Respect SIM; Don’t Abuse It

Let’s talk for a moment about trading in simulation mode (SIM). I recommend trading in SIM while one is working out the details of a system, when you change something in your trading plan and need to practice, and when you are trading a new market. Using SIM as...

Trust the Force; Fade the Obvious

It’s not uncommon for day traders to say, “Damn! If I had done the exact opposite of what I actually did I would have had a great day.” On strong trend days it’s important to “Trust the Force.” This is more difficult than it sounds...

Optimal Adrenaline

There are many good reasons to trade in SIM. For example, you are practicing a new trading method or trading in a new market. If you have been trading in SIM for a long while, however, it might be to your advantage to trade live…even though you might not feel...

Rogue Trading

The real-life film Rogue Trader illustrates a key principle in trading psychology. Leeson’s mistake was his unwillingness to take a loss, because it was significantly larger than what he was comfortable taking. He had a reputation to uphold as the floor manager,...

The Recency Effect

Daytraders who become bearishly biased after a sharp sell off are unprepared to catch the rebound. This bias is the result of the Recency Effect, which is the tendency to attribute more meaning to what-just-happened, especially if it happened quickly and had adverse...