The Emotional stress and Psychological discipline required of an automated trader

Photo Credit To Emmanuel Tweneboah Senzu, Research Director-Frederic Bastiat Institute

Contrary to the perception upheld by some experts, who are against my writings on the subject of innovation required of the investment industry of the ECOWAS region, especially with the automated trading, as idealism theory. I do submit, my writings are guided by the experience of industrial standards as a practitioner in the business of securities trading, especially with forex and market analysis.

Technical Analysis as a theory of practice in the body of market forecasting, is a knowledge that has not holistically been absorbed as a strand into the mainstream academics. Because of the dynamics and required developmental stage of its body of theory in the accurate forecasting of the market, and the need of the application of any of its methods and instruments to be highly effective and efficient for industrial usage. It is of this very reason that is why, any market technicians and theoreticians, well vexed in this kind of industrial practice are recognized and required to comply with global structured benchmark standards of ethical codes, as well as legal regulations codified within its supervisory body called International Federation of Technical Analysts, with headquarters based in Maryland, USA, which I find myself as a proud member.

Not to deviate from the substantive issue on the emotional stress on the trader’s job and psychological discipline required. As argued in the earlier article, trading chosen as an individual venture could be explored as an entrepreneurial exercise. However, it could not be mistaken as the easier means to make a lucrative profit to satisfy greed. Not equally forgetting that the proceeds from the quality professional practice of automated trading are better than investment returns offered by on-the-counter fund management firms in Africa. Therefore, three (3) factors below would be discussed to guide young traders and those aspiring to become professionals in this field to apply it as a compass in cautioning their steps in this industry. They are,

  1. The Reason for Entering the Trade room
  2. Types of Trade rooms and behaviourial trends of Instrument
  3. The Trading plan and personality
  1. The Reason for Entering the Trade Room

Over the years, in my observation of aspirant seeking to engage the trade room, especially with participants from Africa, has mostly been to satisfy their greed desires as a short-term multiplication of their micro-deposited funds. To the extent that even some acclaimed training gurus in forex trading within the ECOWAS region have a similar preconception of joining the trading business to become a billionaire overnight and advertising in such a manner to admit students into their training camps. Whenever, you observe such signals from trainers, it is an indication of being quack traders and worth not spending your money on their seminars and classes.

 If you are students into automated trading, you are to acknowledge the fact that the gradual process in the percentage growth of funds depends on the quality of process and preparation to achieve the target by the trader, not the system of tools and equipment, which the traders work with. The use of indicators, automated trading platforms, and fundamental data are all available to traders across the world to make a profit from their investments, yet some are making lucrative wealth out of this industry, while others have collapsed their investment empires. This implies that the problem of blowing your account is independent of the equipment and tools used, but rather the quality of skills of the trader to combine in an accurate ratio of effective and efficient use of indicators, fundamental data and quality functioning of the brokers trading platform, to produce the best lucrative result, as a reward of the efforts invested by the trader. The reason of entering the trade room is to focus on the quality of preparation for the best result as a fund manager not as how much profit to make. Which is also the foundation of Emotional Stress control in managing real funds.

  • Types of Trade room and behaviourial trends

Currently, there are five(5) types of trade room with different trend behaviours in terms of price fluctuations. Which are (I) Forex  (II) Commodity  (III) Stocks (IV) Blockchains (V) Bonds. The instruments of any of these listed trade rooms generate different types of trends either primary, secondary and tertiary, or mixer which a trader has to be fully acquainted with to have a well-developed plan and strategy to explore the profit associated with such market through its Pips-Value.

  • The Trading Plan and Personality

In the live-account trade room, there is nothing like experimentation within the scope of trial and error.  Any mistakes due to inefficiencies and poor preparation of the trader will cause blowing of an account as an accident. This is a market which requires a high level of discipline, time consciousness, and competency to the art, without condoning excuses of trader inefficiencies. Every professional trader steps into the market with a well-carved trading personality, which defines its trading plan to guide the strategy for profit making and very disciplined to trade the plan devoid of greed.

Conclusion

The psychological discipline required for effective performance in the trading venture is very high, than how it is perceived by many trading students, which I have engaged within the ECOWAS region. Trading is not a means to satisfy the greed intent of a fund management. Contrary to this statement made earlier, I could assure you of depression, resulting in an emotional crash, if you are fully into the business of trading.

My next article will focus on the misconception of the trading community in Africa on the use of Artificial Intelligence trading and Trade Copier.

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Emmanuel Tweneboah Senzu, (Ph.D.)

Tsenzu@ucoms.edu.gh  

Research Director, Frederic Bastiat Institute

Associate, OAK Forex

Post source : Library of Frederic Bastiat Institute

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