Hi everybody,
I had some free time, so I thought OK, let us write some thing about the mental side of gambling.
This is yet another effort to share some of my knowledge, and what I have learned during my trading journey. I hope that some of us will find this info helpful.
The info may be a little bit cluttered. . .but after all I am a trader, not a writer...
I will start with a couple standard things, than afterwards I will attempt to include more advanced stuff. I know that most people aren't very interested in these topics, but I also know that most men and women lose their tops in trading thus....Lets see what we can do this.
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The sport of speculation is the very uniformly fascinating game in the world. But it is not a match for the stupid, the mentally lazy, the person of emotional balance that is inferior, or even the adventurer. They'll die poor. #8201;Jesse Livermore
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In sports most athletes perform very well during training, some even break records, but often under perform during the actual competition.
Same thing in gambling. Many traders make consistent profits on demonstration but on the account they neglect. This tells us just 1 thing - the game is the most essential part. Lots of men and women attempt to automate their egies, but that is just another excuse not to work on the match, and their abilities.
Most people do not'like to face the issue. They search for escape. They search for shortcuts....and this ends the exact same way.... Sooner or later people come to the conclusion - there is no shortcuts! You must do the job.
Call it the Holy Grail or the number one reason for failure, however you look at it, when it comes to trading, plogy (the internal sport ) is the elephant in the room.
In the end of the day, its the mindset which separates winners from losers! Perhaps not the egy or anything else....Yeah, yeah, most of us know about the 3'M's of trading (Mind, Method, Money Management) but also the mind is the most important! Anyone who has been long enough in this sport knows this, though some people today prefer to look for all kinds of reasons for their collapse, and deny it.
The simple truth of trading is something similar to this:
70% Head
20% Strategy
10% Money administration.
Even in the event that you have almost fair egy/methodology, and just moderate skill, you are still able to join the top 5% when you've got rock-solid mindset.
However, when the mindset is feeble, nothing will help you. No method, no egy, no tools, no resources.... Everything becomes useless.
If the mindset is your weak side, the collapse is almost guaranteed!
I will attempt to dissect the entire issue and to examine different elements, relationships and relations. I also made a couple of pictures to illue the fundamentals.
Let us start with the clear.
Trading is part art, part science, and a part common sense. But it functionality oriented subject, quite much like individual sports.
Every single day the trader has to deal with all soft challenges: to examine in real time that the news and the price action, to make fast decisions, to handle positions and risk, to maintain focus, to control feelings, to deal with stress and to adapt constantly to the ever changing market conditions. Multiple tasks and all of them come in the exact same time.
Plogists have discovered that the human mind can deal effectively only with certain quantity of information - about 110 bits of information per second. It could sound like a lot, however it's not! Just for instance - partitioning speech takes approximately 60 bits of information per second....
This means that in order to achieve maximum performance (outcomes ) we must concentrate 100 percent on the task! All external distractions that are unnecessary have to be eliminated.
The trader must attain optimal emotional and plogical equilibrium between skill and challenge in order to find the sweet spot - the Zone! This is where the magic occurs.
In plogy the expression for this is called flow.
Several conditions will need to be met in order for a person to put in the zone:
1. One must participate in an activity with a transparent set of progress and aims. This adds direction and structure to this task.
2. The task at hand must have clear and immediate feedback. This aids the person negotiate any shifting demands and allows them to correct their performance to maintain the flow state. Short-term trading (intraday) is more likely to cause a flow state.
3. One must have a fantastic balance between the challenges of this task at hand and their own abilities that are perceived. One must have confidence in your ability to complete the task at hand.
The necessary components in short outline:
Knowing exactly what to do (your match plan, egy)
understanding the way to take action (your abilities, experience)
Knowing how well you're doing (your journal)
High perceived struggles (sink or float scenarios!)
High perceived skills (confidence in your abilities)
Freedom from distractions (concentrate just on the task)
Not all activities can induce flow state, but as you can see, trading fits perfectly!
That is actually the standard flow model and the association between skill and challenge.
OK! Thus far, so great. Many traders are able to reach this condition (the zone) and finally to generate some profits. But here is the next big challenge - How to keep the profits, and the way to repeat indefinitely (the way to grow the account exponentially)?
Many men and women make profit, then reach some invisible ceiling and then they crash. (Blow up the account) Most of you know what I am referring to here do not you? Why it occurs, do you know? Do you know how to repair this issue? Most of us have no idea!
Here is what happens:
When you trade profitably, your confidence grows together with the profit, until it reaches a peak, a critical level where you become too greedy and cocky (you believe that you are extremely good trader) and you start to pay attention, and maybe you start to violate your own rules.
At this point a little mistake can turn into disaster. And a chain reaction will happen. The little drawdown contributes to revenge trading, end eventually can make the situation even worse as more and more emotions become involved. (Stress, fruion, disappointment) At this point it is critical to shut everything, to step back, and to take a rest, so you can clear your mind. Because otherwise, the phase will be entered by you!
You have to have high confidence, but not too significant. It is a topic of equilibrium that is optimal.
If your assurance becomes too high, you may enter the danger zone and you will blow your trading account. Or will input drawdown.
The best method to stop all this from occurring is to constantly monitor your emotional state.
Should you observe that you just get too cocky and covetous - reduce trade size!
Also after very successful (profitable) period, take a break (little vaion). And for a while, trade little following that. Don't improve your trade size instantly. Play defensively! Play clever contrary to your emotions.
Also use this tactic to recover after bad day (or period). Don't attempt to make it back instantly In the event you lose some money. Revenge trading contributes to more loses!
Remind yourself the egy (the rules, the strategy ) and why you even trade in the first place (the target ). Go back to basics and start little.
Some folks know the majority of these fundamentals, but they face another common issue - Fear of loss and mental freeze during stressful circumstances.
Very common issue and it really kills the performance.
Common symptoms are:
-Strong hesitation in the presence of obviously good chance (based on egy)
-Closing profitable trades too soon (from fear) with no real sign.
-Strong reaction from the body during gambling - adrenaline rush, quite high heart rate, blurred vision, tight stomach....
These are signs that you are reaching your plogical limit. You experience too much anxiety, and sometimes too high challenge (exceeding your skill level).
Just about everyone has experienced this issue. And if you haven't experienced this if you think that Im exaggerating and you aren't affected by this issue - just wait until you start to trade big size ($50 - $100 a pip or even more...)! This is one of the answers for this issue.
Very modest trade size = little stress! However, its not the ideal solution because it contributes to functionality, and a lot of potential.
You will never grow if you trade too tiny!
If you're serious about trading and want to grow, sooner or later you will have to trade large lots. (There is no escape from this)!
Another factor contributing to this issue is that the strong attachment to money.
Detach yourself from the worth of this money! Imagine that money = score!
It is only numbers, like in a video game. If you play - you earn more points.
Should you play bad - you lose points... It's really that easy! Concentrate on the points.
Anxiety is vital element for great performance. You will need stress but in dose. What is considered average dose? This is dependent upon how far you can manage.
You see, this is the problem. People have very low limit when is comes to stress.
They just can't handle it. This is part, and one of the main reasons for underperformance. 90% of people don't know how to perform under stress.
Without special training many people who live in the civilized world are far too soft mentally. And they don't even know they are until they confront some true challenge. Trading is a severe challenge (for the brain )! That is why many traders lose. That is why so many clever and intelligent men and women lose. Because intelligence isn't sufficient in trading! Mental toughness is what counts the most.
Most men and women live very comfortably and they get used to the comfortable zone.
But that's a big problem. In trading this comfort zone is the main enemy!
If you are seriously interested in trading and want to make real cash, you have to measure out.
This is the only true solution - you have to extend your limitations! You have to acquire much higher degree of mental toughness.
If you do so, I guarantee you that you will take your trading to the next degree. (You will be surprised by the result).
You have to challenge yourself with some thing big outside of gambling. Do what you are scared to do!
Intense sports, Jump with bungee, sky diving, people speaking, speak with strangers on the road, join some boot camp for civilians (military style), live from the wild for a few weeks...I mean, anything that will increase your mental toughness.
Then later in trading you will no longer be constantly on the limit. The limit will be a lot greater.
I am not going into much information about the exercises because there is countless info and a lot of very good advice on the web on the best way best to increase mental toughness. Look in google.
Most of the best information comes from game. There are excellent exercises there.
Also physical training is a really good method to arouse the mind. Regular exercise will create a true change in your own trading performance (and on your life)! Walking, biking, swimmingpool, mountain climbing, hiking.... All these are outdoor pursuits. Proceed and do these items as frequently as possible. Push yourself! Your physical limitations will reveal your limitations.
That is for now. I'll add more later.
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