For those of you who have not heard the whipsaw song by Ed Seykota, listen to it here. http://www.youtube.com/watch?v=LiE1VgWdcQM
I have traded for a living for over 10 years and actively traded for over 15 years, starting well before online trading became the norm. Day traders in my view fall into two categories, momentum players and those who look to fade, be it buy a dip or short a rally. A lot of the momentum crowd got wiped out by Naz, they were not nimble enough to turn on a dime when the Naz hit 5k and dropped like a rock. Sports gambling taught me the fade, I love to fade, the public is usually wrong. In order to make a living on fading whatever comes your way, you must have a contrarian streak. Cynics and skeptics are not necessarily negative people they are quite happy to be survivors, you see they NEVER drink the kool-aid be it offered by boys who are in over their heads like Bush or Barry, or by Kramers, Kudlows, Bill Grosses, Benny Bernanke or Buffy himself.
Being emotional or not in everyday life has nothing to do with how well you can develop trading skills. It is important to be very sensitive to risk when developing trading skills. If an aspiring trader was unemotional he would blow his entire account and feel nothing at all. You can still be sensitive to risk yet take on way to much risk. It's all about finding the balance of risk and caution. When trading it is important to be stubborn as hell when it comes to breaking your strategy. I think the best way to do this would be to have some sort of a punishment each time a trader broke his strategy. Do you think traders with a discipline problem would have a problem sticking to their strategy if each time they broke the strategy they got 20 lashings? They might break it once... Breaking a strategy is changing the game completely. It's like tiger trying to kick a golf ball after 8 holes of great golf. Successful trader's aren't completely unemotional. They just know what to expect whether positive or negative. Knowing how to apply those traits is the key.
For some reason, these 2 posts you've made in this thread is contravicting each other... My wannabe profitable trader alert is lighting... Please correct me if I'm wrong.
Yeah but my point is that there are other causes of large losses, such as changes in market behaviour, surprise news, etc. It's not always caused by bad trading or mistakes. You can have a reliable edge, adequate capital, low cost structure, excellent information and technology, and be happy with your risk levels, and still get totally hosed out of the blue. If you don't have good psychology, you can get into trouble when this happens.
FALLING ON THE GROUND SOBBING MEANS THAT YOU ARE SENSITIVE TO RISK BUT HAVE NOT IMPROVED YOUR RISK MANAGEMENT. That is the key. The smart trader is the kid that goes down a steep hill on a bike for the first time, wrecks and then realizes he needs to establish a much safer practice route. The dumb trader is the kid that goes down a steep hill on a bike for the first time, wrecks and then keeps doing it only to wreck over and over again. Both are sensitive to pain. One is sensitive enough to realize that changes need to be made in order to improve. A trader has to be sensitive towards risk and has to be able to implement a strategy that balances risk and caution. When you start trading you don't know how important risk management is because you don't know that your own greed and inner drive to succeed can actually kill you. Falling on the ground sobbing after a bad trade is definitely a sign of a sensitive trader however that trader fails to implement a system/method of trading that lowers the risk of each trade. If that trader was sensitive enough towards risk then they would change their risk management in order not to be caught in situations where sobbing occurs. Almost all traders have been in situations usually in their early years where they felt like falling on the ground sobbing. One trader has listened to and trusted himself and made the changes needed. The other trader does not. Do you see the difference now? In the end everyone is sensitive to massive losses. The smart group minimizes those losses.