Psychology, are you sure?

Alexis,

Thanks for generating one of the most interesting discussion threads here for a while.


Travis,

Its a shame ET doesn't have a best posts strategy because I'd nominate that for one of them. Although I think you skipped the way people attempt (some succeed, some don't) to use psychology to overcome those issues it was a brilliant exposition. Also, I recall that a lot of the earlier trading psych stuff I read was about accepting the nature of systems trading and being able to get on with it without (discretionary) interference.

Great post.

 

Thanks, very much. And thanks also to Alexis.

And this he said is also very good in terms of conciseness and I agree with it: "If you trust your strategies, there is no room for thinking or doubts".

I can tell you lots of examples on it from my discretionary trading. One day you exit too early and you'll ask yourself "what is wrong with me for exiting so early?". The next day you apply a stoploss right before it went your way and you'll say "what is wrong with me for not trusting my original idea?". The next day you will trust that idea and you'll take a huge loss or even blow out your account and say "why did I do it again and not apply the stoploss?". With the thousands of trades I've made I have come across all the above situations and contradictory thoughts.

The only answer is that I didn't know where statistically it made sense to apply takeprofits and stoplosses. If people are gifted they can do the stats in their own minds, and make money with discretionary trading. But if after 12 years of discretionary trading (like me) people are still consistently losing money (and blowing out their accounts) it means they can't do the math and the stats in their head (most likely because their emotions get in the way) and they haven't figured a way to trade profitably. The sooner you realize it, the better - if you can't think straight, then do not trade discretionary. I can't believe it already took me 12 years and still I didn't quit trading discretionary (just like people don't "quit" smoking). For those who can't think straight, and will never be able to make money with discretionary trading (trust me) in my opinion the best way to go is trading systems and even better automated trading systems. Now the sickest thing in my case is seeing that despite having developed a system that works, I still kept losing money for a whole year (after I started running the system) because I still felt the need to try and make money with discretionary trading in the meanwhile.

Possible explanations:
1) I didn't take trading as work but as a game
2) I didn't need the money
3) I didn't have full confidence in my system and wanted to "help" it (but I only hurt it)
4) After spending years on building systems and trading, I had cut off all other hobbies, had nothing else to do, and traded out of boredom
5) Maybe the desire to succeed even faster or maybe - to the contrary - the fear of succeding too fast. I am puzzled about this one. Maybe it was self-sabotage or maybe it was over-confidence. It'd be too easy to say "self-sabotage" because that would be good for my ego, as it would be like saying "if I don't succeed is only because I don't want to", so the true cause may actually be greed and over-confidence. It is probably that I thought I had the markets all figured out, while nobody will ever be able to predict every move. For me, after I get a trade right (or the system I built does), it takes very little time before I start thinking I am god. And, whereas I am a big dreamer in every aspect of my life, the markets don't allow that. If you're thinking something unrealistic, the markets let you know pretty fast, especially the futures markets.

I am not selling you any courses on trader psychology - I am just telling you to listen to my advice, because I have lost money with discretionary trading consistently for 12 full years. If you don't have a method that has worked with paper trading (with frequent trades for a few months), then simply do not trade. This is a great recipe for not losing any money. If you follow this recipe from now on you will either make money or not lose any at least. Last month my system made x % returns, and in the meanwhile I have lost it all, the entire x % return, with my sick discretionary trading. Now if I'll have a drawdown I'll be screwed and blow out my account. I'll have to thank myself for forgetting my mistakes so many times, for not understanding that if people use automated trading systems there are reasons and it's not because the systems are smarter than those who build them, but because they remember everything, they wait forever, and they don't have any emotions.

Just like right now, I am going to bed late again, and tomorrow at work I will be tired. The system would have gone to bed on time to be rested.

 

Maybe psychology cannot be entirely ruled out, well a full auto system that never needs tweaking or management of any kind would rule it out... I got up this morning and misapplied all that I know for a while and lost money... it was just a bleary eyed Monday morning.. by the time I woke up and tried to get back on course I was so tired of the whole process that I had to shut it down for a loss... the system is really air tight, how well it's implemented can make a large difference but these days where I just cannot implement my own system are a wonder.. fortunately they are not often and today was a totally unforgiving narrow range day with no news... in August.. I sort of wanted to just skip it entirely.. maybe I should go with those feelings... but I surely felt like an idiot, it's my own system, I developed it, well I'm standing on the shoulders of greats, little doubt about that but it's not like I was implementing somebody else's system that I didn't like, it's a system I like.. but it was Monday morning.. I kicked coffee recently, down to one cup a day.. I think I'll start having that before trading, well before trading....

 

Sir we are all human - and as such stuck with the same human frailties..... Been there done that too

Tomorrow - Give em Hell Sir

Good Trading to You

RN

 

comedian once said "sex is way overated" "when is the last time u got thru the day without a good rationalization?"

 

Brutal - but true.... But then so are the mkts

 

Travis - Thanks for your posts. I understand where you are coming from. I have been working on a system myself and back tested it successfully from Jan. I decided to trade it live this month but NOT ONE day did I follow the system completely. I traded discretionary and it has almost blown out my account. I have now stopped trading futures and is sim testing my strategy live for a few months. I feel like I lack faith in the system so it makes me think I can do better. The truth is I have done 1000% worse when I look back at the trades. It is a deeply routed problem I have I kept telling myself I would not interfere but I would do so anyway. It has made me aware of my personality flaws.

Redneck Trader - You don't know this but you are my mentor when it comes to trading I believe the truth lies with me and I need to be at peace with myself before I can be a successful trader. I need to start with the little things in my life and it will grow from there. I am flawed and only I can fix me.

 

Is psychology 90% of trading?

I think it is, for most people who are not naturally wired to trade. For me, getting to where I am today was and still is a process of sorting out all of my "losing" inclinations - chasing trends, overtrading, moving stops, thinking I can control the outcome of any given trade, thinking I'll do better if I try harder, etc.

As much as I've worked to come up with profitable methods, I've worked twice as hard to get my head right.

Of course, once you've got all that figured out and squared away, psychology becomes a non-issue and only a tiny part of what you do every day.

 

Sir

Please don’t


I will never be there to help you trade – ever

I will never be there to help you make money, or preserve your capital – ever

In fact – I just may be on the other side of your trade – or not – but it is possible.. And if I am - I will be after your money


Please read my post in this link and take it to heart Sir


Because here's some absolute truth - When I am here I try to be nice - I can afford to be... I should be....

When I am trading - It's business (I trade to make money)

RN

http://www.elitetrader.com/vb/showthread.php?threadid=172062&perpage=6&pagenumber=4

 

Mindtrade,


Before I go into the mkt today – I told you last night – trading is business

This morning – I will show you it is business – and it won’t be any Dr. Jekyll / Mr. Hyde Bullshit



Exactly what purpose did posting “Redneck Trader – You don’t know this but you are my mentor” serve

You trying to feed my ego

You trying or feed your own ego

You trying to bring special attention to me

You trying to bring special attention to yourself



You trying to endear yourself to me

If you were truly appreciative – a simple "Thank You" – would have been be more than enough


I have already stated – I will talk trader to trader with anyone – any day….

What the hell more do you want



Possibly you are comparing me to jack hershey and his ilk – an individual who represents everything I absolutely despise about this business…

Hell for all I know you may be one of jack’s trolls, or jack himself



You purposely want me to lose money – so I can come back here and get my dumbass ego stroked by you…

That damn sure won’t feed my family.... You plan on giving me the money I lose?



Here’s a fact

I can never be a teacher or mentor, or guru – why

Because I know fuck about how you – or anyone else for that matter – learns…

I know how I learn…. I can only teach me….. I can only be my mentor….


Now bring your money to the mkt – let’s see who goes home with it


RN