So far we’ve concentrated on looking at how fear and greed can affect a traders ability to follow their trading plan, and then we started deconstructing those fears piece by piece.
In this post you’ll find some more strategies for dealing with the fears that may be sabotaging your trading.
Understanding where you are strong means having an edge. For example, one that stands out for me is a successful options trader. Before becoming a trader he was in the navy, and one of the things you can associate with defense forces is the strict discipline they must learn. You may or may not already know that discipline is an important key in trading success; and this man turned $10000 into 1 million in 3 years!
Unfortunately, many don’t find out what their strengths and weaknesses are until well after they have taken a solid beating from the markets. An example of this is getting involved in a trading system or buying a course where the meat of the trading is discretionary, meaning you analyze and make discretionary decisions based on your analysis. There is absolutely nothing wrong with this approach if it suits you, but for many it does not. Some people need a solid set of rules that require nothing more than if A = B, then do C, and this is called mechanical trading.
In my last post on trading psychology we started looking at some of the indvidual fears that traders can have, and also some of the effects greed can have as well. But if you missed reading it, click Understanding Fear and Greed and read that post first before reading on.
In this post, we’re going to start looking at how you may control fear and greed, so I hope you have your list of fears handy as we might be able to cross some of them off.
What are CFD’s?
I had planned on doing a post on CFD’s in the near future as part of a series on the many products available to traders, however I have moved this forward in response to a comment made on this blog asking to explain what CFD’s are. Brian did give a response but asked me to expand on it for the benefit of all.
The term CFD stands for Contract for Difference, and it is essentially a contract between you and another party (the provider), where by you settle the difference between the purchase price and sale price of the contract. If your sale price happens to be higher than your purchase price you make money, likewise, if your sale price is lower than your purchase price, you will lose money.
