A rational peek into traders mind

trading psychologyA trader is someone who is expected to act on rational decision, that are based on facts and logic, that’s at the very core for being a trader, this also means following discipline. Let me be also be clear about rationalism, a rational action, is one that is first evaluated in terms of good or bad outcome it may bring, how we know that, is by experience and logic? A learned trader is supposed to already have gained that knowledge and could apply without failing, that’s what I call rational trading, but this easier said than done.

Rationalism is not limited to trading, it spans across almost everything in life. unless we explore and discuss those as well, it may not be help us much,

Many scholars and psychologist like Sigmund Freud had findings. that human beings are not rational animal, in ways that, what they want to do is already preconceived in mind and later they merely look for some-kind of justification or confirmation to do that, take for example, if anyone wants to commit a crime they will prepare a thought process like potential target is a corrupt person, or in modern world everybody does that etc. Its in the experience of all of us, we tend to start hating or loving a newly met person without knowing much about him/her.

So, without these justification a person will not be able to act upon thought structure, now that also means once they have decided and found some support, they will not be going to deviate from path no matter what may come. Basically here the order is changed, logic and facts that should have come first followed by decision making, now come towards theend and what needs to be done is already fixated by – god know what !

If you figured out above, it will not be difficult to see same thing happens daily with traders, A trader, once taken bullish or bearish view for a market, is unable to see otherwise, also it applies to trading style which persist for lifetime, traders that are pertinent, contra or trend followers, find them unable to change their trade style even if the market is clearly telling exactly opposite of that.

All kinds of indicators we use also end up working like that, we would have our preset ideas to “short” or “buy” that particular stock, and with these indicators we merely look for justification, in fact at times we ignore if the indicator telling exactly reverse story, this is blinding of mind by its own powers.

Preconceived ideas are not bad thing, in fact that’s the very basis which a trader has to hold on, but that such idea must be based on facts, and by reading the cumulative brain of market. Once we learn to do that it starts to work in our favor, until then its always against.

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