do we make ourselves fail

Discussion in 'Psychology' started by brokerboy, Dec 27, 2003.

  1. i am a profitable net trader but not making a real living. i never have a 10000 or even a 5000 month but i can take money out of the market. i have taken a 1000 or 2000 out of a day alot of times but it never seems to be when i'm positive in my account. i seem to get positive and make a few 1000 paycheck. then have a very bad day or just fall in a weird losing zone. i'm starting to think i do it to myself does that make sense? how do you fix that? i have done this alot that is why i ask this question. how can i take 7000 out of the market when i'm in the hole in 1 1/2 weeks but never when i'm positive in account. i think i need a mentor maybe but any comments how to fix it would be great. also i am a young trader

  2. the way to find out if this is a psychological problem or just the way your system works is to go back over your trades for a few months.. how does your trading differ when you are down vs when you are up.. do you tend to make back large losses sustained over multiple losing trades in one big trade? how far do you let your winners run on average when you are down vs when you are up.. how many trades do you take that dont conform to the guidelines of your system when you are up vs when you are down..

    if there is a serious divergence in your trading when up vs down then probably you are trading emotionally.. if there is not real divergence, perhaps your system just has large drawdowns but is positive in the long run..

    learning about yourself is the great quest of trading :).. good luck..


    p.s. - if you trade intuitively (by the seat of your pants).. ask someone who trades with you or is around you alot if you seem depressed/frustrated when you lose or elated when you are winning.. you might be suprised with other peoples perspectives..
  3. What you seek to "fix" cannot be fixed. You will never be smart enough, experienced enough, nor observant enough to assure success. Your trading career is now and forever will be under constant assault. Even if you have success, the market will later take several "runs" at you and try to get it all back and more.

    How to cope?
    a. Find the best setups you can identify and trade them bigger.
    b. Trade lesser setups more conservatively.
    c. Remain flexible in your thinking. All you need to do for the market to knock you off is "keep doing what has been successfull". (How ironic is THAT?)

    You will have survived the market when you stop trading and still have money (hopefully, lots).
  4. Boomer


    douglas writes about your situation in "the disciplined trader". i would highly reccomend reading it. it talks about how different people are raised with certain values, and lots of times they come out in our trading. wether it is thinking we truly dont deserve winning or money or all kinds of other observations he makes about our lives that i would never put together. the book was well written and really makes you evaluate your life and apply some of his principles to certain situations.
  5. i have trading in the zone from douglas is it pretty much the same theme. i read it a year ago when first started out. i will maybe have to read it again.
  6. swinger


    i never look at my p/l intraday, after the end of the day or even the end of the week. monthly at the very minimum. it is the most important thing i have done so far to improve my trading.

    one of the most important things i have learned about trading is that when you thinking about the money and trying to make trading decisions at the same time, it usually doesn't work well.

    i'm sure that you know that you're supposed to cut your losses short and let your winners run. why do so many traders fail to do this? because they are thinking about the money.

    money poisons our trading decisions. we know we are supposed to trade unemotionally, but when we are thinking about the money, the very destructive emotions of greed and fear cloud our decisions.

    don't look at your level of cash unless you need to withdraw some. otherwise, there is no need to look. eventually you will find that you are trading less on emotion, and more on the motivation of making good trading decisions. you will find that emotions nearly cease to be a factor in your trading decisions. (i hesitate to say that you will be completely unemotional and trade like a robot because i don't really know if it is possible....we ARE human. but maybe it is possible, and i just havent reached that point yet in my trading.)

    also, read mark douglas's trading in the zone. it focuses on removing emotion from your trading. most important trading book you will ever read.

    Why you lose Money
    The Wall Street Gang.
    by Richard. Ney

    "I align myself with the specialist as he seeks to solve his inventory problems. The thrust of all my efforts is to buy when he buys and to sell when he sells."

    "It is impossible to look solely at the tape as it passes in review and hope to determine longer-term trends in the market. One can understand the tape and decipher its code of communication only when experience is shaped through memory - or through the use of charts. …In the final analysis, we need both in order to make financially rational decisions"

    "This is dangerous since the need to use existing investor techniques to mislead compels the specialist to change the trend in some way if he is to gain the element of surprise needed to make his manipulations "pay off." As he moves from one phase or price level to another, however, his inventory objectives begin to reveal themselves in terms of specific trends. "

    "It is no accident that most investors lose money in the stock market. Their losses are an inevitable by-product of their ignorance of how little they know about the invisible world of the Stock Exchange. Like machines dominated by external influences, they are capable only of mechanical action.
    Regrettably, the arrangements that exist to preserve the traditions and legalize the frauds of the security industry are inseparable from the general organization of a society controlled by the financial establishment, a society whose laws and principal customs have been contrived to serve the special interests of the financial community. Thus, although the Stock Exchange's most profitable practices clearly compromise the freedoms granted others by the constitution, Exchange Insiders are granted immunity from the legal obligations and penalties that should be imposed on them."
  8. gwb333


    Besides the workability of your trading plan i would make the following comments:

    After a series of losses or a greater than average bad loss or poor trading result, a trader can make decisions which may not aid him in this trading.

    Of course he can decide something like he will never do *that* again, or will stop trading mid day or similar types of things.

    He could also make much more dangerous decisions as far as his results go - he could decide that he is a bad trader or will never learn or it's too hard to learn or he will decide that there is no real winning approach to trading or something like that.

    While he may get over his temporary setback he may not quite ever fully recover until he changes his mind about his attitude towards trading or learning to trade.

    This type of attitude about trading will leave a trader unwilling to be decisive in executing trades. He sees that his set up that he has tested in the past exists. He does not take the set up and looks immediately for excuses as to why not. So now he has a decision about trading in general that is negative and a decision about entering trades that slows him down or stops him from taking good trades.

    This extends to the zone of profit taking and trade management assuming this trader does trade again, once he has entered a trade he may have so many reservations about his abilities he starts looking for an exit immediately after entering the trade and instead of following a plan on the trade he immediately or almost so jumps out break even or with a small profit, then watches the "trade" he had some a large gain which he missed. This further reinforces his spiraling decline.

    Now turn this around and you would get a successful approach to Trading from a mental aspect.

    Have a plan and trade it and instead of beating yourself up about losses work to refine your plan to limit losses and increase profits on your trades.

    Notice when you have a positive trade and the component parts of it. Work towards doing more of the same.

    You then gain confidence. Decide to work diligently at applying your best trading plan and improve it. Once you have gains be sure to let your winners run and plan your exits to allow them to.

    So you decide, but pay attention to what you decide if you want a good result.