Wednesday, December 12, 2012

Mark Douglas on Psychology of Trading

Mark Douglas states that success in trading is 80% psychological and 20% one’s methodology. If we
make an inventory list of a trader’s abilities in order to succeed in trading then technical analysis skill
is, though necessary but, just a small part of the overall business. Trading has much more to it than
finding entry & exit signals based on technical analysis. Trading successfully requires psychological
abilities which include-

1. Creativity to develop strategies which have an edge.
2. Patience to wait for a high probability opportunity.
3. Confidence to take risk and pull the trigger when the opportunity arrives.
4. Discipline to follow his/her rules.
5. Ability to stay cool & calm during pressure situations.
6. Flexibility to change views/opinions to get in sync with changing market conditions.
7. Humility to accept mistakes when market moves in opposite direction to his/her entry.
8. Perseverance to learn and improve his/her trading.
9. Courage to be able to trade after a string of losses.
10. Love for trading which can make all of the above and everything else possible.

This is not an exhaustive list and there are many other psychological aspects to trading. I am not
sure if a trader can have all the qualities listed above at all of the times. Traders are successful only
in proportion to the psychological abilities they show. Also we all should strive for perfection while
making best use of whatever we have got.

When we trade we get to know more and more about our strengths, our shortcomings, in short our
character is revealed to us.

As always, esteemed readers are welcome to share & enhance knowledge.

(Contributed by Jitender Yadav)

10 comments:

Dinesh said...

Dear Sir,
Excellent !
I think these 10 rules (or disciplines or principles) are very useful especially the rule number 10 - love for trading. I absolutely agree love/passion to learn new concepts can take a trader to new heights.
Thanks for sharing.
Regards,
Dinesh

Nikhil said...

Hi Sudarshan, could you tell us how to trade options using moving average(s)?

Krishna said...

Any technique which can forecast the price of nifty at a given date ?

Forecasting is by many companies for handling their sales & associated revenue generation in given time frame.

can we do so in nifty trading also ?

Any educational literature on this available any where on net or so ?

Regards
Krishna

Krishna said...

http://www.it.iitb.ac.in/~ashishl/files/MTechProjectReport.pdf

Krishna said...

http://www.nseindia.com/content/research/FinalPaper206.pdf

Suthar Muktesh Kumar said...

agree with all 10 point s u have listed ....
a trader who has all this quality ,never lose .....

trendzvolt said...

great sudharshan, iam listnig u on cnbc ,since 9/11
candidly it is 100%psychanalytic---
been trading last 12 year
regrads
suresh kripalani

Anudeep Reddy said...

Geat Sir,
I follow your recommendations all the time..


Anudeep Reddy said...

Great Sir,
I follow you on CNBC and your suggestions

Tamatam Reddy said...

Very useful information. I am new Investor so that I feels that the Psychological abilities shared above would definitely helps me.

Thanks for Posting sir.

Regards
TAMATAM REDDY