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- Herausgeber: Artur Sinitsyn
- Kategorie: Ratgeber
- Sprache: Englisch
The book explains how strongly emotions and the human factor impact trading and that your trading can be made better only through self-improvement.The book is intended for beginners and experienced traders who want to understand what they are doing wrong and why. The practical exercises will help to identify and eliminate mistakes, and develop your own trading style.
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Veröffentlichungsjahr: 2023
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Artur SinitsynSTRESS FREE TRADING
A PRACTICAL SELF-HELP GUIDE FOR TRADING ON THE STOCK EXCHANGE
THE PURPOSE OF THIS BOOK:
to demonstrate how strongly emotions and the human factor impact trading and that your trading can be made better only through self-improvement.
THE INTENDED AUDIENCE:
for beginners and experienced traders who want to understand what they are doing wrong and why; to help identify and eliminate mistakes, and develop your own trading style as a result.
ABOUT THE AUTHOR
Artur Sergeevich Sinitsyn is a trading psychology teacher at Live Investing Group; he is a practicing trader, a developer of "Sell’n’buy" intellectual game — a guidance manual for teaching trading skills.
* * *
would like to express my personal gratitude to Sergei Alekseev and the Live Investing Group prop company. Without them, this extensive publication would not have been possible.
Working as a psychologist at LIG helped me gather a sufficient information base for writing this book. I was able to follow the activities of hundreds of traders for a long period of time, identifying their main psychological problems and mistakes. I was able to collect statistics which formed the basis for my writing.
I hope that this book will help you to deal with common trading problems and will give you a boost towards qualitative growth in trading.
TERMS AND DEFINITIONS
Stockexchange — a centralized financial market where securities (shares), bonds, derivatives, and other financial instruments are traded.
Broker — an institutional and regulatory intermediary in trading financial instruments.
Volatility (from Lat. volare - to fly) — an indicator of price movement speed.
Chart — a visual display of price fluctuations of a financial instrument.
Deposit — the amount of the account with which the trader conducts his trading of financial instruments.
Closing a position — a transaction of buying or selling a financial instrument, resulting in fulfilment of the trader’s obligations on the previous opening transaction, and profit/loss calculation.
Investment — long-term placement of capital for the purpose of making a profit.
Instrument, financial instrument — an asset with which a transaction is made for the purpose of making a profit.
Intraday — one of the approaches to trading on financial markets, where open positions are not carried over to the next day. All trading is carried out only within one day.
Long — a "long" trade, or a buying transaction.
Lot — volume of the trade, equal to a part of the base instrument.
Margin — the margin amount for which the broker provides a credit for trading operations; market participant's funds used to finance a transaction.
Margincall — literally: a call from a broker with a request to the client to replenish the margin; a trading situation in which a trader does not have enough funds on the balance to maintain open positions.
Volume — the total amount of the asset traded per time unit.
Order — an order to perform a certain action on the stock exchange (to open or close a transaction)
Opening a position — buying or selling a financial instrument, which results in the trader’s obligations to make an opposite trade in the same financial instrument in the same volume.
Pattern — price model, or behavioral pattern.
Overtrading — excessive buying or selling of financial instruments.
Drawdown — a loss incurred during the time period starting from the historical peak of the yield curve to historical minimum of the yield curve.
Prop (proprietary) trading — a type of activity on financial markets, when a company works with its own capital (without attracting investor money), and also allows private traders to work with them, selecting the best ones for the regular staff.
Profit — income gained in financial markets as a result of a successful transaction or transactions.
Point (pip-price interest point) — the smallest possible price movement in financial markets.
Scalping, pipsing — a slang term for one of the internal strategies of three-day speculative operations on the stock, currency, commodity markets, when a transaction is closed at a small profit of a few points (pips).
Stop-loss — an advance order that locks in the trader's planned loss.
Timeframe or trading period — a time interval used to group quotes when building the elements of
a price chart (bar, Japanese candlestick, line chart).
Take-profit — literally: to take profit; an advance order that locks in the trader’s planned profit.
Trading terminal — a computer application used for stock trading.
Trend — a stable price direction either up or down. A trend going up is called a bullish trend, a downtrend is called a bearish trend.
Level — symbolic lines that display the minimum and maximum prices of a position at a specific timeframe.
Flat ("trading flat", sideways price movement)— literally: flat; a market condition without a pronounced trend.
Short — literally: a short trade; a selling transaction.
INTRODUCTION
Trading is the direct job of a trader: analysis of the current situation in the market and making trade deals.
The fact that a trader is a person does not need to be explained.
Psychology is a branch of science that studies the patterns of origin, development and functioning of the psyche and psychic activity of a person and groups of people.
So, what have we got?
Psychology of tradingis the study of the patterns of origin, development and functioning of the psyche and psychic activity of a person and groups of people acting on their own initiative and striving to gain profit directly from the trading process.
During trading, a trader may experience difficulties that can be resolved with the help of a specialist.
PROBLEMS THAT CAN BE RESOLVED WITH HELP OF SHORT-TERM WORK WITH A PSYCHOLOGIST
• Performance stress. When profit-to-loss ratio worries more than making good trades.
• Fear of trading. Freezing while trading; missing out favorable opportunities.
• Impulsive trading. Excessive activity (inadequate increase of trade volume and/or trading too often) because of boredom or loss of concentration.
• Revenge trading. Departure from trading plans because of anxiety or anger caused by a loss.
• Loss of self-confidence. Self-doubt and lingering negative thoughts because of losses and/or recent problems outside trading.
• Beliefs that interfere with good trading decisions: perfectionism, negative expectations, overconfidence, linking self-esteem with income size.
WHY DON’T I DO WHAT I SHOULD DO?
WHY DO I DO WHAT I SHOULDN’T DO?
QUESTIONNAIRE
Before you read the book and start answering questions and doing exercises on your own, fill out the questionnaire. After reading the book, be sure to go back to your notes and study them.
Date:........
My attitude to trading:
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Trading on the stock exchange for me is
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I started trading to
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I assess my attitude to risk as
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Uncertainty for me is
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My strengths are:
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My weaknesses are:
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Opportunity for me is
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What kind of sport can be compared with trading?
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How will I take money from the market?
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CHAPTER 1TRADING SYSTEM:RISK, MONEY AND TIME MANAGEMENT
THREE BASIC COMPONENTS OF TRADING
Why do people usually start what they call trading or stock trading, one way or another?
Of course, it starts with desire or need. What lies behind this, what goals the future trader pursues, what drives him — we will discuss all this later on. Many do not even suspect how mistaken they are in the reasons why they trade in the stock market.
What is required to move from thoughts and desires to actions?
Three main elements are needed for this: a trading system – a set of rules, according to which trades will be made, capital — money, deposit, this also includes risk and money management, as well as control of time — time management. The most important component is the individual himself, the trade, with his skills and abilities, as well as with all his psychological characteristics.
Only in the case when all these three components are present and correspond to each other, there is a probability of a positive outcome, that is profit (profit; see Fig. 1).
Fig.1 Components of trading
Each element is a separate area of responsibility. Often people who teach trading courses, or teach it online and in the media, do not even mention it.
How should these elements be combined with each other and is profitable trading possible without any one of these components?
Most people will answer: yes, of course, we need a trading system and discipline, the rest is “a matter of technique,” and they will prove to be wrong. A trading system and the desire to be disciplined will not make trading profitable. This is not enough.
The parameters of the trading system must fit your deposit size, the working volume. They should match your trading skills and suit your trading style. Trading must be in the zone of your psychological comfort.
Let's compare a trading system to a car. The trading system, which you want to use for your own purposes, will be your car. The vehicle is used for certain purposes (trips, cargo transportation, entertainment, status, etc.). Your actions in the stock market and the choice of a trading system lead to the goals you set. The basis for your trading can be the course you took online, a purchased trading robot or algorithm. Or maybe you studied and identified on your own some patterns or inefficiencies and decided to trade them. Even a simple decision: "Now I will invest, buy once a week, a quarter, or according to certain rules,” is your trading system. This is your area of responsibility.
But, as we know, cars are different, as are trading systems. Someone prefers fast sports cars, they can be compared with scalping: in both cases, speed comes first. Minivans or buses, that are not in a hurry but carry more people, can be compared with medium-term trading. And there are heavy trucks and special equipment, with those, like with long-term investing, you can’t ride fast and with a breeze; but there are different goals in this case, and the probability of crashing is much less. Trading can also be both, fast, short-term, with a large number small transactions per day (the so-called scalping), and long-term, aimed at accumulation, with one or two transactions per month (investing).
And now, when you have a car, that is, a trading system, chosen by you based on certain parameters, your skills – driver’s license— need to be of the appropriate category.
If you study a trading system with a mentor, it is like learning at a driving school, with a car and an instructor from the driving school: yes, he is with you, he helps and makes sure you do not skid to avoid an accident. Then you get a category B driver’s license and you are by yourself. Your personal car and your driving style must correspond to the acquired skills. Otherwise, it is only a matter of time before problems start. Having skills to drive a passenger car, you will hardly be able to drive a towing truck or a bus: different size — different speed and power.
Oftentimes, people who have studied trading or took a course in trading, complain to their instructors afterwards that they are not successful in stock trading. It turns out that they most often simply violate the "rules for operating a car", that is, they break trading system rules or trading robot settings. It is not the automobile’s fault if you can't start it, and neither it is the fault of the instructor who taught you how to drive.
By default, we assume that the car is up and running, that is, the trading system has a positive mathematical expectation, confirmed by one way or another. Trying to drive a car that doesn't start or without wheels is a torment in itself.
What else do we need to drive a car? Of course, it is fuel. This is your deposit, your money that you will use. The amount will be up to you. According to the rules of a trading system, for example, you learned to trade with the sum of 50,000 USD, that is, fuel consumption of 5 liters per 100 km. And you need 10 liters to drive 200 km. If you fill in less than that, then do not be angry with anyone but yourself when the car stops halfway. But for whatever reason people often want to minimize the initial amount, although this can cause an imbalance in trading, since risk and money management is also incorporated into the trading system.
Time management factors are important: the speed at which you get from point A to point B and the distance between them. This has to be taken into account. At a speed of 60 km/h and a distance of 100 km between the points, there is no way you can get there in an hour, even if you really want to, even if you have a full tank of gas, or in trading —a large money deposit. It means, you need a faster car, but then the fuel consumption can change. The risks of crashing increase if your driving skills are only at 60 km/h. In trading: if your trading system is designed for 20% per annually, trying to get 5% monthly is an excess risk.
So, what do we get as a result?
The trading system in itself is just a tool, a car, which, without a driver-trader, will simply take up space in the garage. Even if there is a full tank and the tires are inflated.
Traffic rules apply to everyone, but someone complies with them, and someone constantly breaks them, running red lights. And everyone who violates the rules, has a driver’s license, they all went to driving schools and passed the exams. It is the same in trading: there are rules and there are those who break them.
And once again: the car must be in operating condition. Even if you calculated everything correctly: the distance, and the route, and your license is of the right category, but the car stalls at idle, no matter how much you fill up, no matter how hard you try, it will only be a waste of energy, time and money. If a trading system does not have a positive mathematical expectation, in other words is "faulty", it will not be profitable.
SO WHAT IS A TRADING SYSTEM?
A trading system (TS) is a set of rules according to which a trader acts.
The trader must clearly understand these rules and strictly follow them. If the trading algorithm gives a signal to buy, it means we buy and do not think whether we should do it or not. If the system says we don’t need to do anything, so we don’t do anything, regardless of the market movement. Of course, it is a shame when good trends pass by you, but it is almost impossible to foresee all price fluctuations; therefore, if there is no signal from the system, the trader calmly waits for the right situation. If the system indicated that it is necessary to close the position, then this must be done and do not regret that after closing the price continued to move in your direction.
How to develop a trading system?
