regret: The Other Trading Emotions

Market action is powerfully influenced by fear and greed. But fear and greed aren’t the only emotions that influence market decisions. Other emotions, such as disappointment and regret, can also ..

473. Seeking Pride and Avoiding Regret

Jason has been holding a position in Dell Computer for the past month.  It’s been doing well so far, and earnings forecasts suggest profits, in part due to sales in new markets.  On the other ..

474. Controlling Disappointment and Regret

Jim is mulling over a bad trade he made yesterday. He thinks, “I wish I didn’t make it. I’ve lost so much of my capital that I’ll have to work extra hard to recover.” As ..

475. The Dynamics of Regret

Consider a tale of two brothers, Allen and Jason, who decided to go long on Home Depot last January.  Although they both made the same decision, they did so for very different reasons.  Allen bought ..

476. When Regret Motivates

Fear and greed drive market action. We enthusiastically put on trades when we think a huge profit is assured, but when we see the market shift dramatically, we get out as quickly as possible. We fear ..

477. Reprogramming Your Instincts

Humans have basic instincts for survival. They need to protect themselves at all costs. Technically, an instinct is inborn, such as the drives for hunger and sex. But humans are complex creatures in t ..

478. Resilient and Ready For Profits

Traders face setback after setback, but they never feel beaten down. They recover from a setback quickly and are ready to tackle their next challenge with enthusiasm. Not all traders can take setbacks ..

479. Don’t Seek Revenge

Jim has lost a bundle in the last six weeks. He was riding high at the end of 2004, but when the New Year started, he couldn’t get his act together. He hasn’t been trading very long, but h ..

480. Don’t Forget to Reward Yourself

Trading isn’t always rewarding, at least in the traditional way we view monetary rewards. When one works a traditional 9-to-5 job, for example, he or she puts in 40 hours and gets a paycheck. An ..

481. Everyone Needs R & R

Responsibility and respect are the bricks of a successful foundation, yet practically no one ever talks about it.  Still, they represent two critically important components in our trading careers and ..

482. New Year’s Resolutions: How to Keep Them

Losing weight. Quitting smoking. These are just some of the common resolutions people make on New Year’s Day. Did you make any New Year’s resolutions? If you did, you’re not alone. M ..

483. Riding Through the Downers

Despite what most people think, there are times when we just aren’t at the top of our game. We try to put on a trade, but our heart just isn’t in it. What do you do when this happens? Do y ..

484. Don’t Stress Out: Rest Up During the Holidays

Today marks the start of the holiday season. During this time of year, many people have extra responsibilities and hassles. There are holiday parties to attend, family obligations, and holiday shoppin ..

485. Mad and Ready for Action

There are times when everything goes wrong while trading the markets. If you aren’t ready for a barrage of mishaps, however, you may feel frustrated, and if you are tired and worn out, you may e ..

486. Rested, Relaxed, and Ready for the Market Action

Sometimes success is a matter of making the most of a few key moments. Those hoping to gain acceptance to a prestigious college, for example, must perform well for a few key moments on a standardized ..

487. Take a Break, Relax, and Rejuvenate

The mind is similar to a muscle. When you go on a long run, for example, you soon run out of energy. You can’t go any farther. Your muscles begin to ache and you need to take a rest and recupera ..

488. Curbing a Vengeful Spirit

Jack has just lost $1000 on a trade that he thought was a sure winner. He’s frustrated and angry. He thinks, “I want revenge.” In the back of his mind, he wants to get even with some ..

489. Setting the Right Goals: It Makes All the Difference

If we had a choice, we would all want to become an overnight success. But unless you win the lottery, it is unlikely that you will become wealthy that quickly. If you are like most traders, it will ta ..

490. The Right Mindset

Trading the markets requires cultivating the right mindset. You must be relaxed, logical, perceptive, and ready to tackle anything the market throws at you. Unfortunately, this sounds much easier than ..

491. Finding the Right Mindset

Jack woke up later than usual this morning. He didn’t sleep very well, worrying all night about two big losing trades he made yesterday and kicking himself for trading too impulsively. Today, he ..

492. Is Risk Management Really Important?

Many traders view risk management as critical to long-term success. Consider what a couple seasoned traders told our Innerworth staff about risk management. Mark said, “You can have a crummy tra ..

493. To Risk or Not to Risk

To risk or not to risk, that is the question.  One has to risk money to make money.  Is it better to survive losing streaks and risk small amounts of capital on each trade, or risk a lot of capital ..

494. Cut Your Losses

When it comes to trading, it’s not whether you win or lose, but how much you make on a winning trade compared to how much you lose on a losing trade. If you can cut your losses and move on, you& ..

495. Searching for a Winning Strategy

Winning traders must identify profitable trading strategies. It’s a creative process. Much like scientists find evidence to support a theory, traders must formulate hypotheses and determine whet ..

496. Protecting Your Interests

It’s impossible to make money as a trader without taking some risks. You’ve got to risk money to make money. But if you take unnecessary, or extreme, risks you may not survive to trade in ..

497. Taking the Risk and Living with the Consequences

One of the few undisputed facts of trading is that you must risk money to make money. The risk would be easy if we were assured a successful outcome, or if we didn’t care. (Gomez Adams, the patr ..

498. Risk Aversion: The Trader’s Fundamental Handicap

Tom has often heard the sage advice, “Cut your losses early, but let your winners run.” He has trouble following it, however. Based on his experience, he thinks letting your winners run is ..

499. Always Manage Risk

There’s nothing more thrilling than anticipating the markets and making a huge profit off of a trade. Not only do you feel on top of the world for getting it right, but the feeling of security f ..

500. Accepting Uncertainty and Risk

Trading is synonymous with risk. Shorter-term trading isn’t about using a buy-and-hold strategy and minimizing risk by holding an investment over years. Short-term traders capitalize on volatili ..