Ahhh, the sweet smell of verbiage....
Been a while, but it’s good to see the same old same old. Plus ca change…
This thread was initially ‘about’ psychology in trading and of traders and then, as these things tend to when the blind lead the blind, became its own case study. LOL.
Assign psychology as a component of consistently successful trading at zero percent.
Look at some charts. You’re trading fundamentals and technicals, real world business needs and changing asset values based on fundamental supply and demand and moving toward technical aspects and setups as you head off into the shorter timeframes. Interest rates, inflation rates, and expectations and anticipations of both. Exchange rates, relative strengths of economies, global supply and demand: agro, Pharma, gasoil, foodstuffs, minerals. Impacts on the underlying market by a very large derivative market in just about everything (the derivatives dwarf underlying markets in some cases).
Now assign psychology as a component of consistently successful trading at one hundred percent.
Look at some charts. You’re trading the same charts, same world conditions apply, but you’re going to ‘assign’ psychological ‘value’ to every single twitch and shake. Support and Resistance become ‘where people sold/bought’ last time. Trends become self-fulfilling and trading ranges can have an entirely adequate psychological basis for their existence worked up a treat.
The fact of the matter is you’ll see what you expect to see. And you can base what you see on all manner of explanations involving from no to virtually all psychological aspects. Rationales for taking positions are largely post hoc. For those few consistently successful traders I know personally, the decision on what and where and when to trade is largely intuitive, but intuitions based on experience and effort and exposure – in their markets. What they see. Right now.
My personal view is that it is largely irrelevant whether you ‘believe’ trading is 0% psychological or 100% psychological or anywhere in between. Any attempt to codify, rationalise, define, explain or in any way attempt to understand anything other than price as it is right now, and where it is more likely to go next, is an intellectual arrogance and largely a waste of time unless you’re out to impress those who know less than you do and are easily impressed with stale explanations and are embarrassed to challenge the subject of so many texts (and posts) even though the challenge is screaming out to be made.
If you know nothing about psychology, you’re not wrong-footed in starting your trading career and consider it as an element to be examined with due diligence and empirical experimentation. Or if you ignore it completely.
If you have a higher degree in Psychology when you come into trading, you’re not wrong-footed if you forget everything you thought you knew about psychology and looked at it afresh and considered it as an element to be examined with due diligence and empirical experimentation. Or forgot about it completely.
The real danger is in spending too much time away from the charts and the price…
