“I’ve always said that trading is basically a psychological issue and that traders should devote much time to work on these key points. In fact, most of my Super Traders spend at least one year working the psychological aspects before starting to develop their business plan or trading systems. ”
Van K. Tharp
One of the key aspects to consider in the psychology of trading is the personal self-knowledge that you adjust the operating in financial markets to the character of each, in order to take advantage providing you your strengths and limit the damage they cause him their weaknesses.
Referencing some articles Van K.Tharp in describing different groups of traders, let’s see what characterizes them:
- The traders of automatic systems ( mechanical traders ) believe they can eliminate the psychological aspects leaving it a computer program to take operating decisions.
Basing the effectiveness of the system of trading in checking the same historical data ( backtesting ) to determine future outcomes also has its drawbacks, because although disappear the human factor in the decision, arising other sources of error to consider: errors data on the software platform in system programming … and exceptionalities – remember the flash crash of May 6 past- or changes in market conditions.
Perhaps the dream of every trader: a self-magical that no psychological strain contribution recurrently huge profits system. Is this possible?
- The discretionary traders without rules ( no-rules discretionary traders ) are engaged in operations unscripted, without method or rules, sometimes guided by the recommendation of some guru and others by their own intuition.
The fact of not having a clear set of rules results in the inability to manage operations in an efficient manner and rarely usually leads to an operative with recurring profits.
Is it possible to achieve positive and consistent results following the recommendations of some guru without knowing the reasons that lead to this operation or specific setups?
- The discretionary traders with rules (rules-based discretionary traders ), as opposed to the above, have a clear and specific set of rules and methods to guide their operations and can also allow them some flexibility (eg as set a particular reward ratio ).
Having a system of clear rules can allow them to learn from their mistakes and keep improving their operational, analyzing daily operations and wondering mistakes and discipline in following positions.
Does have a formal and concise description of rules governing the operations and follow up with a strong discipline guarantee themselves success in trading? Or perhaps the bureaucracy that generate maintenance can disperse attention?
Any system or method that does not respond to mere improvisation and impulsivity operator may have the ability to reward and professional services market for traders, aware of this, he has been able to perfectly identify this business by offering specific solutions in the form of automatic trading , newsletters with recommendations, coaching and training services, among others.
Who will emerge the curiosity to know what your style may make the test Van K.Tharp.
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