Module 4: Trading Psychology Rules (Done)

Question 1

What is David Green’s first rule of trading psychology?

Answer 1

• Do your own research, on your own, because you are capable
• Trade with conviction and push the button when things line up
• Don’t believe in a company (when day trading)
• Stocks are vehicles, no need to get emotionally involved
• Good earnings do not necessarily mean that a stock will go up
• When day trading, don’t analyze based on company
• As day traders, you should focus primarily on technical analysis

Question 2

What is David Green’s second rule of trading psychology?

Answer 2

• Stay in your weight class
• If you trade 100 shares, trade 100 shares
• Over time, slowly increase your trading size
• Profitable month over profitable month you can slowly start to trade more
• Trading is a get rich slow scheme
• Don’t get too confident because the market will take everything away in a heartbeat
• As a trader, you must have humility

Question 3

What is David Green’s third rule of trading psychology?

Answer 3

• You have to pay attention
• Trading is not a game, trading is not entertainment; you are trading to make money
• Less is more when it comes to trading; more bells and whistles don’t make you a better trader
• If you are feeling off, do not trade that day (i.e. mentally, physically, emotionally)

Question 4

What is David Green’s fourth rule of trading psychology?

Answer 4

• Leave your ego at the door
• There is no room for having an ego as a trader
• You will be wrong
• If you execute a trade properly, there is no difference between a winning and a losing trade
• You will either lose a bit or make your target profit (those are the two possible outcomes)

Question 5

What is David Green’s fifth rule of trading psychology?

Answer 5

• You have to move on
• Do not be a chaser
• Chasing: Hastily making another trade on a stock that you’ve just lost money on, without any proper technical analysis
• Don’t try to get even with the market
• Get used to losing, it happens
• Don’t have huge reactions to great trades or losing trades
• Have a neutral attitude when it comes to your trading profits and losses
• You have to put becoming a great trader ahead of anything else
• Hope is not a strategy in trading or in life (this stems from the fact that big losses don’t come without warning)