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Your Options Handbook: The Practical Reference and Strategy Guide to Trading Options by Jared A. Levy

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Chapter 10

A Revolutionary Approach to the Mind Games of the Markets

Understand Why You Need Emotions to Trade Well

Denise Shull

“What is the truth?” The answer is, whatever works. If beliefs impose limitations on what we perceive as possible, and the environment can express itself in an infinite combination of ways, then beliefs can only be true relative to what we are attempting to accomplish at any given moment. In other words, the relative degree of truth inherent in our beliefs can be measured by how useful they are

—Mark Douglas Trading in the Zone

The psychology of trading seems to be one of the least addressed and usually the last thing that a trader pursues, often after experiencing failure, which at that moment may be too late. I was lucky enough early on to have a mentor stress the importance of this often-overlooked part of your trading plan. You must understand yourself and your state of mind, I believe, before you can really flourish as a trader. Of course, for some this ability comes naturally whereas for others it may take quite a bit of work. This isn’t about mind reading or some complex neuroscience that must be understood, but rather understanding your state of mind, isolating your emotions, and learning how they can help or hurt you. This chapter offers some simple, practical advice and exercises for traders to at least begin to understand the psychology of trading. It contains a lot of practical information that you should easily be able to put to use in your ...

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