Thursday, May 10, 2012

Scope for judgement in Trading

From Trader Psyches:

Hopefully this doesn't sound like an old broken record because it feels to me like I need to say it again.
Trading is not precise.
And this begets a whole number of downstream realities.
1. Your brain demands a judgment call in imprecision.
2. Your plan needs to leave room to make that best judgment call.
3. Improving your results comes from making better judgment calls.
4. Avoiding just your worst judgment calls (no "oh what the hec, oh I will just risk a little" trades) will make a big difference in your bottom line. The fallout is too great - lost capital, debited psych capital, revenge trades, wasted commission and lost time spent in mental recovery.

My Notes: Trader Psyches is a company offering psychological coaching to traders, based in the USA. Denise Shull, promoter of Trader Psyches has recently written a book on trading psychology - Market Mind Games. I am reading it.

The theme is: trading requires discretion. These decisions are judgement calls on current market behavior. This is similar to what I have practiced for some years:  to have a view on the market every day, for day trades. I make a judgement call on likely market behavior, before the markets open. Most readers know this since I discuss the call on CNBC every morning, pre-market. This makes it easy for me to use mechanical methods to trade during the day, since I know which side of the market / with what anticipation, I am trading.


ITradeForProfit Daily said...


I have a similar experience. I used to do a lot of trading without any pre-planning.

Then I started this blog with a strong view that I need to prepare a pre market plan. Describe the why's and what's of that plan. Have a plan b in place.

Since I started that, my trading experience has improved both on monetary gains and satisfaction.

The importance of planning a trade and trading a plan cannot be emphasized more.

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