 Here are the five principles that benefit specifically to trading psychology. Next up will be five principles for trading the markets.
The first principle: Trading is a performance activity
And it seems to be the main idea. Because everything, for example, the playing of a concert instrument or the playing of a sport, and also trading entails the application of knowledge and skills to real time performances. We know that success depends on a developmental process in which intensive, and experience over a long time yield talent and skill. The same we may say about success in trading. Moreover, many trading problems are attributable to attempts to succeed at trading prior to undergoing this learning process. And all these suggest that professional traders account for well over three-quarters of all share and futures contract volume. By making sure that you don't lose your capital in the learning process and without honing one's performance, it is very impossible to uphold success against these professionals. You should know that confidence in one's trading comes not from psychological exercises or acumens but from the mastery conferred by one's learning and development.
The second principle: Success in trading is a function of talents and skills
Innate talents and developed skills determine one's level of success. That's why, trading is no different from any game or acting. The key to success is finding a seamless fit between one's skills and the specific opportunities available in a performance field. But for traders, this means finding a superior fit between your abilities and the specific markets and strategies you will be trading. That's why the result of a suboptimal fit between what the trader is good at and how the trader is trading is the reason of many problems.
The third principle: The core skill of trading is pattern recognition
Pattern recognition always lies at the heart of trading. And it doesn't matter whether the trader is visually inspecting charts or analyzing signals statistically. The trader is responding to patterns that are indicative of such shifts. He also is trying to identify shifts in demand and supply in real time. Technical and fundamental analysis, cycles, econometrics, quantitative historical analysis, Market Profile are simply methods for conceptualizing patterns at different time structure. And most traders will profit most from those methods that fit well with their cognitive styles and strengths. A person expert at visual processing, with superior visual memory, might profit from the use of charts in framing patterns. But someone who is highly analytical might profit from statistical studies and mechanical signals.
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