Trading Educators Blog

​Jim own a Hog farm. He produces 1,000 hogs per month to take to market, so he runs a fair-sized hog operation.Jim grows corn and soybeans for feed. He grinds his own beans into meal, and has silos for storage of both the corn and the beans. In years where the crop of the best quality, Jim stores as much of his crop as possible. If the crop is of lesser quality, he sells his crop in the open marke...

​Traders and investors try to understand their world. They make hypotheses and test them. Rather than conducting formal experiments, however, they use their everyday experience to test out theories they have about the markets. We study the markets and try to develop our own personal theories about how the markets work. Because we don't conduct formal experiments, we may fall prey to psychological ...

​In 1981, when I first started day trading, I would get to bed early night, wake up early, and be excited about starting the trading day. I remember on time when it was a cool, sunny day, and I really felt rejuvenated. After a quick exercise session, I couldn't wait for the markets to open, so I could make a few winning trades. I was really hyped. "Today is my lucky day. Today I'm going to make a ...

​Have you ever had a bad day when nothing seemed to go right? First, you got up late. Second, your computer wouldn't boot up, and third, when it did, you couldn't seem to get in and out at the right time when executing even the most basic trade. What really upset you was when your Data line went down for 10 minutes during a critical moment in your trading plan. Traders face setback after setback, ...

​If only humans were more like machines. In theory, the ultimate trader would act like a robot, analyzing market data with unfailing accuracy, devising a trading plan, and executing it without flaw. But does trading work that way? Trading is more art than science. Without an intuitive grasp of the markets, it's difficult to successfully trade the markets using short-term trading strategies. Humans...

​Beginning traders may make trade after trade and watch their account balance dwindle with each trade. They may feel unintelligent and thoughtless and think, "Why am I making so many losing trades?" At times they may wonder if they are thoroughly incompetent. But it's all a matter of perspective. If you aren't trading profitably, it isn't because you can't. It isn't because you have bad luck. It i...

​Whether you're a novice or seasoned trader, there are days when you face setback after setback: Adverse events go against you. You make a trading error. You misread the markets. The possible setbacks can be endless, and it hurts a little to watch your account balance take a hit when one of them catches you off guard. But whatever roadblocks get in your way, you have to take them in stride. How ca...

​Are you experiencing an emotional roller coaster, euphorically celebrating wins, but facing despair when losses mount? If you are, you may be taking things a little too personally. If you want to trade like a winner, you need to take responsibility for your actions, taking every precaution possible to neutralize adverse events and to control risk. That said, when things go wrong, it may not alway...

​As traders in the markets, it's informative to study everyday examples of mass psychology. Although humans are highly intelligent, they can act like cattle blindly following the leader of the pack to the slaughterhouse. For example, have you ever observed how people drive in busy rush hour traffic? On a crowded freeway, it's common to see people refuse to acknowledge that the flow of traffic has ...

​Winning traders are extremely disciplined. They wisely study the markets, devise a trading plan, and follow it. They control their impulse to abandon their plans prematurely, and they don't allow emotions, such as fear and greed, to influence their trading decisions. In the trading profession, emotions often get a bad rap, however. There are critical moments of investing when it's vital to contro...

​Fear and greed drive market action. We enthusiastically put on trades when we think a huge profit is assured, but when we see the market shift dramatically, we get out as quickly as possible. We fear being trampled by the masses as they all rush to sell. Fear and greed are powerful emotions that underlie the actions of the masses, but behavioral economists argue that regret is equally powerful. R...

Have you ever been so excited about a trade that you couldn't sleep at night? Or perhaps you are trying to dig yourself out of a hole and worry has taken a toll. Studies of disasters, ranging from major environmental catastrophes to minor laboratory accidents, happen when people are under extreme stress or experience physical exhaustion. When people are tired, there's an increased risk of disaster...

​The winning trader stays ahead of the crowd. In ever-changing market conditions, you have to think of new, innovative trading ideas. But it isn't always easy. There are times when you feel mentally stuck and unable to think creatively. When you are feeling a little stuck, there are specific steps you can take to get your creative juices flowing. Creativity can't be forced. If you try to force you...

​The expectations you hold about where your trading career is going can have a powerful impact on what you do and how you do it. Consider three traders, Jake, Steve, and Paul. Each has a different outlook, and this outlook dictates how they approach the markets. Jake is a pessimist. He wants to become a profitable trader, but his attitude gets in the way. He thinks, "I just don't have the talent t...

​Your ability to concentrate fully and intensely can mean the difference between consistently taking home huge profits and barely staying above water. It's really important that you pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make a wise decision once all information has been scrutinized. You can't be distracted and unfocused while formu...

​Marvin has been following a company stock for the past year. It's a great company with solid management, high sales growth, and consistently high earnings. It is in a booming industry sector and a favorite of the media. After a year's worth of careful deliberation, Marvin has decided to pull the trigger and buy a large position. He can't see what can go wrong. What can go wrong? It's a good compa...

Don't follow the crowd! You've been warned over and over, but few are that independent minded. Breaking away is harder than it looks. We are all familiar with the rebel, the person who breaks all the rules and is skeptical of the status quo. At the other extreme, the ultra-conformist seems to follow the rules too blindly. Neither extreme is optimal for trading. It's necessary to find the right bal...

​Jake has just made three losing trades in a row? He decides he is in a slump and is now worried that he can't get out of it. But is he really in a slump? Perhaps he's just panicking for no good reason. He may just have a pessimistic attitude, but this might be enough to keep him stuck. Thoughts are powerful. The reality of the situation may not matter. All that matters in the end is your percepti...

​Making profits as a trader is often a matter of trading in the proper state of mind. Trading expert Dr. Van K. Tharp, author of several best-selling books on trading psychology and head of the Van Tharp Institute, describes three states of mind that may dictate how you approach trading. As traders gain experience with trading the markets, they move from a "having" state of mind to a "doing" state...

​It would be wonderful if there were a foolproof and valid instruction manual for how to trade the markets profitably, a cookbook of sorts where you merely follow the steps and you are successful. For decades, traders have tried to find recipes for financial success. For some, the Holy Grail comes from the latest trading guru. For others, it may be a new software program. As appealing as a trading...