Category: Psychology Of Trading

Cognitive Flexibility

Cognitive flexibility is being aware that in any given situation there are options and alternatives available. As an example, you don’t have to stay in a losing position, yet so many traders do just that as their conviction in a trade turns to hope. Cognitive flexibility is a critically important executive function  that occurs, almost

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Executive Function and Trading

A while back I asked the question of whether or not you were an instinctual trader. To find out you were asked to click a link and play an online card game. The game is called the Iowa Gambling Task (IGT) and was developed to simulate real-life financial decisions where performance is strongly influenced by

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Slow Down

Tony Schwartz, the author of Be Excellent at Anything, posited that a major problem today is that many of us can’t say no. We’re unable to define a stopping point or establish boundaries when it comes to “work.” In a sense we’ve become multitasking masters where we’re able to spend significant amounts of time juggling

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Rules Based Trading

There are numerous questions that need to be answered when it comes to trading. How much to buy or sell, where to trim profits, should I use the leverage of options or stick to stock, etc. Creating a set of trading rules can alleviate some of the cognitive load associated with trading related questions. For

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Overcoming poor trading habits

Poor trading habits are difficult to overcome, especially those that have been a part of a trader’s routine for years. Part of the reason is that habits are perfected through experience. Habits can be formed and reinforced through expectations (from one’s self or others), triggers (smells, visuals, etc.) and even market conditions. Research suggests that

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Working Memory Research

I’ve been conducting research in the area of working memory and want to further that research to find out if there is a relationship between trading success and working memory. I’m seeking 10-20 participants to help me conduct this research. Here’s what’s required of the participants: While the research will help to clarify, my hunch

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Discipline Is Key

Barclays Wealth has a new report out entitled “Risk and Rules: The Role of Control in Financial Decision Making.” This report looks at people and personalities and how they influence financial decision making. It also explores the strategies people use to manage their behavior when making investment decisions. Something I’ve noticed over the years in

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5 Days

As a therapist, when dealing with adjustment disorders and/or anxiety issues, one of my favorite questions to ask my clients was “what will your life look like in 5 days?” The logic that spewed from that point would offer up a window into that individual sitting in the chair on the other side of the

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Trade Metrics and Drift

As we approach the end of the year it is common for many traders to review their yearly performance. Most use an equity curve but those that want to improve upon what worked in 2010 take it beyond the basics. I’m talking about performing an analysis of the trade data to see where your strengths

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Own It!

It seems so easy to focus on the things we do wrong. I can name hundreds of mistakes I’ve made in my life. I choose not to focus on what went wrong, but rather on how I can improve my standing and learn from my mistakes. I found one of the most frustrating aspects of

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