Do successful traders have different mental models

While much of the focus on trading is around chart patterns, scanners, analytical techniques, indicators, quantitative techniques etc., most of it is commodity. Everyone has access to same tools, techniques, books, research or analysis. So why is it that some traders are very successful and some are not. You can largely divide the traders in to those with consistently good returns, those with mediocre returns and those who are unsuccessful. Most of the time you will find mediocre traders continue to have mediocre returns for long time and their best years never exceed beyond a certain thresh hold.

Much of the same things you will notice in life in general. Vast majority remains stuck in sea of mediocrity. It has nothing to do with innate talent or efforts. Much of it has to do with mental models.

Mental models are deeply held mental images, beliefs, and assumptions. The mental models play a very important role in dealing with world around us. We interpret the world according to our mental models. Two people with different mental models react and interpret same data and same situations differently. Mental models include what a person thinks is true but not necessarily what is actually true.

Successful people in most walks of life have different mental models than mediocre people. That is why successful people can see and act on opportunities which others do not see.

One thing which you can do to be successful in trading or in life in general is to change your mental models. But in reality it is one of the most difficult things to do. Movies often have very dramatic scenes of mental model change leading to transformation in leading character. But in real life changing mental models requires a sustained and structured process and many times requires facilitation by an outside entity. There is a vast array of books and techniques dealing with this field. I have spent years studying this fascinating field of mental modeling.

Once you have the right mental models you see the markets and the trading opportunities differently.

Mental Model Links
Mental Model Website
Mental Models
Mental Models by P. N. Johnson-Laird
Mental Models, Metaphor, Systems Theory and Theory
A Latticework of Mental Models

Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

Why traders come to stockbee?

The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial  and no tall claims of making you instantly wealthy, and yet the site attracts new  members everyday. Members come from all walks of life and all kinds of trading size and trading styles.

You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.

Over the years thousands of traders have been members and those who benefitted from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.

What will I learn in the members site?

The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to setup your own scans, select right kind of stocks, how to setup stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.

The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.

If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

Do you have a trial?

If you are just looking for trial you are better off trying thousands of other trading site that offer free trail or one month trial and offer you promise of riches.

It is for those who are ready beyond the trial phase and ready to put serious months or years  of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.

The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.

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    market operator said...

    Can you recommend some good books with respect to mental modes in both trading and other aspects?

    Pradeep Bonde said...

    You will find lot of literature on this on web. Peter Senge popularised it in management literature in his book Fifth Discipline. I am not aware of any trading specific book exploring this concept.
    My interest in mental modeling started with my first job in advertising. All successful advertising is based on manipulating consumers mental models. That is how advertising adds value to a product which does not exists in the product itself.A successful change in consumer behavior involves changing his or her mental models.
    Subsequently while studying leadership again I found good leaders have different mental models compared to followers or other ineffective leaders.Leadership essentially involves changing or influencing followers mental models.

    nodoodahs said...

    I believe, and I think Pradeep believes the same thing, that an amateur without schooling but with a scientific attitude can make tons more money in the markets than most financial professionals or academics! The heuristics (mental models) that we build are built from scratch, relatively unpolluted by a "higher (mis)education.


    The irony is, most of the research has been done already – dozens of effective methods have been documented – but few are willing to execute!

    Caravaggio said...

    Just a quick thought - I wonder if there is a causal relationship between creating and nurturing the right mental models and having a trading strategy with a positive expectancy (i.e., the two are not independent of each other, but there is an influential feedback that runs in both directions).

    Complacent Panda said...

    I completely agree with your post Pradeep Bonde. Very insightful. If you don't have a mental image of how people are making money in the market, how the money is moving, what others have as their objectives, etc, you will have much more trouble making money.

    I would say that the above takes a bit of studying in multiple areas...some economics/market stuff. some psychology. you might even want some math, science (I like using quantum physics as an analogy when thinking about the probabilities associated with stock movement).

    Really, whatever you find that you can apply successfully is a boon. The more success you have doing this, the easier it will become to separate the useful from the bad.