I have suffered from the same problem, … overtrading heaps, trying to chase the next hot stock rather than letting the ones I held run. I haven't lost a lot of money, but I haven't made as much as I could have by holding. I am slowly learning better self control and emotionless trading.
Yes robotic is the way .. you have a big win and the you feel invincible and then pilfer it away on trades you should not have objectively taken (outside your rules) in your euphoric state ... or have a big loss or several in a row and fail to take a trade which turns out was the big winner... Develop rules and leave your emotions in check.
In first year and half of trading/investing, I learnt one really good thing is that WE ONLY NEED 2-3 GOOD WINNER IN A YEAR rather chasing every stock and trying to be in and out. 2-3 Good winning strategy not just save our time but brings relaxation in the life and you can study your stocks FA & TA very well due to very little in numbers.
Study the "commonality" of the tips from the top 5 on the Hall of fame list ... figure out what they are doing to be successful... Makes some rules based around what your seeing, Keep a trade diary to record what works what does and your psychological state at key times during each trade ie, stock rose 20% urge to buy more, did buy more, stock fell, Disgust ... lesson Don't buy a spike etc etc
Just bought a dairy today. Was using excel sheet last year but stopped using it.
Great advice - a record of what works and what doesn't work. And write about how to improve results.
Technical Analysis, Fundamental Analysis and Psychological Analysis.
After many years and too much of this
I still tend to suffer from analysis paralysis - the frozen state where I am thinking 360 degrees about everything and doing nothing.
As I have written in my diary, So now I assess, I need to get into "the successful outcome state"
Then I look back and reassess TA, FA, PA - left out the most important - "market sentiment".
Now I have the foundation state. The 4 pillars of the "successful outcome state"
1. Technical Analysis
2. Fundamental Analysis
3. Market Sentiment
4. Psychological State.
Just my words- others can reword and improve upon these.
Also to open my mind, added some words of wisdom from others in my diary today;
"It's times like these, so many moving parts are at play, that following the charts, trading the trade, is probably the smartest strategy, rather than anticipating too much"
Date: 15/01/15
Time: 14:29:13
Post #: 14588980
Treat you losses as a cost of training albeit expensive ... The bigger the loss the more etched into you brain the lesson becomes... Often people set targets too high and often don't have a stop at all... Go back and examine each loss you had and determine what you should have done that would have saved you ... It may be that you should never have taken the position in the 1st place in some cases or set a different stop. Take those "what I should have dones" and make solid rules. ... When you come round next time into the same situation read through your diary of mistakes and the psychological state you were in before you made that wrong decision ... see a parallel this time around. A fool is not someone who makes a mistake (we all make mistakes) ...a fool is the one who repeats the mistakes over and over the more time the bigger the fool. ...
Market sentiment is a leading indicator. This reason and emotion in the minds of traders initiates a buy or sell and drives the overall price action of the market. A person has to have a thought or a feeling before they act. Whereas technical indicators are lagging.
We can assess market sentiment in HC forum, due to the statistical number of different people posting being a near enough representation of the overall market sentiment. Pretty sure that, that is what people want in a forum.- to be able to assess objectively, wether the price is undervalued or overvalued and which to choose to make some coin.
Take for example.
Someone initiates a thread titled "Enormous Dump" which gathers momentum of ideas from others.
Obviously a spiteful reaction to the hype and exuberance of others.
No amount of psychological work on yourself can stop the effect in the minds of others. If you havn't read the HC forums, then you cant assess market sentiment properly, unless statistically there is a pattern. We know the pattern for a successful outcome is get in "before the herd and sell into the herd".
Sometimes, this pattern can be determined by the hype and spite of HC posters. Or is this being narrow minded?
That is the market sentiment changing. The only constant is change. When there is hype there will be spite. The more hype the more spite.
Does this pattern reoccur thousands of times?? Balance is the preferred option.
This external factor can be beyond our control. Or u can apply stops and position sizing practices for risk and money management and not be bothered about the sentiment adversely affecting your psychological state, to induce pain or loss. That is the intent of spitefull postings- destroy the psychological state of another person.
So "Market Sentiment" is an external factor that can affect your internal "psychological state", which affects your decision making process.
A mechanical system avoids this. So does proper training in maintaining a "successfull outcome state", so that it is unconsciously executed to make profits, without being labelled as a daytrader or short or long term trader. How to do this???
Because I devised my system of profit on all timeframes and the fastest timeframe appears to lead I get myself into all sorts of mind bending madness. At least over time the process builds patterns. The mind looks for patterns. Where there is a gap in the pattern the mind will fill it in. Clearly, the so called pump and dump of the daytrader which affects your profits is anexternal pattern.
So what do we put in the gap of our internal pattern to get a "successful outcome state"?
Training and conditioning with the correct practices? Whatever works for u?
So in my dear diary I will write and ask the question, time and time again until I get it correct.
Mraket Sentiment is a leading Indicator. This affects your psychological state.
My system which I am still developing, was designed to take into account all timeframes.
A well balanced foundation for a successful outcome u need the four pillars.
1. Technical Analysis
2. Fundamental Analysis
3. Markey Sentiment
4. Psychological State
The negative viewpoint imprints in the mind of people more than the positive, because it is threatening to our body.
The number of posts.views on about "overvalued" outweighed the oyjers by an enormous amount.
The number of posts.views on about "Enormous Dump" outweighed the othere s by an enormous amout.
This is a measure of market sentiment, because the HC forum is a statistical representation of the whole.
This is a true indicator and a leading indicator.
Charts with lagging indicators are, behind the times.
