One can point out two models in man’s activity. They are “job” and “game”. Job is a certain good structured process which result leads to payment, i.e. job is a win-win process where certain employee’s resources (time, mental and physical efforts, and even health) convert into money. Let’s note once again, it is the win-win process, either the risk of loss is rather moderate (money non-receipt) or it is considered as force majeure, that falls out of “job” concept.

Another model of activity is “game”. There are risk, freedom of choice, space for creation and research here. But the result of this activity can be both win and loss. Thus, it can turn out, that the result of the game will be quite free both of efforts made by a player and of his spent resources, i.e. the main game feature is the risk.

But when the matter is about trading, an outside man can hardly understand what kind of activity is carried out by all these serious fellows in coats and ties. What does an outside man know about the stock exchange? That big money spins here. After all, these are money streams of state scope, they are talked about on TV and in news programs. That traders carry out their activity at stock exchanges on behalf of banks and large investment companies. All this looks quite seriously. And, accordingly, the model named “job” is selected from two.

Getting to the stock exchange, trader-beginner is going “to earn”. He expects to find the sequence of actions, which will bring him to the permanent and win-win process passing without any risk. The risk is regarded not as the internal system characterestic, but as the dissapointment one needs to get rid of by all means. First of all, of course, one needs to learn how it works, to find an internal mechanism propelling prices, to make it clear and to place it at the service. And everything will operate then yielding the happy trader large percentage each month. That is expected from the stock exchange. But life appears to be far more sudden and interesting. Stock exchange is not a “job”. It is an absolute Game.

There is one more thing misunderstanding of which leads to taking wrong and mostly accidental decisions. It is a probabilistic market nature. If take an enough liquid share, and especially a stock exchange index, such an enormous amount of factors operate it, that taking into account even their basic part is quite impossible. Surely, it is possible to predict sometimes some local motion with some quite high probability, but doing this constantly always and everywhere won’t come out.

Price is the unsteady system, thus all these emotional traders from both sides of the price make it a positive feed-back system, i.e. price move can already generate price move by itself, which strengthens price move more. Often, one needs no news and fundamental factors for price move. Most analysts’ tall tales about “this move was caused by that” are mere strained attempts to work off their salaries.

So, price is such a complicated system, that major part of this complication can be put down for “random value”. It means that price moves are chaotic to a certain extent. There are serious and clever researches, considering price entirely chaotic. But we are not so pessimistic about it. And what does chaos in trading give us? It gives us a random outcome, i.e. our activity result at the stock market doesn’t quite depend on troubles spent on its achievement. However, it sounds too globally. Let’s start with the least: the result of every particular deal can’t be predicted for 100%. Its predictability percent is far less.

Each deal contains the risk. This risk is neither a result of trader’s bad preparation nor a wrong treatment of his activity. It is the internal system property impossible to get rid of. One of the trader’s errors is trying to get rid of this risk.

These attempts are quite reasonable. A man is badly adjusted to the activity in a probabilistic, random situation. Prediction is evidently estranged to the psychology of man’s nature and nature on the whole usually operating within the framework of notions “cause-effect”. In simple terms: one needs no predictions, but adequate and rapid reaction. It is enough for species survival. Seeing the effect, the man implies some reason for it. Having the reason, the man expects some certain single cause from it. To realize that there can be few effects from one reason, and their choice is free from the reason, the man has to insult over his mentality, use conscious and reasonable part of the brain and make predictions. And predictions show that mentality has made a mistake.

One of the errors of the trader-beginner can lie in profit waiting from each deal. He continues to think within the system framework “cause-effect”, excluding the possibility of the random outcome out of his consciousness. In trader’s opinion, all circumstances’ aggregate, pointing at one or another situation development, will inevitably lead to the desired outcome. If everything goes wrong (and sometimes he is simply not ready), and the deal doesn’t render the profit, the trader gets strained, considering a loss his own error, the effect of bad preparation to the position opening, some factors which existence he hasn’t taken into account, though he had to. A loss brings him major psychological discomfort, than it ought to. Profit is considered a regular and natural result and joy from deal close in the black doesn’t cover distress from deal close in the hole. There turns out a kind of peculiar negative psychological balance, which man’s mentality tries to minimize somehow. For example, a trader starts to change his trading methods thus to have more profitable deals than (in amount!) unprofitable. It can lead to bad consequences for trading strategy.

A deal at the stock exchange is a parlay in the game. The game result is partly (at best) or fully (in worst) unforeseeable, i.e. the deal profitability doesn’t  always depend on how much you have been thinking at night before, what education you have got, how many analysts’ recommendations you have received  and how many books on technical analysis you’ve read. There can arise a reasonable question – what’s to be done? In fact, it is a casino, a chance. What are these shares and clever people in coats for, if you can do the same simply tossing up a coin?

The thing is, that the deal result is not predetermined for 100% by a chance. But in order to make money at the stock exchange, it is quite unnecessarily to have an absolutely exact working method giving ten profitable outcomes in ten deals. If your trading system gives 6 profitable outcomes in 10 deals (here we simply suppose that profit in the deal is equal to the loss in size), it is more than sufficient to become bitter rich. The question is about digging out a factor, allowing doing this sag in probability of outcomes, and then to rise calm and quietly, deal after deal, carefully regulating risks with the help of capital management methods and patiently accepting all, fixed by probability, losses. That’s what trader’s job about.

Generally speaking, the trader’s basic problems happen because he is impelled rather by psychological vigour than sound reflections. It is not surprising, in fact the question is about money and all this own account motions up and down can’t leave anyone indifferent and emotionally balanced. Emotions have always been a counterbalance to logic and rationality, and the stock exchange is not an exception. Even vice versa, it is here these deceitful  maneuvers of subconsciousness become evident with frightful strength compelling adult, reasonable and consistent in ordinary life people to give out desired for actual and to persist on their delusions right to the end, in spite of all facts and proofs.

The man’s subconsciousness aspires to diminishing of psychological discomfort, and thereby compels trader to make him concessions. The problem is that often the desire for psychological comfort strongly differs from plans to get profit, and the most unpleasant is that the first desire skillfully disguises, shoving consciousness irrational (after sound reflections), but very tempting decisions, which rationality for some reason is undesirable to doubt at once.

For example, the idea about “paper profit” or “paper losses”. Sometimes you hear such an opinion, that profit or loss, got from position, is “virtual” while position is open, and it becomes real only at position closing. It would seem, it is a simple inoffensive logical construction. However, at certain situations this inoffensiveness turns into losses.

Let’s imagine a situation. The position was opened, we gladly wait for profits. However, something went wrong. The price falls, position turns into the loss. The reason and practice prompt a decision: to close position. However, it suddenly becomes extremely difficult to do this, as while position is open, its loss is considered “virtual” by trader. An action for position closing suddenly obtains sacral sense of transference “virtual” (and not so painful) losses into the real. Position closing becomes equivalent to admittamce of own errors and their consequences, however actually both an error and consequences have already taken place. However, position saving appears psychologically more comfortable, and trader, squeezing his teeth, decides to wait a bit, and often perfectly understanding that it is unreasonable to confront strong motion.

Psychological comfort costs dear. However, between pleasant and profitable deal many (or rather majority) choose the first unwittingly. It is more pleasant to look for a coin where light, but not where it was lost. Large efforts are needed to separate the desired from the real to gain profit, even at the cost of nervous tension. But it is also the trader’s job.