There is a lot of truth in your statement.The inherent psychosocial problems of day trading can not be eliminated. Firstly it is very personal quality orientated , sitting in front of a screen (a roulette wheel) expecting the market will do what you expect it to do, expecting the market to give you profits everyday and reward your efforts and the markets to behave and trend to your desires.Sadly it does not work , the market does what it wants to do to please the majority. The market will frustrate you, make you angry, starve you of success, break your discipline and put you off track.If you trend follow the market on short term intra day basis, you will get chopped out and chopped up.Many trends will come off and many will fail after just one touch of the trend line.You can't time the markets , the markets will make their moves in the direction the day trader trader hoped for, but not on the day he expected.After a few losses , it won't reverse and give back the losses and finally a profit on the same day.It will give profits , but on a different day when the majority are on your side. If a day trader has a bad day, he is on the wrong side of the market.Today it is not his day, the market is not going to give him anything.If he puts on 10 more trades, he still is not going to get a reward today.There is random distribution of profits and losses , and that is the psychological problem with day trading. Anything can happen , and if the trader continues ,he will have anything happening against him to break him down. The odds are against day trading , the slippages ,the sudden untimely trends ,the spreads widening , the fakes etc.On longer time frames with wider stops , these problems rarely exist. There is no solution to the psychological problems of day trading.Hope we agree on this.
That's because the psychological difficulties of day trading are caused by not having a robust strategy with which to trade, leading to negative expectancy trading over time and the overwhelming temptation to "break the rules" in the hope of gaining back some of one's losses or having a robust strategy and overbetting, causing drawdowns beyond the trader's risk tolerance. These are "second order" effects, not root causes, although the second is by far the better situation to be in. The way to confirm this would be to ask successful day traders what proportion of their lack of success in earlier days was due to psychology and what proportion was due to inadequate strategy. But, they have to be successful ones because that's the only vantage point from which one can actually see the distinction. Your use of the Journals section of the website as evidence of your hypothesis begs the question of whether or not what is happening there is that traders are trading one form of methodological randomness for another. My bet would be that it is. So, when I saw the OP saying that day trading success is 90% psychological, I figured I would chime in with an opposite view. Doesn't mean that I can't be wrong, of course.
Hi, Until we start discussing specific types of psychological problems and specific types of discipline problems...there's no "one hat size fit all" solution. Yet, I do agree that tweaking a trade method regardless if it's day trading, swing trading, position trading or investing can not be a surrogate solution to psychological or discipline problems. Simple analogy, a runner that doesn't workout will not run faster when he/she puts on a better pair of nike shoes. Also, I've done some research of several hundred day traders, swing traders and position traders. They have the same psychological and discipline approach to trading regardless to what trading style they have. My point, those with discipline problems in day trading will have discipline problems when they switch to swing trading or position trading or vice versa. Therefore, if you're making the assumption that someone that does not have discipline problems in swing trading will have discipline problems when they try day trading...that's false. Yet, I have seen traders develop discipline problems while designing a new trade method regardless if they are day trading, swing trading or position trading. However, they are not the norm. Simply, it's possible for someone with a working/profitable swing trading method to develop discipline problems while day trading because they are in the middle of designing/testing a new trade method for day trading. Thus, don't make the mistake of assuming swing trading has a discipline or psychological advantage over day trading via your specific situation because you're in the process of designing a day trading method while you already have a working/profitable automated day trading/swing trading method. In fact, it's very commonplace to have psychological/discipline problems when designing a new discretionary trade method and it has nothing to do with if you're day trading, swing trading or position trading because the problems was already there prior to developing the discretionary method. Discretionary day trading will reveal your existing weakness. Therefore, have you done any comparisons between a swing trader with discipline problems versus a day trader with discipline problems while using the same trade method. ??? I have... and the odds are against any day trader, swing trader or position trader that has psychological or discipline problems when trading. Thus, the market does not care who you are nor does it care about your trading style. Also, I'm a little shocked that you stated untimely trends, the spreads widening, the fakes and etc rarely exist on a longer time frames with wider stops especially when you've already stated that your own swing trading methods have seen their profits decline since 2008. Therefore, its starting to seem like you're making a comparison between automated trading systems (swing trading and day trading) that worked fine until 2008 versus your recent interests in discretionary day trading methods. Automated Trading versus Discretionary Trading I think that's an unfair comparison because from my experience...automated day traders or automated swing traders usually don't re-design their trade methods because of psychological or discipline problems. In contrast, discretionary day traders, discretionary swing traders, discretionary position traders will tend to re-design their trade methods even if the problem is related to psychological or discipline problems. Here's my opinion based upon many past surveys, personal friends (folks I know in person) that are retail traders, institutional traders and so on...most psychological and discipline problems are not related to trading. In contrast, they are related to issues involving something in our personal lives (e.g. failing relationship, rising debts, mental issues, health problems, poor stress management, anger, frustration, guilt, loneliness and so on). Yet, I'm not saying "every trader"...I'm saying most traders regardless if they're day trading, swing trading or position trading. The market does not cause this...it's already there before you take that trade. Identify the psychological or discipline problem first (no vague generalities). Resolve it and then trade. Unfortunately, most will trade first and then tweak their method in hopes that their psychological and discipline problems will magically go away. Mark
Therefore, what's your opinion about what's causing psychological difficulties for some swing traders ??? assuming we're talking about discretionary and not automation. Mark
Mark I know I have patience and discipline problem.I really need to get into the disciplined mindset and get the entire trading plan in place before trading.The plan should be robust enough to take care of everything. "Also, I'm a little shocked that you stated untimely trends, the spreads widening, the fakes and etc rarely exist on a longer time frames with wider stops especially when you've already stated that your own swing trading methods have seen their profits decline since 2008. " These problems are greater with day trading day trading using 12 pip and 20 pip stops as opposed to 100 pip and 70 pip stops for swing trading , spread widening is more likely to hurt day traders.There are likely to be more false moves on the lower time frame which will affect the day traders more than swing traders , stops get hit frequently.In high volatility 12/20 pip stops are blown away with wind , and fakes are more frequent.
I would say it boils down to essentially the same things, either their strategy doesn't actually work or they are overbetting on a winning strategy, causing larger drawdowns than they can withstand, which breaks their discipline. I also think that ego plays a larger part in discretionary trading, so that impacts results as well. If there's discretion at play in getting in to a trade, there's room for discretion in getting out. I don't doubt that the external factors you cited above, like health and interpersonal relationships, can impact a trader's psychology, I just think that if a trader who's having a bad patch in his marriage has a sound strategy, he should remain profitable at expected levels even while his home life is in bad shape.
Hi, For clarification purposes...I already know your automated systems (day trading and swing trading) are profitable but have been declining in profits since 2008. In contrast, the current new day trading method you're designing...is that automated or discretionary or you're trying to take something that's discretionary day trading and transform it into a new automated day trading system Further, based upon you implying your automated systems are still profitable but just not as much as you want them...I'm going to assume the decline in your automated systems is enough reason for you to add a new method in an attempt to find a new way to increase your profit levels near to where they were at prior to 2008. Thus, you have not abandon your existing profitable automated day trading and swing trading methods. By the way, most of my psychological and discipline problems while trading are not related to trading. They are related to things occurring in my personal life. Further, these existing problems have more impact on my swing trading than my day trading. That reason alone is why only 10% of my trades are via swing trading. Thus, it wouldn't make any sense to me to change jobs and concentrate on swing trading in comparison to day trading especially knowing that my psychological/discipline problems have more impact on my swing trading. Mark
I strongly agree that we should remain profitable at expected levels regardless to what's occurring in our personal lives. Unfortunately, as human beings with emotions while discretionary trading...that's a very difficult task for most to do. Just as important, one specific type of an event in our personal life may not have the same impact on another trader that has the same event in their personal life. We're just too complex as humans to have the same reactions. I saw a trader fall apart when his dad died. In comparison, another trader didn't fall apart when his dad died but he did fall apart when he caught his wife having an affair which then resulted in her asking for a divorce and then moving out of state with the kids to be with the other guy. Mark
But did their strategy cease to work or did they cease to follow its rules? If it kept working, presumably they could have come back and recouped their losses, after their period of psychological distress passed. Also, as the saying goes, "the market will still be there tomorrow". You have to know when to step away. That's why it pays to have some kind of network of trading colleagues or anyone who just understands how quickly not being on the top of your game can crush your account. Someone who can give you a third-party perspective on whether or not something is off with your trading.
That's exactly my point I'm making via the Journal section commentary. If you have a profitable trade method and you develop discipline problems due to something not related to trading...why do traders think that if they develop a new method or tweak the existing profitable method that they can return to prior profit levels. I believe they cannot until they first resolve those psychological/discipline problems. In the Journal section, there are guys doing just that, making changes in their methods along with getting encouragement from trading colleagues (fellow ET members) to do just that via all the "trade method advice" and rarely anything involving identification/discovery of the reasons behind the psychological/discipline problems. My own observation shows that a discretionary trader that's profitable and then start seeing profit levels decline due to psychological/discipline reasons will more likely change methods, tweak the profitable method that's not as profitable as it use to be prior to finally conclude they must first resolve the psychological/discipline problems. In fact, some traders will openly and publicly admit their poor trading results is due to psychological/discipline problems but you'll still see them hammering at tweaking/changing their trade methods in comparison to taking time away from the markets until their mental game returns. Like I said, most can't do this while a few can. The main reason why most can't do it is because they aren't getting adequate help from someone or professional in person in comparison to anonymous advice to then decide they'll use a discussion forum that's much easier to disregard if we don't agree with the particular advice. Simply, a little more difficult to debate the issue with someone in person that has more in-depth details about the problems. Mark