Think for yourself, trading rule number 5

27 9 2014 - 1 comment

I have been applying this rule for some years now and whether it is by coincidence or not, I have become a winning trader by applying it. I’m not sure that this rule would apply to everyone. I think it depends on the personality and psychology of each individual. In my case, it allowed me not to be easily influenced and meet my objectives of swing trading.

The influence of the environment on trading

Formerly, I spent a lot of time reading technical analysis, I spent many hours scouring through discussion forums, reading trade press … I felt like I was “working”; collecting information, trying to see what the general trend was… In fact, the time I spent collecting information was not used to reflect, analyse my trades, think about my graphics and especially work on my behaviour and my psychology when I was positioned. All this energy spent was in fact perhaps just a smokescreen or activism so that I was not dealing with the basics: success in trading is 80% psychological. Worse still, when I had a form of certainty in the stock market, reading 2 or 3 different opinions got me confused, and put me in doubt. Doubt is essential in trading, it helps you to be cautious, to properly control your lever … but it can also be annihilating, as it can prevent decision making.

I had a flash of intuition a few years ago when I was preparing to become a buyer on Nasdaq 100 after several months of strong declines. I was confident with my analysis; it was based primarily on the rebound of a major psychological threshold with other supporting technical elements; an extremely beautiful swing to try. Alas, I then read some analysis going against my conviction; I visited a well-known stock forum where 95% of traders were bearish. I was seized with doubt; could I be right and everybody else wrong?, I had not done anything and I had missed one of the most beautiful rebounds in the history of Nasdaq 100 … which would have allowed me to start earlier as an own-account trader. From that day, I content myself just with raw information: the U.S. unemployment figure, the GDP figure … I do not always read the interpretations and analysis … I form my own personal opinion and I especially look at how the stock market reacts at the time the information is published.

Too much information kills the information and over-anxiety

My behaviour may be extreme, but it gives me a balance, a form of serenity. For example, I have been bullish on all indices since November 2011; it was my personal analysis which was based on the psychology of markets and over-anxiety. By having a forum on my blog and in reading comments, I found some sometimes violent for months running, of people reciting what they had heard on TV. I was summoned to justify myself because my opinion was contrary to doom-mongering, to the announcement of the end of the world the collapse of the euro … They were trading blindly because X or Y, renowned analysts in the literal and figurative sense had gone on TV … saying indices will drop to an all-time low … We were just in a state of hysteria – or at least with a wide audience to maintain…

We must take this fact into account: the business of television is to create anxiety among people, because anxiety attracts a large audience. There are many theories about this exciting topic especially in sociology and behavioural psychology. For example, if you say that the crisis we are experiencing is not the mother of all crises but that it has been the natural state of the economy for 40 years now; that the Euro cannot collapse, etc. this will not interest anybody. You will not go on television, you will not be invited to a debate programme. You are not in the spotlight, people will zap … If tomorrow you write a book entitled “Napoleon died a natural death” you will not sell a single book. If you publish a book whose title is “Napoleon was poisoned to death by the English” it will be a best-seller. The media give people what they want to hear. Human nature is more drawn towards anxiety, death, catastrophic situations…

You must take this into account when trading, learn to judge the quality of information served to us and the motivations of the media. In the end, the best interpretation remains ours. But to actually think, you must certainly have a form of contemporary autism; if not, you will be totally overwhelmed with information of very varying quality. I therefore believe that if I did not voluntarily dissociate myself from these “influences”, I would not have been able to hold my bull position for such a long time and I would have thus missed the 2 most beautiful bullish years of this decade.

The main objective of an own-account trader is freedom: to no longer depend on a boss, hierarchy, to be autonomous, responsible for his actions, his choices … but intellectual freedom is also a feature for success in trading. This is all summed up in a saying: ” advisers are not those paying.”

List of my 10 personal trading rules:

1) Do not lose money, trading rule number 1

2) Trading rule number 2, reread rule number 1

3) Always have a backup solution, trading rule number 3

4) Only trade when in top form, trading rule number 4

5) Think for yourself, trading rule number 5

6) Control your losses, trading rule number 6

7) Do not force yourself to trade, trading rule number 7

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1 Comment pour Think for yourself, trading rule number 5

  1. Richarrd says:

    Best rules for trading CFD.

    Thanks for your healthy vision.
    Your backup plan is great.


    CFD trader

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