Psychology & Mindset Insights¶

Mental models, psychological observations, and mindset lessons from my trading journey.

Why I Fail at Exits¶

Root Cause Analysis

Now I understand why I didn't use to sell when I was in profits; why I used to feel stressed when I am in profits, because:

I didn't understand the boundary conditions
I didn't have any indicator to check
I didn't follow the raise stop loss and take partials discipline
I didn't even know that you need to sell when stock comes below 20
Use 20SMA as line in the sand
I was naive about entry and also exit
Deep down I guess I knew it was a bit of gambling
I didn't know the consequence of not cutting early in terms of:
Loss
Opportunity cost
Leading to long term bad discipline

Learning from Teachers¶

Trust the Process Initially

I guess that is why when you start to learn a new skill, it's good to just follow the teacher and blindly trust him initially. Although Matt was not exactly spoon feeding.

This is similar to me learning driving fast and my dad having lost ability to follow rules and blindly trust a teacher couldn't learn to drive. I did the same mistake in trading and lost a ton of money.

The 100% Certainty Trap¶

Probability vs Certainty

Sometimes I was telling myself that stock will run up to earnings. I tend to do this, where I tell myself "something" would happen and go all-in with 100% certainty.

I lack the probability thinking of an event happening, which Gareth Soloway is very good at drilling into my head.

Speed Over Perfection¶

Why I Miss Entries

I usually miss the correct entries and later chase wrong stock or sector thinking market ripped and these didn't rip so I have chance for good alpha.

Because when market rips it rips so fast and within few days or 2 weeks everything will be too much up. Combine this with my non-existent trade management is why I am losing.

This is similar to Fantasy. I miss buying a player, prices rise and I end up compromising and getting some other lame player to fit the squad.

The Solution

So just like at work to impress bosses speed matters more than perfection. I need to quickly enter trades when markets are ripping instead of waiting or procrastinating.

Remember This

People who make money in the markets are fast, smart (trade management) or cheat.

The TSLA Panic Exit¶

Real Example: TSLA Dec 05 2024

I panicked and exited on a doji within 3 days on regular candles but HA candles showed bullish for few more days (no lower shadows) and I could have exited much later.

I would have made a killing with that trade but I didn't.

Re-Entry is Always Possible¶

Cutting Early is OK

Now I understand why cutting early is important. It's always easy to re-enter a trade if your timing of entry was wrong. Especially when you trade DTL compression moves, which could go either way.

Repeating Beginner Mistakes¶

Hari Seldon's Warning

Even after trading for a very long time: some people still make the same mistakes they would do as a beginner. This is what Hari Seldon said.

Simple Works Best¶

On Amit's Success

Amit is investing will be successful because he is not doing anything special; he is not trying to prove to his own insecurity inside that he is smart by counter trade trending. He did very basic dip buying and now he is making a safe move.

He is not that smart and that's why he will make it in stock market.

Probability Thinking¶

Think in Probabilities

Always think in terms of probability like Gareth does:

Every outcome, setup, move, trend, support and/or resistance break, will only make it most likely to happen and that is 80%
There is no 100% in trading. Max is 80%
2-3 support zones, creating a strong S or R will make it 80% but not 100%

Perhaps this kind of philosophy also helps in life.

Environment Rating¶

Rate Before Trading

Classify a move before you make for the environment: rate if it's:

Low prob environment
Medium prob environment
High prob environment

...for that stock.

I like Matt's analogy of comparing the environment with a black jack table at casino. When env is bad, it's similar to casino putting up a board saying today's winning prob is low.

The Danger Zone¶

Chop Markets

The most dangerous period to be is when market is neutral or chopping. This is where people will lose all the money they have made until then.

It's very difficult for a strong bull trend to turn to Bear immediately... it usually has to go through a chop. Or multiple chop periods.

Institutional Thinking¶

Institutions are Not Beatable

You cannot make money in trading by beating the institutional investors. We can only beat and steal money from other retail investors. (David Wyse)

Trade Hierarchy Mindset¶

Default to Position Trading

Think like this: always assume first you are gonna position trade a stock. If not then swing trade. If not then options for very short term... that should be the hierarchy.

Things Always Circle Back¶

Matt's Skill

Things always circle back to Matt and how good he is.

Why Matt Seems Simple¶

Hidden Complexity

Matt is also partially to be blamed here. I understand his logic for setup and he says it's very simple but now with my indicator and above 7 steps I mentioned it makes much more sense what he says.

Imagine he gives 2-4 names a day he is looking to enter and I can pick one of them by studying them with my rules for multiple confluences and this pushes prob. of successful trade to 65-70%.

Everyone Uses Indicators¶

The Hidden Truth

I am pretty sure every major trader or even minor firm has some kind of indicator or confluence of indicators or algo which flashes buy or sell at multiple time frames.

All these service guys or Matt act like they just stare at charts and take decisions. Perhaps they do but...

My Unlucky Start¶

I was incredibly unlucky I think. I just started my investment/trading journey in September/October of 2024 and within 6 months there was such a crash so fast that it was within few days of turning into official bear market. SPY and QQQ were down more than 25-30%.

Most Common Mistakes Retail Traders Make¶

The 11 Deadly Sins (David Wyse)

Not considering current market conditions
Over Trading
Trading your P&L instead of technical
Trading what you think instead of what price says
Over leveraged (too much risk)
Not using daily chart for swing trades
Lack of Patience
Forcing Trades (related to lack of patience)
Attempting to pick tops and bottoms
Not waiting for confirmation to enter a trade
FOMO (fear of missing out)

Source: David Wyse YouTube Video