How to cultivate a “trading brain”

“The biggest enemy of traders is fear. Those who are afraid lose.”

This is the basic argument of the German trading psychology book “Trading Psychology” published in 2012. Many readers and critics commented that this is the best book they have read on the subject, or the first really useful book.

The author of this book, Norman Welz, is a psychologist and journalist who has a keen interest in the stock market and related psychology. His specialty is trading psychology, which not only has rich experience, but also has some unique insights. In addition, he also trains traders to develop their brains in the right direction.

Weltz emphasized that the difference between his works and writings and the vast literature in this field lies in the emphasis on Already applied Transaction psychology. It is well known that traders need discipline, but accepting this idea is not enough for investors to operate in an appropriate manner.

Key points

  • Norman Welz (Norman Welz), author of the German trading psychology book “Trading Psychology” published in 2012, stated that to be a successful trader, the right attitude is essential.
  • In order to solve the psychological problems of trading, Weltz uses the subconscious mind and hypnosis to act on the trader’s brain.
  • Welz said that effective trading involves personality changes, and those who only focus on charts and trends will end up struggling with countless emotions.

How to develop a trading brain

It’s really everything in my mind

The essence of the problem is that most people like and need various forms of security, but “transactions are the least secure business you can do,” Weltz said. He believes that no other profession can create so many such strong emotions and reflect so much of our personality. He even said that stock market activity is the embodiment of money: “We are not just trading assets and money, we have become money,” Weltz said.

To trade effectively, the right mindset is essential. However, nothing is more difficult than separating ourselves from the many factors that originally created our way of thinking and determined how our brain functions. We are influenced by our parents, family, friends, environment, society, media, books, etc. By the time we start trading, all these effects tend to fix the usual dysfunctional or sub-optimal trading patterns. Trying to change these patterns is somewhere between difficult and scary.

Why do traders ignore the power of psychology?

In order to understand Weltz’s method, it is necessary to understand the general role of psychology and the brain. Although the concept that psychology is essential to the stock market is nothing new, Weltz believes that trading is actually 100% psychology. Without mind, we can never assess financial risks or identify trends. “Without a brain, there is no stock market trading,” Weltz said. Therefore, mental strength is definitely the basis for successful trading. In addition, approximately 95% of our behavior is subconscious, and we tend to copy our behavior over and over again. Many times, this kind of replication means repeated mistakes or even catastrophic course of action.

To support this argument, Weltz cited a study in which 120 traders were provided with a system that has statistically proven its intrinsic value in 19 of the past 20 years. After a year of testing, it became clear that 119 of these traders failed to use the system because their psychological tendencies led them astray. Except for one trader, everyone else’s psychological process is wrong. “Success comes from the mind,” Weltz said. The system is good, but the attitude and psychology of traders applying the system is not.

Most traders are men, and they tend to think that psychology is not really important. Instead, they believe that what is important are simple concepts that are indifferent, rational, well-informed, and experienced. However, according to Weltz, if the brain is not properly programmed and adjusted, reason, information, and experience will not help. So what can we do to make our mind and subconscious take appropriate actions?

Weltz’s method

Weltz acts on the trader’s brain through the subconscious mind and hypnosis. The trainee is placed in a trusting mood, and the necessary abilities are fixed in the subconscious area of ​​the brain. If this process sounds a bit strange, please think about it: Over the years, Weltz has helped people overcome fears and obstacles, enabling them to win sports championships and even ensure victory in the Olympics. In addition, he helps traders make money by activating the correct mental energy, motivation and behavior. He emphasized that everyone has unique psychological bridges and obstacles that need to be crossed or overcome to ensure success.

“Trading discipline” comes from changing a person’s behavior in the desired direction and overcoming psychological resistance and fear that usually hinder it. Especially in the context of the transaction, Weltz considered a “resisting army.” In fact, the trading brain needs to combine the correct investment and market knowledge with the correct mental abilities. It’s not that usual skills are unimportant, it’s just that they are usually covered by wrong mental and behavioral patterns.

Therefore, effective trading involves a change in personality. According to Weltz, “Those who are unwilling to try shouldn’t even bother about trading.” Those who only focus on the so-called logical aspects of charts and trends, including all those patterns, such as “flags, triangles, channels, or stop “Loss and trading range” will eventually struggle with countless inevitable emotions, which inevitably play a role and even dominate the market.

Weltz explained that the above is a “super short version” of his theory, but it is indeed the essence of the problem. In addition, he believes that anyone can become a trader and overcome his or her fears. As long as people don’t have clinical diseases, if they are really willing to work hard for themselves, they can solve these basic anxieties. In addition, if they are to succeed, they need to have a good understanding and grasp of reality. Of course, financial knowledge and skills, information and research still play a key role.

However, getting there is very difficult. Welz believes that people should not think that they can “start with a mini account and live as a professional trader within six months.” It takes time and dedication. Welz believes that if this were not the case, there would be Ferraris and Porsches everywhere on the road.

Frequently asked questions

How do you develop a trading brain?

To be a good trader with the right mindset, you need to recognize the role of emotions and psychology, and actively take measures to mitigate these effects. Have disciplined conventional and objective trading strategies. Record your transactions and their results. Pre-determined entry and exit points can be modified using reasonable standards.

Who is Norman Weltz?

Norman Welz is the author of a book on German market psychology called Trading psychology —— So denken und handeln die Profis (“Trading Psychology-This is how professionals think and act”).

What does market psychology teach us?

Since market participants are human beings, the market as the sum of human choices will exhibit herding behavior and other irrational trends, such as panic selling and irrational prosperity that lead to asset price bubbles. By acknowledging the existence of market psychology, we can understand that the market is not always effective or rational.

How to use market psychology to give full play to their advantages?

Through their own research, people can determine when market psychology such as fear or greed leads to oversold or overbought, respectively, and trade against the trend—buy when others are oversold and sell when others are overbought. It can also help catch trends as early as possible, but don’t catch up with them after they have already surpassed the fundamentals.

Bottom line

The fundamental role of trader psychology is often underestimated, with too much emphasis on technical aspects. Although both are essential, it can be said that the right mindset distinguishes successful and unsuccessful traders. However, learning the technical aspects of trading is more straightforward than acquiring a first-class trading brain. The latter usually requires in-depth research on their own personality characteristics and eradicating deep-rooted behavior patterns. This process is not easy, it requires dedication, time, and usually the help of a skilled coach. Nevertheless, the result is likely to bring dividends.

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