Unfortunately i have no training in psychology but i use it a lot for myself in trading. I decided to use it after i find out that i was pretty good when my orders were inactive and far was far away my performances when simply activate them I compare traders with sportsmen...for example basketball players. The NBA players have the best skills around the world when it comes to control the ball. They are able to shoot from the half of the court etc... When you watch them training they put the ball in the basket a hundred times one after the other even with their eyes closed... This is were i want to come at..Let's take one of the best rookie ever(shaquille for example)...look at him when it's FREE THROW time.!!!!You can not suspect any NBA basketball professional player not to know how to shoot!!! But the stats are here when it's time to free throw it seems harder than ever(when u play in your garden you have better stats than most of NBA players at free throws ) You can easily imagine that when the coach is training his players at free throw he doesn't show them how you hold the ball!!! You know it's MENTAL!!! In france(where i live) we had a soccer player everybody was saying "he got skills" but every time he was on the court....he wasn't doing nothing except falling and moaning ...one year after he met his actual new coach he became one of the most valuable player of the national team and has the bigger fighting spirit of it!! In every sport you see that some players who were just good players become the best after they met the good (i would say "appropriate") coach and it's not the way they hold the ball that have changed it's the way they come to compete... Do you think John SMith(hsi) knows a secret way to put your feet on the lane so you are faster than the other? When asked he said that he knows and understand how to mental building his sportsmen and sportswoman... This is what i think can apply to trading..so i use techniques that the best coaches use for their champions(hard to find the books but when you want... :ip ) The exercise i was talking about was formerly used for a skier who was afraid after he felt and injured himself in a competition...and a tennisman who said he was always loosing on his backhand my two cents
Candle.........ya that Brett is a great guy & has endless information to share............ Cayman...........awesome post.....thanks
well.. its been many months since i started this thread.. i had decided not to continue this because one of the more valuable contributors on this board was run off by some who just wanted to argue.. but, i think its time to resume, at least for me it is.. these last months have been difficult for me emotionally.. what a rollercoaster ride.. about a year or so ago i remember talking to threei over at realitytrader about my losses and he recommended that i read Trading in the Zone by Mark Douglas.. the ideas in the book combined with the well defined trading setups at RT really helped me.. and over time i managed to move from being a consistent loser to what Mark Douglas describes as the "Boom and Bust" cycle.. of course, at the time i didnt know i was on a boom/bust cycle, i just thought i was finally winning.. every time i had a winning streak for 2 weeks or a month or 6 weeks i would think i had turned the corner.. only to hit a psychological wall that caused me to give back all of my profits in a very short period of time.. then the process would repeat.. ive been on this cycle for over 8 months now and its just not funny anymore.. so.. here i am.. back on this thread.. because my process of recovery after a binge (read big loss) always starts with getting back to the basics.. and because i want to overcome, defeat, get around, remove, sidestep, change, work in harmony with instead of against, whatever this mental thing is that is causing me to blow up.. currently im re-reading "Trading in the Zone".. and ill be tweaking my discipline self talk and adding some new ones that ill be using every day.. i would like to invite those who would like to share from their own experiences to post here as well.. -qwik
Email to Mark Douglas, 01/21/02 Dear Mark, I have just completed both your books. In the final chapter of "Trading in the Zone", you strongly recommend the completion of an exercise in which one is to trade a system for at least 20 trades where the entries, exits etc. are all rigidly predefined. I want to go through with the exercise faithfully - however I am a discretionary trader using a top/down approach, and presently would be unable to fully define on paper my predefined entry and exit criteria, which as a Nasdaq trader are basically Level II, time and sales, Nasdaq and S&P futures oriented, with a little bit of help from strictly unsophisticated TA like support and resistance. On the one hand I don't want to cheat and use discretionary trading for the exercise - on the other hand I must find something which I believe has an edge. On p.172 you mention the 3 stages of a trader - mechanical, subjective and intuitive. As a discretionary trader I am in the subjective stage, but as I have yet to methodically complete the mechanical stage, I will need to find this mechanical system with an edge - something I don't really believe in 100%. Can you guide me through this dilemma? I have decided that I must work on my beliefs and discipline, so doing the exercise is mandatory. Should I do the exercise with any mechanical system with the 2 drawbacks of (i) lack of 100% belief in edge and (ii) it's not the style I'll be eventually trading or somehow compromise on the rigidity aspect of entries and exits and use my discretionary system? Looking forward to your reply, Sincerely, Tom ============================= Email from Mark Douglas, 01/21/02 Tom: If you stay focused on your ultimate purpose your dilemma will resolve itself. The only reason why it's necessary to do the exercise by trading mechanically is to convince the rational part of your mind that "every moment is unique," and that "you don't need to know what will happen next to make money." If installing these two beliefs is your primary purpose, then having a mechanical system that you "believe in" (meaning one that will be right and make you money), isn't necessary to accomplish the objective. I did say on Page 197 that the bottom line performance of your edge is not that important. Based on the correspondence I've been getting since the book was published, I would say that I should have really emphasized this. The profitability of the edge you choose for the exercise is not the primary consideration. Meaning, if it costs you money to do the exercise, that's fine. What is important is setting up the potential conflicts and confrontation as I describe them on page 200. If you can find or devise a mechanical edge that breaks even -- I would say you're doing fantastic. Good luck, Mark Douglas ============================== PM from Magna, 01/22/02 Tom, Thank you very much for sending that my way. Very, very interesting when he says: ...If installing these two beliefs is your primary purpose, then having a mechanical system that you "believe in"...isn't necessary to accomplish the objective. That may be true, that is you don't need to "believe" in it which I agree with, but later he says: The profitability of the edge you choose for the exercise is not the primary consideration. The keyword there is EDGE, which, by definition, means probability is on your side (otherwise it's not an edge...) Then he says: If you can find or devise a mechanical edge that breaks even -- I would say you're doing fantastic. Maybe he's relating the unimportance of profitability to the relatively brief, 20 trade sample, because over the long haul a mechanical edge that breaks even...is NOT an edge! Anyway, what'cha gonna do? Magna =========================== PM to Magna, 01/22/02 Magna, Clearly, as he states in his reply, not only you and I had this dilemma. Edge or no edge, I will go through the exercise, and repeat it if necessary, until such time that I don't feel the conflicts he mentions on p.200 and I can execute the system without fear and hesitation. My logic is as follows : I don't have to reinforce my belief in my edge. I know my discretionary trading has an edge from my results. When I am selective, position-sizing correctly and using stops, I have no trouble stringing together 6, 8 or 10 consecutive, modest winning days (my maximum is 23). I do have a problem taking a loss, I don't always predefine my risk, so what happens is that eventually I give huge amounts back in a couple of days of wild trading. I am in the "boom and bust" cycle - and I want out. I will "optimize" some system to delude myself into thinking that it has an edge and use it for the exercise. At best it will be break-even and I will just lose commissions. But hey, Mark Douglas says that's not the point, and I agree with him. You're right about Douglas' loose usage of the term "edge" - but we know what his point was. So there we have it - after I have selected my system I would like to send you my full rules for entry, exit etc. for your comments and suggestions. Tom ========================== PM to Magna, 01/24/02 Magna, I'm still tinkering around with setting up the parameters of my system - much more complicated than I thought. Just hope I don't waste too much time trying to find the holy grail. To think all this time I was trading using only the S&P futures and my gut feeling, is frightening. After this exercise, I will have to formalize my "seat of the pants" discretionary trading - not too much though cos we are the edge I am always envious of you guys discussing this chart pattern and that setup - I never really did get into TA. I may reluctantly have to introduce some indicators in my trading mainly for exits I have taken a complete hiatus from trading, and sometimes it's really tempting to jump back into the fray. I don't want to get too carried away with all this "re-definition", but if I don't change my behaviour, I'm doomed to eternal "boom and bust", and I'm not prepared to accept that anymore. I won't, as you say, eliminate all conflicts, but at least will learn to recognize them and hopefully control them a bit. I could've (should've) done all this methodical preparation over a year ago before starting to trade, but to be honest with you, do you think one can appreciate all the stuff in books like Tharp, Elder and Douglas before one has experienced all the pain, frustration and humiliation firsthand? Maybe, but perhaps a lucky few only. Even now, it's very difficult, and I haven't even gotten to the exercise stage, let alone what will ensue thereafter. Tom =================================== PM from Magna, 02/13/02 Tom, Just wanted to check in with you and see how the development of the system was coming along. Hope all is well, if you haven't been trading over the past few weeks you haven't missed a helluva lot. Mostly a bunch of tough, choppy, low-range days. Magna =========================== PM to Magna, 02/14/02 Magna, Thanks for thinking about me. Well, Douglas was right when he said that the reader will find it difficult to do his exercise. I've been tinkering around with different systems and what started off as a quest to find any reasonable system has turned into the search for the holy grail (which we know doesn't exist, and is just a stalling tactic). So, I haven't been trading since our last exchange, and will not, till at least I work out why I don't want to do his exercise, whether it takes another week, month or year. Tom ============================ PM to Magna, 03/21/02 Magna, I have decided to slightly modify Douglas' exercise and will be formalizing as much as possible my top-down approach, something I've never done. It will still be discretionary, but at least there will be mention made of stops, position size etc. In the meantime I'm watching (not trading) the market and reading. I'm in no rush. It's interesting how someone, who is logical and knows the theory, never wanted to predefine a stop, or a trading plan for that matter. That is what I have learned from attempting Douglas' exercise. I will start trading when I have a trading (discretionary) plan in writing - and I'm probably talking about no more than a paragraph. I promise to send you that paragraph for your comments before I start. Tom ========================== The first draft of my trading plan was sent to Magna in mid-April - it was more than a paragraph and must have been the hardest thing I've written in my life. After a few more emails, we put together an acceptable version and shortly thereafter I resumed trading.
tom.. excellent post.. thanks for sharing that with us.. you and i have talked before, in December actually, about these very issues.. are you trading again now? if so, how are things going? "but to be honest with you, do you think one can appreciate all the stuff in books like Tharp, Elder and Douglas before one has experienced all the pain, frustration and humiliation firsthand? " i have to agree with you here.. experience is the only teacher for some of lifes lessons.. i pretty much scrapped indicators and such things and went with simple bear/bull flags and open break plays.. i found myself straining to find the price under all the spaghetti on my screen =).. i have alot of confidence in the system im using.. but, its somewhat discretionary in that no lights or buzzers go off to tell me to enter a trade.. i have to watch whats happening and make a decision.. the problem seems to be that after a couple weeks of straight wins, i sabotage myself.. ive tried everything i can think of to figure out what the root issue is thats driving me to this.. probably the biggest culprit for me comes down to a betrayal issue.. where after a period of wins, something in my mind clicks and i start subconsciously trying to prevent the market from betraying me by either taking the opposite position that i would normally take in a trade, or by getting back into a trade immediately after a stop to prevent the market from stopping me out and then continuing in the direction i expected.. crazy huh? but, thats the only explanation i can come up with for some of my bizarre behavior.. im working on several fronts to correct this issue.. but until i can work through it, i intend to work around it as best i can by using self-talk to keep me from entering that state of mind.. you know.. before i became a trader, i didn't think i even had any issues =).. but thanks to the markets, i now know just how screwed up i really am.. heck, i think ill send the Nasdaq a thank you card.. -qwik
I've had similar problems at various times. I believe that, after a good period, a few things can combine together in a bad synergy: 1. Overconfidence - Coming off an excellent period during which I generate a high winning percentage, I might seem on the verge of a major breakthrough, and begin to overpress, refusing to accept losses until they really hurt, or refusing to be satisfied with the small-looking wins that seem to offer decreasing satisfaction... 2. Changing too many aspects of my approach at once - seeking improved performance, I increase position size AND trade frequency AND number of different set-ups. No one change was very dramatic in itself, but the total effect can quickly lead to a destabilization of my entire approach. 3. Failure to adjust properly to unique market circumstances: Last month was, after all, a pretty darn crazy month in the market. Aside from producing some highly unusual events and general volatility, and contributing to internet, software, and exchange problems, the action also created a potentially deadly "everyone's partying but me" syndrome: Amidst huge moves, traders were bragging about their success, celebrating opportunities, making daring bets, and so on, reinforcing a natural desire to join in â even if it meant taking marginal or unfamiliar set-ups, overcapitalizing positions, increasingly adopting a gamblerâs mentalityâ¦Even in a normal period, paying any attention to how some other "great trader" appears to be doing can screw up your head... And there's always something somewhere going off "without you," making you wish you were trading differently... 5. The worse things get, the worse they get: Underperformance begets more underperformance, as unhappiness and self-recrimination lead to desperation and foolish gambling, and one broken trading rule paves the way for another and another. Pretty soon, you're pressing the worst trades, and rushing out of the good ones. The next bad trade turns into a can't-miss psychologically: Either it works out, helping you to end the losing streak, or, much more likely, it adds yet another failure, giving you the punishment that you've been convincing yourself you deserve! You cry out to yourself, "You're such an idiot! You make such terrible trades!" And you're right... You can't imagine yourself making a good trade - and you don't... Presuming you really do have a method that can work, you need to go back to it. I think there are a lot of ways to do this. One is to accept that you've crashed, go back to your trading records and review how you were trading when things were working, then start all over again, planning to take it one day at a time, but holding out the goal of sticking with it longer this time, improving your understanding of it and ingraining the good habits even deeper, and, if you do crash again, curtailing the death spiral earlier. Maybe those of us without mentors or trading rooms need AA-like sponsors - people we can call or e-mail or instant message when we think we're falling apart... Just a thought... Good luck, and, like I said, take it one day at a time...
Kymar I just wanted to take the time to tell you that I really enjoy your contributions to the board Keep em coming... PEACE and good trading, Publias
As one who has gone through boom and bust cycles for two decades without getting it right, I have become an expert on identifying the problems, but not too good on finding a solution. However IMO the biggest problem guys like us have is in not truly believing that you don't have to know what the markets going to do next. When trading well, what sparks over confidence? The notion that you KNOW what the next move will be. The better you're trading. and the clearer you're seeing things, the more you feel the freedom to push your luck, the perception of our ability becomes stretched beyond logical limits. Then as the slide in equity occurs it becomes increasingly difficult to stay flexible. If I was long yesterday and the market broke, then I must trade from the long side today. Why? Because I will feel more pain from missing a rally that I'm not positioned for then staying long and having the market break further. You begin fading yourself. What makes me think I'm correct turning bearish at these "low" levels when I was so wrong being bullish at higher prices earlier. During this downward spiral one becomes married to a preconceived notion of not what the market should do, but what the trader NEEDS it to do, to make him whole. These periods of both over confidence and desperation are when traders are most ignorant of the fact that anything can and will happen. That is why for even the discretionary, intuitive trader, a plan of action, is paramount to avoid the worst case scenario days. Be it a stop based on pct. of equity, a technical level, or even just beyond a price that your gut tells you is where the market really wants to go, you have to minimize the damage from the INEVITABLE self destructive binges that all human beings will upon themselves. I have always believed that the easiest thing in the world is to make money trading. The hardest thing in the world...to not lose that money trading. Now if I could only heed my own advice, because to-morrow I'll probably have some crap trade go 6 pts. against me and I'll be hoping and praying, and ignoring the information that the market so generously gives to those who are patient enough to listen.
IMO, a broken winning streak is one of the greatest causes in jeopardizing one's overall success; to put it on an even smaller time frame, one good trade followed by even the smallest loss -- or even seeing a peak in open profit followed by a substantial drawdown in that unclosed position -- will sometimes destablize me emotionally far worse than never having had an open gain to begin with. To quote Daryl Hannah in Wall Street: "When you've had money and lost it, it's much worse than never having had it at all." I think this statement holds true when applied to trading and emotions (despite Bud's vociferous denial).