GRE Analytical Section

One of the newer and most important fields of psychology today is that of traffic psychology. It may sound insignificant at first, but when one considers the amount of traffic accidents and deaths caused by traffic incidents, one starts to consider why these incidents keep on occurring and, more importantly, what the cause of these incidents may be. Traffic psychology is concerned with this very notion and aims to shed some light on some of our more interesting behavior tendencies.

Traffic psychology is very closely related to something known as transportation psychology, but the differences between the two sets are clear. Traffic psychology is primarily concerned with the study of behavior in people driving on the roads and how that behavior influences their actions on the road. This is where “road rage” and all sorts of other terminological distinctions come from. Transportation psychology is, on the other hand, concerned with how people move around in general and is significantly less exciting.

Behavior and Accidents

One of the most important things that traffic psychology touches on is the relationship of behavior and accidents. The study of this behavior usually depends on various ages of drivers and their mode of transportation. Traffic psychology in this area studies such things as the attentiveness of drivers while driving, the cognitive properties of drivers, the driver’s fatigue or workload level and its impact on driving, and the social interactions of driving.

Many findings report some fairly obvious observations. The less social interaction a driver has with the other drivers on his or her road, the more likely an accident is to occur. Driver-to-driver communication is important to avoid collisions. Driver fatigue is also clearly an issue, as those drivers that are not properly rested before getting behind the wheel represent a certain risk to other drivers on the road.

Also important to look at in this area is the idea of driver personality. Drivers who are “risk-takers” are more prone to pass on a double-solid line or perform risky movements in traffic that can put other drivers at risk. This personality often influences many accidents because of the reckless abandon that the individual driver shows towards traffic and the social interactions of the other drivers.

Practical Applications

Traffic psychology has been used to perform a number of practical applications designed to make road travel safer for all drivers on the road. Traffic psychologists collaborate with engineers and city planners to plan roads to make them more effective and “driver-friendly.” Traffic psychology is also used in terms of the economics of the road, with items such as toll booths and gas prices monitored to determine their impact on drivers in general.

Traffic psychologists also introduce educational methods by which to influence good driving behavior. Habits formed through bad traffic psychology are monitored and exposed with advertising campaigns, classroom instruction, and other public property tools. The “road rage” campaigns were one example of traffic psychology at work. Other campaigns involved with traffic psychology include drunken driving campaigns and other campaigns concerned with public safety on the roads.

Logical Reasoning tests your ability to evaluate the merits of an argument or opinion. You'll see 8 to 10 Logical Reasoning questions in your GRE Analytical Section, each based on a short argument. For more info visit this link - Psychology Graduate School Search.

It is said that trading is 90% psychological and 10% methodological. Does this then imply that regardless of trading method, a trader that has control over their emotional issues will thus be a profitable trader, or will it be impossible to ever control emotions without the proficient implementation of method? The trading method viewpoint will suggest that not only are these statistics not the case - trading psychology does not exist. Trading method will be the determinant of profitability, and this will be done through: (1) the ability to understand the method's inherent strengths and weaknesses (2) the ability to maximize these strengths and minimize the weaknesses.


The Trading Method Viewpoint

Trading psychology has become so widely discussed and promoted through books and consultants that it has become a very convenient rationalization and excuse for losing. Why take the responsibility for a lack of work ethic and trading without any concept of plan, an honest assessment which would be a ‘hit’ on the trader’s self-esteem – when you can just blame it on trading psychology instead?

Trading psychology is ‘something’ that a trader creates from existing personality traits that are not initially related to trading, but surface from trading without method understanding. The outcome of course is fear, but wouldn’t this be the case when doing anything that was perceived as ‘dangerous’, and which was being done without the necessary understanding and skills? Trading, with its inherent characteristic of accepting financial risk while participating in unknown outcomes, is certainly ‘dangerous’, and thus the more preparation and understanding that is needed.

Trading Scenario

Consider the a trading plan which has the following three setup types: (1) initial which your intended trade entry (2) first continuation which is used to enter a trade in case you have either missed your initial entry, or you decided that you wanted more confirmation because it was a counter direction trade (3) second continuation which is intended as a trade addon setup, but is also one ‘last’ chance to enter a trade.

You get an initial sell setup that triggers, but you do not take the trade = trade1. The trade breaks cleanly and goes to what would have resulted in a partial profit, and then before price goes down further, it retraces back to the area where the sell was done. This price holds so the swing remains short, and from this hold of what is now resistance, you get the trigger of your first continuation setup BUT you don’t take this trade either = trade2. Why wasn’t the trade taken? You decide that after missing the initial entry that you have missed the trade; your emotions and biases tell you that the ‘move’ has gone too far. Again, this trade breaks cleanly, not only adding to the gains of trade1, but also giving a partial profit on trade2.

Price now consolidates between the lows and the price resistance that you would typically be using to stay short if you had taken either the initial trade, or the first continuation trade. Instead of the swing reversing after consolidating, it continues down again, and with this continuation your second continuation setup triggers = trade3. AND AGAIN - you don’t take the trade. After all, if you didn’t take either of the first two trades, how can you possibly take this trade; maybe you were wrong when you thought that the move had gone too far to take trade2, but certainly that’s the case for trader3.

Like trade1 and trade2, trade3 is a profitable trade. This swing has really turned into a great directional move, with each break holding on weak retests – a textbook example of the strengths of your trading method, but YOU have never entered a trade. You are going nuts! You are getting into this damn swing - you just can't take it any more. Another retrace holds as a lower high. You don’t have an entry setup, but that doesn’t matter, the other three trades were profitable after a lower high. Isn’t it interesting, the same emotions which wouldn’t let you enter your plan trades, are now ‘forcing’ you to take a non-plan trade.

Instead of YOUR trade going to a lower low and to a profit, it instead goes to a higher low and then reverses into an initial buy. Bad just got worse, you also don’t exit when the swing goes into buy. After what you went through to finally get into the trade, you have to try and make it work, and after all the trend is down – right? TraderA uses this initial buy to exit their profitable sell and sell addon; they decide that they want more confirmation of swing reverse before trading the counter direction. A first continuation setup triggers and they go long, the swing has reversed, and this trade reaches its first profit target.

TraderB finally ‘gives up’ and exits THEIR short, although with a two point loss instead of the intended one point, and without any consideration of taking their next plan trade, the first continuation buy. This trader is done for the day, but at least they were ‘right’ all along; the swing had gone too far to enter, and their fears had been warranted – this was a losing trade that they should not enter.

Is this a trading method or trading psychology issue? What ‘message’ is TraderB going to take from what has just happened. Will they take the attitude that they should not be blamed, they just can’t trade because of trading psychology? Or, will they acknowledge that the method did win, that the resulting loss was not a method trade, and even if it was, the loss would have been offset by the prior winners. Will they acknowledge that THEY made their worst fears come true and not only turned this into a losing trade, they also increased he size of that loss, and then avoiding another method winning trade.

Granted, psychology was involved with what has happened in the described trading scenario, but that is a function of the individual’s ‘core’ personality, and would most probably be an issue regardless of what was being done; if there is ‘risk’ involved, there will be an ‘emotional’ response. Thus, it is first necessary to separate personal psychology from trading psychology, and the use of this concept as an excuse for trading actions. Then, if trading psychology is going to be controlled, this will be done through the development and implementation of a tested plan that the trader is willing to follow. Do not trade with ‘built-in’ excuses for failing, you will have lost before you begin, and will continue to do so with a continued ‘snowballing’ of emotion to the extent where trading will no longer be possible.

Logical Reasoning tests your ability to evaluate the merits of an argument or opinion. You'll see 8 to 10 Logical Reasoning questions in your GRE Analytical Section, each based on a short argument. For more info visit this link - Psychology Graduate School Search.

The psychology behind the trading mindset deals a lot about how conditions govern a person’s decisions with regards to commerce and trading.

Most experts agree that trading is generally categorized into three key areas, the mindset or psychology, money management and how a trader manages risk and the methods used for a particular trading system.

The mindest is, by far, the key area of the system that governs a trader’s ability to control and drive trading market forces at play, especially how one would deal at a particular situation or circumstance

The key is that the mind drives everything you do in your life and trading is no exception.

Many people still think that at the onset of getting into trading, many people wonder how come some end up successful, while some end up at the losing end.

Truth be told and many would agree, that when one asks what was responsible for them getting a good headstart at trading, they would say that ‘psychology’ has a good deal of influence over it.

Essentially, it is the mental ability of managing losses and profits considering the good and bad periods in trading, as well as managing risk and not becoming too greedy, among others, are some of the major aspects that define ‘trading psychology’ or the trading mindset.

For one to be able to make good use of the trading mindset, it would be best to define how it works.

A trading mindset primarily deals with a person’s character attributes, differentiating the strengths from weaknesses.

Are you a level headed person or highly emotional? This character attribute will make a good assessment of how a person deals with conditions and circumstances affecting one’s decisions when it comes to trading.

Are you disciplined enough and willing to work hard to get the desired results? This attribute will spell how one deals or reacts to trading circumstances or situations that affect your trading forces.

However, to sum it all up, there will only be one overriding influence on trading success and that is attitude, which will eventually determine one’s trading mindset.

Many experts will agree that attitude will determine whether or not a trading mindset is geared towards a profitable trading venture or method.

Attitude is by far important than any of the character attributes required for successful trading and it is more important than your market knowledge and your degree of skill, and this should be the ideal trading mindset that should govern one’s trading choice.

Attitude is best described in a saying that goes ‘It is not important what the market does to you, it is how you react to it that is important.’

For instance, it is not important when one is caught in a situation with the prospect of a losing trade, what is important is how one reacts to that situation and take action to best help address it.

A good trading mindset is planning and knowing how to react to situations without letting a spur of the moment emotions cloud one’s decision.

Essentially, a good trading mindset is to focus on the idea that successful trading is all about decision making, but because of money and inherent natural instincts, many people still associate their emotions from their decision making process, which should not be the case.

So, it is best advised that to trade successfully, one must be aware of the psychology behind the trading mindset.

Logical Reasoning tests your ability to evaluate the merits of an argument or opinion. You'll see 8 to 10 Logical Reasoning questions in your GRE Analytical Section, each based on a short argument. For more info visit this link - Psychology Graduate School Search.