The  set of thoughts and emotions constantly running through our internal perception apparatus, creates the narrative that defines one’s internal state.

The study and measurement of this phenomena (as it relates to speculation in financial markets) typically falls in the category of trading psychology.  For there to be a furtherance of activity toward one’s speculative objectives, a clear distinction between the internal narrative playing out in a trader’s mind, and the particular pattern of event occurance in the external world, must exist.

At the very least, an assumption,  of time and event neutrality will allow one to aquire an appreciation of the probabilistic nature of price returns. The more one is able to recognize and appreciate the contrast, between the unfolding of events in the real world (or a subset of the real world, such as changing prices of a market), and the typically  more deterministic narrative running through one’s mind, the more the law of large numbers will allow for a manefestation of whatever edge your trading model can procure.

Simply stated, anything can happen in the “real” world. Typically, our individual thought lives tends to be more finite,and consistent. Thats why they are called fantasys.

So, first, do everything you can to perfect the performance ratio of your analytic model. Second, do everything you can to prevent your “fantastical” thought stream from encroaching on the series of events unfolding in the real world. In this way, your collective internal state will be supportive of and not antagonistic to your trading.

On Wednesday (10/16/13) at 4:00pm Pacific Time, I will present a webinar, and indicate a concept integral to affecting this proper “trading psychology” or state.

Register Now for the Free Webinar