Day Trading Psychology, Levels & Economic Reports 10.31.2014

and thought it was worth sharing. I think that if you know which category you fall into, it may actually help you deal with this “non human brain friendly thing called trading”……

THE COMPULSIVE BRAIN

People with Compulsive brains tend to get stuck in a particular thought or view of the market. Whether bullish or bearish, right or wrong, the main thing is that their minds are closed.

People with compulsive brains often don’t use stops (because they “know” what’s going to happen). They can have some amazing winners, but they will hold a losing position much longer than necessary because they are not open to the feedback the market is giving. These folks demonstrate the same closed-mindedness in daily life and tend to have very strict, by-the-book ways of doing things.

THE IMPULSIVE BRAIN

People with Impulsive brain function are the exact opposite. They tend to stop themselves out all the time and over-use the reverse button. They over-trade. Like a fish spotting a shiny lure, they can’t resist getting involved in a moving market.

In other words, they lack impulse control. This will show up not only in trading, but in conversation, driving, eating and other aspects of daily life.

THE ANXIOUS BRAIN

The third type of brain function found among traders is the Anxious Brain. These folks live with a non-specific sense of impending doom. They see the glass of life as half empty.

When they take risks in trading, they are skeptical and have a heightened sense of the obstacles in their way to success. For example, if they are long, they over-focus on resistance.

THE DEPRESSED BRAIN

The fourth type is the Depressed Brain. These people tend to feel victimized by the market. They have a ‘Rodney Dangerfield’ mentality, believing that they never get a break or a fair shake.

They blame the Fed, the robots, the news, company management, or whatever for their investing and trading troubles. This type of thinking rationalizes and justifies their pre-existing negative mood. They don’t see their part in a self-fulfilling prophecy of disappointment.

THE ADDICTED BRAIN

The fifth type is a combination of Compulsive and Impulsive. These folks tend to be compulsively impulsive, which usually means that they have an addictive relationship to the market and to trading.

They over-trade because they are trading-to-trade, like a mouse pressing a lever to generate pleasure signals in their brains.

GOOD TRADING !