Information

The market is an endless supply of information. It is always spitting out unique information every single second. It is not supplying painful, joyful, angry or happy information, just information. How we perceive this information is up to us.


If you have a position in a stock, long or short, you are going to objectively see things as you want to. If you’re just cruising around the market typing up charts with no positions on, you’ll likely see the full scope of what’s going on.


If you're long, you are more likely to focus on the positive bullish aspects of your trade because making money feels good and losing it feels bad. "I've spotted this buyer on the tape or the moving averages are all curving up on the daily chart, there is a tight bull flag on the 5 minute chart, etc.”


You don't have as great a propensity to look at things from the other side -- 


“The volume on the hourly has mostly been red volume” or “the break of highs just failed at a downtrend line on a 30 minute chart”.

 

The message that is important to ask yourself, "If I was on the other side, what would I be thinking? Should I be nervous because my trade looks like it will fail or should I be confident because I am seeing the indicators all come together to show more downside ahead?" While you’re at it, ask yourself where your stop would be.


It is much easier to objectively navigate equities with no position as the entire picture will be clearer. How you perceive information is completely changed and you have no attachment to the stock. If you have a position, you have an attachment to the stock in the form of your risk. Consider you're long a stock and you see a massive seller come in; you're going to perceive that as negative information, when really it's just information. But because you have a vested interest, you have negatively charged emotions to that seller. If you just naturally come across the seller with no position, you just perceive this information as what it is black and white. 


If you want a horse to win a race but they lose, you may briefly be upset but get over it rather quickly. If you bet your rent money on the horse then you're going to be pretty angry. How you perceive information will be drastically different. If the horse rallies from 6th to 1st you will be ECSTATIC because you are so heavily invested in the race. 


This lesson ties right into position sizing. Remember, we want to have no emotions when trading because they are the enemy and will cause you to act irrationally when too wound up. 


If you're living and dying in every trade, it is likely you are risking too big a percentage of your account on each trade. I personally like to risk 1% of my account for favorable trades, depending on the setup. 


Remember, longevity is much more important than today's P&L. 



Do you have balls? 


Share one or more of your own marks that you know the trade is fucked when you say it. If we know your marks we can help point them out before Mr Market cleans your clock (think of your high five sell signal - posting a P&L, acting cocky, etc) 


POST IN TRADING PSYCHOLOGY CHAT 

 

You are officially at the 50% mark! Only 50% to go! Drop “I'm at the halfway point and I learned ….”in the Trading Psychology Group Chat!


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