(Video: Market coach Doug Hirschhorn, PhD, answers your questions.)
From time to time, I get questions at my website, drdoug.com. Many people want to learn how to overcome the barriers they face as a trader. And I try to help them, focusing on the psychology of investing.
Here are a few more recent inquiries:
Q: What do you think are the most important characteristics for a trader?
A: Hands down, the most important characteristic for a trader is self awareness. You have to have self awareness to know how you think, where your fears are, what the triggers are. And once you understand the barriers are around you and how they influence your decision-making process, you can modify your behavior to make better trades.
Q: I’ve been burned by the markets in the past and my confidence has been shattered. How can I re-engage in the process.
A: Confidence is a very interesting thing. We feel like it comes and goes, but the reality is, it never really disappears. You always have it somewhere inside of you. What you need to do during times you're feeling low confidence is actually put together a solid game plan and make it as mechanical as possible. Follow the game plan so there’s less thinking involved. If you follow the game plan, you can execute with confidence.
Q: How can I learn to be more aggressive in my trades? I often find I have the right idea, but I miss out on opportunities where I think I should be making more money.
A: Being able to see the right trade is really the first step to being a profitable trader. The next step is sizing up, getting more aggressive. The way to do that is to have a process in place where you identify your A-, B- and C-quality trades, which trades you feel the most confident and the least confident in. On the other side of the spectrum, you want to have sizing charts. In other words, if you feel you have A conviction in a trade, and you’re feeling very confident, then rather than thinking about the right size, you just go to the chart and say, 'Well, if I have A conviction, I gotta go with A size. If I have B conviction, I go with B size. And if I have C conviction, I go with C size.'
Think better, invest smarter.