Trading Educators Blog

​Seasoned traders observed long ago that after a series of wins, a trader is vulnerable to over-confidence and trading errors. It's quite understandable. Trading is a competitive business, and when you win, someone else loses. Market participants trade because they are greedy for profits, but often sell out of a fear of losing. How do many traders deal with the inevitable feelings of uncertainty a...

​Short-term winning traders have guts. They have to. No one has a crystal ball. You can guess what the markets will do, but you can never know what will happen with complete certainty. Only the traders who risk enough money, and make enough winning trades can hope to achieve glory. And living under these conditions takes guts. Trading can be about 90% market psychology. Do fundamentals play a role...

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 fast enough. It seems to be hovering around 51 and 50. You're starting to wonder whether or not it will ever move up. Panic sets in and you sell. About an hour later, the price hits 53 and it now seems obvious t...

​What is your tolerance for pain? Consider the following scenario. You have 10% of your account balance on the line. For the past two days, prices have been going in the direction you had anticipated, but today, an announcement was made that caused a market move that caused all your profits to be wiped out in an hour. What will you do? See if prices will move back to where you are okay again? At t...

​How should a trader deal with "overconfidence?" Maybe a better question about confidence--trading and otherwise--is not why people are overconfident to begin with, but why they stay overconfident. You see, the problem with overconfidence is not the innate bias toward optimism that most people seem to possess. That's a good thing it keeps the world moving forward. The problem is the inability to t...

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 fool themselves into thinking they are omnipotent. Behavioral economists Brad Barber and Terrance Odean illustrated how novice traders are especially overconfident. They analyzed account records from a...

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 newspapers? You don't need to spend hours and hours reading about the markets if it doesn't directly lead to a profit. For example, most media coverage of the markets is for entertainment value, so spen...

​In the movie "Wall Street," Gordon Gekko argues, "Greed is good." Greed can motivate you to strive for perfection and keep you persisting in the face of adversity, but greed has its downside. It is often said that the markets are driven by fear and greed. The masses have a natural desire for wealth and all the advantages that money can buy. In their zeal, the masses invest in stocks and believe t...

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 when the market is moving in your favor. It's hard to avoid closing a trade out early in order to lock in profits. Some winning traders face more losers than winners, and when you hit upon a winner, ...

Good trading times may be just ahead. Are you ready? It's times like these when the right mental edge can make all the difference. If you want to take advantage of trading opportunities for the New Year, it's vital that you approach trading with the proper mindset. Be ready to work hard and do whatever it takes to come out a winner. Unfortunately, many traders aren't up to the challenge. They don'...

​Would you ever think of jumping out of an airplane without a parachute? Of course not, but that's what some people do when they trade the markets. They are very willing to put their money on the line, but they don't have much to protect them from a major disaster. Placing a stop, for example, can prevent you from allowing a small loss to turn into a big one, but many traders avoid placing stops. ...

​It's almost impossible to have rock solid confidence as a trader. Sure, some traders can't be thrown off track very easily, but it's natural to feel a little afraid occasionally. Let's look at some of the reasons that you might feel shaken. What the markets will do tomorrow or next week is far from certain, and you don't have a crystal ball. Your information is fallible. And without perfect infor...

Imagine what you would do in the following scenario. You have been looking at a position for a week. You had a clear and simple trading plan: Just wait for an announcement at the end of the week, watch prices jump, and then sell. As might be expected, things aren't working as you had planned. First, no clear trend has emerged; prices are moving chaotically up and down. Second, it's been two days s...

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 back to your hotel? Do you get upset when you are told you are wrong, or do you welcome criticism or an opposing opinion? The ability to be open and flexible often makes the difference between winning and lo...

In his book, "Trading to Win," Dr. Ari Kiev notes, "winning days are often followed by plateaus and losing streaks." Behavioral economist Dr. Terrance Odean observed that novice online investors who had a series of winning trades tended to have periods of overtrading. It's as if they believed they could take more risks, and potentially lose profits, since they had just made more than they expected...

Something is usually going up when something else is going down. Therefore, good trading times may be just ahead. Are you ready? It's times like these when the right mental edge can make all the difference. If you want to take advantage of trading opportunities for the New Year, it's vital that you approach trading with the proper mindset. Be ready to work hard and do whatever it takes to come out...

When you are riding a winner, avoid looking at it all the time.Search out new trades in other markets.Absorb yourself with looking for opportunities elsewhere, if you are the type that must have market action.Diversification is the key word here.But remember, you can afford to take only the very, very best trades elsewhere when you are riding a winner.Don't blow away the profits you are making on ...

​Are you having trouble finding a balance between your trading and the rest of your life? Since you took up trading, do you seem to be possessed by it? Trading can be all-consuming. You don't seem to have time for your family, or any recreational activities. Is it always going to be that way? Have you gotten into something in which you are now trapped? What I'm describing is what happens to many p...

​Humans don't like taking chances with their money. If given the choice, they would take a sure thing rather than a gamble, even if it meant making relatively little profit. What do you think most people would do, take $100 right now or take a gamble in which they would either receive nothing or $200? Most people would take the $100 but would you? If you trade the markets as a short-term trader, y...

​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 carefully to protect yourself from getting hurt. People are so attuned to others that they mimic their behaviors without knowing it. Psychologists call this phenomenon contagious behavior. Contagious behavio...