Sometimes customers and friends ask me if I will spend some time with them so that they can just pick my brain. Much of the time, I am reluctant, because I would have to give hundreds of hours a year if I said yes to everyone. I am taking a break from the norm today and showing readers a glimpse of my daily journal. This particular excerpt was from last week. I have notes here which were sparked from questions asked in the book The Psychology of Risk by Ari Kiev. My notes are shown below (if there are misspellings or bad grammar, I left some of it in to preserve the authenticity):

How do you avoid being trapped with overanalysis, regrets over losses and other things that preoccupy when you are trading?

Itââ,¬â"¢s true that I can get emotional when trading. I get happy when returns are good which is dangerous and I get upset sometimes when trades are going badly. I think the best way to deal with those emotions is to think of myself as more of an observer than a trader. My job is to observe what happens, draw conclusions and make decisions that will improve the quality of my systems. That is my job in a nutshell- observe, improve, and act. My job is not to get happy, to think of myself great when trading is going well, or to get upset when losses happen (which is inevitable). Kaizen is what I need to concern myself with mainly. I get over losses by judging my actions instead of short term results. Itââ,¬â"¢s similar to a poker system. Sticking to the system and improving the system constantly is the name of the game. Short term fluctuations mean nothing. I trade based on long term profitability, logic and proven techniques that work in the long term.

If I start setting bigger return numbers as targets, then I will mostly likely have to increase my risk expectations. The increased account fluctuations should be expected. Being in the zone or trading the best possible way means you can tolerate pain better. The author thinks that pain tolerance is the most important aspect of trading or perhaps one of the most important aspects.

As a trader, what more do I need to know?

* who the best option traders in the world are
* what the best books in trading are
* what the best indicator is long and medium term
* are there more ways to add fundamental analysis to trading short term?
* Are low PE stocks that I trade performing better than high PEââ,¬â"¢ers
* Can I trade futures well?
* Can I make more money in futures than in options?
* Which security offers the best returns?
* How can I talk to more people who trade for a living and how can I get additional advice from them?

When you donââ,¬â"¢tââ,¬â"¢ have a specific return target, then you will randomly choose one based on emotion and it may spin you out of control. Return targets are very important.

What can I do to change my self limiting habits and attitudes that often lead to repeated failures or limited success?

One habit I can change is this psychological need to be right. This can actually make things very bad and unprofitable for me. Of course I want to be right, but itââ,¬â"¢s not that important. I was testing the RSI thing and I started to panic because I thought my whole optimization thing was a silly mistake just like the Chaikin line test. But the truth is, the only thing I need to concern myself with is how to improve my trading. My concern over being right can often be couter-productive. Also this habit of starting a system and not continually honing it can be a problem. I should be working on it all of the time and each week I may want to schedule half an hour to improving my current system, This week, I can do that very thing by optimizing very thoroughly in several environments. I just need to remain calm and take the necessary steps to succeed. The word of the day is ACTION!

What new approaches can I adopt that can transform my trading and make me a lot better returns with reasonable risk?

2 hours of reading a week is the most crucial thing I can do. Just what I got philosphically from Mortimer Adler is humungous. I should consider reading more of his stuff regarding philosophy because the logic helps me in trading.

How do I deal with ambivalence, uncertainty and indecision?

First of all, I believe that some decisions are worth waiting on. I canââ,¬Ëœt make quick decisions in every matter. That is, I canââ,¬â"¢t make a decision in one day on every matter. Sometimes it requires research to make a confident decision because decisions, especially when it comes to trading, have to be founded on historical probability or super-strong logic. That takes research. That being said though, I must also avoid sitting on my hands and doing nothing because thatââ,¬â"¢s not the name of the game either.

So there you have it. This is the kind of work I put myself through to improve my abilities on a consistent basis. One of the keys is to eliminate the EGO and  focus on progress instead. Warren Buffet says that when he is evaluating the management of a company, one necessary characteristic of management is the ability to be upfront about good and bad decisions, because mistakes are made occassionally and they must be dealt with. As a trader, you must know your strengths AND your weaknesses. Trading is driven by our psychology, ego, and emotions. You must constantly improve yourself through study and self- evaluation. Be disciplined- and trade well!

Price Headley is the founder and chief analyst of BigTrends.com.