Mind Games: Trading Psychology

I've spent a lot of time working out the details of the setups I find profitable.  I know they work.  Now I need to work on me.  I.e. the psychological component of trading.  It doesn't matter how good my trading strategies are If I cannot execute.  

Sure the "psychology of trading" sounds cliched but I feel it is what is holding me back at times.   For example, at times:

•  I've fretted over pull backs 
• I've put on too much size
• I've put on too little size
• I've held on to losing trades
• I've chased trades
• I've been unable to pull the trigger.
• I've worried over whether to sell into a strength, 
• I've broke or bent my rules after a winning streak only to give back entire stretches of profit and more. 
• I've even found myself searching twitter message boards to determine who else is in the trade and what are they thinking (i.e. I did not have enough confidence in the trade to not give a damn what anyone else thought) 

I suspect I'm not the only one to have those issues at times.  Those are all signs that I'm not completely comfortable with my trade and I am not seeing my vision for the trade or I am doubting it.

Yet, I've also had moments where:

• I saw the entry perfectly and hit it. 
• I bought pull backs because I knew they were an opportunity
• I bought breakouts at levels others were too afraid and the market ripped in my direction
• I've gotten out of potential losers before they broke against me because I could read the price action. 
• I didn't care what any analyst, other trader thought because I knew what my plan was.

That emotional state feels amazing.  And I don't want to ever go back to insecure trading. 

For that reason, I will be delving into trading psychology, my psychology in a number of posts.  This month. I have read/ am reading a number of books on trading psychology and I will be working through the exercises.  I will be doing it publicly because by sharing I force myself to face my insecurities and defeat them.  By defeating fears, I can reach objectivity.

 Mark Douglas' "The Disciplined Trader" speaks the process to reaching the this psychological state:

 

1. Learning the dynamics of goal achievement to stay positively focused on what you want-not and what you fear. 

2. Learning how to recognize the skills you need to progress as a trader and then stay focused on the development of those skills, instead of the money, which is merely a by-product of your skills. 

3. Learning how to adapt yourself to respond to fundamental changes in market conditions more readily. 

4. Identifying the amount of risk you are comfortable with - your "risk comfort level"-and then learn how to expand it in a way that is consistent with your ability to maintain an objective perspective of market activity. 

5. Learning how to execute your trades immediately upon your perception of an opportunity. 

6. Learning how to let the market tell you how much is enough, instead of assessing the potential from your personal value system of how much is enough. 

7. Learning how to structure your beliefs to control your perception of market movement. 

8. Learning how to achieve and maintain a state of objectivity. 

9. Learning how to recognize "true" intuitive information and then learning how to act on it consistently.

So that's the plan. I must conquer my demons to truly become a successful trader  The failure to do so means my successes will be short lived.  I.e. that I simply borrow money from Mr. Market because I'm sure to have to pay it back If I don't have the solid psychological foundation.

Cheers.