I'm not quick to agree on the merit of this point. Trading small to keep the stress down is fine, but it's difficult to grow your net worth signficantly even when you're right. (That is, if you're trading with money small enough that it won't hurt too badly if you screw up, you might as well be paper trading.) To do "well" overall, you must make a significant return on your overall capital and net worth. That means, (a) bigger position at risk, and (b) your ducks must be in a row all the better to succeed. There used to be a national year-long trading contest called Money Manager Verified Ratings. It required contestants put up $1 Million to enter, trade for the entire year, then have the results audited. Though some had one good year, not many did well for 3 or 5 years. The bigger the play and the more important the money, the more difficult it is to succeed.
Gann...... Some cultures also believe in genital mutilation and cannibalism. Emotions are hard wired into us for evolutionary reasons. If we are afraid its our nervous system registering danger; anger is a registration of hurt or threat etc. Obviously these primitive emotions do not translate so neatly into symbolic situations where money, for example, rather than body is at risk....
Puff, True to a point. What about when one knows better cognitively but makes mistakes anyways? As Douglas points out regarding certain unconscious errors and self-sabotage, there are deeper reasons one may be performing poorly. He sites overall relationship with success/failure and money as possible underlying keys.
Gnome, the point is the simple one of keeping bet size low relative to your capital. Also no withdrawals from capital+profits. Crucially you must have a very reliably predictive system so that you are usually not taking a loss on any day. Capital keeps growing relatively as does you bet size .. increasing but still in the same ratio to your capital. It is up to what any trader wants to do: I am just travelling from A to B. Start point to target accrued capital.
Over the last several years I have come to believe that trading is 50-60% knowledge and the balance is "art". All of the books, studies, training in the world are not going to help. Most people approach trading as some sort of math/engineering problem that can be solved if only I have the time and right "mindset". Get in the "zone". Everyone is seeking the "holy grail" of some type of system that will be automatic. Engineers can verbally describe the mathematical calculations needed to hit a major league pitcher throwing a curve ball. Very few people can actually hit that ball. None of them are engineers. " see the ball, hit the ball". Training/teaching can make a good hitter a better hitter. But, if he does not have that natural God given ability (art) it is not going to happen in any meaningful way. Think of all the trading rooms where there was some basic training and yet most blew up their account. Could not even stay solvent, much less make money. Just my two cents SteveD
Cheese, Gnome has it wired here, what you're suggesting is the equivelant of remaining in your chair instead of asking the pretty girl to dance, no chance of rejection. Artfull players know when to lean, fully extend their risk parameters, and when to pull in their claws. You're into a slide rule mentality that will grind out limited wins as well as limited losses. I'm not saying it's wrong, just that it's a plateau along the road.The next step encounters emotional barriers. No matter where one is on the road the next step always requires an expansion of perception that can place one in the position of self doubt, a degree of fear. If one creates a system thats working and then stops working one moves on and creates the next system, the next proper perception of the market. The belief in ones ability to properly percieve, create and choose the time to apply the acummulated knowledge, of the mkt and self, is landing on the unsinkable lily pad. Believing in that feeling of knowing this is the moment to get up off the chair and ask that georgous thing to dance is the Holy Grail. If you get there you may see you had it all along, it was the gift of fear from those around you that kept you seated.
I agree 100%. I have read all the posts in this thread, and although the "emotions" that people experience are somewhat alien to me, I fully understand that someone call feel that way. Here is a little background on me that taught me alot about how I work, and if it can be generalized, how the brain works. I grew up learning to play chess. I also grew up listening to classical music. I used to go to a chess club where lots of really sharp older people would go (I was all of 15 years old.) We used to play lots of music while we played speed chess, mostly classical, but every once in a while, people would put jazz on and I did not like it. My mind very early on was shaped by having total information, and the only limitation to doing better was to search deeper into a chess position. I remember how I was in those days. All things were black and white. A chance event happened. Someone came in to the club that had moved from the east coast. It was a chess club, but we liked playing all kinds of games. This man brought a game called bridge and taught it to many. I was very hesitant at first, and considered it an inferior game because it was a card game and therefore it must be luck. I don't remember why I decided to learn to play bridge, but I did. Now here is the point of this story, and perhaps as it relates to this thread. I learned to pay bridge, and the way that I started thinking, the way you had to think about the game, completely threw my chess off. I would start to look at chess positions as some sort of probabilistic thing, and I also started to look at my opponent for clues. That was not the way I played chess, but it is the way you play bridge! What is more, I started to like jazz. My mind went back and forth between confusion and stability as my brain reorganized itself to be able to handle a game with "complete" information, and one where making "mistakes" is part of the game. I learned that there are two types of mistakes that are made, the kind where you do the right thing based on a knowledge of probability, but turns out wrong, and doing the wrong thing and turning out right or wrong. In chess, there is only one kind of mistake. But here is the most important lesson I learned from Bridge. Even at the lowest level of the game, being able to simply do the mathematically correct thing will not get you anywhere. What I learned was that the single most important part of success is to put enourmous pressure on the opponents to do the wrong thing (which in Bridge means taking the information content away from them so that they have to guess - the weaker the player the worse he guesses,) while taking a very middle of the road and measured approach when the opponents applied the squeeze on us. In this microcosm that is a game, one also learns alot about the the human element. I realized that I was playing against people that were smart, but simply did not have that ingridient, I do not know even to this day what it is, to think correctly about incomplete information. It was always one thing or another, either logic, or confidence, or "feel", or technique, or any one of a number of countless things that are required to succeed at the game. These people reach a plateau they can never overcome. I am not sure why I felt I needed to respond in this manner to this post, I only know that in all that morrass that is how my life shaped, shapes the way I trade everyday, and how I look for new ways to trade. To answer the original question, I think that many people read books like the "Market Wizards" and see many different approaches that work and therefore believe that trading is mostly psychological. To me, this point of view is like the people that want to continue using the Bible to deal with modern day moral issues. Some things stay the same and "old advice" works, but not all things do, and books are static things. IMO, Psychology is where people that either do not have the right mental make up to trade in the first place, or desperately cannot find a repeatable edge, or both, look for answers. Every generation will have it's market "wizards," and the one's that continue to do well are constantly noticing the changes in structure of information forming by the actors that play the market everyday. The market is the ultimate super attractive giddy woman - she wants your full attention, wants 100% full control of the situation always, will leave you for someone else in an instant, and unless you can keep up, you are history. nitro
"..grind out limited wins as well as limited losses." Banjo Thats neither what I do nor what I have ever suggested others do. You need to research and put in place a reliably predictive system (ie DOW) if you want the Holy Grail. But its entirely up to you as to what you like to do. If you want to take a bigger risk every so often well thats also up to you.
Thank you for the nice post. I didn't mean to come across as a whiner. I just meant it to be a warning to others that once you no longer stress out over a trade or a series of trades you might also find it difficult to get excited in other areas of life. I'm not the only one to have gone down this path. I know Linda Raschke was diagnosed with Chronic Fatigue Syndrome. I don't know what the correct label is. Maybe some psychologist will study the long term effects of high stress and come up with some new theory. I don't want this post to be negative so here's a book that I've found VERY useful in mastering my emotions during trading. Just think trader everytime the author says athlete. http://www.amazon.com/exec/obidos/tg/detail/-/0452269989/104-1413911-9339950?v=glance
Well, after reading your post about PTSD, I checked a site with diagnosis of the disorder. Well, most of it fit except for the sudden emotional outburst and anger/violence.... That was 10 out of 14.... But I'm proud a PTSD Anonymous member. I'm the only person in the meeting and saying out loud alone in the dark, "Hi, I'm John Galt and I'm a Post Traumatic Stress Disorder Patient." in my bathroom... acrary... would you like to join the meeting sometime... Some say it's like a Goth meeting but there's no drug and alcohol... Other's? Would you like to join... .... .... ... I need to get a life... ... ... Oh, time to take my Zoloft... LOL... Bwahahahahahahahaahahahahahaha