Stock Trading Psychology - Your Most Important "Hat"

You. Hi, Brian McAvoy here with Inside Out Trading. And today's topic is the most important hat that you wear as a trader. As a trader, you wear several different hats. There are seven specific ones that any individual trader wears. You know what I'm talking about? You know, when I say, yeah, I wear a lot of hats, meaning that you fulfill a number of different functions. Now, being an individual trader, that means that, yeah, you're wearing several different hats. Like I said, there are seven of them. Now, the first one that you put on when you chose to become a trader was that of being a venture capitalist or business investor because you decided to invest in a trading business. And right along with that, then you also became a business planner. And again, right alongside with that, you are now the business manager because you have to manage your trading business. These all have roles. Now, of course, you're the trader, the person placing the trades. You're also the risk manager. You're also the money manager. And there is a distinction between those two. But the most important hat that you wear, and this kind of goes hand in hand with all, all of them, is that of being a system analyst. Because before you ever trade $1 or before you continue to trade any dollars with real money, you need to be able to take a look at a system and analyze it and see if it's worth risking real money on. The system, not trades, the system itself. Again, the system analyst is probably the most important hat that you wear because your system and the trading is right at the core of the business. And that's where the decisions are going to be based for your other roles, or they'll be the center of your other business decisions in your trading business. So what does being a system analyst mean? Well, it means that you can take your system or any prospective system or any changes to your current system and analyze them and get all the various metrics that go with them to make sure that, yes, trading real money with the system is, is a good, sound business decision. Profit, of course, is the end goal. But just because a system is profitable doesn't mean that it's necessarily the one that you want to be working with. Here's what I'm talking about. You can have a system that's profitable, but if your average return per trade or profit per trade is only, say, five or ten bucks per trade, day trading, that's probably not what you're looking for because your hourly pay at that rate is not good. And you're probably never going to realize the freedom and security that you want with having a trading business. I mean, the whole point of being in a trading business is to have the financial freedom and security. See, that's one of the other big distinctions between somebody who's just trading to make money and somebody who takes a business approach to it is the security. It happens quite frequently that a trader will have a good success streak that might even last for months. Had one gal, actually several conversations with this gal. Her start in trading was excellent. It was like a dream start to a trading career. Over six months, she took her account from $10,000 to over $100,000. But the problem is the security isn't there because just like what happened with her happens with a lot of people, she wound up giving it all back to the markets. Then she's left standing there scratching her head, saying, what did I do? How do I get it back without having a good handle on the system and the whole business approach to the trading. A lot of traders run into this. It's easy to have a false confidence when you hit kind of a winning streak, but you have to know why it's there. You have to become consciously competent. You get good and you know why you're good. Not you just hit a lucky streak. You want to know how you got there, how you made it happen so that you can repeat it and also prevent it being reversed on you again. The most important function or hat that you wear as a trader really is being a system analyst, where you can take a look at a system, you know that it's solid because you can look at all the different metrics. Not just did it make money or does it have X winning percentage, but you've got all the different metrics where, you know, it's sound and it's solid and it's something that you can rely on. And also, as market climates change, like we saw in last quarter of 2008, things went wild. And a lot of people really didn't know what to do, and they didn't really even know what to do with their system to address the matter. They just knew that the system that they'd been using for a while wasn't working anymore, and they didn't know where to go. So being a system analyst really is at the core of your. That's the most important function. Now, to help you along with that, if you want to check out the trading performance analyzer and profit potential calculator, that's what this tool was designed specifically for. I didn't make it. I didn't create it really for the purpose of financial analysis much as an emotional tool so that you can get away from the unknowns. It's to give you that knowing that certainty with your system where you know it works and you know when it works and you know why it works and you also know how well it works. You know the real strengths and weaknesses of it. So swing on by Insideouttrading.com and you can check it out there or you can go to Insideouttraining.com blog. Take a look at the Trading performance analyzer and Profit potential calculator. You'll see what I'm talking about. There are a lot of different ways to use it to really give you the security in your trading that you want as well as the profit making. To make money is one thing, to have some freedom is one thing but you want it to be secure and reliable and it really is the key. That's what having a true trading business is all about. Anyway, Brian McAvoy with Inside Out Trading. Have a great day. Cheers.