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with the software, it will not help much in dealing with the added anxiety that goes with real wagering. |
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So, the next best thing would be to trade in small share lots with limited amounts of capital being risked. Even if no money is made for a while on these learning trades, the small price paid in commissions is far preferable to risking significant losses by putting much more money into a trade. This approach would be consistent with research on how we best learn new tasks. Behavioral psychologists call it successive approximation. This means you want to take small steps in the direction of your goal and be rewarded for each one, which then reinforces moving further in the desired direction. |
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The trader has got to get the feel for when to trade and when to stay out of the action. Experienced day traders know that their odds improve when they are trading in a strong market, a strong sector, and a strong stock all at the same time. When all three line up, scalping for fractional gains becomes somewhat less risky. Then traders keep buying at the bid and selling at the asking price all day long, chipping away a profit and trying to lessen their risk. |
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Another consideration is the demand characteristics that we mentioned in Chapter 3. One is the tendency to make too many trades because that is the way the game is played in a trading room. Those who are more sparing in their trading stand to hold more of their gains by not mounting up commission costs. Again, this requires going against the grain of how you will be taught in this scene. |
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There are some atypical traders who come in to make a few trades and then leave, not forcing themselves to stay for the entire market session. This may be a smart way to take advantage of the hardware and software without risking getting too sucked into the demands of the scene. It can be compared to winning in Las Vegas and getting out of the casino before all gains are given back. Mental discipline is required for both. |
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A second demand characteristic is the feeling you can't leave your seat for very long without missing something. As previously mentioned, no one walks out of the trading room for a break, which is a mistake. |
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A third characteristic is less of a demand and more of a choice: the scene is riddled with anxiety. How much of this will affect you just by being in the setting with others who are anxious? How sensitive to it are you? Do you thrive in this type of setting? Or is it too uncomfortable? How much distracting noise can you handle? How do you feel |
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