DAY TRADING FOR A LIVING

“Four Stage to becoming a succesful

trading”
1 Trading Psychology
2 Trading Strategy
3 day trade guide
4 how to be in the zone

Utilize your personal Traits and cognitive abilities to invest & Four
Levels to Become a Successful Trader
LORENZO DAGLIO
ANDREW DOUGLAS
MARK AZIZ
© Copyright 2021 - All rights reserved.

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 Table of Contents
Introduction
Chapter 1: Individual Trading Psychology
1.1 Why Trade?
1.2 Fantasy vs. Reality
1.3 Self-Destructive Behavior
1.4 Losers and Winners
Chapter 2: Psychological Theories
1.Prospect Theory
2. Gestalt Theory
3. Cognitive Psychology
4. Cognitive Dissonance
5. Psychoanalysis
Chapter 3: OCEAN Traders
3.1 What is Ocean Traders?
3.2 Exercise
Chapter 4: Trading Strategy
4.1 Discretionary Trade
4.2 Mechanical Trading
Chapter 5: Selecting the Trading Market
5.1. Stock Market
5. 2. Bonds
5.3. The Forex Market
5.4. Commodities
5.5. Cryptocurrencies
Chapter 6: Day Trade Guide
6.1 A Day Trader's Attributes
6.3 The Basics of Trading Platforms
6.2 Tools and Platforms
6.4 Day Trading Software
6.5 Stocks and Bonds
6.6 Futures
6.7 Options Trading
6.8 ETFs
6.9 Spread Trading's Strategy and Goal
6.10 Big Five Model: Trading with Emotions
6.11 What you need to do to get better scores?
Chapter 7: Be in the Zone
 7.1 Yoga and Breathing Exercise to get flow
7.2 Be in a Flow State
7.3 Seek Flow in the Goldilocks Zone
7.4 Common Factors for being in Zone
7.5 Importance of Trading in the Zone
7.6 Self-Management and be in the Zone
7.7 Subconscious and money management
Conclusion
 Introduction
The expression “you want a framework which suits your style” is often
used, but based on our own experience assisting traders, we can conclude
that few people really understand what this entails.
Trading style is often linked to a trader’s personality. Before deciding on a
trading approach and designing a trading schedule, it is critical to focus on
one’s personality and lifestyle. This is because investing in a way that is
incompatible with your personality can make it impossible to adhere to your
trading schedule down the line. When a trader discovers the trading strategy
that best serves them, they want to stick with it for a long time. The most
popular trading errors are made by traders who aren’t familiar with their
trading style or haven’t found a home with their trading style.
In the search for long-term success in speculative trading, possibly the best
trading expertise and a well-established edge are essential. However, all the
books, blogs, and trainers in the world won’t be able to solve a negative
outlook and mental roadblocks that sabotage trading success from start to
finish, whether this explains why effective traders have similar personality
traits.
Good psychological qualities that improve personal strength and the desire
to create positive consequences, such as dedication to physical and mental
well-being and stress control, are shared by successful traders. This book
aims at discussing the personality traits of a person in relation to their
Trading capabilities and the effect of those traits on their business.
Chapter 1: Individual Trading Psychology

Trading effectively in the capital markets necessitates a wide range of

abilities, which provide skills like analyzing a corporation’s dynamics and
predicting the trajectory of a stock’s trend. However, none of these
technological abilities nor the trader’s mentality are as significant. Trading
psychology is described as the ability to control emotions, think fast, and
maintain discipline.
1.1 Why Trade?
Trading tends to be a simple process. A novice can carefully come into the
market, gain several times, and continue to realize that he or she is genius
and unstoppable. It’s why he finally takes huge chances and loses a lot of
money.
People trade for a variety of motives, some of which are reasonable and
others that are unreasonable. Trading gives you the chance to earn a living
quickly. Many people see capital as a sign of independence, even though
they don’t really know what to do about it.
You can set your regular hours, work, and live wherever you choose, and
you will never have to listen to a supervisor if you learn how to trade.
Trading is a wonderful game that combines chess, poker, and video games.
People who like competitions are drawn to trading.
It draws risk-takers and repels risk-averse people. A normal person wakes
up, goes to work, takes a lunch break, comes home, has a drink and supper,
watches TV, and falls asleep. If he earns a little extra money, he deposits it
in a savings account. A dealer works odd hours and places his money on the
line. Most traders are hermits who forego the comforts of routine in order to
venture into the unknown.
Self-satisfaction
Some people have a natural need to be the perfect version of themselves to
maximize their ability. Traders are motivated to test the markets by this
push, as well as the fun of the game and the allure of money.
Successful traders are usually hard-working, astute, and receptive to fresh
ideas. Surprisingly, the aim of a successful trader is not to generate profit.
His ambition is to be a successful trader.
Money comes more like an oddity if he trades correctly. Successful traders
need to develop their talents in order to achieve their personal best.
The problem with self-fulfillment is that it might lead to the self-destruction
of certain people.
Accident-prone drivers continue to wreck their vehicles, and self-
destructive dealers continue to wreck their banks. Markets have many
incentives for both self-sabotage and self-fulfillment. It’s very costly to act
out the interpersonal disputes in the markets.
Traders who are unhappy with themselves always attempt to satisfy their
conflicting desires in the markets. You’ll end up somewhere you wouldn’t
want to be if you wouldn’t know where you’re going.
We try to perform a practical activity here by involving you. There is a table
below and you are required to enter all the reasons for yourself that why
would you want to trade or why are you into trading business at first place.
Write at least minimum five reasons why would you trade.
Sr. No Reasons to Trade
1.2 Fantasy vs. Reality
You’d anticipate a friend with no agricultural background to go starving if
he informed you he tried to feed himself with food grown on a quarter-acre
(1,000 square meters) estate. You can only get too far out of a little plot of
land. However, there is one area in which grown-ups should let their dreams
run wild: investing.
A realist is a good dealer. He is well aware of his capabilities and
shortcomings. He is aware of industry developments and understands how
to react. He studies himself, evaluates the markets without cutting costs,
and makes practical preparations. A competent trader can’t afford to be
deluded.
When an amateur loses a few trades and receives a few margin calls, he
goes from cocky to afraid and develops odd business theories.
Owing to their amazing inventions, losers purchase, sell, or stop trades.
They behave like children who are scared of ghosts and are afraid to walk
around a graveyard or peek under their bed at night. The market’s
unorganized nature encourages the creation of delusions.
The majority of people who grew up in Western society have a number of
fantasies in common.
They’re so popular that there was a program offered “Universal Fantasies”.
Many people, for example, have a childhood dream of being adopted. This
fantasy seems to justify the world’s unfriendliness and impersonality. It
comforts a boy but keeps him from seeing a fact he doesn’t want to see: his
parents aren’t perfect. And if we aren’t sure of it, our dreams have an effect
on our actions.
The Myth of the Brain
“I lost because I didn’t know trade techniques,” losers who believe in the
“brain fallacy” would tell you. Many people believe that good traders know
something they don’t. This fantasy contributes to a thriving demand for
consultancy services and pre-built trading schemes.
A downtrodden trader could reach for his credit card to purchase links to
“trading secrets.” He could give money to a charlatan in exchange for a
$3,000 “can’t miss” electronic trading scheme that has been back-checked.
When that scheme fails, he’ll use his almost carefully thought credit card to
buy a “science textbook,” which tells him how to avoid failing and start
winning by staring at the sky, the stars, or even Uranus.
Losers are unaware that dealing is a relatively straightforward analytical
exercise. It’s not about as difficult as removing an appendix, constructing a
bridge, or prosecuting a lawsuit in court. Successful traders are astute, but
few are thinkers. Many people have never attended college, and others have
fallen out.
Traders are also attracted to trade by intelligent and hard-working
individuals who have achieved success in their professions. Why do they
keep failing? Knowledge, secrets, and definitely not knowledge are not
factors that distinguish winners from losers.
The Myth of Undercapitalization
Many losers believe that they’d have a larger portfolio, they might trade
effectively. A series of losses or a single egregiously bad deal will wipe out
a person’s account. When a loser is sold out due to an inability to reach a
margin call, the price always reverses and goes in the direction he predicted.
He becomes enraged, claiming that if he had lived another week, he would
have made a fortune rather than lost!
Those people consider market reversals that occur too late to be
confirmations of their methods. They might return to work to invest,
mortgage, or earn enough money to establish another small account. The
loser is washed out, the economy reverses and “confirms” him right, but it’s
too late—been he’s sold out again. “If only we would have a stronger
account, we might have stuck in the market longer and won,” the fantasy
begins.
Any losers elicit funds from family and colleagues by presenting them with
a track record on paper. It appears that if they’d had more time, they would
have won high.
The Myth of Autopilot
Traders who believe in the myth of the autopilot assume the money can be
automated. Some individuals attempt to create their own automated trading
device, while others purchase one from a retailer. Thousands of dollars are
wasted on canned expertise by men that have spent decades perfecting their
talents as attorneys, physicians, or businessmen.
Many are motivated by vanity, laziness, and a lack of mathematical
knowledge. Previously, systems were printed on paper sheets, but now they
are imported onto a machine. Others are simple, while others are complex,
like built-in simulation and even financial planning rules. Thousands of
dollars are spent by merchants in pursuit of the “spell” that would transform
a few lines of computer code into an infinite stream of cash. Paying for
automated trading mechanisms is similar to medieval knights paying
alchemists for the art of converting metal into gold. Human tasks that are
complex do not lead oneself to automation. Computer-based learning tools
have not displaced instructors, and tax preparation software has not resulted
in accountants losing their jobs. The majority of human actions necessitate
the application of judgment; computers and systems will assist but not
replace humans.
If an automated trading scheme had been good, the buyer could retire to
Tahiti and live comfortably for the rest of his life, backed by a steady
stream of checks from his broker. The only ones who have profited from
trade schemes so far are the people who market them. They are part of a
tiny but vibrant cottage industry. How can they sell their devices if they
started working? They could relocate to Tahiti and collect checks from their
brokers! Meanwhile, every device vendor has a telephone number. Some
people say that they prefer programming to sell. Others believe that they are
selling their programs to collect money or perhaps out of a sense of
compassion for mankind.
Markets are constantly evolving, making automated trading processes
ineffective. The strict laws of yesterday won’t work as well today, and
they’ll actually stop working tomorrow. When a skilled trader senses an
issue, he may change his strategies. A self-destructing machine is less
adaptable than a manual system.
Despite the use of autopilots, airlines pay high wages to pilots. They do that
because humans are capable of dealing with unexpected situations. Just a
person can deal with emergencies like an airliner’s roof blowing off over
the Pacific or a commercial plane losing its engines to a flock of geese over
Manhattan. These incidents were covered in the newspapers, and in each
case, experienced pilots were able to land their planes using improvised
solutions. That is something that no autopilot can achieve. Putting your
money on autopilot is akin to putting your life on autopilot. Your account
will crash and burn the first time anything unforeseen happens.
There are strong trading schemes out there, but they must be regulated and
tailored according to personal preferences. You must be vigilant; you cannot
hand over control of your performance to a mechanical machine.
Traders who have autopilot fantasies want to recreate the feelings they had
as children. Their moms used to take care of their health, warmth, and
comfort needs. They’re now attempting to replicate the sensation of sitting
on their backs and watching profits pour in like an infinite supply of free,
warm milk. The stock exchange is not your grandma. It is made up of
strong men and women who choose to make money from you instead of
putting warm milk into your mouth.
The Personality Cult
Most citizens declare their desire for freedom and liberty on the surface, but
when pressured, they change their attitude and seek “great leadership.” –
Traders in trouble often seek advice from various gurus. We all have the
fantasy someone else will make us wealthy.
In the capital sector, there are three kinds of gurus: business cycle gurus,
magic method gurus, and dead gurus. Important market turns are what cycle
experts refer to. Fresh highways to riches are promoted by method gurus.
Others have eluded scrutiny and attracted cult followers by using the
simplistic mechanism of leaving this country.
Trade with The Eyes Wide Open
Dollars aren’t as strong as wishful thinking. People have a tremendous
capacity to deceive themselves into resisting seeing the facts, according to
new studies.
Dan Ariely, a researcher at Duke University, outlines a smart experiment.
An intelligence test is presented to a group of participants, but part of them
are “inadvertently” showing a response sheet, encouraging them to look up
corrective feedback before documenting their own.
Unnecessary to mention, they outperform the competition. Following that,
everyone is required to forecast their grades on the next IQ test, which will
have no cheat sheets and will pay those who estimate accurately.
Interestingly, half of the audience that did well with cheat sheets even
expected better outcomes on the next test. Even if their false estimates of
achievement would cost them money, the cheaters needed to think they
were really clever.
Wishful thinking is not an option for a good trader; he must have been a
realist. In the stocks, there are no cheat sheets; the reality can be seen in
your trading diaries and equity curves. To succeed in the markets, we must
learn three key elements of investing: sound psychology, a rational trading
mechanism, and a sound risk management strategy.
These are similar to the three legs of a stool: take out one, and the stool will
collapse. Focusing solely on metrics and trading processes is a common
beginner error. To ensure that your choices are rational, you must evaluate
your emotions when trading. Your trades must adhere to well-defined
guidelines —You must plan your financial planning so that you really do
not lose your game due to a series of defeats.
1.3 Self-Destructive Behavior
Trading is a difficult game. A trader who wants to succeed and be
competitive in the future must take his profession very seriously. He can’t
afford to be naive or sell because of a nefarious psychological motive.
Unfortunately, impulsive people, gamblers, and others who believe the
planet owes them a living are attracted to trade. If you trade for the thrill of
it, you’ll almost certainly take trades with poor chances and take
unnecessary risks. The markets are harsh, and emotional dealing almost
often leads to losses.
Gambling
Gambling is the act of placing bets on games of chance or expertise.
Gambling happens in all cultures, and almost everyone has done so at some
stage in their lives.
Gambling, according to Freud, is widely appealing because it serves as a
substitution for masturbation. Gambling and masturbation are connected by
the constant and exciting movement of the hands, the addictive desire, the
resolutions to avoid, the intoxicating level of gratification, and the feelings
of shame.
The Derby of Demolition
Any member of society makes minor concessions to shield one another
from the repercussions of their errors. When you’re driving, you try to
avoid colliding with other vehicles, and they try to avoid colliding with you.
You will swear if anyone cuts in front of you on the highway, and you may
even slow down. You swerve if anyone opens the door of a parked vehicle.
Collisions are avoided because they are expensive to all sides.
About every occupation has a safety net for its members. When you act
poorly or self-destructively, your supervisors, friends, and customers will
warn you. Trading lacks this very safety net, making it riskier than other
human endeavors. The markets have a never-ending supply of ways to self-
destruct.
Buying at the peak of the day is akin to opening your car door into
oncoming traffic. When your buy order hits the floor, merchants race to sell
to you, ripping your door and arm off in the process. Those traders would
like you to struggle so they can get the money if you lose.
Dr. Ralph Greenson, a well-known California psychoanalyst, divides
gamblers into three categories: the average guy who gambles for fun and
can avoid whenever he wants; the serious gambler who chooses gambling
as a source of income; and the neurotic gambler who gambles due to
various latent desires and is powerless to stop.
A neurotic gambler is either fortunate or needs to put his luck to the test. He
feels more powerful as he wins. He is happy as if he were a baby eating at a
mother’s breast. A neurotic gambler still loses in the end when he wants to
replicate the omnipotent sense of bliss rather than focusing on a practical
long-term game plan.
Gambling is “an epidemic without a prescription,” according to Dr. Sheila
Blume, head of the compulsive gambling unit at South Oaks Hospital in
New York. The majority of gamblers are men who gamble for the thrill of
it. Gambling is a common way for women to unwind. Losers conceal their
defeats and attempt to appear and behave as champions, but they are
afflicted with self-doubt.
A gambler will get high by trading bonds, futures, and options while still
being more professional than betting on the horses. Stock market gambling
has a more sophisticated ring to it than playing numbers with a bookie.
When trades go in their favor, gamblers are ecstatic. When they lose, they
are devastated. They’re not like ambitious people who rely on long-term
goals and aren’t bothered by or excited by single trades.
Markets function without the assistance of ordinary people. Any trader is
affected by the actions of others. Any trader wants to get the better of the
other. There are a lot of wrecks on the trade highway. Short of war, trading
is the riskiest human enterprise.
Managing Self-Destructive Behavior
The majority of people make the same errors decade after decade. Some
people organize their lives so that they can excel in one region while
resolving their internal problems in another.
You must be mindful of the proclivity toward self-sabotage. Stop blaming
your mistakes on poor luck or others, and take ownership of your outcomes.
Begin recording all of your trades, along with the reasons for joining and
leaving them, in a notebook. Look for cycles of success and loss that repeat
themselves. Those that fail to learn from their mistakes are doomed to
repeat them.
A dealer needs a psychological safety net in the same manner that a
mountain climber requires survival equipment. At an early stage of trader
growth, we considered the ideals of Alcoholics Anonymous, which are
summarized below, to be extremely helpful. Strict money management
principles can double as a safety net, whilst the diary allows you to benefit
from both your victories and your failures.
1.4 Losers and Winners
We move to trade from various backgrounds and carry our emotional
baggage with us. All of us find that we risk money in the economy because
we behave as we do in our daily lives. Most importantly, the ability to use
logic rather than emotion determines whether you succeed or fail. An
investor who is ecstatic when he wins and frustrated when he loses is
vulnerable to price movements and unable to build up equity.
To be a business winner, you must be calm and responsible. The agony of
loss motivates people to seek out magical solutions. Simultaneously, they
discard all of what they have learned in their personal or corporate lives.
Like the Ocean
The stock market is more like an ocean; it rises and falls irrespective of
your wishes. Once you buy a stock and it goes on a run, you can be ecstatic.
When you go short, you can feel terrified, but the price increases,
evaporating the equity with each uptick. Those emotions have little to do
with the stock market and just live inside you.
The industry is completely unaware of your existence. There’s nothing you
can do about it. The ocean is unconcerned with your well-being, but it still
has no need to harm you. Just you have the authority of your actions.
A sailor has little power over the sea, but he does have control over himself.
He can practice good sailing techniques and gain knowledge by studying
currents and weather patterns. He will figure out when to sail or when to
stop in port. The wisdom of a competent sailor is put to good use.
You can swim in it and use the surface to travel to other islands, so an ocean
can be helpful. An ocean can be harmful, and it is possible to drown in it.
You’re more likely to be someone you’re if you take a more realistic
approach. When you play out your thoughts, on the other hand, you can’t
rely on the truth of the ocean.
If a sailor tests the seas, a trader must observe industry dynamics and
reversals. When learning to manage his account, he must trade on a small
scale. While you will never be able to dominate the market, you will learn
to control yourself.
A novice can believe he can step on water after a series of successful trades.
He begins to take reckless chances, blowing up his bank account. A novice,
on the other hand, suffers many defeats in a row, can become so
demotivated that he is unable to position an order, even though his scheme
indicates that he can purchase or sell. You can’t properly use your
imagination if trading makes you feel elated or terrified. You will make
absurd bets and fail as joy takes you off your feet. You’ll lose out on
lucrative transactions if you’re paralyzed with anxiety.
When a sailor’s boat is pounded by strong winds, he battens his sails,
reducing the sail area. The first thing a trader who has been hammered by
the economy can do is reduce the scale of his trades. When you’re studying
or nervous, make small trades.
A skilled trader keeps his cool and uses his head. Amateurs are the only
ones that get excited or sad. Emotional dealing is an unnecessary
extravagance that no one can afford.
Emotional Investing
The majority of people yearn for thrills and fun. Health professionals,
pilots, or college teachers earn even less than singers, writers, and
professional athletes. People like having their nerves pricked, which is why
they buy lottery tickets, drive to Las Vegas, and slow down to watch traffic
collisions.
Emotional investing has the potential to become rather addictive. And those
who lose money in the stocks get a great deal of entertainment. The
business is both a spectator and a player sport at the same time. Consider
attending a major-league baseball game without being relegated to the
bleachers.
For a few hundred bucks, you can sprint into the field and participate in the
tournament. If you strike the ball perfectly, you’ll get treated like a pro. The
first couple of times, you’d actually think twice about racing into the track.
The well-known “beginner’s luck” is due to this conservative approach. If
an amateur hits the ball correctly a few times and receives his salary, he is
likely to believe that he is on par with, if not better than, the pros and that
he might make a decent living off the game. Greedy amateurs rush into the
field all too much, even though there are no decent chances to compete. A
series of defeats devastate their finances before they can realize what has
happened.
Since the market is one of the most enjoyable locations on the planet,
emotional choices can be fatal. Turn back to watch the people instead of the
horses if you ever find yourself at a racetrack. Stomping their feet, jumping
up and down, and yelling at horses and jockeys are all common behaviors
among gamblers. Thousands of people put on a show to express their
feelings. Winners congratulate each other while losers rip up their tickets in
shame. Wishful thinking’s excitement, suffering, and strength are both
caricatures of what appears in the markets. A knowledgeable handicapper.
Whoever makes a living at the racetrack should not get too agitated, shout,
or stake the majority of his money on a single run or even a single day.
Casinos adore inebriated patrons. They give free beverages to gamblers in
addition to making them more emotional and encourage them to bet more.
Casinos often employ calm and astute card counters.
On Wall Street, there is less free booze than in a casino, but at least you
won’t be thrown out for being a decent dealer. You are in command of your
own. Whenever a monkey’s foot is injured by a tree stump, he goes into a
fury and hits the stump. As you laugh at a monkey, do you still laugh at
yourself when you imitate him? If the price falls when you are long, you
will either double up on your falling market or go short of making up the
difference. This is because you act on your emotions rather than your
intelligence. So what is the distinction between a dealer attempting to
reclaim market share and a monkey hitting a tree stump? Behaving out of
anger, anxiety, or euphoria eliminates the possibility of accomplishment.
Rather than acting out your emotions, you should observe your actions. We
become enraged by the economy, fearful of it, and grow fairy stories.
As this is going on, the market continues to cycle through its rallies and
falls, just as an ocean does through its hurricanes and calm times. “There is
no beginning, middle, or end—only what you make with your own mind,”
writes Mark Douglas in The Disciplined Trader. Very seldom do all of us
grow up learning to work in an environment which requires full freedom of
artistic speech with no external constraints.”
We attempt to coerce or exploit the economy, as imperial Xerxes did when
his fleet was sunk and he commanded his soldiers to horsewhip the sea.
Most of us are unaware of how dishonest we are, how we negotiate, and
how we play out our emotions. Most of us believe we are the center of the
world, and we want everyone and everything to be good or bad to us. In the
economy, which is totally impersonal, this does not succeed.
“Cannibalism and slavery are perhaps the earliest examples of human
parasitism and submission,” wrote Leston Havens, a Harvard University
psychiatrist. Despite the fact that these are now discouraged, their
continuing presence in psychological ways shows that humanity has
succeeded in transitioning from the tangible and tangible to the abstract and
intellectual while maintaining the same goals.”
Parents threaten their children, bullies assault them, and teachers attempt to
persuade them to change their minds at school. It’s no surprise that most of
us grew up either hiding in our shells or learning to exploit others in order
to protect ourselves. We don’t feel like acting on our own, but it’s the only
way to survive in the industry.
“If the market’s behavior is enigmatic to you, it’s because your own
behavior is enigmatic and uncontrollable,” Douglas cautions. When you
wouldn’t know what you’re going to do next, it’s difficult to predict what
the economy will do next.”
“The only thing you can influence is yourself,” says the author. You have
the choice of giving yourself money or giving your money to other traders
as a trader.” “The traders who can reliably make money...approach trading
from the standpoint of a mental discipline,” he says. On the road to being
good merchants, we all have our own demons to face. Here are a few rules
that helped me progress from a rambunctious novice to an unpredictable
semiprofessional to a calm, experienced trader. This collection can be
customized to suit your style.
1. Determine if you’d rather be a trader over the long haul—in other words,
that you’d like to be a trader in 20 years.
2. Learn all you can. Read books and listen to experts, but have a strong
cynicism about anything. Ask questions and don’t take experts’ word for it.
3. Don’t get arrogant and jump into trading right away; instead, take your
time and learn. In the months and years ahead, the stocks will be there,
providing more successful prospects.
4. Provide a strategy for analyzing the market, such as “If A occurs, B is
expected to occur.” To confirm trades, use a variety of analytic methods.
Markets have several dimensions; use a variety of analytic methods to
confirm trades. Anything should be tested on historical evidence before
being put to the test in the markets of real money. Markets are always
evolving, so you’ll need different strategies for trading bull and bear
markets, as well as a way to say the difference.
5. Create a budgeting strategy. Your first priority must be long-term
survival, your second priority must be consistent capital growth, and your
third priority must be high earnings. Most traders prioritize the third goal,
oblivious to the fact that goals 1 and 2 exist.
6. Recognize that the weakest link of any trading scheme is the dealer.
Attend an Alcoholics Anonymous group to learn how to prevent risks or
create your own strategy for avoiding impulsive trading.
7. Winners think, feel, and behave in ways that losers do not. You must
examine yourself, dispel your delusions, and alter your old habits of being,
dreaming, and behaving. Change is difficult, but if you want to be a
successful trader, you must focus on improving and changing your
personality.
You must have ambition, experience, and discipline in order to excel.
Money is significant, but it isn’t as important as any of the other virtues. If
you have the motivation to finish this book, you will gain a great deal of
insight, and we will then return to the subject of discipline in the final
chapters to complete the loop.
 Chapter 2: Psychological Theories

Theories have been used in psychology to have a framework for

interpreting individual feelings, emotions, and actions. Several explanations
have been proposed throughout psychology's evolution to understand and
forecast different facets of human behavior.
There are two main elements of a psychological theory:
 It has to be a description of a behavior.
 It needs to make forecasts regarding the future activity.
Each hypothesis has added to our understanding of the human mind and
behavior.
Here we will discuss Personality Psychology theories that may help in
trading. Personality psychology examines a person's particular patterns of
emotions, perceptions, and actions.
1.Prospect Theory
According to prospect theory, losses and benefits are priced differently
because people make choices based on expected profits rather than losses.
The basic notion of the "loss-aversion" hypothesis is that if a person is
faced with two equivalent options, one of which is provided in terms of
potential rewards and the other in terms of potential damages, the former
alternative will be selected.
The Prospect Theory in Action
Prospect theory is a subgroup of behavioral economics that describes how
people choose between stochastic options where there is uncertainty, and
the likelihood of different scenarios is uncertain. As opposed to the
predicted utility principle, this theory was proposed in 1979 and further
expanded in 1992 by Amos Tversky and Daniel Kahneman, who believed it
was more psychologically true about how choices are taken.
Within prospect theory, the basic reason for a person's action is that since
the options are distinct and singular, the likelihood of a gain or failure is
honestly assumed to be 50/50 regardless of the real probability. In other
words, the likelihood of a reward is usually regarded as higher.
Tversky and Kahneman argued that losses have a stronger emotional effect
on people than gains because, with two options for the same outcome,
people would choose the one that offers perceived gains.
Presume that the final outcome is a payment of $25. One choice is to be
offered a flat fee of $25. The alternative is to earn $50 while losing $25.
The value of the $25 is the same in all scenarios. Individuals, on the other
hand, are most likely to pick straightforward cash since a single income is
commonly regarded as preferable to getting more cash at first and then
losing everything.
Fear and greed are the two most important feelings to comprehend and
regulate.
Quick Judgements
Traders are always required to think quickly and make swift choices,
scooting in and out of markets on a whim. They'll have to have a certain
level of mental presence to do this. They must also have the patience to
adhere to their trading strategies and understand when to take gains and
losses. Emotions obviously cannot be allowed to get in the way.
Fear: An Overview
When investors get negative news about a specific product or the economy
overall, they are understandably concerned. They can react badly and feel it
necessary to divest their investments and rest on their money, avoiding
further risk. They might escape some defeats, but they could also lose out
on some profits when they do so.
Fear is a normal response to a potential danger, which traders must
consider. It is a challenge to their earnings prospects in this situation.
It would be beneficial to quantify the anxiety. Traders should think of what
they're scared of and why they're afraid. The thought, however, should
come even before the bad news, not after it.
Market participants will learn how they unconsciously interpret and react to
situations if they learn about them long in advance, and they'll be able to get
beyond the instinctive attachment. Of course, this isn't easy, but it's critical
to the health of an investor's investments, as well as the entrepreneur's own
health.
Defeating Greed
On Wall Street, there's also an old quote saying "pigs get slaughtered,"
which applies to selfish traders' practice of holding on to a profitable spot
for too long in order to get every last tick upward in interest. The cycle will
eventually change, and the greedy will be trapped.
 Greed is a difficult foe to defeat. It's usually motivated by a desire to do
more, to get a bit more. A trader should be able to understand this impulse
and create a trading strategy that is based on logic rather than whims or
intuition.
Generating Guidelines
Whenever the cognitive crisis hits, a trader must set policies and stick to
them. Establish rules on when to join and exit trades depending on your
risk-reward tolerance. Set financial targets and a stop loss to remove
emotion from the equation. You may also choose which particular
circumstances, such as a positive or negative earnings report, can prompt
you to purchase or sell a stock. It's a good idea to set daily limits on how
much you're willing to win or lose. Take the money and run if you hit the
profit target. If your defeats reach a certain threshold, fold your tent and
return home. You'll continue to sell another day in any case.
Prospect Theory Forms
The assurance effect, according to Tversky and Kahneman, occurs when
people choose certain outcomes over those that are only likely. If there is a
chance of a certain reward, the certainty effect causes people to stop taking
risks. It also encourages people to pursue danger because one of their
choices is a certain failure.
When individuals are given two choices for the same result but different
paths to the outcome, the isolation effect happens. People will probably
cancel out related facts to reduce cognitive load in this situation, and their
decisions will vary considerably on how the choices are framed.
 According to the prospect principle, investors value profits and losses
accordingly, favoring perceived gains over perceived losses.
 When given a choice between two options, an investor will select the
one with the highest future returns.
 The prospect hypothesis is a behavioral economics concept that suggests
investors choose supposed usefulness over losses because losses have a
larger emotional effect.
 The confidence effect states that people choose certain outcomes over
likely ones, while the isolation effect states that when making purchase
judgments, people cancel out similar facts.
2. Gestalt Theory

The phrase Gestalt derives from the German language and has no exact
English counterpart. Even so, it usually refers to how objects are arranged
or assembled as a whole. Gestalt is more aptly defined as a pattern or
structure in the field of psychology. Gestalt, in this sense, refers to the
whole human brain and action.
Gestalt theory's initial stuff concentrated on vision, with a particular focus
on a visual organization that could be clarified by a phenomenon known as
an illusion. Other branches of psychology have used Gestalt theories to
further explain the brain and social behavior. Many of Gestalt psychology's
basic principles are difficult to describe. Despite its detractors, Gestalt
psychology has had a significant impact on psychology.
What Is Gestalt Theory and How Does It Work?
Gestalt psychology is founded on the idea that the sum of its parts is greater
than the sum of its parts.
Gestalt researchers have suggested the rules of perceptual organization,
which include the laws of resemblance, proximity, consistency,
inclusiveness, Closure, as well as connectedness, to help explain how
human vision works. These rules illustrate how our brains organize
information to aid us in understanding the world around us.
The law of resemblance states that like objects can be grouped together to
form a sequence of things that relate together. Proximity refers to putting
objects together based on their spatial proximity. Continuity refers to the
process of grouping items together based on patterns to form a whole
figure. We see all aspects of a picture until we see different portions of it,
according to inclusiveness. Closure refers to being able to mentally fill in
the holes of what we think could be there after seeing a portion of an item.
Finally, connectedness refers to our tendency to view objects traveling in
the same direction and at the same pace as a single entity.
Gestalt Psychology Examples
It's easy to find instances of Gestalt psychology in our daily lives.
Wertheimer identified the phi theory in 1912. Have you ever seen a
flipbook of interactive illustrations that you flip through by running your
fingers through the sheets of a little book? Each page is a different drawing,
but when we turn through them quickly enough, the subject seems to be
moving. This is an indication of the phi effect, which has been used as the
basis for animations.
Your imagination would always like to see the circle as a whole if you draw
a circle on a sheet of paper, then delete half of it and view it once again.
This is an indication of perseverance.
If you've ever looked carefully at an oil or acrylic abstract art, you'll find
that it's made up of random brushwork or palette knife patterns that don't
sound right up close. When you step back from the drawing, the
brushstrokes seem to be grass, leaves, and firm earth. This is a resemblance
case. We see the brushwork as being reminiscent of natural sights.
When you walk into a place and see a bunch of participants gathered by the
bar, you might think they are friends as they're so close together. This is a
good illustration of proximity.
The Gestalt principles
Gestalt psychologists identified five practices that guide how we understand
spatial information. One's Gestalt principles arose from witnessing how we
perceive objects in combination, as both the sum of their parts as well as
something the most.
Gestalt psychology is based on five principles:
The Continuity Rule
The rule of Closure
The rule of interconnection
The proximity rule
The rule of similarity
When objects or forms are close together, we prefer to view them as a
group, according to the law of proximity. Specific components are always
clustered together in our heads. We see these sections as one image rather
than many because of the law of proximity.
We tend to interpret items that are comparable as part of a whole, according
to the law of similarity. Essential characteristics are seen as a single unit.
According to the rules of continuity, we recognize a line as proceeding in
the same direction as before.
The law of Closure states that even if a picture is unfinished, the
subconscious attempts to see it as complete.
Whenever we see objects traveling in the very same path and at the same
pace, we appear to see them as a single entity, according to the law of
connectedness (also known as the law of collective fate).
These would be, nevertheless, just the most relevant Gestalt rules. Other
Gestalt principles exist as well, such as the figure-ground concept.
3. Cognitive Psychology

The concept of how we behave is known as cognitive psychology. Interest,

vision, recollection, action-taking, and memory are some of the inner
mental functions that it is dealing with. - of these elements plays a critical
role in shaping what we are and we act.
The feelings associated with these ideas may be conscious or unconscious;
for example, we might actively want to center our attention on a lecture, but
the light flashing in the room can cause a non-conscious change
somewhere.
This discipline is referred to by many cognitive psychologists as enveloping
both conventional cognitive psychology and cognitive neuroscience.
Cognitive neuroscience is a discipline that studies cognitive functions using
neuroimaging approaches. It has certain similarities with cognitive
psychology, including a common methodology and worldview, but it also
provides a way to imagine the brain function involved with these inner
thoughts.
Many overlaps exist between cognitive psychology and cognitive
neuropsychology (which is mainly concerned with the impact of brain
injury on cognition) and, to a lesser degree, computational neuroscience
(concerned with creating computational models of brain function).
Cognitive psychology's origins
Every human behavior is conditioned and flexible to the environment and
context it is in, as per behavioral psychology. In a variety of forms,
behavior may be strengthened or disciplined, resulting in an increase or
decline in those behaviors. When time passes, these interactions form a
series of attitudes, resulting in a multifaceted person with diverse
preferences, aspirations, pursuits, talents, and habits.
On the other side, cognitive science suggests more autonomy – perceptions,
and desires are being more involved in the shaping of actions. Individuals
are likely to process emotions that decide whether or not to carry out
actions.
This paradigm changes from the main behaviorist to a predominantly
cognitivist perspective was triggered by a number of factors, making it
impossible to pinpoint a particular cause. Even so, the rise and advancement
of knowledge theory (a standardization of communication protocols that is
analogous to the cognitive approach), as well as Noam Chomsky's crippling
criticism of behaviorism, have had significant impacts.
Cognitive Psychology of the Present
When cognitive science became more widely known and mainstream, a
number of influential studies demonstrating its usefulness appeared.
Alfred Yarbus, a Russian psychologist, demonstrated how saccadic eye
movements could represent inner neural processes in the 1950s and 1960s.
This was a development not in the sense that eye gestures were linked to
understanding, as was commonly anticipated, but in the depth and ingenuity
with which it was accomplished. Yarbus's system was suction-attached to
the eyeball, offering a new degree of precision that offered accurate
responses to a multitude of questions about eye patterns and cognitive
processes.
Recent experiments using eye monitoring glasses have focused on this
work, demonstrating how perceptual mechanisms can be studied in more
naturalistic settings. Not only has research shown how detailed eye patterns
shift in response to stimuli, but it has also shown that the controversy
among cognitive and behavioral psychology is no longer relevant. Eye
gestures have been found to be influenced by neural systems, which are
influenced by behavioristic beliefs. The unseen hand of reinforcement
governs cognitive functions.
The evolution of theories about perception has also had an influence on
how responses to facial expressions are perceived. The non-conscious
muscle motions of the face that respond to subtle presentation to facial
expressions were examined by investigators from Uppsala University in
Sweden.
The investigators were able to prove how psychophysiological reactions
exist even in the exclusion of active consciousness, suggesting that they are
the product of nonconsciousness neural processes, using a camouflaging
procedure (to inhibit conscious appraisal of the displayed faces) and facial
electromyography (to monitor improvements in muscle function which may
not be clearly perceptible).
4. Cognitive Dissonance
Cognitive dissonance is an uncomfortable feeling that occurs when two
contrasting beliefs are held together. One of the most highly studied areas of
psychological science is cognitive dissonance. As an individual attempt to
balance their contradictory convictions, cognitive dissonance can lead to
unreasonable decision making.
One of the most commonly used and recognized aphorisms in the
economies is that "the pattern is your buddy." It's clear that the pattern is
your buddy. It's also understandable that so many retail investors, including
the most experienced, are surprised by the change. We obviously can't both
be on the same side of the exchange. Otherwise, there will be no
competition. Many merchants, though, fell into the trap of searching a little
further than that.
When individuals are confronted with facts that their views or conclusions
are incorrect, they feel cognitive dissonance. Humans have a proclivity to
go to great lengths to defend their religious beliefs. In the industry, this
form of protectionism is manifested by "doubling down" or "dollar cost
averaging" a location.
When a trader's self-concept is threatened, for example, traders feel
dissonance. The self-concept of becoming a good/smart/profitable trader,
for example, maybe under pressure. Trade was established, perhaps quickly,
and it is now underneath. The fear which comes with the risk of making a
dumb decision contributes to rationale, which contributes to focusing
attention, and so on. This is a low-probability trade that will result in
significant losses.
5. Psychoanalysis
Psychoanalysis is a collection of psychiatric hypotheses and behavioral
approaches that originated with Sigmund Freud's research and hypotheses.
The idea that someone has an unconscious mind, perceptions, wishes, and
memories is at the heart of psychoanalysis.
Individuals can undergo poignancy and obtain insight into their present
mental state, according to psychoanalysis, by taking the substance of the
subconscious into conscious perception. An individual may find relaxation
from depressive symptoms through this procedure. In addition,
psychoanalysis assumes that:
The unconscious drives of an individual affect their actions. Disputes
between all the conscious and unconscious minds are also at the center of
psychological and emotional issues like psychological distress. Early
childhood events have a significant impact on personality formation
To shield oneself from knowledge stored in the subconscious, people use
defense systems. Utilizing psychoanalytic techniques such as dream therapy
and freedom of association, skilled analysts may assist an individual in
bringing certain facets of their unconscious mind into conscious
consciousness.
The psychoanalytic theory is closely associated with Sigmund Freud. As
per him, human nature is formed by the presence of three mental
components: The Id, Ego, and Super Ego.

Super-Ego: The Super-Ego is linked to the social or moral ideals that a

person develops as he grows older. It serves as an ethical restraint on
actions and aids in the development of a person's conscience. As a
 person matures in society, he develops the cultural values and norms that
allow him to think differently.
Ego: The rational and rational portion of the consciousness that is linked
to the true concept is known as the ego. This means that it strikes a
balance between the needs of the id and the super-ego in real-life
circumstances. Ego is conscious and therefore keeps Id in check by
careful reasoning of the external world.
Id: The primitive portion of the mind that requires instant fulfillment of
biological or instinctual desires is known as the id. The physiological
requirements are the essential physical needs, while the instinctual needs,
such as appetite, desire, and sex, are innate or unlearned requirements. Id
is the subconscious portion of the mind that acts without thinking about
what is right and wrong.
Hence, these are the three basic mental constructs, and there is often a
disagreement between them. The attempts to achieve harmony between
both determine how we act in the outside world.
 Chapter 3: OCEAN Traders

The modern financial theory is founded on the neoclassical economics

principle of homo economics. An optimal, self-interested, and completely
reasonable agent optimizes his usefulness by selecting the best choices
available at any given moment. Portfolio selection theory that is deemed the
place to start contemporary finance theories, established this ideal
rationality in conjunction with the efficient markets. The principle of
market performance was formalized, and new finance philosophies are
based on reasonable investors and competitive markets.
Behavioral finance's agent, on the other hand, is a typical person who
behaves and makes decisions while being influenced by impulses and
cognitive mistakes. Interdisciplinary aspects (particularly from psychology)
started to be integrated into behavioral theories of finance in an effort to
explain the mechanism of risk-taking judgment.
Behavior scientists use the "Big Five" as a method for measuring
personality. Its aim is to determine who individuals are in the five primary
areas.
Openness (curious versus consistent/ inventive /cautious)
Conscientiousness (industrious versus easygoing/ careless /orderly)
Extraversion (reserved /energetic/ gregarious versus solitary)
Agreeableness (cooperative/ emphatic versus self-interested/
antagonistic)
Neuroticism (sensitive/ nervous versus secure/ confident)
Jordan Peterson, a psychologist, claims the entrepreneurs have a
combination of these characteristics. They appear to fall into the groups of
"openness," "conscientiousness," and "agreeableness." Traders, like modern
financial entrepreneurs, must have more in common with inventors than
with neurotics. In tumultuous market environments, successful traders must
remain calm and receptive (or adaptable) to fresh concepts. Traders, like
innovators, must be incredibly transparent. They must be able to see it and
envision something that only a small percentage of the population can.
They would go for something that the rest of the people would not question
or consider. Traders must be very conscientious– to be active in this career
for a long time; a trader must have a high level of discipline. Otherwise,
he'll be dismissed as a dreamer rather than a serious player.
The last quality that good traders must possess is the ability to be
disagreeable. Traders should challenge the "power structure" on a routine
basis. People who trade are able to face risk exposure.
Traders should avoid attempting to "beat" the market in an unfavorable
way. They can be abrasive enough to recognize when they are mistaken.
Traders can be irritable enough to recognize that it's time to cut their losses
or let their winners fly. "The fair man adapts oneself to the environment; the
irrational man succeeds in attempting to conform the world to himself,"
wrote playwright George Bernard Shaw. As a result, the irrational guy is
responsible for all advancement." What do you think—does the expression
have anything to do with trading?
3.1 What is Ocean Traders?
The Five-Factor Model, also known as the Great Five Model, is by far the
most
commonly recognized personality hypothesis by scientists today. According
to the theory, the character can be simplified down to five main elements,
abbreviated as OCEAN or CANOE:
People are believed to have differing degrees of core personality traits that
influence our thoughts and behavior, according to the Big Five model.
While personality traits alone cannot predict behavior, variations in the Big
Five factors can help to explain why participants react, respond, and then
see things differently than others in similar situations.
The Big Five is a personality trait system, not a personality style model.
Personality styles, like Type A or Type B traits, or Myers & Briggs' INFPs
and ESTJs, are the most common means of defining personality. Type
models are simple to comprehend, but they are not statistically reliable
because individuals do not simply sort into groups. The Big Five is a far
more accurate and evidence-based way of describing personalities because
it defines individuals in terms of characteristics on a continuum.
The five measurements of personality in the Big Five paradigm are:
Conscientiousness

Conscientiousness refers to a person's goal-orienteers and perseverance.

Many with a high Conscientiousness score are well-organized and
committed, and they can forego instant gratification in favor of long-term
goals. Many with a low level of this personality trait are impetuous and
easily fooled.
Conscientiousness is linked to frontal lobe activation in the head. The
frontal lobe could be conceived of as the "organizational cortex," going to
moderate and controlling the brain's most animal and instinctive instincts.
Although we may be tempted to take a slice of cake that is placed next to
us, the frontal lobe intervenes and suggests, "Nah, that isn't safe, but it
doesn't match in with our diet goals." People with a high Conscientiousness
score are abler to use this part of their brain to regulate their urges and stay
on track.
Lack of Vision vs. Conscientiousness: Someone with a high
conscientiousness rate are structured, orderly, detail-oriented, reflective, and
cautious. They still have excellent self-control, allowing them to finish
projects and accomplish their objectives.
Many who rank low on conscientiousness can have trouble controlling their
impulses, making it difficult to complete assignments and achieve
objectives.
They have a tendency to be disorganized and dislike order. They can even
be more impulsive and reckless with their behavior.
Agreeability

The degree to which an individual prioritizes the interests of others above

their own is referred to as Agreeableness. Individuals with a good
Agreeableness score have a lot of compassion and enjoy helping and caring
for others. Individuals with a poor Agreeableness score have less empathy
and choose their own interests over others.
Strong Agreeableness has been linked to elevated activation in the superior
temporal gyrus, a brain area involved in language production and
recognizing individuals' feelings.
Antagonism vs. Agreeableness: Gentle, trustworthy, and very well people
have a high level of Agreeableness. They are considerate to others' interests,
as well as friendly and cooperative. They are seen as honest and selfless by
the general public.
Many with a poor level of agreeability can be viewed as suspect, dishonest,
or noncompliant. When dealing with people, they can be hostile, making
them less likely to be loved and trusted.
Openness
Openness in the sense of the Big Five refers to Openness to Experience, or
Openness to contemplating new ideas, which is not to be mistaken with
one's ability to be open and share one's feelings and thoughts. Few scholars
have referred to this attribute as "Intellect," but this definition has generally
been discarded because it suggests that individuals who score high on
Openness are more intellectual, which is not always the case.
The ability to think abstractly is referred to as Openness. People with a high
Openness score are more likely to be imaginative, adventurous, and
intelligent. They love experimenting with new solutions and having new
experiences. Many with a low Openness score are more realistic,
conventional, and concerned with the details. They like to stop the
unexpected and stick to tried and true methods.
The extent to which those brain regions are linked appears to be linked to
Openness in the brain. Those with a high Openness score seem to have
more associations between brain areas, which could clarify because they see
interactions where others don't.
Experience Openness vs. Closeness: Someone with a strong openness to
practice is thought to be more imaginative and artistic. They respect the
independence and prefer variety. They love traveling and discovering new
skills and are interested in their settings.
Many with a poor openness to new experiences enjoy repetition. They are
averse to transition and doing new activities, but they choose the known to
the unfamiliar. They have a hard time thinking dynamically or complexly
because they are real people.
Extroversion

Extraversion is a personality trait that defines a person's need for

gratification from the outside environment, particularly in the form of other
public attention. Extraverts seek friendship, respect, strength, status,
enthusiasm, and love by regularly engaging with others. Introverts, but on
the other hand, save resources and do not exert too much effort in order to
obtain these social benefits.
Extraversion appears to be linked to dopamine production in the brain.
Dopamine is the primary chemical correlated with our desire to achieve a
target and is known as the "reward" neurotransmitter. A textbook example
is a rat trapped in a labyrinth whose brain releases dopamine as he
desperately searches for the cheese. Extraverts have higher levels of
dopamine in their brains, meaning that they are more receptive to the
possibility of a reward. Introverts have lower dopamine levels and are
therefore less likely to go out of their way to seek out incentives.
Extraversion vs. Introversion: Extraverted people are proactive, sociable,
enjoyable, and pleasant in total. They excel in social settings and are
unafraid to express themselves. Being with people causes them to gain
momentum and get excited.
Introverts are people who rank poorly on the extraversion scale. These
individuals are more withdrawn and silent. Instead of having to be noticed,
they want to listen to everyone else.
Introverts also need periods of isolation to re-energize since attending social
gatherings can be exhausting. It's worth noting that introverts don't
inherently despise social gatherings; rather, they find them exhausting.
Neuroticism

Neuroticism refers to something like a person's proclivity toward negative

feelings such as terror, depression, depression, remorse, and guilt in
response to stressors.
This characteristic can be compared to an alarm device. Bad feelings are
used as an indication that something is wrong with the universe. Fear is a
reaction to risk, while guilt is a reaction to wrongdoing. Even so, not
everyone reacts to a circumstance in the same way. Individuals with a good
Neuroticism score are more inclined to answer negatively to a situation.
Low Neuroticism people are much more likely to move on from their
misery.
Neuroticism tends to be linked to the connectivity of many brain areas, such
as those that perceive emotional feedback (like angry faces or attacking
dogs) and interact with negative emotions. According to one study, elevated
Neuroticism is linked to altered serotonin synthesis throughout the brain.
Emotional Stability vs. Neuroticism: Neurotic people are prone to feeling
nervous, uncertain, and self-pitying. They are sometimes misunderstood as
glum and anxious. They have a tendency to be down and have poor self-
esteem.
Those with a low neuroticism score are more likely to be cool, confident,
and self-satisfied. They're less likely to be labeled as jittery or moody. They
are more likely to have a high sense of self-worth and to be robust.
3.2 Exercise
Which OCEAN Trader are you?
Take the test and measure your personality in financial psychology
Question Disagree Slightly Neutral Slightly Agree
disagree agree
1. Am the life of the party. 1 2 3 4 5
2. Feel little concern for others. 1 2 3 4 5
3. Am always prepared. 1 2 3 4 5
4. Get stressed out easily. 1 2 3 4 5
5. Have a rich vocabulary. 1 2 3 4 5
6. Don't talk a lot. 1 2 3 4 5
7. Am interested in people. 1 2 3 4 5
8. Leave my belongings around. 1 2 3 4 5
9. Am relaxed most of the time. 1 2 3 4 5
10. Have difficulty understanding abstract 1 2 3 4 5
ideas.
11. Feel comfortable around people. 1 2 3 4 5
12. Insult people. 1 2 3 4 5
13. Pay attention to details. 1 2 3 4 5
14. Worry about things. 1 2 3 4 5
15. Have a vivid imagination. 1 2 3 4 5
16. Keep in the background. 1 2 3 4 5
17. Sympathize with others' feelings. 1 2 3 4 5
18. Make a mess of things. 1 2 3 4 5
19. Seldom feel blue. 1 2 3 4 5
20. Am not interested in abstract ideas. 1 2 3 4 5
21. Start conversations. 1 2 3 4 5
22. Am not interested in other people's 1 2 3 4 5
problems.
23. Get chores done right away. 1 2 3 4 5
24. Am easily disturbed. 1 2 3 4 5
25. Have excellent ideas. 1 2 3 4 5
26. Have little to say. 1 2 3 4 5
27. Have a soft heart. 1 2 3 4 5
28. Often forget to put things back in their 1 2 3 4 5
proper place.
29. Get upset easily. 1 2 3 4 5
30. Do not have a good imagination. 1 2 3 4 5
Question Disagree Slightly Neutral Slightly Agree
disagree agree
31. Talk to a lot of different people at 1 2 3 4 5
parties.
32. Am not really interested in others. 1 2 3 4 5
33. Like order. 1 2 3 4 5
34. Change my mood a lot. 1 2 3 4 5
35. Am quick to understand things. 1 2 3 4 5
36. I Don't like to draw attention to myself. 1 2 3 4 5
37. Take time out for others. 1 2 3 4 5
38. Shirk my duties. 1 2 3 4 5
39. Have frequent mood swings. 1 2 3 4 5
40. Use difficult words. 1 2 3 4 5
41. Don't mind being the center of attention. 1 2 3 4 5
42. Feel others' emotions. 1 2 3 4 5
43. Follow a schedule. 1 2 3 4 5
44. Get irritated easily. 1 2 3 4 5
45. Spend time reflecting on things. 1 2 3 4 5
46. Am quiet around strangers. 1 2 3 4 5
47. Make people feel at ease. 1 2 3 4 5
48. Am exacting in my work. 1 2 3 4 5
49. Often feel blue. 1 2 3 4 5
50. Am full of ideas. 1 2 3 4 5

Steps to follow:
Use the same math string for each personality trait to calculate the results.
The object numbers are the numbers in parentheses. The numbers in
parentheses indicate the score should be written on the side. Each of these
numbers corresponds to a single test item number.
If you see “(6)” in the math string, for instance, it means you can insert the
number on the line after it, which corresponds to the person's answer option
for item #6. Keep in mind that all of the math strings contain addition and
subtraction. A score of zero to forty will be assigned to each personality
trait.
Extroversion
Extroversion (E) is a personality disorder characterized by a need for
gratification from places other than oneself or in the culture. High scorers
are more likely to be outgoing, while low scorers choose to work alone on
their tasks.
E = 20 + (1) _1__ - (6) __4_ + (11) __3_ - (16) _5__ + (21) _4__ - (26) _3__ + (31) _2__ (36) _5__ + (41) _1__ - (46) _4__ =
__10___

Agreeableness
(A) reflects how much individuals adjust their behavior to suit others. High
scorers are typically polite and like people. Low scorers
tend to 'tell it like it is'.
A = 14 - (2) _1__ + (7) _4__ - (12) _1__ + (17) _5__ - (22) _3__ + (27) _5__ - (32) _3__ + (37) _3__ + (42) _5__ + (47) _4__ =
__32___

Conscientiousness
Conscientiousness (C) is the personality trait of being honest and
hardworking. High scorers tend to follow rules and prefer clean homes.
Low
scorers may be messy and cheat others.
C = 14 + (3) _5__ - (8) _1__ + (13) _5__ - (18) _1__ + (23) _4__ - (28) _2__ + (33) _5__ - (38) _1__ + (43) _5__ + (48) _5__ =
__38___

Neuroticism
Neuroticism (N) is the personality trait of being emotional. High scorers
tend to have high emotional reactions to stress. They may perceive
situations as threatening and be more likely to feel moody, depressed, angry,
anxious, and experience mood swing. Low scorers tend to be more
emotionally stable and less reactive to stress.
N = 38 - (4) _4__ + (9) _2__ - (14) _5__ + (19) _4__ - (24) _2__ - (29) _4__ - (34) _3__ - (39) _2__ - (44) _3__ - (49) _2__ =
__19___
Openness to Experience
Openness to Experience (O) is the personality trait of seeking new
experiences and intellectual pursuits. High scores may day dream a lot
(enjoy
thinking about new and different things). Low scorers tend to be very down
to earth (more of a ‘hear and now’ thinker). Consequently, it is
thought that people with higher scores might be more creative, flexible,
curious, and adventurous, whereas people with lower score might tend to
enjoy routines, predictability, and structure.
O = 8 + (5) _5__ - (10) _1__ + (15) _2__ - (20) _2__ + (25) _4__ - (30) _3__ + (35) _5__ + (40) _4__ + (45) _5__ + (50) _5__ =
_32____

Narrative Summary of Findings

Here’s an example of how you might document the above findings:
According to the Big Five Personality Test (BFPT), CT self-reports
extremely low Extroversion 10/40, moderate Neuroticism 19/40,
and high Openness to Experience 32/40, Agreeableness 32/40 &
Conscientiousness 38/40.
 Chapter 4: Trading Strategy

A trading strategy is a tried-and-true way of preparing and executing

trading with the intention of getting a gain.
The classic trading strategy would specify the trades to build, when and
how to make them, when and how to leave them, as well as how much
money you can gamble across each place. They provide you with a method
of critically deciding if a transaction is worth taking the risk at the start if
you follow them correctly.
There are several strategic approaches chooses from, and selecting one
requires determining the alternative best fits your trading needs, including
your risk aversion, business experience, and trade duration.
4.1 Discretionary Trade

Discretionary trade is for traders who prefer to have complete control of

their investments. Whenever it comes to identifying openings, traders who
practice this approach take the very same measures as everyone else. They
vary in their proclivity to decide things based on factors other than technical
research. For instance, a discretionary trader can determine that market
conditions no longer sustain their hypothesis and take the profits before
reaching their initial market valuation. Traders have greater power over
their roles as they operate with discretion.
Optimized traders consider themselves superior discretionary traders. They
realize that as the economy shifts, even the greatest strategies will go
horribly wrong. Whose ability to rock and swirl in and out of business is
due to their focus on instincts and judgment. Discretionary traders should
enter and leave positions depending on consumer activity rather than being
stuck in a spot. This enables them to manage danger.
Trading with a Decision-Making Approach
Since discretionary investing is just how it is, it is often alluded to as
“decision trading.” Traders don’t simply follow a system when making
investment decisions. Alternatively, they employ a method to spot
openings, and they then exchange depending on market conditions.
A discretionary broker, for example, may open a place with the intention of
selling once a trend is completed. They will, nevertheless, note that the
trading volume remains high. A decision trader can update their market
value rather than take the profits at the original cost. Throughout this case, a
discretionary trader’s judgment could result in greater ROI or poor earnings
if they exceed the trend. It all relies on the trader’s trust and the market’s
response.
Discretionary trading is seen by some as a casino game. Others define it as
the desire to stay competitive. It all basically comes down to the trader’s
tactical awareness and vision.
The Big give personality Traits Model plays a pivotal role in decision
making. Financial psychology comes into play in Discretionary trading, and
it is a game of gut and instinct.
Downsides in Discretionary Trading
Discretionary investing has a significant flaw: human error. If structured
trading results in damages, there is a flaw in the scheme. If a trader’s
discretionary dealing results in repeated losses, there’s a concern. It’s not
unusual for investors to have a strong technical concept of markets but
weak trading intuition.
Emotion is also a factor. Intuition or emotion may be used to enter or leave
a location, which can be counterproductive to technological signals.
Discretionary traders must put their emotions aside and behave based on
evidence. Gambling is, in practice, arbitrary behavior based on sentiment.
If you’re going to try to make trades due to decisions, you’ll need the
courage to follow through. Traders should avoid second-guessing.
Discretionary Trading’s Advantages
Stocks are erratic and constantly evolving. Discretionary traders are more
agile than systemic traders, so they can respond to new conditions and
interpret new signals. Rather than making a choice by a system of
regulations, educated traders may reframe their positions in light of a new
set of criteria.
This versatility has a slew of advantages. Traders may, for instance, take
gains faster or at a greater price target or run a smaller trend inside a larger
one. Discretionary traders are not really tied to their positions and can leave
them at any moment depending on technical indicators. It’s a fantastic way
to keep liquidity in a volatile economy.
Final Thoughts
Discretionary trading is based on intuitive sector analysis. Emotionally-
driven investing is terrible; evidence-based trading is fine. Discretionary
merchants must be able to tell the difference and behave accordingly. This
usually entails having an aggressive trading mentality rather than a passive
one.
You may also read more about the various forms of investing techniques
that are currently in use.
You need evidence, not just a gut instinct if you’re trying to be a judgment
trader. As a result, discretionary trading is considered a more mature
strategy. Many who have the time, professional knowledge, and foresight to
assess their positions would make choices that are beneficial to their
portfolio.
Here the Personality traits as explained in the Big Five Model come into
play, and people with strong personality traits get benefit while opting for
this strategy.
4.2 Mechanical Trading

For certain traders, a mechanical financial market that can continuously

beat the market is the Holy Grail. The concept of automated gain is
appealing, but is it feasible? In a broad sense, yes, but it is not simple.
A structure or mechanical spread trader employs a trading strategy or
system of regulations to determine when and how to enter and leave an
exchange. Prior to actually placing a spread trade, such a trader will have it
figured out in a scheme. In simplest terms, it is a strategy that makes
investment decisions for you! A scheme would have guidelines about how
much to assign each deal when to join trades, when to leave trades, and how
much to lose on each trade. You enter the trading details, and your machine
responds with a recommendation on what to do next. Based on the
equations used by your system, you purchase, advertise, or do nothing.
Then you’re left without any options but to know how to spend your
earnings! But we’re still a long way off from that point.
What Are Their Functions?
Mechanical structures are designed to be responsive. They believe that
when a market has behaved in a certain manner in the past, it will behave in
the same way in the prospect. This isn’t always the situation, but the goal is
to find a trend that will replicate itself quite often in the future to make the
method profitable in the long run.
How Do We Make One?
Your own structure can be as simple or developed as you want to.
Consequentially you can adjust your own requirements and develop. The
process of building one should follow such main guidelines:
Phase 1: Select time span
Phase 2: Identify entry Criteria
Phase 3: Develop exit procedures.
Phase 4: Backtesting
Phase 1: Decide on a time span
First, decide on a price range for your method. one min, five min, ten min,
fifteen min, thirty min, and monthly are the seven main timelines for
traders. Instead of having to work the system overall of these timeframes,
we suggest picking only one.
The lower the overall benefit per deal, the lower the level of risk, and the
higher the number of deals, the shorter the timeline. It’s up to you to choose
whatever timeline works well for you. A day trader, for example, may use a
5-minute scheme, while anyone that can only get to the trading screen once
a day would choose a normal system.
Phase 2: Identify entry criteria
You might come up with potentially countless different entry laws.
However, they can be divided into two categories: pattern tracking rules and
reverse rules.
Pattern tracking programs use metrics such as Moving Averages (MA) and
Positional Movement to try to profit from a market’s proven trend. Going
long whenever the fifty-period MA passes the 200 duration MA from below
and brief when the 50 period MA passes the 200 periods MA from above is
one instance norm. The reasoning here is if the fast-moving MA tackles the
slow-shifting MA from underneath, a possible future pattern is going to
start.
Phase 3: Establish exit protocols
You have to blockchain ledger to get out of trade since you’ve been in it. To
safeguard your capital and realize profits, you’ll need two general
guidelines: a stop-loss order rule and a threshold profit order rule.
There are five fundamental methodologies for establishing exit rules:
Amount in euros (for example, €1,000),
Capitalization rhythm (e.g., 2 percent of capital),
Percentage of contemporary premium (e.g., 2 percent of the entry
price),
Volatility percentage (e.g., 99 percent of the average daily movement),
The passage of time (e.g., exit after 2days).
If you want to get more specific, you can integrate such methodologies.
Perhaps set a stop loss at three percent of capital, a threshold revenue order
at 3 percent of the initial cost, and a period reign to shut the exchange after
two days if none of the instructions have been touched.
Phase 4: Backtesting
Now since the mechanical trading system’s principles have been
established, you can backtest it against statistical information to see how it
works. The outcomes of backtesting will give you an idea of how profitable
the system would be over time.
The Investment Spreads graphs are a fine place to begin when backtesting.
Examine various maps on your selected timeframe manually for areas
where your entry criteria are violated. So stick with it until one of your
escape criteria is met. Make a note of your gains or losses and move on to
the next time your entrance rule was met. For a while after doing just that,
you must be able to tell whether or not your scheme is financially viable. If
you’d like to build multiple rules and optimize your testing, you should
consider using a back testing application, such as AmiBroker is an online
broker.
You could also enhance your regulations by tweaking them marginally
during the backtesting step. For instance, rather than 2.5 percent, you could
increase your stop loss to 4% of capital. But then don’t fall into the trap of
attempting to “slope” the system!
We see more ‘black box’ devices that claim to produce accurate trading
signals, or indeed exchange for you, especially in the Forex market. These
may be trained to obey sound standards and can even produce positive
outcomes for a short period of time, but they are no replacement for sound
judgment and reasoning. Mechanical structures are examined measurements
carefully, and qualitative research is the practice of analyzing a variety of
diverse and accurate scientifically derived indicators. There has not been
and never will be a flawless electronic trading scheme.
Mechanical structures have two applications. The first method is to use the
performance of the mechanical trading scheme as yet another indicator of
the judgment process. They serve as a filter for the other variables in this
way.
Second, you can say a mechanical trading machine to operate on any signal,
which, in the hands of a well-thought-out system, might result in long-term
gains. There’ll be winning and losing exchanges, but censoring them
introduces the possibility of emotional choices and eliminates the
advantages of the mechanical solution. An automated system’s advantage is
that it removes sentiment from trade.
Since mechanical systems are built on historical evidence, they may or may
not work satisfactorily in the future, depending on market circumstances.
It’s usually not worth it to fine-tune the framework for a better match to
historical events, and you shouldn’t make up new laws just to match history.
A structure built on sound general principles can provide acceptable results.
You should build and backtest the system with your software to ensure
accurate and stable performance.
The Advantages of Using a Mechanical Trading System
They’re easy to use. There’s no room for complex understanding or analysis
when it’s all taken care of for you. Often traders do not have enough time to
track and absorb all of the data available. This is unnecessary for a mere
“mechanical machine” strategy.
Most merchants, like (probably) you, are hampered by their emotions.
Before even mastering their passions, no investor has ever been able to
dominate the industry. The majority of feelings are removed by a
mechanical machine.
They force the price with greater confidence. You should be assured that
your investment will be efficient and productive if you have thoroughly
backtested your scheme. As a result, there will be fewer uncomfortable
moments thinking over an open spot.
Since they lack control, most traders lose a lot of money in the markets. A
mechanical device simplifies the application of discipline when all that is
required is a determination to obey the system. The mechanical device aims
for what is currently there, not really what we think will be there, so a
suggested change may seem counterintuitive.
A well-defined computational mechanism is more likely to maintain
accuracy than a system in which the trader takes purchasing and selling
decisions. Cutting losses without delay and being on the right side of deals
are two ways to maintain discipline, and reducing risks is one of the most
difficult aspects of trading for several investors.
Mechanical processes are often built to trade with the pattern, which is
really the safest way to sell, and that they will often let cash flows of an
entity in the presence of a good pattern, rather than being inclined to lock in
profits early. A computational trader will usually backtest the take
advantage of the market using scientific proof to see whether the rules are
profitable.
Mechanical System Downsides
There is no such thing as a perfect machine, and if the demand is not
trending, the mechanical system is likely to deliver marginal results. It is a
significant drawback since stocks may only trend half of the time.
The most successful mechanical systems are pattern, and they depend on
big industry movements to make money. If the machine didn’t detect the
absence of a pattern, as most can’t, money would be spent trying to sell
when the market is going sideways.
Why not purchase a competitive system?
You might be tempted to just buy a successful one on the web at this point.
The phrase “caveat emptor” means “let the buyer beware.” On the web,
there are several programs for the offer which appear to be extremely
lucrative. Purchasing one is an alternative, but not one We advocate – at
least not without first conducting thorough research into the platform’s
guidelines and reasoning.
The Big five personality model plays its role in the financial economy as
per a study conducted by Muha, ad ZubairTauni, Zulfiqur Ali Memon. The
aim of their analysis is to determine the impact of investor-advisor
personality congruence on futures investor trading activity. This study used
a one-of-a-kind data sample from 408 investor-advisor dyads in the Chinese
stock market to test the proposed hypotheses. The primary database is real
futures investor trading data collected exclusively from Chinese futures
trading companies. To analyze the effect of investor-advisor personality
congruence on trading volume, they used Ordered Profit estimation. Their
findings show that whenever the trader and adviser are on the same page in
terms of transparency, conscientiousness, and agreeableness, they exchange
more prospects. Investor-advisor agreement on neuroticism, on the other
hand, lessens futures trading. Retail investors will trade separately if they
have personality concordance (duties under health and safety) with their
advisors, as per this study. As a result, regulators should recognize investor-
advisor persona concordance in order to improve the retail investor services
sector’s market efficiency.
 Chapter 5: Selecting the Trading Market

The world has an increase in the forms of financial instruments, which can
be used as technology advances and trading competition progresses. Also,
industries that seem to be unrelated are trying to take market share from one
another. To engage in the motion of gold prices, a person no longer decides
to acquire gold literally or from a futures market; instead, they may start
buying an exchange-traded fund (ETF). Given that similar situations can
occur with commodities, currencies, securities, and other portfolios,
investors can fine-tune the trading strategies and adapt them to their specific
needs.
Markets Relying on one’s knowledge and expertise, he or she might not
have been obviously conscious of the portfolios or trading current
alternative at the click of a button. Investors may find deals in a variety of
markets, even though they ignore generalized and insolvent markets:
5.1. Stock Market
A market is a gathering of buyers and sellers, orchestrated by a stock
exchange, that allows the value of assets, such as company securities, to be
determined. A stock exchange is where share prices are set and where
organic market forces for stocks will play out during local and international
markets in the form of share trading. Good market values may reflect the
high interest in an economy or industry, and market rates are also used as an
indication of business and consumer confidence. As a result, the markets
are viewed as a significant economic tracker, as well as a means for traders
and investors to profit from their investments.
Traders can enhance the productivity of their capital by investing in
financial exchanges, where they can gain returns that are not present in any
other investment tool. The financial markets could be an ideal way to
produce a capital gain for anybody, whether they are a billionaire
investment manager or a one-man novice trading company with a small
capital budget.
A stock market is a global marketplace where buyers and sellers of assets
may communicate and exchange standardized share instruments. Stock
exchanges control stock markets by accepting applications from public
entities to list their shares for public sale. Companies must satisfy
comprehensive qualification thresholds in order to be classified, which are
intended to protect traders and guarantee a degree of standardization of
securities across the industry.
Stock exchanges determine the price of underlying assets by comparing the
rates buyers and sellers are prepared to pay to decide pricing for a product
of a product at any given time.
What Is the Function of Stock Exchanges?
Stock exchanges work by connecting publicly listed company listings and
allowing traders to enter the markets and trade with businesses and other
investors. To begin with, stock exchanges will expect firms to conform to
strict listing requirements in order to be considered for listing, and traders
should rest assured that listed companies are thoroughly vetted before being
made available to the financial markets to ensure that they satisfy the
regulatory listing criteria. The stock market then guarantees that the
securities being exchanged are uniform before allowing buyers and sellers
from a variety of motivations and capital sources to participate. The stock
exchange is responsible for ensuring that markets operate smoothly and that
trades are completed as needed.
5. 2. Bonds
Bond investing is a strategy for profiting from changes in the valuation of
government or corporate bonds. Most people consider it, alongside stocks
and money, to be an important part of a well-diversified trading portfolio.
A bond is a type of financial asset which allows people to lend money to
entities like governments or corporations. The entity would pay a fixed rate
of interest on the loan for the life of the agreement and return the original
amount at the expiry of the agreement.
What is the procedure for trading bonds?
Although the end reward on a bond is set, the economic conditions around
its selling will trigger price volatility. Rising interest rates, for instance,
render bonds less appealing to investors since other low-risk ways to earn
high returns are available. As a result, borrowing costs and bond prices
appear to be inversely related.
Traders may use financial instruments to bet on a bond’s stock price in
addition to purchasing bonds at favorable times. Spread betting is a
common way of bond investing for those who just want to exchange the
volatility of a bond’s price rather than the underlying asset: nevertheless, it
carries substantial risks, and losses can surpass deposits.
What exactly is the distinction between a stock and a bond?
Let’s begin with the fundamentals. A stock is a share of a company’s shares.
You become a part-owner of General Motors when you purchase one share.
An IOU is what a bond is. When you purchase a General Electric bond, you
are effectively lending the business money.
The holder (you) of all equities and bonds is entitled to working capital
from the issuer (in this case, GE). The distinction would be that a stock’s
transactions are less predictable than those of a bond. If you buy GE shares,
you can earn a dividend payment from the firm, but the amount is
determined by the firm.
A bond, but on the other hand, is a legally binding agreement. You have
decided to give loans to a corporation (or state) on the condition that it
would be repaid on a specific date and that you’ll be given a certain, pre-
determined rate of interest at frequent intervals in order to make the loan.
They’ve broken the deal if they wouldn’t pay you back.
The debt sum (principal), the return on investment the bond borrower will
expect (yield), and the period that the bond lender will refund the full
amount of the bond to the creditor are the three major aspects of each bond
(maturity date). The perceived probability that the lender would be able to
execute the deal determines the bond’s yield.
5.3. The Forex Market
The forex market is an online platform whereby dealers buy and sell
currency all around the world. Since currencies are in such fierce
competition, it runs 24 hours per day, from 5:00 pm EST on Sunday till
4:00 pm EST on Friday. It is in charge of determining the currency values
for currencies with a floating exchange rate system. The Forex market is
reported to have a daily volume of $6.6 trillion.
It is the world’s oldest and most competitive stock exchange. The
differences in currency fluctuations, which decide traders’ earnings, are
determined by demand and supply.
There are two levels of this world economy. The interbank business is the
first. It’s where the world’s largest banks swap currencies. The trades are
huge, despite the fact that there are just a few participants. As a
consequence, currency prices are determined by it.
The over-the-counter business is the second class. It is here that companies
and individuals do business. OTC investing has grown in popularity as a
result of the number of companies that have online trading platforms. New
traders need to learn more about forex trading because they are beginning
with a small amount of money. It’s volatile because the forex market isn’t
well-regulated and offers a lot of leverage.
The United Kingdom is home to the world’s largest OTC trade Centre. The
industry is dominated by London. The listed price of a currency is normally
the selling price in London. As of April 2019, the United Kingdom
accounted for 43.1 percent of overall foreign forex trade. As a result,
London is the world’s most powerful forex trading center.
A bond between two entities is the basis of currency exchange trade. There
are three different types of occupations. The spot market deals for the price
of a currency at the moment of the exchange. The forward market is a
contract to swap currencies at a pre-determined price at a later date.
Both are involved in a swap deal. On the spot market, dealers buy money at
contemporary prices and sell the same sum on the forward market. They,
therefore, simply reduced their potential risk in this manner. They would
not lose more than the forward mark, regardless of how far the currency
declines. They will spend the money they purchased on the spot market in
the meantime.
5.4. Commodities
Commodity markets are tangible assets such as wheat, gold, and oil. Raw
materials are divided into three groups due to their vast number: agriculture,
energy, and metals.
Agriculture
Sugar, tea, chocolate, and fruit juice are examples of beverages. The soft
markets are what they’re called.
Wheat, soybeans, soybean oil, rice, peas, and corn are examples of grains.
Live cattle and pork are examples of farmed animals (called lean hogs).
Cotton and timber are examples of items you would just not consume.
Energy
Crude oil, RBOB diesel, oil and gas, and heating oil are also used in the
electricity division. Commodity trade is a major factor in determining oil
prices.
Metals
Extracted minerals such as gold, iron, silver, and platinum are examples of
metals.
The cost of all commodities is determined by commodity trade. As a result,
the costs of the essential commodities you use on a daily basis fluctuate.
They vary day by day in some ways, such as oil.
Commodities trade has a particularly negative effect on the world’s poor,
who spend much of their meager income on food and transport. It also
increases the chance of farming.
Oil, gold, and farm goods are among the most traded commodities. They
swap futures and options instead of transporting such large objects, and no
one wishes to ship them. There are contracts to purchase or sell something
for a certain price on a certain date.
Agreements for commodities are valued in US dollars. As a result, as the
value of the dollar increases, it costs fewer dollars to purchase the same
quantity of goods. Commodity rates collapse as a result of this.
Commodities as a term used in the business world
Commodities may be described as any product or service that is purchased
and sold solely on the basis of price in the business world. This involves
goods that are traded. They may also be goods that aren’t distinguished
from others by their name, advantages, or other distinctive characteristics.
Coca-Cola, for example, is a premium beverage that inspires loyalty and
commands a higher price due to its perceived distinction from other cola
beverages. Since it isn’t any different from most retail labels, a low-cost
store brand is something of a product. It’s bought mostly for its low cost,
not for its flavor.
5.5. Cryptocurrencies
The activity of theorizing on cryptocurrency price fluctuations using a CFD
trading account, or purchasing and trading the corresponding coins via an
auction, is known as cryptocurrency trading.
Using an exchange to trade cryptocurrencies
Whenever you buy bitcoins on a platform, you’re really buying the tokens.
To open a spot, you’ll establish an exchange account, deposit the entire cost
of the property, and keep the cryptocurrency tokens with your own account
before you’re prepared to sell.
Exchanges have their own steep learning curve, and you’ll have to wrap
your head around the application and figure out how to interpret the results.
Many exchanges often have limitations on the amount of money you can
spend, and maintaining an account can be costly.
The essence of cryptocurrency markets
Cryptocurrency economies are decentralized, meaning these are not
distributed or sponsored by a central body like a state. Rather, they’re
distributed around a computing network. Cryptocurrencies, on the other
hand, can be purchased and sold on exchanges and held in ‘wallets.’
Cryptocurrencies, with the exception of standard currencies, only function
as a decentralized cryptographic archive of ownership held on a database. A
user sends cryptocurrency amounts to some other user’s wallet app. The
transfer isn’t deemed complete before it’s checked and applied to the
blockchain, which is done by a method known as mining. New
cryptocurrency tokens are normally generated in this manner.

What drives the price of cryptocurrencies?

Markets for cryptocurrencies are driven by supply and demand. Due to their
decentralized structure nature, they are immune to several of the economic
and political issues which plague conventional currencies. Although there is
already a great deal of confusion around cryptocurrencies, the following
variables may have a big effect on their prices:
The overall number of coins in circulation, as well as the rate at that they
are issued, destroyed, or lost.
Share price refers to the total value of all coins in circulation, as well as
how people consider this cost to be changing.
The way blockchain is depicted in the media and the amount of attention it
receives
Integration: the ease with which a blockchain may be integrated into
traditional networks, such as payment mechanisms for e-commerce.
Major occurrences: Such as policy updates, security vulnerabilities, and
economic setbacks are examples of key events.
What is the growth?
The expansion is the discrepancy between such a cryptocurrency’s
estimated buy and sale rates. Once you create any place on a cryptocurrency
exchange, you’ll be given two rates, much like many other stock markets.
You sell at the buy price, which would be just above the stock price, to open
a long spot. You trade at the sale price, which is just below the share price if
you’d like to open a short account.
How much is a lot?
Lots – collections of cryptocurrency tokens used only to standardize the
scale of transactions – are frequently used in cryptocurrency trading. Since
cryptocurrencies are so unpredictable, lots are typically very small: the
majority are only one component of the base cryptocurrency. Some
cryptocurrencies, on the other hand, are exchanged in larger lots.
What is leverage?
Leverage is a method of getting access to vast volumes of cryptocurrencies
without having to spend the whole value of the exchange upfront. Instead,
you make a slight down payment known as margin. When you end a
leveraged position, the entire scale of the exchange determines the benefit
or loss.
Although there are other sectors, they are now readily available from the
comfort of one’s own home for anybody with a connection to the internet.
Each competition has its own set of benefits and drawbacks. As a result,
many traders may want to trade only one marketplace as it fits one part of
their lives or because they are unfamiliar with other markets. This may
indicate that, with their trading style, traders are not taking advantage of the
special demand.
What Markets Do You Trade?
Personal investment styles, financial capital, position, and the time of day a
person trades (or wishes to trade) will all influence which markets are better
suited to them. Since some of these markets might be unfamiliar, we’ll look
at two different types of traders and how they can use those markets to
boost their trading. It’s good to be mindful of those options because they
can allow for some tweaking, which can lead to better long-term
performance.
Day Traders’ Parallel Markets
The biggest attraction to investing in the forex markets is that it requires
very little capital. Individual people will also open accounts for as little as
$100 and day exchange world currencies, indices, and resources. The
broker on the forex market is simply trading one exchange for another,
presumably in a different currency-denominated account. It appears to be
appealing, with low entry barriers, no charge (though a split is charged),
market volatility (significant risk payoff), and tariff-free instruments,
including such charts and analysis. However, if one needs to exchange forex
or CFDs, which can cover almost any sector, there are other options.
Traders will also participate in currency movements by trading on the stock
market with money market funds. Although starting the day trading
stock/ETF portfolio would take more cash, ETFs may be utilized or
unhedged, which has benefits. This implies that anyone who wishes to take
on more risk/reward with each marginal trading activity will, for example,
purchase a “3X bull” ETF. A trader is therefore not obligated to pay the
spread by using an ETF. Instead, they may stay on the deal or contract and
earn ECN rebates by offering liquidity. This would be particularly useful
when trading currency pairs with little motion or when using a scalping
technique.
ETFs can enable traders to participate in other sectors, including the
exchange of oil, gold, silver, or trading volume; traders may leave the CFD
market and start selling ETFs, giving them access to a wider variety of
items. ETFs, CFDs, and the foreign exchange market can be beneficial
based on your trading style. Various methods may be used to mitigate or
profit from market disconnects, including a currency pair moving
independently of its related ETF (or vice versa).
Long-Term Investors Should Consider Alternative Markets
Long-term buyers are also drawn to commodities, but they’d be unfamiliar
with futures trading and hence have not actively invested in the prices of
materials such as gold, silver, or platinum. It’s also doubtful that they’re
used to multiple currencies. Although they could have contemplated options
investing, the instrument’s frequency would not suit their trading strategy.
Also, for investors looking who only market a few times a year, knowing
various markets will unlock new opportunities. The foreign currency could
be used to achieve cash holdings after knowing about the various markets.
ETFs may also be used to achieve cash holdings and share in the price
fluctuations of gold, oil, silver, and other world markets. Long-term
investors may benefit from CFDs because the bid/ask range is small over
time, and they offer some of the advantages of contracts without any of the
expiration date. Big blue-chip stocks, for example, are often offered as
CFDs. The inventory is not actually owned, which allows for market
movement involvement with fewer resources (even though high leverage
could be used if wanted), but the CFD does not have voting rights or any of
the other benefits that come with owning a piece of the business. When
selling every instrument, it’s critical to consider taxation and how the
instruments work with larger goals, such as retirement. Since each tool can
need a significantly different approach, it’s best to pursue professional
advice.
 Chapter 6: Day Trade Guide

Buying and trading stocks in a single trading day in the market system,
including ordinary shares currency and international payment systems
(FOREX), in order to acquire a unit of brief loans is known as day trading.
Day traders who engage in this market practice make use of a variety of
tools, including time to study and the correct kind of money, and they are
often profitable. When it comes to day trading, success means making a lot
of money.
6.1 A Day Trader's Attributes
Becoming a day trader doesn't really happen naturally; it necessitates a
certain character and set of characteristics. A few of the features of a day
trader are listed below.
A disciplined person
It is an important characteristic for day traders to be aware of. Day traders
should be diligent in staying alert when no openings pose themselves and to
respond fast when possibilities do. Transitioning quickly also entails
adhering to the process guidelines and rules outlined in their original plans.
Open to new ideas
Day trading is an instructional type of income-generating activity, which
means there will be good times and bad times. Be kind to yourself and start
taking what you've learned. Enhance the good times while actively ignoring
the bad ones. Getting subjected to both wins and losses teaches you to be
open-minded and apprentice all probable score leaps.
A software enthusiast
An investor should be aware of different trading channels and processes
used in day trading. It should not be a source of concern for you. Seeing
how they operate does not, in any event, necessitate becoming a machine
wizard. Learn the fundamentals and progress technologically over time.
Mentally challenging
Losing stock trades are inevitable; even the most active traders can lose
trades on a daily basis. They win marginally more often than they lose.
During a losing streak, it's important to keep positive and sensible and don't
let the reality that revenue has been wasted bother you. Incorporate any of
the tactics listed in your strategy to focus on potential day trading practices.
Self-reliance
The pursuit of autonomy entails assembling a toolkit that will serve as a
reference. Reading trade books, watching every movie, and conversing with
one tutor after another can be a complete waste of time. What happens if a
YouTube blogger you follow wishes to stop uploading videos? Still
remember the fundamentals after doing the extensive study. Dare to
convince yourself that you've earned it and concentrate on the advantages.
If you feel confused, though, do not wish to consult assistance. Most
critically, master and evaluate good moves and incorporate them into the
overall strategy.
Patience is required
It takes time for the good stuff to happen. Think carefully for any strategic
maneuver you attempt, but don't get paranoid. Act in a disciplined manner
to reduce the number of damages that are expected to occur during different
day trading operations.
A diligent day trader is also a student of the market. Day trading would not
be straightforward at all, but with time and the acquisition of a variety of
skills or practice, things can get much easier. Be polite, please.
Future-focused
You become a slave if you get trapped in the past. Forward-thinking allows
you to see potential moves and gives you the last word on where the next
trading transaction will take place, based on the day trader's plan's fixed
protocols. Being medium to long term encourages forward-thinking, which
entails critical thinking and determining the next course of action after
careful consideration. Being long run speeds up and streamlines day trading
operations, increasing the likelihood of a profitable outcome.
Economic independence
Day trading does not necessitate being a tycoon, but it does necessitate
having a certain sum of money that has been carefully chosen to begin day
trading. As you continue to learn and evolve, keep in mind that the first
times are usually a win or lose the case. This amount of money is, therefore,
susceptible to loss. When it comes to day trading, be cautious about how
you manage your money. A good story isn't really a good story.
Exuberance
The pursuit of good objectives is aided by a strong interest in the topic. You
have a desire to study and master day trading because you are passionate
about stocks, shares, assets, markets, and industry. These are the
characteristics of a good day trader in the future.
Awareness and understanding
Learning for both profits and defeats provides experience. To get the most
out of day trading, expose yourself to various learning opportunities and
mastering every successful step. It's important to gain experience and
familiarity with stock exchanges and strategies in order to be effective at
day trading.
6.3 The Basics of Trading Platforms
Trading systems are electronic software-based technological instruments.
Such platforms are used in the capital market to execute trades and manage
open positions. From a simple screen to complicated and complex
structures, online platforms are available. Easy and simple trading platforms
normally only allow for order entry and don't do anything else.
Streaming quotes, newsfeeds, and charting are only a few of the features
available on advanced trading terminals.
When choosing a trading site, day traders must think about their needs. Are
they, for instance, novice or highly qualified? Assets, forex, assets, options,
and futures all have separate exchange channels that are suited to their
respective markets.
Trading platforms are classified as industrial platforms or crop platforms
based on their characteristics. Commercial sites are more useful for day
traders and institutional buyers. These would be easy to use and have a lot
of useful features.
6.2 Tools and Platforms
Trading systems are electronic software-based technological instruments.
These tools are used for the capital market to execute trades and manage
positions available. From a simple screen to complicated and complex
structures, digital platforms are available. Easy and basic trading platforms
normally only allow for order entry and don't do anything else. Streaming
quotations, news sites, and documents are only a few of the features
available on open trading terminals.
When choosing a trading site, day traders should think about their needs.
Are they, for example, a novice or a professional? Assets, forex, assets,
options, and futures all have separate exchange channels that are suited to
their respective markets.
Trading platforms are classified as industrial channels or crop platforms
based on their characteristics. Commercial sites are more useful for day
traders and institutional buyers. Those were easy to use and have a lot of
useful features. Day traders can appreciate the news stream and technical
charts available on these websites. Investing resources such as analysis and
education are available to investors. Professional trading systems are more
advanced and tailored for major investment firms who want to provide their
customers with one-of-a-kind market knowledge.
For newcomers, choosing a primary online trading site with a simple and
easy-to-understand GUI is recommended. It would be difficult to adapt to
market fluctuations and learn new lessons with each trade at the start of a
day trading career. Furthermore, any complex trading software can perplex
an inexperienced day trader, resulting in losses rather than providing ease of
use.
Before deciding on a trading site, day traders should think of two things.
Every appropriate platform must have a live data stream. Around the same
time, it shouldn't be prohibitively expensive. As a result, the day trader must
strike a balance between price and trading characteristics. Choosing a low-
cost platform can help you save money, but it can also have delayed results,
which can ruin your day trading operation. An outstanding trading desk, on
the other side, could burn a hole in the pocket and perplex you while trading
due to its vast array of features.
Day traders in the forex markets, likewise, would need various types of
trading platforms. Take a close look at the resources available on every
online website. Make a definitive decision to buy it if it meets your needs
and suits your budget.
Any trading sites are only open to people who have a broker account.
Before encouraging traders to use it, others could have high deposit costs.
It's also likely that some online trading sites can readily offer margin to
their clients, while others will not. Both of these factors should be taken
into account before investing in a trading site.
It is preferable to make a list of the specifications before making a decision
and then compare the list to the features of each platform. Choose the one
that meets all or more of the requirements.
Choosing an Appropriate Broker
A brokerage firm can act as your business partner during the day trading
business, connecting you to the stock markets and providing you with a
forum to conduct your trades. In addition, this program will charge you a
fee for each purchase. As a result, you'll need to think about a lot of things
before deciding on a day trading broker.
A high brokerage will stymie the profit-making activities, whereas a low
brokerage will conceal certain low-quality trading platform functionality.
Compare various brokerage services before deciding on one. This
brokerage service will be the channel by which you will conduct your day
trading business.
The very first thing to think of is whether or not the broker is a good match
for your needs. If you're just interested in day trading, you'll want to go for
a service that charges a reasonable brokerage fee. Examine its capabilities
to see if they are appropriate for intraday trading. The first phase in
participating in your trading company would be to find the right broker.
Investing in the right knowledge and tools would help you build a strong
trading base.
Numerous brokers tend to a variety of trading and investment requirements.
Their software and services are also customized to meet the demands of
their clients. Day traders may not have been a good match for a brokerage
service that caters to long-term buyers. Various programs are tailored for
day traders in the forex markets, while others are aimed at day traders in the
commodity markets. If you want to day trade stocks, you can look for
brokers that have the most detailed features for stock traders.
Paper Day Trading is a good way to get started
With practice, everyone can learn something. Even the most challenging
skills can be learned with consistent practice. The greatest examples of
what rehearsals should do are athletes and performers. Day trading seems to
be a normal talent, but the fact is that once you start trading, you can feel
like you're standing at a crossroads of several freight trains running at you
from all directions.
Because day trading will result in substantial financial loss, it is
recommended that day traders begin with paper trading and then progress to
real cash trading until they are confident with the stock market's speed.
Except for capital, almost everything in paper trading is true. Day traders
can display real-time price charts and market statistics, as well as determine
how to trade without losing any real capital. This is a form of simulated
trading in which day traders are given the opportunity to make real
transactions with fictitious currency. It allows them to learn from their
errors, improve their trading strategies, and familiarize themselves with
stock market trends, much like actors choreographing scenes before a big
movie.
Often brokers and digital sites provide traders with sample or paper trading
accounts, which they can use to practice day trading for months. It also
allows them to hone their chart-reading and money-management abilities.
6.4 Day Trading Software
For electronic trading, often day traders use computer tools. This eliminates
the hassle of detecting trends and choosing whether to enter and exit trades.
They still don't have to waste hours analyzing charts and reviewing business
headlines to figure out what might happen in the stock market. Most of their
time-consuming and decision-making issues are taken care of by day
trading tools.
Trading software now analyzes chart signals dynamically, determines
transaction entry and exit points, benefit reservation, and stop-loss
thresholds, and conducts the trade at the dealer's behest. The most notable
benefit of electronic trading is that it eliminates the risks associated with
emotional trading. Fear and greed overwhelm day traders in the stock
market, and not everyone can contain their impulses. They miss the right
pattern and make trading decisions because they are influenced by
emotions. This is a common day trading error since most day traders who
lose money do so because they can't contain the emotions.
In such cases, an automatic trading program solves the issue by removing
the emotional component from day trading. The trading software will only
rely on evidence and make trading decisions based on technological cues
since it is a computer. Automap processing generates these signals. As a
result, human error is completely excluded from computer trading. Since
trade signals are produced using computational models, automatic trading is
also recognized as algorithmic (or Algo) trading. Many traders tend to
create their own Algo-trading systems, which produce exchange signals
based on reliable signals.
These days, a variety of electronic trading systems are available. Standalone
websites that offer trading signals for time-based subscriptions are the most
basic example of such an application. These websites show trade maps,
which provide real-time rates during the trading day and provide intraday
buy and sell signals. Day traders must keep an eye on these signs and sell
manually on their trading platform. Such services are inexpensive, and day
traders can choose whether or not to renew their subscriptions depending on
how much money they earn from them.
Clients of some financial companies may also use electronic trading
systems. These services are only available on the company's trading
website, and day traders can use them to place buy and sell orders. Big
firms, hedge funds, and certain private traders are more likely to use costly
Algo-trading tech, which does everything for them: picking the correct
trade entry, placing the order, and leaving the trade at the appropriate time.
Traders will also position buy orders in advance. When the price hits a
certain threshold, these are immediately executed. They can also position
advance orders for sales stock at a certain price level, and the order will be
fulfilled immediately at that price level.
Stock price instability has been blamed on algorithmic trading. Large orders
are issued at certain price thresholds, and when the price exceeds that
threshold, a surge in purchasing or selling action will send financial markets
into a panic. Specific day traders who individually position their orders are
particularly vulnerable. Before they can defend their positions or grasp what
is going on in the markets, the abrupt churning in the financial market
reaches their stop loss thresholds.
6.5 Stocks and Bonds
The bond market is where all the general public trades long-term debt
securities or investment vehicles. The bond industry includes the bond
issuer, who is responsible for purchasing debt securities, and the
bondholder, which is responsible for selling debt securities. Bonds are, in
essence, a form of a loan.
Bonds and Their Dynamics
When you purchase a bond, you're promising to lend your money to the
borrower in exchange for a set interest rate that will be paid at regular
intervals prior to or at maturity. A coupon is the rate of interest that would
be offered to the lender on the corresponding collateral protection in the
case of a loan.
The rate of interest is charged either once a year or twice a year. The
maturity is the date from which the corresponding bond is supposed to pay
the bondholder the specified dividends.
Bonds vs. Stocks: What's the Difference?
Stocks are a form of equity financing vehicle wherein owners participate in
the profits and losses of the project or business in which the funds are
deposited. Bonds, but on the other side, are credit financing instruments in
which borrowers are not shareholders in the enterprise or business in which
the funds are deposited.
The Stock Exchange
What comes to mind when you hear the term market? A stock exchange is a
gathering spot for both investors and sellers of publicly traded stock shares
to purchase and sell them. It's also a location with all of the requisite
facilities for making massive volumes of transactions in a very easy and
safe manner from about anywhere in the world, whether on the market's
actual physical location or over the Internet.
When we refer to the stock market, we're referring to individual stock
markets, which are websites or networks where stock shares can be
exchanged on a daily basis. The New York Stock Exchange (NYSE) and the
NASDAQ are two examples of stock markets. Buyers and sellers of stocks
of many of the world's largest firms will use their websites to trade quickly
and efficiently.
6.6 Futures
Futures markets are where futures contracts are traded. A futures contract is
a deal between a buyer and a seller that a particular asset, such as a product,
money, or stock, will be purchased or exchanged for a given price on a
specific day in the long term (the expiration date).
What are Futures Contracts and How Do They Work?
Futures contract prices are continually changing. A tick is the smallest price
change a futures contract will see at any given time during the day. The
value of the tick depends depending on the futures contract being traded.
Crude oil (CL), for example, trades in $0.01 installments (tick size),
whereas the E-mini S&P 500 (ES) trades in $0.25 increments.
Day Trading Futures Fees and Capital Requirements
A broker is required to trade a futures contract. Payment is a premium
charged by the dealer for the exchange. Futures day traders do not need to
have $25,000 in their trading account, with the exception of stock traders.
Instead, they must only have sufficient day trading profit for the deal they
are trading.
A trader's ratio is the percentage of the money they need in their account to
start a deal. Deal and broker margins differ. Review with your broker to see
just how much money they need to establish a futures trade ($1,000 or more
is common), then see what margin conditions they have on the futures
contract you wish to sell. This will tell you how much money you'll have to
get started. However, to account for lost trades and price swings that exist
when owning a futures position, you will want to invest with more than the
basic essentials you require.
6.7 Options Trading
An option is an agreement that requires (but does not obligate) an investor
to purchase an asset such as a safe, ETF, or perhaps even benchmark at a
predetermined fee over a specified time span. The options market, which
markets futures based on shares, is where you buy and sell options. A "call
option" is one which encourages you to buy shares at a future stage, while a
"put option" enables you to sell the shares at a later stage.
Options, on the other hand, are not the same as stocks in that they do not
reflect equity in a business. And, while futures and options both use
contracts, options are known to be less risky since you can cancel (or step
away from) a stock option at any time. The option's cost (price) is then a
proportion of the underlying value or security.
When purchasing or selling options, the purchaser or broker retains the
freedom to exercise the option at any time up until the expiration date; thus,
merely buying or selling an option does not indicate that you must exercise
it at the buy/sell stage. Options are classified as financial shares because of
this scheme, which implies their value is extracted from somewhere else.
As a result, options are often seen as less expensive than stocks (if used
correctly).
Why does a trader, on the other hand, use options? Practically, buying
options is gambling on shares to go up, down, or to hedge a share trading
advantage.
The "strike price" is the cost at which you choose to purchase the
underlying security from the option, and the "premium" is the amount you
pay to purchase the options offered. When deciding on the strike price,
you're betting on whether the resource (usually a stock) will rise or fall in
value. The fee, which is a proportion of the asset's worth, is the amount you
pay for the gamble.
Call Vs. Put Option
Call and put options are two types of options that offer an owner the right
(but not the obligation) to sell or purchase shares.
For example, if you buy a call option for Alphabet (GOOG) - Get a
Statement at $1000 and are optimistic about the stock, you are betting that
the stock's share price will go up.
If you buy put options, you're betting that the underlying security's price
will fall over time (so you're bearish on the stock). For example, if you buy
a put option on the S& P 500 I: GSPC index, which is currently trading at
$2,100 per share, you are bullish on the stock market and believe the S& P
500 would fall in value over time (perhaps to $1,600). Since you bought the
put option whenever the benchmark was at $2,000 per share (presuming the
market rate was at or above that level), you'd be ready to trade this for the
same price (not the new, lower price). As a shareholder, this will result in a
good "cha-ching."
6.8 ETFs
An ETF is a fund that, like a bond, can be purchased and sold at any time
during the trading day on a stock exchange. ETFs allow you to purchase
and sell a portfolio of assets despite having to purchase each one separately,
and they frequently have lower costs than other forms of funds. ETFs, come
with a variety of risk types, depending on the type.
However, ETFs, like any other financial commodity, is not a one-size-fits-
all approach. Examine them on their own merits, taking into account
management expenses and commission fees (if any), ease of purchase and
sale, and investment efficiency.
What are ETFs, and how do they work
The fund issuer holds the financial value, generates an investment to
monitor their success, and afterward sells stock in the investment to
investors. An ETF's shareholders own a majority of the fund but not the
underlying funds. Nonetheless, participants in an ETF that monitors a stock
index may receive aggregate dividend payouts or capital expenditures for
the index's stocks. (See how to invest in hedge funds or match mutual funds
and exchange-traded funds.)
Although ETFs are intended to monitor the value of an asset class or index
— including such gold or a basket of stocks like the S&P 500 — they sell at
market-determined values that are typically not the same as the asset.
Furthermore, due to factors such as costs, an ETF's long-term returns will
differ from those of its asset class.
The following is a condensed version of how ETFs work:
1. An ETF supplier recognizes the whole world of securities, such as stocks,
shares, services, and currencies, and produces a basket of them, each with
its own ticker.
2. Investors will purchase a share of the basket, just like they can a
company's stock.
3. Like such a market, sellers and buyers swap the ETF on an exchange
during the day.
Stocks vs. ETFs
ETFs, like commodities, are exchanged on exchanges and have specific
ticker symbols that allow you to watch their price movement. ETFs, unlike
stocks, reflect a group of stocks rather than a single firm. ETFs can have
greater liquidity than just a particular fund when they hold several
properties. This diversification will help to will the risk of your portfolio.
Spread trading, often recognized as relative cost trading, is a form of
trading in which an investor buys one security while concurrently selling
another. The shares being purchased and sold, alluded to as "legs," are
mostly executed with commodity futures or options, but other stocks may
be used as well. Spread investing, also recognized as relative cost trading, is
a trading strategy in which an investor buys one security while actively
selling another. The shares being purchased and sold, alluded to as "legs,"
are mostly conducted with futures contracts or options, but other securities
may be used as well.
6.9 Spread Trading's Strategy and Goal
Spread trading is a technique that aims to give the trader a gross position
with a valuation (or spread) based on the price gap here between assets
being traded. In certain instances, the legs are not exchanged separately on
futures markets but rather as a segment.
The objective for traders is to benefit from the spread as it widens or
narrows. Investors in spread dealing aren't usually trying to profit from
market fluctuations in the legs themselves. Spreads are either purchased or
sold, and they are conducted as a group. If an investor thinks he would
benefit from a broader or tighter spread relies on his needs.
Spreads categories.
There are many kinds of spreads, but inter-commodity spreads & options
spreads are the most popular.
1. The spread between commodities
Whenever an investor purchases and sells goods that are distinctly different
but connected, an inter-commodity spread is generated. Between the goods,
there is an economic connection. Get the following scenario:
The association among soybeans & the residues is known as a crush spread,
and it represents the value of refining soybeans towards oil or meal.
A spark spread is a link between gas and electricity; several power stations
use gas as a fuel source. A crack spread is a connection between oil and its
byproducts that demonstrates the importance of converting crude oil into
gas.
2. The spread of options
Choice spreads are yet another common spread. Multiple option futures are
used as legs of options spreads. All contracts must be over the same kind of
defense or asset.
ETFs are often based on specific industries or themes. For e.g., one of the
ETFs that monitors the S& P 500 is SPY, and there are some nice ones like
HACK, which is a cyber-security fund, and FONE, which is a mobile ETF.
6.10 Big Five Model: Trading with Emotions
Because of the rises and downs they face in the market, it is normal for
traders to get their emotions and thoughts jumbled up while day trading.
This is a long cry from the self-assured self that an investor normally
portrays until the markets open, brimming with anticipation of the gains and
earnings they intend to achieve. In trading, emotions will cloud your
judgment and hinder your capacity to make sound judgments. Day trading
cannot be done without emotion, but as a broker, you should be capable of
working your way through it and make it work for us. If your earnings will
be on the rise or you're on a losing run, you can maintain a precise, calm
head and a healthy mind at all times. This isn't to suggest that you can
ignore your feelings as a dealer. You can't stop emotions, but you can strive
to navigate with and through them when faced with real-world business
situations. A trader's personality plays a significant role in deciding which
kind of trader they are. When it comes to opening trades, cautious traders
are often dominated by terror, whereas reckless traders are driven by greed.
Fear and envy are so powerful motivators that they play a significant role in
deciding gains and losses.
Greed is a bad thing
Testing the deposits in their banks or seeing them at a reduced rate can
motivate a trader to make more income. Although this can be a motivating
factor to work very hard, many traders go too fast with their desire to earn a
living right away. They find trading decisions that have the opposite result
to what they expected. Overtrading and taking needless chances are two
examples of such mistakes, which will be addressed further down.
Taking Risks That Aren't Required
Greed for more profits will persuade a trader to take unnecessary risks in
order to meet a certain financial goal in their trading account.
These threats are almost certain to result in damages. Risky traders may
take risks such as high leverage in the hopes of making a profit, but they
may end up losing a lot of money in the process.
Excessive selling
A trader can trade for extended periods of time due to the desire to make
more money. Typically, these attempts are for naught since overtrading
through the market's rises and lows put an investor in a situation where
greed will clean out their account.
Incorrect Profit and Loss Calculation
Since an investor wants to make a lot of profits in a short amount of time,
he or she will not close a losing deal, keeping the losses, and will override a
profitable trade before the price reverses, canceling out all the profits. It is
preferable to optimize and concentrate on a profitable trade while closing a
losing trade as soon as possible to prevent major losses.
Dread
Fear may act in a variety of ways, such as restricting an overtrade or
limiting benefit potential. A trader can close a trade to avoid a loss, which is
a fear-driven move. A trader can even close a deal too soon, even though it
is profitable, for fear of the price reversing and causing losses. Fear is the
motivator of all cases, working to prevent both loss and success.
Fear of Failure
Fear of losing money in investing may prevent a trader from starting trades
and simply watching the market shift and cycle and doing nothing. The
threat of losing money in trading is a deterrent to success. It prohibits a
merchant from conducting a potentially profitable deal.
Fear of Succeeding
When a trader's buying psychology is fearful, he or she will risk money in
the market whenever there is a chance to win. In business scenarios, it has a
self-destructive impact. Traders in this group are afraid of making too much
money, so they let risks run while being mindful of their actions and the
losses they would suffer.
Bias in the Market
There are many market prejudices that an investor can have as a function of
their emotions. These prejudices can influence a trader to making foolish
and ill-advised trading choices that take in losses in trading psychology.
And if your trading prejudices are in view, you must be mindful of your
feelings as a trader and devise strategies to hold them in check and maintain
a level head while trading. These forms of prejudices would be debated, but
anxiety is at the root of it all. Overconfidence, verification, anchoring, and
failure are some of them.
Overconfidence Bias
Once you create a huge profit on a deal, it's normal for traders, particularly
new traders, to become euphoric. You tend to keep opening trades with the
expectation that the analysis can't go wrong and that the benefits and
improvements you've made will inevitably evaporate. This isn't the case,
and it shouldn't be. You should not have been so overly confident in your
ability to analyze that you think you can't lose. Since the market is so
volatile, the cards will move at any moment. Whenever they do, the
overaggressive and flustered investor becomes a disappointment. Until you
open every exchange, make sure you have a thorough understanding of the
industry, irrespective of whether your prior transactions were profitable or
not.
Confirming Trades Bias
One of the reasons that waste a lot of time and resources for traders is
racism in checking and defending a deal that has already been made.
Professional traders are more likely to have this kind of bias. They return to
reviewing and assessing the exchange they just produced, attempting to
show it was the right one. They squander a lot of time looking for facts they
already have. They may even be demonstrating that their error in starting an
illicit business and making a bad decision was right. Nonetheless, whenever
a deal they made turned out to be right, cognitive dissonance sets in,
strengthening their resolve in their analysis skills and plunging them further
into losing time confirming to themselves already proven evidence. They
can still risk money in the process, so this kind of prejudice in investing can
be avoided.
As you have taken the test in chapter 3 Exercise, you got your scores of all
your personality traits, so keeping those scores in mind write at least ten
lines about your personality in the table below.
Keep in mind the trader's 10 main emotions / situations (Greed / Taking
Risks That Aren't Required / Excessive selling / Incorrect Profit and Loss
Calculation / Dread / Fear of Failure / Fear of Succeeding / Bias in the
Market / Overconfidence Bias / Confirming Trades Bias) and Day Trader's
Attributes
Sr. No. Statements about your personality as per your test
score
Greed

Taking Risks
That Aren't
Required
Excessive
selling
Incorrect Profit
and Loss
Calculation
Dread

Fear of Failure

Fear of
Succeeding
Bias in the
Market
Overconfidence
Bias
Confirming
Trades Bias
A disciplined
person

Open to new
ideas

A software
enthusiast

Mentally
challenging

Self-reliance

Patience

Future-focused
 Economic
independence

Exuberance

Awareness and
understanding

6.11 What you need to do to get better scores?

Most of us feel that some facets of our work cause us to change our usual
habits. Maybe at workplace you're more assertive than at home, or maybe
you're more inclusive.
The argument is that by adopting a "job personality," we can and do deal
with the demands of the workplace. Much of us do so with relative ease.
We agree that working life does not always require us to stay in our comfort
zones, and that we all have the potential to go outside of our normal
behavioral preferences in order to complete a task.

How deeply you feel about something, for example Greed. If we train at
home and create modified behaviors we can get to better scores.
Example 1:
Date of the exercise _05/02/2020_
 Goal __ decrease greed ____
Strategy ___ increase generosity____

Date of the exercise _____________ Goal _____________ Strategy

______________
Date of the exercise _____________ Goal _____________ Strategy
______________

In this example, a trader experiencing high greed could reduce it by

showing generosity to family, neighbors and friends.
I call this Behavioral T-H process. it is considered a fundamental process
to improve the personality and improve the score.
By working on Behavioral T-H process you can change your personality by
improving your score. However this phase must have support is entering a
flow state or be in the Zone.
 Chapter 7: Be in the Zone

Have you ever seen a master artist at the job? In performance, are you a
world-class musician? A sportsperson at the pinnacle of their abilities?
Is really not it as if they operate on instinct? Stuff that is difficult seems to
be easy. They’re at the top of their game, completely focused, but
something seems to come naturally to them.
However, there is some positive news. Although we can mostly not achieve
such lofty heights, we should all cultivate a common style of experience.
This concept is often referred to as “being in the zone.” We’ve all seen it at
some stage. However, Mihály Cskszentmihályi, a psychologist, has devoted
his work to further explaining this concept.
That’s what he refers to as the “flow condition,” but there is more to that
than hits the eye.
7.1 Yoga and Breathing Exercise to get flow
We become healthier and more comfortable as we regularly join the "flow
state of mind." But how will we know when we've entered it, and how will
we get there?
The mind can feel like it's running a marathon in our sometimes sedentary
lives. Since we have to think on so many different topics when we practice
yoga, it allows us to calm our minds. Beginning with the breath is
beneficial, but as our ability to concentrate improves, we begin to note other
facets of the practice – breathing, alignment, Bandhas, postures, sequences.
We have reached what is known as the "flow state of mind" while we are
thoroughly engaged in our yoga practice with a sense of energized
concentration. This has been characterized as a highly active and innovative
mindset. Yoga will assist in achieving this meditative state of mind, but any
action that fully consumes our attention, such as running, playing a musical
instrument, or any other activity that completely absorbs our attention, can
have the same effect. Entering the "flow zone" on a regular basis makes one
happy and more peaceful people.
How can you achieve a state of flow?
If you've grasped the concept of 'flow condition,' you'll be able to see what
you'll do to get there. To begin, what are some of the most critical qualities
we need while in the flow state? The 5th, 6th, and 7th limbs of Patanjali's
Yoga Sutra can be referred to. Pratyahara, Dharana, and Dhyana are the
three types of pranayama.
Pratyahara
The numbing of the senses. This means you'll have to make an effort to
ignore anything else that isn't related to the task you want to concentrate on.
It may be beneficial to take a few deep and full breaths to relax the mind
and turn it away from distractions before you begin.
Dharana
Pratyahara helps us brace for Dharana. We must now focus on our attention
after dealing with the disruptions. We will train our minds to calm down by
focusing on a single task. Practicing longer and longer stretches of focus
can lead to a meditative state of mind over time.
It's important to focus on the activity just for the sake of doing it, with an
interest in the process and how it happens right there, right now, without the
hope of a specific result.
Dhyana
This meditative state is characterized by an unbroken river of consciousness
that transforms into a state of perception and absorption in the present
moment. And, in this case, it refers to your knowledge of and immersion in
the task you're concentrating on.
You lose track of time and become one with whatever you're doing at this
stage. You've now entered the 'flow state.'
You should start by doing easy things that are already a part of your daily
routine and that you don't mind or even enjoy. You can go for a stroll in
peace, brush your teeth, or take a shower, for example. Of course, you
should use it for activities like yoga, dance, or some other activity.
Once you've had some experience in things you enjoy, you should extend
that to activities you don't, such as washing, sweeping the kitchen, doing
your homework, and so on.
Only have these moves in mind:
1. Take a few deep breaths and step away from any potential distractions.
2. Be completely present in the moment while concentrating on what you're
doing. Remember to practice with an open mind and no hopes of success.
3. Transform it into a meditative experience while being aware of what's
going on. When you move slowly and mindfully, you will find an uptick in
lively electricity. When you find yourself on autopilot, re-engage your
confidence and curiosity about what you're doing. Remember that you want
to immerse yourself in the activity.
Practicing any activity in this manner will turn any mundane task or activity
into an exceptional and profoundly rewarding experience that gives you
energy rather than depletes it.
7.2 Be in a Flow State
“Flow” is defined as a state of full absorption and pleasure in the action at
hand in the field of psychology. Nothing else appears to apply in this state
of invigorated concentration and engagement.
Flow has some significant characteristics that differentiate it from normal
oriented work, aside from a simplistic understanding of autopilot and high
focus:
Our sense of time is altered while we are in a state of flow. When you ask
an artist how far they worked on their pieces when it was finished, they can
give you wildly incorrect figures. Flow immerses us in our jobs to the point
that time ceases to exist. It surrounds us so completely that everything else
around us momentarily loses its significance.
Flow gives sense and reason to your life. Flow is the best condition for
achieving intrinsic happiness, as described by psychologists. In other terms,
the actions have sense and intent in and by themselves. They have a feeling
of fulfillment that is almost unachievable solely by financial rewards.
Indeed, studies have also shown that we are depleted of flow for even a few
days, we experience increased depression and health problems.
Flow gives you a sense of self-control. In a flow state, we make the
decisions, have complete control over the result, and get direct input on our
work. When we’re done, we will see the results of our labors right away.
Flow allows for the most independent function, which is the most
motivating. It encourages one to have a say in the result and see the
possibility of success.
Flow can therefore be contained in any action that feels normal. Flow-
inducing activities are remarkable in their ability to make us happy, more
imaginative, and inspired. And, luckily, these characteristics aren’t limited
to professional athletes.
7.3 Seek Flow in the Goldilocks Zone
As per Cskszentmihályi, we are more likely to accomplish flow while we
are fully engaged in a role for intrinsic reasons, such as a sense of
understanding and motivation, rather than being inspired purely by extrinsic
considerations such as financial benefits. (See the reasons why you trade
written in the table in chapter 1)
Presently, if you work in strong sunlight all day (which is most of us), you
may conclude that your work is no longer viable.
Just not right now. From outside the workplace, you’re most likely to
discover intrinsically motivating jobs, but that shouldn’t mean your day job
is a waste of time. There seems to be a lot to be said about looking for flow
activities in the areas where you spend the majority of your waking time.
Of course, this necessitates the identification of activities that are
independent, pleasant, and concentrated. However, it also entails looking
for tasks in the ‘Goldilocks Zone.’
In physics, the Goldilocks Zone is the range between planets where the
environments are just right for water to stay liquid – neither too warm nor
too chilly for existence. However, in recent times, the word has gained
popularity in the corporate and management worlds.
‘Goldilocks tasks’ aren’t too straightforward or too difficult. We will
become frustrated and disinterested if a job is too easy. If the job is too
difficult, we will get stressed and depressed, eventually giving up.

7.4 Common Factors for being in Zone

This would appear prudent to seek advice from athletes who are aware of
the idea of being “in the zone.” Athletes – including megastars – are easily
accessible for appearances during an in-the-zone instance, unlike artists,
stockbrokers, and gamers.
There are some similar descriptions.
1. Maximum Concentration
Outside disturbances such as loudness, ground conditions, or even
competitors’ behavior are minimized or even completely blocked out as an
individual “in the bubble” concentrates exclusively on their goal). Athletes
say that their attention is so deep that perhaps the ball and goal seem
enormous in comparison to their environment in many situations.
2. No-effort operation
When athletes are “at the moment,” they sometimes say they don’t have to
care about what they’re doing and refer to their state of mind as
“unconscious.” To put it another way, they are mindful of the situation but
do not need to prepare or overthink their next steps. They just do it on the
spur of the moment.
3. Complete regulation
Such athletes claim that when they’re in the field, they have an
extraordinarily strong sense of control over their behavior. They don’t seem
to be pushing, however. Their outstanding success comes naturally to them.
4. Time perception
Many competitors who identify becoming “in the zone” claim time slows
down, so everything moves slowly, allowing them to have a spinning pitch
or a looming pass rusher for longer. Many, on the other hand, claim that
things tend to pick up to the point that they lose the sense of deadlines, feel
detached, and just barely recall the moment. When it’s all over, they’re
taken aback.
5. A feeling of ecstasy
Athletes who have been through this say that while they’re “in the zone,”
they get a feeling of sheer ecstasy that goes way beyond their usual, day-to-
day enjoyment of the game.
Those memories are instructive, mostly because many people have common
accounts of their “in the zone” encounters. Emotions and experiences, on
the other hand, are not objectively supported facts. But, do these emotions
match something that scholars or scientists have discovered? Yeah, it’s a
resounding yes.
7.5 Importance of Trading in the Zone
Those from the trading sector have a mentality known as ‘Trading in the
Zone.’ The whole attitude relates to the mental condition when working. It
manifests itself as sensitivity and calmness, as well as a keen eye for
markets with high and low challenges, as well as the ability to respond to
market shifts. This is the attitude you must have if you want to be a
successful trader. It was the subject of a book called ‘Trading in the Zone,’
written by Mark Douglas, an accomplished trader who looked at the
psychology of trading.
While trading in the Zone, one should keep a courageous attitude while on
the job, concentrating on the trades which might make them rich rather than
those that will not. But having capable of reading and forecast markets isn’t
enough. It all comes down to the mentality you carry with you, which will
decide how you read chance, which is a tough read for several traders. All
traders face risk, but those who can embrace it and adapt their strategies to
suit the demand have a greater chance of succeeding. And if they stumble
across a market where they are likely to lose money, they can exit without
feeling bad about it and rethink their plan.
Being Caught Up in the Four Fears
To be profitable, all traders must trade in their comfort zone. You risk being
too deeply entangled in the trades and the prospect of making or losing
money if you don’t have it. Although victories and defeats should be
considered, they should never be the decisive factors in a decision.
Emotions can be a problem as well. All professions necessitate objectivity,
which is difficult to do if you make emotional decisions. If you work for a
bank or a hedge fund and want to build a reputation for yourself in
investment investing, you should uphold this mentality on behalf of your
business.
Another thing to keep in mind is that economies are constantly shifting and
expanding. Whatever plan you have in effect now can become obsolete in a
week. Being a good trader does not require you to be able to predict any
single pattern that will sweep the financial markets; rather, you must be
willing to change your approach when necessary. Traders who are unable to
hold a level head in the face of shifting market conditions are more likely to
have panic attacks.
If you don’t keep this attitude, you’ll be more vulnerable to the four fears
described in Douglas’ novel.
Fear of being incorrect
Fear of losing a victory
Fear of leaving out
Fear of losing
There are common concerns that can be generalized to a wide range of
situations. When it comes to trading, though, those concerns are more
concentrated.
For instance, if you have a fear of losing out, you may face opposition as a
trader. All need to have a foot through the door and stay clear of the curve.
You could be worried about losing out on any gains if there are signs that
anyone who puts their hand in the pot stands to benefit, that implies you
may forego whatever strategic thinking you may have done beforehand and
making a possible negative deal based solely on the contrast.
Fear of failure will arise from a lack of faith in your trading skills,
preventing you from taking minor risks and thereby losing out on a large
payout. When you’re faced with a trade that seems to be going south, your
fear of losing can even be self-destructive. When making a poor deal, both
traders must have a timing plan in place. However, the fear of loss could
make you want to see the trade through to the end, ignoring all red flags
along the way. This will also keep you from starting a new career. You
become immobile, unable to take the appropriate action. Analysis paralysis
is the term for a trader’s fear. If you were in the exchange zone, you would
know the signals of a poor deal and exit to pursue more profitable
opportunities.
This is linked to the risk of making a mistake. You might put oneself – and,
by implication, the organization you serve – in financial jeopardy if you
have a completest mindset and refuse to accept a poor deal. In the most
serious situations, your problems can cause you to have a panic attack.
Maybe the most destructive fear is that of seeing a victory turn into a defeat.
Many of us are familiar with the phrase “let your earnings run and cut your
losses short.” However, it is not unusual for traders to disregard this advice.
Some individuals will turn a profit and then become so afraid of an
evolving pattern that they will let paranoia rule their decision and exit the
trend, losing out on gains they should have made for a longer period of
time.
The trading zone provides you with a mixture of situational understanding
and calmness, allowing you to avoid these four fears. However, it is not a
simple mentality to develop, and many traders succumb to the four fears,
leaving you wracked with insecurities that render it all but difficult to
sustain. This will have an impact on the overall career growth, and the
further one scales the career ladder, then this attitude will be expected. Your
job can become stagnant if you don’t have it.
7.6 Self-Management and be in the Zone
Wouldn’t it have been great if we could achieve flow states for work?
Would it not be great if we, as members, could help ourselves achieve flow
states that would improve our job satisfaction and productivity?
Many people believe that work is work and that it can never ever be fun.
We should, however, plan some work-related tasks to fulfill the three
requirements of a flow-inducing task and achieve self-management by
proper design. So, leaders, here are a few short tips to help you and your
followers build flow states:
good challenge-to-skill ratio
An individual inflow perceives a harmony between the situation’s problems
and personal abilities. A task that is too straightforward can bore people,
whereas a task that is too challenging can create irritation and poor self-
efficacy. As a result, a coach must have a clear sense of an athlete’s abilities
and weaknesses and assign assignments appropriately to help them
experience flow states. It helps you to organize your personality.
Clearly define the objectives
An individual in a flow state has a good idea of what to do and can devote
all of his or her energy to it. Setting straightforward and inspiring
expectations for others will assist them in getting started on their job more
easily and boost their inspiration. It aids in self-control.
Direct and prompt reviews
One of the most important characteristics of a flow state would be that it
provides immediate feedback and relaxation (which is why it can be
difficult to put down a game console!). Giving instant, direct, and fun
feedback that outlines the followers’ progress toward their goals (by
highlighting their success) can be a good way to replicate the incentive
structure we see in games. Such prompt and constructive feedback can help
us not only change our attitudes to improve the performance, but it could
also help them to improve their intrinsic motivation.
Avoid being distracted
Self-management necessitates total focus. Make an effort to schedule all of
the meetings on certain days of the week, and inspire you to do the same.
As a result, you and your fans will be able to have a few quiet hours several
times a day to thoroughly immerse yourself in the tasks at hand.
Create a feeling of power.
How would you handle your people if they have to pause and wait for your
permission to continue? Giving the teammates more independence when it
comes to job assignments and allowing them to manage their job flow will
help them become more internally driven to succeed and achieve flow
faster.
Intrinsic motivation
Flow states are appealing to people since they are intrinsically satisfying.
They feel joy, worth, and a good sense of personal accomplishment. To help
your workers love their job assignments more, try using intrinsic incentives
instead of extrinsic rewards or retaliation.
Flow states are most common in an organized, well-practiced scenario.
Both you and your colleagues can achieve flow states at work with well-
organized activities and everyday schedules, as well as experienced
personal skills.
Peak performance of Athlete applied in Trading
Flow is a condition in which we lose ourselves in a job, but it does not
imply that we are performing at our best. The impact of flow on planning,
on the other hand, is obvious. It is important to have a good match between
high ability level and high difficulty. However, after a task is mastered, a
higher degree of difficulty is needed to stay in flow. We devote more effort
to high-level practice. As a result, it is an optimal state for concentrated
activity. Practicing kicking by aiming at a goal, for example, is much more
enjoyable than throwing to a partner. When aiming rather than passing, the
elements of flow are available.
As seen from the lens of the principle of flow, jogging fails to meet all of
the criteria for an ideal encounter. Where is the obstacle? We don't know
how well we're doing and we don't know how well we're doing. What
happened to the feedback? This may be a little rough on jogging, but it may
explain why obstacle course races are becoming more common. There are
very simple objectives – the pupil must catch the next monkey ring; instant
guidance – inability to do so results in an ice bath; and the difficulty level
can be as challenging as desired.
So, whether you're a mentor or a competitor, you should build an
atmosphere that allows you to achieve the flow condition of optimum
experience. Make a challenge for an athlete that needs knowledge of the
talent you'd like to work on, such as catching a pitch. Ascertain that the skill
level required corresponds to the athlete's higher skills. If tossing a ball is
too fast for them to grab, try kicking a ball at them or have them catch two
balls in a row. Ascertain that there is a particular success target to achieve –
one that is just beyond their capabilities. Rather than having to be
verbalized by a mentor, immediate input should be available from the
assignment itself. In this example, you might give the athlete a challenge
that requires them to catch a ball from two sources almost simultaneously
and return it 100 percent in 60 seconds. It's basic, but coaches who favor
single-line practice drills without the difficulty or inherent input of the
assignment often forget it.
Apply all such scenarios described above in context of Trading put yourself
in place of an athlete and think, for instance forget you are a trader and
think as an athlete and try to perform or observe all those instructions
described above for an athlete to get into flow. It will be both beneficial and
fruitful for you.
7.7 Subconscious and money management
We want to talk of ourselves as intelligent creatures. However, our
subconscious is responsible for a significant portion of our everyday
actions.
Behavioral psychologists examined how humans are designed and found
certain “cognitive prejudices” that affect our daily behavior.
Tendency to overlook the future.
We prefer instant gratification over incentives in the future. This need for
immediate satisfaction is biologically programmed through us from birth.
According to studies, even though a larger and greater reward is given for
all of those who stay several moments, children find it extremely difficult to
restrain themselves from enjoying a treat. As well as the practice of
‘disregarding the future’ does not end until you reach maturity. It might
explain why it’s difficult to get enthusiastic about retirement income in your
twenties. However, the sooner you begin preparing, the more you will be
able to save.
Likely to experience the agony of losing than the joy of reward.
At the gambling, you would see an acute illustration of such behavior as
gamblers chase their losses. As you’ve already invested an amount of
wealth, this ‘trait anxiety will even show itself in choosing to stick to a bad
investment. It may be beneficial to see the long run rather than the short-
term volatility in the price of your securities.
A proclivity to join the herd
We tend to look to anyone for validation, as much as we’d like to think
about ourselves as self-sufficient human beings. Consider the scramble to
get concert tickets when you realize someone else has used the online
reservation system. This is all about FOMO (fear of missing out). This kind
of “herd mentality” can be advantageous. This was culturally acceptable to
cigarettes in cafes or travel without wearing seat belts just a decade or two
earlier. It’s already unimaginable. When it comes to money, this “herd
mentality” will show up during stock market recessions, as shareholders
scramble and sell up, despite the fact that logically, it will only compound
their damages. It will assist in blocking out regular market noise and
focusing on long-term objectives. We have a tendency to overestimate the
likelihood of events.
The prevalence of lotteries around the world demonstrates this. Although
the odds of winning are vanishingly small, the champions get a lot of
attention, leading one to believe that it is more likely to happen. The lottery,
on the other hand, is reasonably risk-free. Instead of global media coverage,
this ‘availability bias’s often focuses on negative incidents such as
kidnappings, airline accidents, and financial market downturns. Investors
who have seen a financial downturn like the Great Recession overestimate
the likelihood of a repeat, even if it is statistically impossible. It will cause
people planning for retirement to shift their investment priorities to lower-
risk investments, which may not be in their best interests because long-term
returns fail to keep up with inflation.
When making choices, we seem to favor recent comparison points
In shopping centers, this “anchoring prejudice” will make it possible to
overspend. When you see a pair of sneakers for $200 and then another pair
for $150, it’s easy to focus on the first price and think $150 is a better deal.
And it doesn’t stop when you leave the mall any longer; online shopping
provides even more ways for the anchor to embed itself and lead to an
unwelcome buy. To combat this, set a ‘base price’ for yourself before you
go shopping and stick to it. Anchoring can also be seen in action as buyers
jump in to purchase securities that have recently dropped in valuation
without considering the company’s underlying results. They’ve made the
error of focusing on the most recent high point
A tendency to be a little slothful.
If making a move is too much trouble, we prefer to stick with our existing
plans. This is most likely why many of us stick with our current service
companies rather than looking for a new contract. If you’re experiencing
‘status quo prejudice,’ start with one aspect of your household finances,
such as your utility bill, to make it more manageable rather than attempting
to handle it all at once.
 Conclusion
We have reached the end of this book. The main purpose of writing this
book was to discuss Behavioral Psychology impacts and their implications
on the Financial market and trading. We have thoroughly discussed
different Personality traits as well as different trading styles and systems,
which nevertheless impact the trading and financial market. We came to the
conclusion that personality traits do have an impact on our decision-making
and investment plans; therefore, conditioning of personality is a vital
element while shooting for the trading arena.