TRADING PSYCHOLOGY
Trading Is 90% Mental, The Other Half Physical
Mind Control
by Michael Bois, CFA, CTA
The psychology of trading has always been a struggle. Perhaps the techniques here could provide a solution.Not long ago, I interviewed a Standard & Poor's floor trader from the Chicago Mercantile Exchange (CME) who recounted his first experience trading inside the pit. Prior to becoming a trader, he had been a clerk, relaying orders from his employer's desk to the trader inside the pit. As a clerk, his physical position was directly outside the pit, literally leaning on the rail separating the spaces, giving and receiving hand signals to and from the desk. From his vantage point outside of the pit, he developed an excellent feel for the market's order flow and subsequently its direction. As his back was usually facing the pit, his ear became acutely attuned to the variations in volume and tone of the voices of the traders inside the pit. Several years later, on his first day as a full-fledged trader, he donned his badge and marched proudly to the center of the pit as the veterans assumed their positions.
At 8:30 am CT, the opening bell rang and, for him, it was as if someone had flipped on a strobe light and dangled a spinning, mirrored ball before his eyes. The voices were no longer the familiar, resonant meter guiding him to the correct side of the market. They sounded like a broken calliope, a cacophonous, confusing racket. Eyes frantically darting from one side of the pit to the other, he eventually caught the eye of a seasoned pro who knew him. The old pro grinned, then signaled and cried out, "You bought one."
As if he'd been lobbed a stink bomb, the young trader immediately turned his palms out and screamed, "One at four even! Four even offer! One at four even!" His voice was at least an octave higher than usual. He sold the one lot down a tick. Relieved of the weight of it, he put his hands in his pockets and considered his condition: damp shirt, pounding heart, fragmented and incomplete thoughts, faint embarrassment. Welcome to trading.
...Continued in the April issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the April 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine.
All rights reserved. © Copyright 2005, Technical Analysis, Inc.
Return to April 2005 Contents