Lot of people think psychology is most important, but it is not unless you have right setup. If it was all about psychology , then most successful traders will be psychologists.
In your trading journey you will have significant breakthroughs once you learn the language of setups. Profitable traders think in setup language while novices think in individual stock term.
If you see on the trading blogs or forums several tickers are talked about without setup context. Same is true of Stocktwits or many other site. Many traders will gladly give you stock picks but not disclose their setup ideas. Most successful traders guard their setup ideas and give only hints. Because many setups deteriorate once lot of people start using same thing.
Look for setup ideas not individual picks. Once you learn a setup idea you can find your own picks.
Do a systematic hunt for setup. Most commonly used setups have survived for hundreds of years. You need to build on those ideas and make modifications to suit current markets and conditions.
Setup oriented thinking is process based thinking. It is how do I find this kind of stock again and again kind of thinking. It is about ways to catch fish.
Setup selection is key to successful trading. Setup selection allows you to condition your behavior. It allows you to develop your procedural memory. It allows you to automate your thinking.
Lot of people think psychology is most important, but it is not unless you have right setup. If it was all about psychology , then most successful traders will be psychologists. In fact the field of trading psychologist is dominated by failed traders.
When it comes to setup selection your time frame is very critical. A setup that is good for day trader may not be good for swing trader. A swing trading setup may be extended setup for position trader.
The steps in trading expertise development are:
Vehicle selection
+
setup selection
+
procedural memory development
+
self efficacy beliefs
+
situation awareness
+
risk management
+
right psychology
=
Profitable trading
When it comes to setup selection your time frame is very critical. A setup that is good for day trader may not be good for swing trader. A swing trading setup may be extended setup for position trader.
The steps in trading expertise development are:
Vehicle selection
+
setup selection
+
procedural memory development
+
self efficacy beliefs
+
situation awareness
+
risk management
+
right psychology
=
Profitable trading
If all elements are in place then psychology becomes important , if other things are not in place psychology will not help you.
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