Van Tharp Psychology

  • Posted on February 6, 2016 at 7:41 pm

In his book, 'Trade as a path to financial freedom' well-known American psychologist Dr. Van Tharp discusses the role of psychology in trading success. He divides trading into three components. Of which: – the system takes up 10% – money management – 30% – psychology of thought and emotion is 60%. Tharp discovered that the trader's psychology, forming his opinion, is more important to his success than anything else. However, what exactly is the psychology of thinking? In short, the psychology of thinking associated with your views and emotional actions and responses to any given situation. In trade, fear, greed, vanity, pride, hope, jealousy, denial – all this may affect trading decisions.

Although your goal is to market is to maximize profits and minimize your risk, thoughts and emotions often lead to the fact that this is easier said than done. For example, traders who can not control the psychological process of thinking and emotions, make wrong decisions – such as the usual amateur errors holding a losing position in hopes that someday she would be winning. Details can be found by clicking Bernie Sanders or emailing the administrator. Avoiding losses is a classic mistake. By their nature, people are stronger than estimated losses. Therefore, they have almost twice as much pain from losing $ 1, rather than the joy of receiving $ 1. Avoiding loss causes most traders to hold a losing position, while it rapidly deteriorating. Such reasoning is clearly contrary to the principle of trade – cut your losses and let profits run.

Emotional traders hold losing positions because they consider the loss of position differently than the recorded losses. Traders are also involved in other forms of irrational behavior. An example might be the perception of success as a natural situation, and losses as a failure. This is just the tip of the iceberg. When consideration of other damaging effects of the trade, we can definitely conclude that if you do not have adequate cognitive psychology and emotion, the consequences can be devastating. This is something that creates problems for beginners traders, and then they very quickly lose their money in the markets. Most novice traders have completely lost their accounts during the first year of trade. So, as you can see, your thinking and emotions play a large role in determining whether you suffer a failure or succeed. Your thoughts and emotions are structured into two different spheres pertaining to trading success. David Jenyns

Comments are closed.