straight from the heart

Discussion in 'Psychology' started by avadon, Nov 18, 2006.

  1. avadon


    This was originally a reply back of an e-mail that I sent back to a friend who kept trying to tell me he knows what trading is all about because of what college professors and studying statistics in college done for him. I thought this was a pretty good read to put on here because it has to do with human condition. It has to do with understanding vs knowledge. You can have head knowledge but not the understanding of it to avoid the pitfalls or even the wisdom to carry it out. I didn't post this here to get recognition or find a listener or to search for agreers. I put this on here because I thought it was a good read on what trading is REALLY about and how large that gap actually is between the public and disciplined traders. Trading is a journey.

    Hey Jeremey, thanks for replying.

    The statistic in the previous e-mail and on the phone was that for broker's accounts 90% of their clients have a negative realized P&L whereas 5% are near breakeven and 5% have a positive P&L. Some brokers are bucketshops in the sense that they fill their client's orders in-house. They are actually the counterparty to their customer's trades and not the forwarder which creates a huge conflict of interest since the money starts coming directly out of the broker's pockets rather than other traders once you start having gains. I didn't know/believe that this practice still existed after the 1920's and 1930's.

    I know I bring the subject of trading up often. It's because that's where a large amount of my time goes so it tends to be buzzing around in my head throughout the day. That or Jesus.

    ---his quote---
    "And no, I haven’t had bad experiences trading. I’ve actually only made one trade in my life and it was a company that a friend of mine thought would do well and it tanked, but I held it for a couple of years and cut my losses and it didn’t bother me."

    I used to think what a company does actually has something to do with the performance of its stock too until I started understanding that a company and a company's stock is about related as a each end of a mile long rubberband is. Sure, earnings cause it to move BUT traders are causing it to move, not what the company does. Traders can just as often take contrary standpoints to it and cause the news to be a negative catalyst. Or even late good earnings after many quarters of good earnings, they may be fantastic but the stock won't do anything because all the people who traded it have already left.

    They won't teach you in school that a company has very little to do with a company's stock because that's not what's popular. It's the idea in people's heads of their desire to own the stock of that company or not that matters. People's decisions is what moves it, not the company. Yeh, that's the same thing but really it isn't because company's activities and roles are facts, people's decisions are variable based off level/degree of desire to buy or sell which fluctuates constantly.

    Why didn't you apply statistical probabilities to it based off how much elasticity that issue traded at since that's your specialty rather than going by what someone else said? It wouldn't have taken more than about 30 minutes. I know the answer to that: because you're human and not a machine. This is an example of how trading is. It becomes emotional/pyschological because people tend to go by what they feel rather than controlling all the knowns so that the unknowns can take over and grow the account. It takes years to rewire a human brain to trade correctly because it takes years to exercise that part of the brain that willfully tries to stay focused in the midst of the fight or flight instinct when fight or flight tries to override a plan. Trading is a battle against human survival instinct. It takes a long time to have a person's brain rewire to the point where trying to survive doesn't override what that person does during the middle of it when the heat gets turned up. Everyone loses accounts their first year no matter how well they were consistently doing demo trading because when emotions start happening it literally stops a person from being able to press the button out of pure fear.

    The response to the above paragraph is, "yeh, but if you know the probabilities and have went over & over & over it then that shouldn't be a factor" but it is....because the pain of feeling it in that moment is like breaking your arm over & over. It takes years of putting oneself through the process of trading in order to make it through each weeks or months pain cycle b4 a profit happens in the midst of it (a profit which should be larger on average than all the small losses combined according to your plan). There have been MRI's done with traders who have successfully traded large accounts and the parts of their brains that gets flared up when you break your arm is the same part of the brain that gets flared up when they had to take loss after loss after loss. When you're most uncomfortable is usually when the most money is made. Being comfortable is what's popular.

    Society says follow your dreams but they also say you have to follow our rules.

    I choose to follow my dreams but without following the rules of what's popular or accepted. The price to pay is one of rejection at first but what's sick is the acceptance that comes after you're successful even though there was rejection b4 it. I'll end up thinking to myself... you hypocrites... people who only look at outside appearances that is. What's the difference between them and a dog that sees food? It's like why can't more people at least try to see the opposite of what appears to be like the way God sees stuff. Not talking about you, just the general sense of one of many many reasons why I want to do this. Not to show people up but to carve a new path that isn't the norm.
  2. nkhoi

    nkhoi Moderator

    Jeremy Rifkin?
  3. avadon


    no, heh...there's like half a million Jeremeys out there. I thought about erasing his name since anonymity but figured it didn't matter anyways since only a first name.