Posts tagged with: Psychology

Trading should not be a solo venture, even if it sometimes feels that way.  In this episode, I present a framework for holding a fun and productive meetup or online trading session with other investors.  It’s important to discuss the markets with other people so you get to hear other ideas and have your own views challenged.  It makes you a better trader.

 

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(CC image by micahvandegrift on Flickr)


Section 1: A General Meeting or Progress Report

  • Check-in with a couple friends or a small group, at least once per month
  • Start with macro trends, the big-picture view
  • One main topic per meeting: 15-minute discussion
  • Discuss your favorite investment ideas: no more than 5 minutes per person plus 5 minutes discussion time
  • Share results (profit/loss) as much as you’re able: builds accountability
  • Each participant should set a personal goal to reach before the next meeting
  • Suggest topic ideas for the next meeting

 Section 2: An Investment Club

  • Many different structures; members usually pool funds or agree to invest separately in the same things
  • More formal structure than other groups would have; more pre-planning involved
  • Longer meeting: aim for 3 hours or more
  • Always start with macro trends; choose one member to present for 5 minutes, can open up to discussion
  • Open the floor to discussion about any of the club’s current investments
  • Any member can propose a new investment idea to the group, giving a presentation of up to 20 minutes then allowing 30 minutes for discussion and vote
  • Designate a treasurer to report profit/loss if funds are pooled

Section 3: A Working Session: Trading Live

  • In-person or virtual
    • In-person: what to look for in a meeting site – Rent out a meeting room or use one at your local library
    • Virtual: Premium services provide full screen-sharing & collaboration tools; otherwise use Discord, Skype, Google Hangouts for just the basic chat & voice capabilities
  • Spend at least half the trading day observing other traders, rather than trading yourself
  • Start before the open: pre-market setup & discussion
  • End after the close: pick one trade to share with all; summarize lessons learned


Intro music by audionautix.com

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Don’t Let Mental Mistakes Sink You

(Part 8 of ten-part series on Financial Truths)

Section 1: We Are All Human

Section 2: Play Devil’s Advocate

Section 3: Forget Your Cost Basis

Section 4: You Can’t Tell the Market What to Do, So Let the Market tell YOU What to Do

Section 5: Stop-Loss Orders Are Only For the Lazy

Section 6: Know When to Take a Break

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trophy case

(CC image by Ben Sutherland on Flickr)

 

Section 1: We Are All Human

  • No ‘bot’ or ‘algorithm’ can come close to what a good investor/trader can achieve
  • Some high-speed trading firms do succeed, but have to spend many millions of dollars on computers and network connections to do it
  • ‘Flash crashes’ highlight the problems with pre-programmed trading algorithms
  • 2016 British Pound Flash Crash

    New Market Wizards by Jack D. Schwager

Section 2: Play Devil’s Advocate

  • Before placing a trade: visualize the market moving against you, what would that look like?
  • Could you construct a plausible alternative scenario around this?

Section 3: Forget Your Cost Basis

  • It doesn’t matter where you entered the trade
  • Don’t hang on to a losing trade because you want to “get back to even”
  • One exception: a “time-out” level based on total losses

Section 4: You Can’t Tell the Market What to Do, So Let the Market Tell YOU What to Do

  • Examine a chart without bias
  • Markets aren’t tradable 100% of the time

Section 5: Stop-Loss Orders Are Only For the Lazy

  • Stops often don’t work the way they’re supposed to
  • Other traders will exploit your stop-loss orders for their profit – “running the stops”
  • Don’t react too quickly to a breach: Watch the action around the price level
  • “Fake-outs” around commonly-known price levels

Section 6: Know When to Take a Break

  • Thinking too much about past mistakes
  • Being tempted to “double-down”
  • Exceeding a pre-defined risk tolerance

 

Intro music by audionautix.com

 

Find more episodes of the Torpedo Trading Podcast at this link

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