Fearless trading

Discussion in 'Psychology' started by romik, Mar 20, 2006.

  1. romik



    Has anyone experienced higher returns when fear wasn't present in their trading? What I find interesting is that quite a few people do better on a simulated account compared to a real money account. If a trader applies the same approach to real trading as to paper trading (assuming that paper trading system is based on realistic fills/etc), surely both should almost match each other in terms of returns generated. What are your thoughts on this issue?

    Fear and greed go together most of the time, let's just concentrate on absence of fear here.

    When you are a new trader testing your strategy on a simulated account, I think you tend to trade without fear of losing a big chunk of your capital by widening your stops, starting to average, allocating higher %age of your trading capital per trade after a losing streak, leaving an open position overnight hoping it will be OK, etc. That is fearless trading that does not work well in real life situations. When you start having this approach in real trading, your capital is at a huge risk. Please stop being naive, it does not have to be a casino, unless you want it to be one. I would go into a casino for fun, I take $1000 knowing that the odds are against me and that I will probably lose it on the night, but I will have fun while at it. In trading the aim is to make money, not lose it.
  2. Hi! I see fear as something that protects me from doing something that i have no control over. Like jumping our from an aeroplane without a parachute. If i have the parachute then there is no reason for fear. If the parachute is not bought on sales...

    But fear probably limit the information we can take in. Fear and intuition may not work at the same time.

    I just see trading as setting up a plan and stay with it. A plan that works in theory of course :) I am not there yet i should say.
    When we have confidence in that plan it is like wearing a good quality parachute.
  3. Confidence to make trades and make money doesn't come from paper trading. After 34 years of trading I've concluded that the only thing that gives one dominion over fear is the constant repetition of trades using a proven and winning method or system. The more you trade with REAL MONEY, the more you desensitize your sense of fear, provided that your method is profitable. I knew some floor traders that worked for a large arbitrage firm. They used to have their beginning floor traders trade in the bond pit and spend the first month just making scratch trades... all day long, each day. The purpose of that was to desensitize their emotions through the handling of money. Paper trading does not do that. If you buy 100 bonds as a paper trade, you can relax and calmly watch the market action and go have a sandwich, if you wish. Do it with real money and I guarantee you will will not be thinking about eating! Emotional control and discipline are huge necessities for a trader. Paper trading is only an intellectual exercise and should be abandoned as fast as practical because it doesn't really teach you anything. You only really learn about trading and about yourself when REAL MONEY is on the line. Courage comes from doing the thing you fear over and over, with REAL MONEY!
  4. start small; 50/100shares.... prove to your acct that your strategy works. build up size slowly and things will take care of themselves.
  5. bitrend


    How about using paper trading in the process of finding a proven and winning system?

  6. romik


    That is the main purpose of paper trading in my opinion. What it doesn't teach a new trader, is 'sticking to the plan'. I have personally observed a person doing it fine on a simulated account and when he went live, it all fell apart, because he never developed the right attitude to treat 'virtual' money as if it was real. I paper traded for a long time, prior to going live. During that period I got used to thinking that virtual account is for real and that is paying back now, I see very little difference in my trading performance.
  7. I say forget the paper trading, real sim or nothing. Get Ninja Trader or X Trader sim and watch the ladder fly up and down. You can't see that paper trading.

    Going through this process now I have found a way to make consistent money on the ER2, no I am not soliciting, but let's see how I do in about a week when I go back to live with this new method.

    I am thinking about just putting in my targets and stops on NT and get up and walk away or atleast stand back from the mouse. I find that being new, I psych myself out and get out of winning trades watching price action with little profit. Most of the time over 70% it goes to my target.

    I think the key is to test your signal alot to make sure it works, have the data to back it up, and study is much as you can about trading psychology. Psychology seems to play the biggest part in trading to me.
  8. bitrend


    Psychology doesn't seems to play the biggest part in trading, psychology does really play the biggest part in trading. In my opinion, we are using both thinking (without emotions) and feeling (with emotions) in trading. The goal in paper trading is to secure the thinking part, and once it's secured we can go live with the goal of securing the feeling part since the feeling cannot be secured in paper trading. Then if both parts are secured then profit starts to show up.

  9. fearless trading + not knowing what you are doing = job at mcdonalds
  10. ozzy


    To all newbies. You better have some fear or you'll have your head served to you on a platter.

    And that's the truth.
    #10     Mar 20, 2006