The psychology of trading

The psychology of trading

June 3, 2013 / Ken Bailey

There are many articles and books written on the psychology of trading. There are even counselors that specialize in helping traders improve their trading.
They only address the psychology of trading, not how to pick better trades and exits. I guess that can work but I’d rather trade the way I’m comfortable
with.

I’ve never read the books and I don’t remember the articles I’ve read. I do remember some of the free webinars I’ve listened to while I was working. While
interesting, I have found that I can improve my trading without any of that. I just trade what I know, understand and I like.

In my last blog I talked about doing homework to improve your trading. It has greatly improved mine. Another way I have found to improve my trading is to
trade the way I like, not the way other people or services tell me to trade. So now my homework is based on finding trades that fit my psyche, that fit my
style, that I feel comfortable with and I like.

If I know and understand a trade thoroughly I’m more likely to stick with it. When I find my own trades and do the homework I know how they work, I know
how to adjust them and I know when to sit on my hands and let the trade work. I don’t worry about my trades and I adjust them far less often resulting in
far greater profits.

In the past I’ve written about how flexible options are. That allows the person that really understands options to trade the way they like. It seems to me
that most of the information that I have seen about trading psychology has addressed the day trader. While I’ve certainly had trades I closed in a day for
very nice profits, I know I am not happy or comfortable day trading for a living. Occasionally a nice day trade sets up and I’ll trade it but typically I
like making a lot of money slowly and with a lot more room for error. People talk about how stressful trading is. I just don’t find it all that stressful
anymore.

A few years back the company I was working for bought a bunch of training around leadership. There were some really big names in the professional training
world that conducted the training. It was at one of those seminars that I started my trading career. There were about 10 people from my company that went
to that training and yet I was the only person that ended up trading for a living. Do what you love and you’ll never work a day in your life, sounded good.
So I guess I haven’t worked in years. I liked the idea of trading for a living and the others thought I was crazy. I’m pretty comfortable with being
considered crazy. Many of my crazy ideas are still being used at that company, saving them more money than they ever paid me. Many of them have lost their
jobs and have not been able to find permanent employment.

One of the things that I took away from that training was the concept of doing what you do best and work with people whose strengths are your weaknesses
and vice versa. They said it took too much time and effort to improve on your weaknesses. Your time is better spent developing your strengths. You’ll feel
better about what you do and you’ll do it better. With options you can trade your strength and stay away from your weaknesses. Trade the way you are
comfortable trading. Trade the equities and the trades you understand.

I’m sure part of the reason I was the only person that was attracted to trade was my concept of what it would be like. It is not at all what I thought it
would be like. Since leaving that job everyone I run into from those days thinks I’m a day trader. That was their concept of trading for a living. Everyone
that asks me what I do for a living thinks I’m a day trader when I tell them I trade for a living. Of course trying to explain what I do in a few sentences
is nearly impossible. So typically I just point them to the website.

My trading has certainly evolved over the years. My life situation and my understanding of the trades have changed. The more experience I have with trading
the more I understand what type of trading I like the most. I guess I could have paid a psychologist to help me get to where I am today but I feel I’ve
learned a great deal more by going through the experience.

So as you trade be away of how you feel. Trade the trades that make you money and you feel good about doing. As you gain more experience try some other
trades and see how you feel. Add to your bag of trades as you find more trades that suit you. I know I love this stuff, I hope that you can find the
trading that you love too.

Ken Bailey
OptionsANIMAL Instructor

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