Emotions in trading

murray t turtle · May 2, 2023

smallfil said:
Overtrading happens to most retail traders. Most of us crave the action and also, feel that we have to be always in the stockmarket. Better to wait for the setups then, get in. Have good risk management to limit losses if you are wrong. And if you are right, you have to focus on managing the trade and exiting with decent profits. The mechanics of how to trade is easy enough and you can figure out how to get into a trade. It is when you get out that matters in the end. You could easily botch what should have been a good trade and even turn it into a losing trade. Your trading rules matter more.
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%%
THAT;
+ IF a silverhaired REALTOR ever warns you ''buying that [lake house] would be a gamble, ask him why??'' A home that has been moved is worse than a gamble[stupid risk].Even if the dam never gives way in 52 weeks + that one did. They eventually fixed the dam, but that home was stupid risk anyway.

SimpleMeLike · May 2, 2023

volpri said:
Most folks would disagree with me on this but I am of the belief that a trader can enter the market at ANY time and if he structures the trade correctly he has a good chance of making money. Thats right! Anytime in the session on any bar, on any TF! With one minute bars being the smallest for a manual scalper.
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I agree with you on this. I want to make money on any TF anytime I want to. I use small timeframe.

volpri said:
I believe there is NO NOISE in the market hence I don’t have to be concerned about avoiding trading in “noise” since for me no such thing exists.
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I agree. Noise is just a trading marketing word to sell stuff. No such thing as noise.

volpri said:
In my case I see scalping as 1 to 8 points and occasionally even more.
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Question:

1. When you are scalping and adding to losing trades how do you determine to go for 1 or 2, or.....8 points? Do you hold for more points (greater than 1 point) when you need the profits to recover a scaling in loss?

volpri said:
Nevertheless, we retail traders constantly hear the song “never average down”. We have the lyric engrained deeply hence our minds so our orthopraxy reflects that “seemly” good orthodoxy. Thus we fail to develop things of a strategic and tactical nature to take advantage of averaging down. So we stoically take our stop losses and comfort ourselves that we have done the “right” thing, correct? Or are we correct? That said, a trader cannot just average down any time on any whim. He must have strategic and tactical reasons for doing so.
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Yes, I have heard this as well. But I have witness that scaling into losing trades increase probability of a win. My biggest challenge or work-in-progress, is know or feeling or have a strategy/plan on when to take my loss when I am wrong. The other challenge is having the mental energy and time availability to begin the drawdown recovery process.

volpri said:
So we stoically take our stop losses and comfort ourselves that we have done the “right” thing, correct? Or are we correct?
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Yes, I often ask my self that as well. When I use my fixed stop loss. tempting to scale in, but then I think of the big loss I will get holding about 10 ES contracts. Then I think about, how to recover that big loss. But I still practice it, alot actually.

And you right, taking DUMB trades and then trying to scale in to win a DUMB trade is misery.

volpri said:
Trading is a high performance-based activity. That is, if nobody activates it, there is no result. Some beginning traders find it extremely hard to “pull the trigger” and actually place a trade. The words high performance implies practice and a lot of it! That is orthopraxia...correct practice...IS necessary. Think of those gymnasts who flip around and make all sorts of twist and turns in front of an audience. Could they do so without practice and win gold? Highly unlikely. Or a world class violinist. Could he be become so without practice? To get good at anything requires a lot practice.
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VERY TRUE here. So much practice required.

volpri said:
Without going into great tactical detail I think a trader can start by having perhaps a “paradigm shift” as concerns trading on any time frame. Skill development, at it’s most fundamental level involves the same thing regardless of the context that the skill will be exercised in. I have given a lot of thought to the subject of skill development and in this post will attempt to share some of these ideas in a general way. I believe they are true in any endeavor we as humans undertake, including trading. And as concerns trading they are true in any time frame. So here goes:

There are Four Important Concepts drawn from ideas in the religious world that can be useful. I know you may think or say “what does religion have to do with trading.” Well let us look at these four important concepts. They in fact can apply across many situations in life including trading.

Orthodoxy

Orthopraxy

Psychology

Discipline

Orthodoxy has its roots in Greek and Latin, and its meaning is:

Correct opinion, correct belief. Although there are many different opinions and beliefs on the subject of TRADING everyone thinks they have the correct version. Everyone seem to have their data to support their beliefs, it is out of this repertoire of beliefs, that they discover strategies and tactics that they formulate and use to carry out the task of trading the markets for a living.

Orthopraxy is the correct practice. That is, correct behavior or action. Orthopraxy means "correct practice" or "correct behavior" and refers, in religions such as Christianity, to how a believer acts or performs, rather than how they believe. The same is true in trading.

See, one can have correct orthodoxy and wrong orthopraxy. Also, sometimes our orthodoxy is directly opposite of our orthopraxy. Sometimes our orthodoxy is wrong but our orthopraxy is correct. All three cases can affect our performance in the task of trading the markets.

To a degree we may state that every trader has his/her orthodoxy or beliefs about the markets. However our orthodoxy, about or what we think and believe, to be correct about the markets, must be tested and challenged on certain points that could be affecting our orthopraxia.

If you want to see success of FOT (Frequency of Trades) with a high win rate it is imperative that your orthopraxy be one that facilitates the possibility of seeing such a phenomena. For instance, if you have the belief that overtrading is bad or that fewer trades are better than many trades then you will trade less and inevitably miss out on the multiple opportunities each trading session gives you. Most folks would disagree with me on this but I am of the belief that a trader can enter the market at ANY time and if he structures the trade correctly he has a good chance of making money. Thats right! Anytime in the session on any bar, on any TF! With one minute bars being the smallest for a manual scalper.

I believe there is NO NOISE in the market hence I don’t have to be concerned about avoiding trading in “noise” since for me no such thing exists. I believe every tick (the smallest move) is for a reason hence I can therefore look to capitalize upon that movement. Nevertheless, because of the cost of commissions when trading the ES and in particular if one is trading MES it is probably best for a trader to structure trades that will render at least one point for a scalp. In my case I see scalping as 1 to 8 points and occasionally even more. The market all session long in the ES gives a trader a myriad of such trades. But, if one believes in noise they will not trade them.

Another example: orthodoxy or what is generally believed to be true and correct is; to never scale into a losing position. I am not of that belief if anyone has read portions of my journal. Look Investors do it a lot buying more as price moves against them as they rely on fundamentals and believe they are getting “deal” by buying more at “cheaper” prices.

I am not claiming to be a professional trader but my understanding is many such traders will add to a losing position. Nevertheless, we retail traders constantly hear the song “never average down”. We have the lyric engrained deeply hence our minds so our orthopraxy reflects that “seemly” good orthodoxy. Thus we fail to develop things of a strategic and tactical nature to take advantage of averaging down. So we stoically take our stop losses and comfort ourselves that we have done the “right” thing, correct? Or are we correct? That said, a trader cannot just average down any time on any whim. He must have strategic and tactical reasons for doing so.

Some traders will agree to scaling into winning positions. That is they will build their position as price moves in their favor believing they are doing the right thing. Often it is the right thing if the context is right but if done in the wrong context and using the wrong tactic whipsawing can destroy one’s profits and actually magnify one’s losses when scaling up.

Trading is a high performance-based activity. That is, if nobody activates it, there is no result. Some beginning traders find it extremely hard to “pull the trigger” and actually place a trade. The words high performance implies practice and a lot of it! That is orthopraxia...correct practice...IS necessary. Think of those gymnasts who flip around and make all sorts of twist and turns in front of an audience. Could they do so without practice and win gold? Highly unlikely. Or a world class violinist. Could he be become so without practice? To get good at any thing requires a lot practice.

Bottom line it behooves us to find the right orthodoxy even if it requires adjusting our presently believed orthodoxy and having done so to then design orthopraxy that reflects our modified orthodoxy. We only get good through orthopraxy.

In trading the best way to internalize something is by using a SIM. It takes a lot of practice to get good at something. Using a SIM can be compared to football practice by a football team. Then when the actual game day arrives they can execute what they have been practicing therefore putting odds in their favor unless of course the opposing team out executes them LOL. But practice serves to internalize the plays. They become second nature. A receiver just executes his route without having to “think” about it. Having to think and decide “on the “fly” produces stress. Imagine a football team that doesn’t believe in practice then gets in a game and “wings it”. They may get lucky and win but odds are against them. Some traders jump in the markets way before they have internalized their “modus operandi”. Their account soon disappears. A SIM can give the needed practice to internalize and build confidence and the ability to naturally execute without damaging ones account. Of course, there always comes the time to execute live without the SIM and that is where our emotions will test us. Our brain will try to disobey and trip us up. It just loves to mess with us. But that is it’s job! To think!

We as traders have to learn to face our lack of orthopraxy. Seemingly correct orthodoxy (without questioning it) is the reason traders keep doing the same thing year after year and they keep getting the same results, year after year. Although they want to succeed they never experience consistent success because they are not yet “good enough.” They think they are right, therefore they are not willing to change their orthopraxy. They are in effect believing wrong and possibly practicing wrong.

A brief look at the psychology of trading.

Trading is a psychological challenge because cognitive dissonance occurs when reality does not agree with our beliefs and well thought out plans. This mental tension is called cognitive dissonance. One's mind struggles to resolve the disagreement and re-establish mental and emotional balance. Cognitive dissonance is uncomfortable and leads to mental stress. A lot of years enduring mental stress produces exhaustion, disappointment, and discouragement. We have to learn to train, calm, master, and correct our mind. Our mind constantly generates thoughts. Some true and some false. We have to find ways to productively deal with these thoughts. In the end, what counts most is not so much your beliefs (your orthodoxy) about an issue, but your orthopraxy in the real world (because the results are linked to your orthopraxy). However the flip side is our orthodoxy affects our orthopraxy. Why does orthopraxy trump orthodoxy? Simply because it is your orthopraxia is what will yield the results of your work. That said, your orthodoxy is also important, but mainly at the precise points where your orthopraxy is affecting your account in a negative way.

What brings results is the commitment to orthopraxis. A trader in my opinion must be WILLING to erase from his orthodoxy and orthopraxy anything that prevents him from achieving his desired results in trading. I am convinced that anyone can be a trader. However, to achieve lasting results a trader has to change old destructive, useless, unproductive habits, and form new habits which he in turn performs or practices daily.

Success is a function of cultivating and practicing daily orthopraxy (the correct practice). Your mind is a wonderful thing. However, your mind has to hear something 50 times for it to begin to register in the subconscious of your brain. And a recent study in the UK https://www.spring.org.uk/2023/01/form-a-habit.php has shown it takes more or less 66 times to form a habit. The mind, to internalize something to what I call the level of “second nature” it must hear it and perhaps see it 150 or more times. At this point it has likely registered in your sub-conscious area of your mind. So, study..study..study..repetition…repetition…repetition of ideas and concepts. But registering alone does not make you or I $$$$. We may know and understand the concepts like the back of our hand but that, doesn’t by itself, translate into money.

After registering it, you have to put it into practice at least three times to begin forming an action model. After practicing a subject between seven and twelve times, a pattern is already beginning to be formed. After practicing a matter 21 times it is already in the beginning stages of becoming an established as a habit. Then according to the UK study at 66 times (more or less) of doing it becomes a habit. All trading, but in particular and especially in scalping, success comes from forming and practicing the correct habits. Hence again orthodoxy and orthopraxia.

So, it is difficult to change a habit and it is difficult to introduce and form another new habit. Many times people give up before the process plays out that turns a concept or behavior into a second nature habit or belief. For this reason they do not achieve the desired results. As long as I have been trading I am always learning and understanding something better and I practice those ideas and concepts over and over on SIM to find out if they fit me and my style of trading. If so, I keep practicing until they become second nature. I see no point in throwing money at something that I don’t know if it will work for me. If I cannot make it work on a SIM then it will certainly not work for me in my live accounts. I strongly believe in taking an idea or concept, internalize it, followed by practice..practice..practice.

For instance, take the idea of making 1 point a trade. It is not enough to practice on a SIM capturing four ticks in the ES. While SIMs are good for practicing we must understand that we have to actually capture 6 ticks to make 4 ticks. Price realistically has to trade through our entry and our PT by at least a tick for us to get filled. Most SIMs do not allow for that. So, if I am intent on making a point per trade in the ES I know I have to actually make 6 ticks. Then when I go live my experience will be likened to capturing 1 point on the SIM. It is relatively easy to capture 1 point on a SIM by only allowing a 4 tick movement but the discrepancy comes when I live trade the same idea with real money and cannot get filled without a 6 tick movement. It others words, I find I need a 6 tick movement in a real money account to capture 4 ticks. But on the SIM I only need a 4 tick move to capture 1 point. Therefore, I get bewildered why I can make it work on a SIM but not with a live money account. Bottom line, whatever I want to capture on a SIM as I practice I need to add 2 ticks to it, one for entry and one for exit to make it more realistic in terms of doing the same trade in a live money account.

I believe that painful experiences in life happen for a reason. Mainly they teach us how inflexible to changes we ourselves are. Sometimes we don't realize our inflexibility until we have suffered a painful experience. The same is true in trading.

Trading requires high performance skill sets. In part, it's a mind game just like any high-return effort. Like a professional athlete it requires focus and practice. Success requires that one focus their full attention on the present moment. If I can learn to focus on the present and execute then I have better odds of being successful at what I attempt. There are studies on mindfulness that prove that out.

Discipline

This post has become quite long and rambling but I would be remiss to not at least touch briefly upon discipline.

I have come to see discipline as being:

“Doing WHAT I need to do, WHEN I need to do it, HOW I need to do it, paying attention to DETAIL, and doing the above whether I FEEL like it or not.”

Several things could be implied from this definition of discipline. But the overarching thing is that disciplined like any thing else worth achieving, must be PRACTICED over and over to obtain the skill to execute in a disciplined manner.

So, even in discipline we go full circle back to orthodoxy (execution of the right and correct things), and orthopraxy (practicing discipline until it become second nature to us)

I finish this post with one of my favorite concepts:

“WE ALL CREATE OUR OWN REALITY IN THE MARKETS”

That creation is a journey of learning, practicing, and executing.

Have some fun along the way. It does not have to be boring. Rise to the challenge and transcend EVERY obstacle! Persistence is Key.
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Thank you for this well written post.

I read nearly 5 times already. Thank you sir.

deaddog · May 2, 2023

SimpleMeLike said:
Yes, I often ask my self that as well. When I use my fixed stop loss. tempting to scale in, but then I think of the big loss I will get holding about 10 ES contracts. Then I think about, how to recover that big loss. But I still practice it, alot actually.
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That's a lot of thinking for a guy who trades unemotionally.

SunTrader · May 2, 2023

deaddog said:
That's a lot of thinking for a guy who trades unemotionally.
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SimpleMeLike · May 2, 2023

deaddog said:
That's a lot of thinking for a guy who trades unemotionally.
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Hello deaddog,

hmmmmmmmmmm, I am not sure what that means. But emotions are apart of my trading, whatever that means. I get emotional, tired, burnout, sad, and very happy. All that stuff.

I do not buy in to all the fancy words of trading. I just trade however I want to and what I feel and take my best guess and try to win. I am not sure the fancy trading term for this style of trading, but I will take that name.

You can also call me a gambling trader if you like. Its all good to me. I just want to WIN in the END.

deaddog · May 2, 2023

SimpleMeLike said:
Hello deaddog,

hmmmmmmmmmm, I am not sure what that means. But emotions are apart of my trading, whatever that means. I get emotional, tired, burnout, sad, and very happy. All that stuff.
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SimpleMeLike said:
No such thing as "overtrade".
No such thing as "emotions"
No such thing as "discipline"
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Just giving you a hard time over a post a while back.

SimpleMeLike · May 2, 2023

deaddog said:
Just giving you a hard time over a post a while back.
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LOL HAHAHAHAHAH

I am just trying to get paid deaddog. Just trying to be consistent.

deaddog · May 2, 2023

SimpleMeLike said:
LOL HAHAHAHAHAH

I am just trying to get paid deaddog. Just trying to be consistent.
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Yeah I can see that. Looks like you got the consistent part going for you, you've been at it quite a while and still losing.
So what ever it is you are doing isn't working!! Stop Doing It!!
Do something you've never done before.
The worse that can happen is that you lose money and you're doing that now.

themickey · May 2, 2023

deaddog said:
Do something you've never done before.
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"That entails work and I'm not looking for this long method, I'm wanting to get there via shortcuts, do you have any?"
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SimpleMeLike · May 2, 2023

deaddog said:
Yeah I can see that. Looks like you got the consistent part going for you, you've been at it quite a while and still losing.
So what ever it is you are doing isn't working!! Stop Doing It!!
Do something you've never done before.
The worse that can happen is that you lose money and you're doing that now.
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Hello deaddog,

I'll be a millionaire ES trader by December 2023. That's my goal.

I will start a journal and post my broker statements and answer questions to all ES traders who have questions so everyone see a real money making trader.