Trading Psychology For Dummies

Chapter 11

Finding the Right Basis for Decision-Making in Trading

IN THIS CHAPTER

Explaining the disposition effect

Comparing doubling up on losing trades versus pyramid trading strategies

Loss aversion

Mental accounting

In this chapter, you get a chance to learn about what are considered to be the typical, well-researched behavioral patterns of investors trading on the stock exchange. You'll see that the very same coping strategies that work well in daily life can be damaging when relied on for trading. The trick is to realize that you'll be successful only when you can control your emotions and act according to the ways the markets work. Throughout this chapter, I give you some practical tips on how to get to that point.

Over the course of your life, you have developed strategies that have served to guide you, for better or for worse. You may not be aware of many of your behavioral patterns and conditioning, but they have worked to allow you to create, as far as possible, a living environment best suited for you.

By choosing to trade on financial markets, you have selected a field ...