Thrifty Thinking: Investing's Mental Game

If you don't know much about investing, you might be interested by this interview I did on the mental game of training with Dr. Woodruff Johnson of the Online Trading Academy.

 1) What exactly is the "mental game" of investing?

a. Trading and investing are about as close as you can get to being involved in a 100% mental endeavor and as such it is critically important to have mental and emotional tools. Trading behaviors are not physically oriented; they are subtle clicks of the mouse that follow a decision that the trader has made. It is all about building skills in things like critical analysis, strategy identification and following, organization and planning, documenting, calculating, implementing and executing; in other words having a disciplined focus on what matters most and fiercely following

through. Actually, being without mental and emotional tools is like driving without a steering wheel. The trader would not only lose her way but will eventually crash and burn without them. 

2) When can investors tell when to stick to a plan, and when they need to make adjustments?

a. Once a trading plan has been initiated it should be allowed to play out and not be second guessed. This is because it is crucial to make one’s trading behaviors consistent. Making changes to a trading plan in the middle of the trade leaves the trader open to potentially devastating erratic behaviors. If this happens it not only increases risk; but it also decreases the traders ability to accurately account for whether the trade results were due to the plan or to the changes in the plan. The time to make changes to a plan is after sufficient analysis of the documented results and what caused those results “after” the trade has been closed. That said, the only time when it is advisable to make adjustments in a plan that is being executed is if the trader identifies that the original analysis and preparation for the trade had been based on false premises. Then it is acceptable if not advisable to make those changes or to close the trade. 

3) Why should people worry about investing in the stock market at all?

No one “should” worry about investing or trading in the stock market. Worry has no positive benefit. That said, having concern for your investment is another matter. It is important for the trader/investor to have 
1) market knowledge which would include technical analysis and fundamental analysis skills;
2) she should have a business plan because trading/investing whether full or part-time is a serious business, and additionally she should have a plan for each and every trade;
3) she should have a set of rules for her trading – rules about time frames, instruments, entries (when to enter a trade), exits (when to exit a trade), stop loss limits (mark when you want to “stop” or sell a trade so that you don’t lose profit) and targets (how high do you want to go in your trade?);

4)also it’s crucial to have money management and risk management strategies;
5) and, she’ll want to have self-discipline strategies – in other words, she’ll want to manage her internal data (thoughts, emotions and behaviors). Trading is arguably the single most challenging business venture on the planet because when you are in a trade with every tick of the price, you are either gaining or losing in that trade. That gain or loss activates your internal working model of what money means to you and what having it or losing it means.

These beliefs (some of which are limiting beliefs, for example “If I lose in this trade that means that I am not a good trader”) will prompt emotions such as fear and/or greed that then drive a behavior that may not be in the trader’s best interests. The bottom line is about approaching the markets deliberately, methodically and by design. 

4) Where can people go if they have no idea how to get started in the stock market?

a. The trader/investor wants to identify an educational institution that has a stellar reputation for having the student’s best interests at the core of their mission statement. Additionally, she should choose a trading school that has a comprehensive approach to all the markets in order for her to get a well-rounded education and to meet all the requirements of her trading/investment goals. And, she’ll want to identify a trading school that has an infrastructure of multiple support mechanisms and communities that are designed to assist her with every conceivable issue that she might encounter related to her trading/investing. 

5) How does the Online Trading Academy help investors?

b. Online Trading Academy provides a strategically oriented market driven compass that is steeped in trading protocols that work; and an instructional team and structure that is designed to comprehensively help the trader consistently manage risk while maximizing profit potential in all asset classes of the financial markets. Additionally, OTA offers a Power Trading Network that includes a mastermind community where the student is supported by her peers as well as instructors through forums, trade picks and opportunities to ask any question you wish. These are just a few of the many ways that OTA creates an atmosphere of trader success. For more information contact Online Trading Academy center in your area.