Giving yourself the appropriate time is very important. I realized that this is going to take me a few years. It's become a long term goal and that has taken some of the pressure off. There are many reasons why the failure rate is so high. This is a demanding business. Being intelligent is not enough. Here's my formula for success in the markets. Market Success = IQ(0.1) + EXPERIENCE(0.2) + KNOWLEDGE(0.2) + ATTITUDE/PSYCHOLOGY/EQ(0.5) ozzy
Your right the equation is incomplete. You must be a mathametician. Market Success = (IQ(0.1) + EXPERIENCE(0.2) + KNOWLEDGE(0.2) + ATTITUDE/PSYCHOLOGY/EQ(0.5))*$$$$$$$$$$$$
I believe mkt is 80% psychology. If so, most fail because of psychological reasons. It effects how you feel about your trades and decisions you make when managing your open positions. I'll give 2 examples...most old timers may already know but some new traders may find interesting. Scenario A: Lets say you start out your day buying stock XYZ. An hour later, huge positive news comes out about XYZ...coupled with mkt events....your stock begins to soar.....up $5000 by 10am....by 11:15am you're up, say...$8000.....but you don't close out and take the profit...you believe stock will rally some more in the afternoon after basing on doldrums. But 2pm comes around and mkts have reversed, and your stock that was once up $8000 for the day...is now only up $5000. Your mad you didn't take the profits earlier...never the less you wait until the close believing it will rally in the last hour. 3pm is here...your stock is now only up $1000....totally giving back all the gains from the morning....you just cant believe it...you say heck might as well wait till the close to see what happens. Right before the close....you close your position, with a $100 profit. scenario B: You buy stock XYZ. Suddenly....devastating news comes out about your stock ....it tanks....and tanks hard...by 10:30am your down $5000.....by 11:30am....your now down $8000...frozen in fear...you just cant bring your self to sell now and take the monster loss....Stock bottoms on dol-drums and begins to rally back up....by 2pm your now down only $4000...by 3pm...your only down $2000....right before the close....you sell....for a $100 loss. OK...how do you think you feel with scenario A...you made $100 bucks that day....how you feeling?? scenario B...you lost $100...how do you feel about it?? You see what im getting at....If all that matters in trading is a Profit/Loss.......a win is a win and a loss is a loss...we should always be happy with a win right??.....and pissed with a loss.....right? Another example....you think your smart?.....you think you know best when it comes to managing your positions? How many of you ever exited a trade early....fearing it was gonna turn sour and you got out with a break even or near break even......heres an exercise: Go back to your last 50 to 100 trades....look at all the trades you exited early...in other words closed out BEFORE you let the play either hit its target or hit its original stop level. Do you think you would have made more money or less money if you had just left them all alone and let them either hit the target and take profit...or let them hit original stop and take full loss???? You think your meddling in them resulted in better profits??? YOU MAY BE SURPRISED!!!!!!!!!!!! See...we just cant help ourselves....like moths to a flame.... we are wired in a way that makes it almost impossible to trade with out some emotion............emotion we could do without.
I nominate this for best post of 2005 imo- Very well put! only thing that could top it is post steps on how to overcome the emotional swing pendulum imo
I think I have an answer to that question "steps on how to overcome the emotional swing pendulum" 1. Trade a size which your are comfortable with and which allows you to remain logical and objective. 2. Give yourself time, to gain experience. Time/experience will dampen the emotional affect of trading. 3. Have a proper trading plan which has been tested and verified. This will prevent your berries from being caught in a jam. 4. Manage Risk which ties in with point number 1. So simple isn't it. Yet we don't follow the basic rules !! haha ozzy
============ Hjkl; a] Its much more than psychology; & Jack Schwager is much more than Douglas by any measure. 2] Sounds like you are overtrading,intraday trading, PLENTY of good trends in stronger sectors like homebuilders much of the year ; good trends , last 62 days last 31 days..... 3] Many of us blew up an account or 2 ; trading too large like you are also-19% in 3 weeks. 4] Still paper trade myself, more helpful; than persistant losing in a bull market especially after about 2 losses in a row in swing /position trading in a bull market Hope this helps.
I've often thought that what makes trading so hard is that we are trying to override our natural flight or fight responses. It's like when you were a kid and a dog chased you and you found yourself up a tree without knowing how you got there - I can find myself with a prematurely closed out trade without knowing how I got there.
And since one can never cath the exact top or bottom, except in some ads; would prefer to try to stick with a planned discretionary approach, even when it doesnt try to catch all a correction. hJkL; Noticed you have the letters JL in your nickname; market makers specialize in intraday trading and specialize in a planned approach to a certain degree, even if it takes years. If someone tried to get me to choose between charts and; specialists/market makers sheets /pages, prefer both, especially market makers multi month charts.
It is almost a given fact that you did not understand what you have read from Mark Douglas' "Trading in the Zone" or you just went through it hoping that the 'knowledge' will somehow leap into your mind.