Wednesday, April 26, 2006

40 - Trading Psychology By Bennett McDowell

An extract of an article from Traders World Magazine issue #40

Trading Psychology

By Bennett McDowell

This is an interesting paradox I found from working with many traders over the years. Many people who start out in trading have been successful in other careers or business ventures before trading. Since it is a fact that you need discretionary money to trade, you need to have been successful in the past to make enough to fund a trading account with risk capital.

The tools that made these people successful in the business world may not be a strength in the trading world. Some new traders who had to be aggressive in their chosen businesses tend to think they need to be aggressive with the markets. It seems logical. In fact, that is what made them successful before as sales people, managers, executives, doctors, business owners, entrepreneurs, etc.

In trading however, this aggressive type of behavior can actually be your biggest weakness. The belief that you can force the market to do what you want and make your trade work, just won’t happen! The markets are too big.

In fact some of the most successful traders I know approach the market passively! They tend to "Follow" the Markets and not force an outcome. There are times to be aggressive in your quest for knowledge, but the aggressiveness I am talking about here is different.

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