Friday, April 29, 2011

Trading and Mindsets

Hey there

A friend of mine was in a restaurant on Darby Street with me a few nights ago and while waiting for a few other friends to arrive, like all good medical students, we talked about investments. We were talking about charts and this friend was asking me how I interpreted them and what indicators I used and if I could teach her what I had learnt.

See charting is a really really weird thing. It is very subjective, like you can ask 10 people to look at the same chart and all 10 of them can draw different lines on them and tell you different things. 3 can tell you to buy, 3 can tell you to hold and 1 can say this is retarded. To some people, charting is a science and to some, it is as good as witchcraft, as long as it works, it works.

After talking to enough people who knows half of what they are doing and reading enough books about charting, you’ll eventually devise your own technique and ways to look at different charts. It is very interesting to get into the psychology and explanation behind each interpretation but I think to be good at reading charts, it is more important to have the right mindset yourself.

Almost all the books that I’ve read or people that I talk to about charting emphasizes the importance of having good mental discipline. In fact, one of the most interesting books that I’ve read about trading is called “Inside the Mind of a Turtle” and the whole book teaches us how to think like a trader.

I guess what I’m trying to say is that it is one thing to learn how to read charts and it is another to acquire the correct mind set to be good at it. Trust me when I say it is easy to say I’ll sell at a 10% loss or when the chart does “this” but when the time comes to actually close your position at a loss or even at a profit, it can actually be really difficult type in your trading password and click execute.

It is not easy but with enough practice and education we'll get there eventually. I hope.

Remember that charting is just a tool, how you use it is completely up to you.

So what do you think it takes to be a good trader? Do you have to be totally free of emotions when executing trades? Is that even possible?

Do leave me comments or drop me an email. I’m more than happy to read about what you think. Thanks for reading!

3 comments:

  1. Since mid-April until today, my profits have fallen by 60%. As an investor, I am looking at the long term. So I look at the realization of milestones such as FDA approvals for biotechs, release of exploration results for infant resource companies etc. Hang on, that sounds more like a speculator.

    Anyway, whether investor, trader or speculator, the % rewards and losses you make all depends on the risk you take!

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  2. One of your next blogs could be about the sectors on the ASX and what factors affect their performance. For example, a tanking real estate market is going to hit the property sector hard. High aussie dollar will affect the profits of local based manufacturers. Under utilization of condoms due to an apathetic and passionless Gen Y will create an oversupply in rubber and latex manufacturers.

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  3. lol I wish i had the chance to use more condoms. I will write about that when I have enough knowledge about it.

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