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Psychology of TradingPsychology of TradingWhat makes a great trader?What makes a great trader?
Presented byThe Options Industry Council
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Options involve risks and are not suitable for everyone. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options. Copies may be obtained by contacting your broker or The Options Industry Council at One North Wacker Drive, Chicago, IL 60606.
In order to simplify the computations, commissions, fees, margin interest and taxes have not been included in the examples used in these materials. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences.
Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results.
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Psychology of Trading
Please note that the information provided today and the views expressed are mine and do not necessarily reflect the views of the New York Stock Exchange, its parent, subsidiaries or affiliates, or any of its officers or directors.
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Psychology of Trading
• Commitment to excellence• Mastery of emotions• Probabilistic thinking• Understanding and ability to control one’s own thought processes
• Staying in the moment• Executing a trading plan without fail
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What is Psychology?
• The science of the mind• Studied by observing human behavior
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What is “Psychology of Trading?”
Common denominator of all successful traders is the understanding and mastery of how mental and emotional states affect the ability to trade.
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Psychology of Trading
What would you do if you knew you could not fail?
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Trading as a Performance Art
• Preparation• Execution• Reflection
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Internal Motivation
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Following Your Bliss
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The Pursuit of Excellence
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Common Traits of Successful Traders
• Discipline
• Commitment and Goal Setting
• Strict loss cutting • Being right vs. making money• Passion• Non-attachment
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Discipline
• Training expected to produce a specific character or pattern of behavior, especially training that produces moral or mental improvement.
• Controlled behavior resulting from disciplinary training; self-control.
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Preparing to be WRONG!
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Thinking Probabilities vs. Patterns
• Eliminating biases• Focusing on what is• Recognizing mental and/or emotional states is the first step to controlling them
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Zen
• Staying in the present moment• The Beginner’s Mind
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Tools to Build Mental Discipline
• Journaling• Cultivate awareness of present situation• Rid mind of preconceived ideas• Taking the next right action• Learning from mistakes instead of repeating them
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Obstacles to Success
• Hope• Fear• Greed• Perfectionism
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Creating a Belief System
• Transforming Intellectual Understanding• Eliminating doubt• Trusting your trading plan
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Irrational Exuberance
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Artists, Athletes, Actors and….
Traders?
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The Psychology of Trading
• The importance of being passionate• Taking delight in the process• Having fun in the moment (even in the heat of battle)
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Trading as a Practice
• Thinking long-term• Continuous improvement• Understanding yourself
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