turtle trades secret was their psychology and position sizing..

each trader started with a small account. if they did well for an initial trial period, then account size increased.

the difficulty in trading lies not in the concepts but in the application. it is relatively easy to learn what to do when trading. it is very difficult to apply those lessons in actual trading

human emotion is both the source of opportunity in trading and the greatest challenge. master it and you will succeed. ignore it at your peril.

to trade wll you need to understand the human mind.

winning traders make money by exploiting the consistenly irrational behavior patterns of other traders.

market movements result from the systematic and repeated irrationality that is embedded in every person.

emotional and psychological strenghts are the most important ingredients in successful trading.

distortions in the way people perceive reality are cognitive biases.
here are some cognitive biases that affect trading.

loss aversion: the tendency for people to have a strong preference for avoiding losses over acquiring gains.

sunk costs effect: the tendency to treat money that already has been committed or spent more valuable than money that may be spent in the future.

disposition effect: the tendency for people to lock gains and ride losses.

outcome bias: the tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made

recency bias: the tendency to weight recent data or experience more than earlier data or experience

anchoring: the tendency to rely too heavily, or anchor, on readily available information

bandwagon effect: the tendency to believe things because many other people believe them

belief in the law of small mumbers: the tendency to draw unjustified conclusions from too little information




it turns out that it is much easier to make money when your are wrong most of the time. if your trades are loses most of the time, that shows that you are not trying to predict the future. for this reason, you no longer care about the outcome of any particular trade since you expect that trade to lose money. when you expect a trade to lose money, you also realize that the outcome of a particular trade does not indicate anything about your intelligence. simply put, to win you need to free yourself and your thinking of outcome bias. it does not matter what happens with any particular trade. if you have 10 losing trades in a row and your are sticking to your plan, you are trading well; you are just having a bit of bad luck.