|
|
|
|
|
|
|
So, how do you break this cycle? First, you must overcome your own psychological and emotional biases. These biases induce emotional reactions and prevent us from peak performance. What are the biases that cause us to be emotional? |
|
|
|
|
|
|
|
|
Our human nature demands certainty. We abhor making decisions under uncertainty. The market, however, will never give you certainty. |
|
|
|
|
|
|
|
|
How can you cope with your bias toward certainty? The answer is to think in probabilities. Learn and use proven (winning) trading tactics. Select high probability trades. Those probabilities themselves become your certainty. For example, through back testing, you can be "certain" that a particular chart pattern will result in winning trades 63.6 percent of the time. That's all the certainty you need. You can control your emotions if you think in probabilities. |
|
|
|
|
|
|
|
|
Our human nature demands control. We are very uncomfortable when we are out of control. But the markets will never give you control. |
|
|
|
|
|
|
|
|
How can you cope with your bias towards control? The answer is to control those things you canyour knowledge; preparation; planning and, most importantly, the execution of your plan. Don't worry about price movements. You cannot control them. |
|
|
|
|
|
|
|
|
The best way to control those things that are under your control is to act in certainty. That is, don't hesitate, don't second guess. You know what to do because you think in probabilities. You can take control if you act in certainty. |
|
|
|
|
|
|
|
|
This bias is unbelievably strong. From birth we are taught to avoid loss and that mistakes are bad. Now you start trading and you see losses all the time. |
|
|
|
|
|
|
|
|
How can you cope with your aversion to loss? We have identifiedfour bad ways to handle losses: |
|
|
|
|
|