Cryptology 9

Module plan

Introduction

Physiology

Against its nature

Stress in trading

Obstacles to stability

Practical methods of solving problems

Psychological correction

Recommended literature

1. Introduction
You can master many trading methods, buy the most expensive indicators, subscribe to
a channel with signals, but it is worth opening a deal, as someone who makes decisions
instead of you comes on stage.

There are nuances on the chart that can speak in favor of an idea, but we can never be
sure what will happen. For example, liquidity can be withdrawn in the near future, or it
can be ignored.

We find the solution to the problem in the consistency of trades and compliance with
risks. We can’t stop the wind, redirect it, but we strive to control ourselves. The market
is an element. And we can’t control the side, what’s behind the monitor screen. But we
can control this side - ourselves. That’s why all known profitable professional traders
talk so much about psychology. Calm in the trading process is achieved only through
self-control, and self-control comes from the scheduled system, planning, understanding
your steps and what they lead to. So, in the lesson, the conversation will not be about
the market. The conversation will be about the market movement observer - the trader.

There are many emotional states that the trader is experiencing. Not only negative
emotions, but also positive ones have an impact on the trader.

Self-doubt and in one’s trading strategy can visit a trader with a series of unprofitable
trades.

Panic can overtake when a deal opens for a very large, unusual volume.

Despair can visit a trader when he hopes that the price will return to the level of opening
an unprofitable deal so that the deal can be closed at least at 0.

Greed is born when a person wants more than he can take.

The fear of opening new deals comes after fixing losses.

Strong enthusiasm and joy of victories after fixing a series of profitable transactions can
also play an evil joke with an inexperienced trader.

Self-confidence, a sense of superiority, a feeling smarter than other market participants

- all this affects the trader’s trading account.

Of all the emotional states that every trader will go through sooner or later, the most
obvious are fear and greed (FOMO - fear of missing out). It is these two features that
will have to be discovered in yourself, recognized and start working on yourself. There is
even a special index - the Fear and Greed Index.

2. Physiology

From a physiological point of view, it will be useful to know the mechanisms that arise
when you feel danger. In the field of trading, the danger to the ego is the unprofitable
position, or the one that begins to go in the opposite direction. One of the most obvious
patterns is Fight or Run. The ego feels danger - I’m wrong or I’m a loser or I’m losing,
etc. Each person will have its own individual form and depth of such experiences, it is
important for us to outline the very essence.

With an unprofitable trade or when everything goes according to plan, but the price
begins to unfold, the trader feels a symbolic threat that damages self-esteem and self-
esteem. These experiences activate the processes in the body, the body prepare for a
fight or rapid retreat. It is this mechanism that forces the trader to close profitable
positions with small corrective movements or close the trade before the price reaches
the stop loss order. Often it is after such actions that the price continues its way to its
goals.

The peculiarity of the above process is the narrowing of perception and focus on
danger, so the trader ceases to see the overall picture and focuses only on a specific
price movement.
A practical solution to the problem is to work within specific time cycles with clearly
defined rules for entering and leaving the transaction. This is exactly the point that most
unprofitable traders do not want to recognize. Remember that for success it is
necessary to do what those who are not successful do not want to do. Doing something
that is not interesting is boring and sometimes painful. Also, look around you: your life
will say a lot about your personality. Disorder, chaos, lack of goals and records - all this
will mirror in the trading process. The disorder will be manifested in trade, which will
lead to losses.

3. Against its nature

Another psychological pattern is the Dislike of Loss pattern. It has been proven that the
pain that a person feels when losing $25 is 2.5 times stronger than the joy of acquiring
$25. In other words, if the number of stops is equal to a loss of -$25, then to
compensate for the balance, the psyche requires a minimum of +$60 realized profit. The
desire to cover past losses distorts the reality of the trader and leads to new mistakes.

Historically, the human brain is aimed at preserving resources, so it is so difficult to

realize and accept the phenomenon of stop loss orders and recognize their obvious
importance. The brain does not want to lose, it is formed to survive and preserve. Often
beginners get the impression that good trading is trading without stop loss orders. But
this is nothing more than a misconception. Stop loss orders are an integral part of
trading and it is from properly built risk management that a solid foundation for profitable
activities is created.

The loss will bring pain and act as a trigger for impulsive actions - this is where the
danger lies. It is important to learn how to work with the pain of loss. The
haphazardness and pain of loss working in tandem are the reason for the drain of the
deposit.

So, you’ll have to recognize your behavioral patterns first and then start working on
them. To go against your nature means to trade a specific situation in the market, not to
trade your deposit and constantly look at your trading balance. Often a trader seeks to
end the day breakeven and closes successful trades precisely because he looks at his
deposit, instead of looking at the chart and the facts.
4. Stress in trading

What can be the stress of trading? Losses. Losses arise from ignorance or
inexperience. In general, they will always be. It’s an integral part of the work. But their
number can be reduced.

Accordingly, no matter how paradoxical it may sound, stress should not be dealt with: it
must be experienced and out of this situation with dignity. Moreover, stress can become
a catalyst for more productive activities. First, decide on the source of stress. If these
are family affairs, then devote less time to trading and more time to family. If you are
overcome by the feet, then you should move away from practice to theory and devote
more time to backtests and transaction analysis. If the stress from ignorance -
respectively, it is better to repeat the material passed. If you don’t have time for
anything, write down all your actions inside the day during the week. Up to the phone
call. And write down what you can get rid of to free up these necessary minutes. You
need to constantly work on yourself. Analyzing mistakes and drawing conclusions. This
applies not only to trading, but, in general, to all aspects of your life.

It may seem to you, “what an unfair exchange: again the price took my stop order and
went in the right direction, why does everyone have a solid profit in the chat, and I’m
sitting here alone with my feet? What’s the matter? Maybe I’m a loser?”

No, although there is room for luck in trading, this is definitely not the most important
thing. It is important to understand that trading is working with probabilities.

No one knows how the zone of interest will work, no one knows where the schedule will
go tomorrow, no one even has any idea how much the assets will cost in a year.

There is only a possibility of working out certain tools. Therefore, you need to change
your attitude to failure. Collect setup development data, know exactly the percentage of
testing of the tools you use. Didn’t the deal take place? It’s not scary if you already have
statistics on your hands and backtests have been conducted. How many out of 10
transactions does this trading instrument work in a plus? How much is minus? There
should be clear answers to these questions before starting trading. If you analyze your
failures and understand that only you are fully responsible, then you should not worry.
Any business is supported by the responsibility of the entrepreneur.

If you got a stop just because Elon Musk tweeted something there, that’s one thing. If
you got a stop because you incorrectly identified the trend, it’s completely different.
Failures, like stress, are not worth fighting. You will lose. You just need to draw
conclusions.

Perhaps the following will help some of you: try to change the initial attitude to your
deposit. It’s your tool - nothing more. Do you think the car mechanic is very upset if
there is a crack on his key? I think not. He concluded that this company does not suit
his quality. Next time he will take another set of keys.

You should also treat your deposit as a set of keys. Only in our case, if everything
cracks at the seams, the responsibility can no longer be shifted to the manufacturer. It’s
about us.

5. Obstacles to stability

Excitement

If you are an extremely gambling person, love disputes, get adrenaline from the process
itself, then it is worth thinking about how you will cope with gambling during trading.
Gambling and professional trading are the opposite in nature and lead to different
results.

Attitude to money
Are you very sensitive to money? Maybe we need to work on the attitude to money?
Maybe we shouldn’t overestimate their importance? After all, this can have a
detrimental effect on emotional health in the future.

Money in trading is a working tool, but at the first stages of the trader’s development,
money will still be perceived as a means of payment. For example, when closing a
transaction, you will think that in 10 minutes of time your trading account has been
replenished with an amount equal to someone’s monthly salary. Or that on the stop you
just caught, you could buy something significant for you. The transition from a standard
to a professional one takes time. It’s about when the funds in the trading account have
only percentage value. Both profit and loss. Money will serve as a catalyst for all your
skeletons that will fall out of the cabinet as soon as you open a position on the stock
exchange. It’s inevitable.

A number of psychological unsolved problems

Trading will take you to such distances where you have never been and did not know
that inside you there is something you will find. But only with the right approach and
understanding can trading be turned into a means of self-awareness.

6. Practical methods of solving problems

Time

Do not sit 24/7 on the charts and monitor each candle: except for overtrading and
fatigue, you will not get anything (you will definitely not earn more money). Therefore,
choose a work schedule for yourself. Either you work all day and rest in the evening, or
during the day you occasionally monitor the situation, having previously analyzed the
charts in the morning and scattered the limits, and at that moment you do your own
business. Yes, it will be difficult to choose a time for yourself right away. This will come
when you decide on the type of trading, whether it’s scalp, swing, intraday, etc.
Pay attention to the schedule

Customize your convenience in the color scheme and tools in TradingView and on the
exchange itself.

Start a notebook and make notes manually

Write everything down there at first. All observations, all transactions, all emotions, all
shortcomings. Write absolutely everything there, every trading day. It is impossible to
improve the process without specifics and statistics. Know yourself.

Prepare a checklist

Add everything that prevents you from working and hang it in front of the monitor. Every
morning, before you sit down on the schedule, see if the conditions match.

For example: great mood, no headache or other pain, slept well, concentrated. All
urgent matters are done so that nothing distracts you, etc. And most importantly, be
disciplined.

Profit and loss are calculated ONLY in percentages

Your deposit is 100% and only, no matter how much it is in $, it is only important how
much % it increases monthly. If you get used to this simple rule initially, in the future the
improvement of your life and finances will not be long in coming. A compound
percentage will do its job.

Create and refine the trading system

The trading system is the most important element of trading, which helps to cope with
stress, see the big picture, know your goals. But creating a trading strategy is one thing,
and quite another - FOLLOWING THE RULES that you have drawn up for yourself. The
vehicle makes it possible to neutralize all types of concerns. Concerns arise when a
trader violates his own rules.

Backtests

The most important element of trading activity. Know for sure: when to open a deal,
know the percentage of tool development, know exactly the stages of market analysis.
Print out your personal business data. Keep an account. Stop playing on the stock
exchange - trade professionally.

7. Psychological correction

Rest is not the least important. You decide how to conduct it yourself.

I would like to tell you when to take a pause for a while.

A few stops in a row

Determine for yourself a critical point of loss (percentage of drawdown trading account)
for the day, or week, or month, again, it depends on your trading style. For example, I
have a critical point of 1% within the day, then I turn off the computer and no longer
approach the charts or the terminal. Sometimes I can afford to do backtests, but it
doesn’t help in any way, because my head is not cold, not reasonable.

Don’t try to recover losses!

Know that you can only make things worse by trying to get back the money you’ve
already spent. Money can no longer be returned, losses are part of any business. Have
you reached a critical point? We turned it off, spent time with our family, went to the
gym, took up our hobby. Understand, the market will not go anywhere, it will be
tomorrow, the day after tomorrow and even in 5 years, the market will always be as long
as humanity is alive.

Profitable transactions

It is also worth always taking a break: either after a transaction with a large profit, or
after a number of successful transactions. Why? Because you are filled with euphoria, it
seems to you that here it is, a bright stripe in trading, from this your attention is
dissipated, you also become less responsible, you can overestimate the risk on the
transaction or neglect the stop. I think you caught the logic.

Is everything going well? That’s great. Take the earned money, spend on yourself your
loved one, give yourself or your loved ones a gift. You just need to do it, you have to
feel what you earn. While the money is on the stock exchange - it’s 100%, as soon as
you have withdrawn funds from the exchange - it’s already $.

You can’t make all the money in the world. And it doesn’t make any sense.

Freedom

Trading can give you the most important thing - freedom. Freedom in finances, freedom
not to depend on the place of work, freedom to manage time yourself. BUT, only when
you can accept this freedom. If you sit at the computer for days, try to increase your
deposit with the thoughts “I’ll have $100,000, then I’ll rest”, deny yourself pleasures: “It’s
better to buy a coin with this money and it will grow”, etc. - in this case, you deprive
yourself of your freedom and become a prisoner of this squirrel wheel. Do not look for
entry into the transaction within each interest zone on the M5 timeframe. In the end,
you’ll just stop enjoying trading. And if you live only an exchange and you do not have
emotional diversification, you may find yourself in a difficult situation. Come to harmony
between work and rest - then you will feel the pleasure of the process.
8. Recommended literature

I would like to recommend you to read or listen to the following books. They are not all
about trading, but they will help you in one way or another in the formation of the
“Trader” personality:

Darren Hardy: Accumulative effect. From act to habit, from habit to outstanding results.

Covey S.R.: 7 skills of highly effective people.

Green Robert: 48 laws of power.

Mark Douglas: Zonal trading.

Brett Steenbarger: Trading Psychology.

Nassim Taleb: Black Swan.

Lance Beggs: The first book.

Lance Beggs: Adapting the strategy to the lower timeframes.

Mark Douglas: Disciplined trader.

Morgan Hausel: Psychology of money.