"We all hold the keys to our own jail cells." I came across this line in a novel unrelated to either trading or psychology. However, this notion seems to arise with some frequency in trading psychology literature. What are your views? Do you believe it to be true? And if so, has the revelation helped you in any meaningful way either inside or outside of the trading arena?
It's true that success in trading is mostly psychological, but knowledge is a necessary condition. If staying calm is the golden sauce, then you could be commatose but still lose money if you're entries and exits suck. Bottom Line: If you are scared it means you either don't fully understand what you are doing or you don't believe in what you're doing. The former is a function of knowledge; the latter, psychology.
Very nicely stated, FaderTrader. That is my view as well. I'm just wondering if the concept has actually helped anyone here or perhaps hindered them. Depending on the outcome, I suppose we can surmise whether it was a matter of knowledge or psychology.
Well i have to say experience is a very important thing also The more the experience and if we learn from our mistakes we can do better in the future
And, no doubt, you have the matter well in hand. As an aside, you seem to be following me around with your references to masturbation: http://www.elitetrader.com/vb/showthread.php?s=&postid=996935#post996935 Should I be worried?
I'm at the extreme in my belief that knowledge is the necessary condition to successful trading and that the calm and healthy pscyhological state flows as a consequence of that. Most good traders start with doing one or two things well. This allows them to stay involved in the markets since thier strategy is not random. Once the issue of staying in the game is handled the trader tries other strategies and/or maximizes days when an opportunity presents itself- but he can always return to his core strategy to make money. I PERSONALLY feel that strategies that are basic tautologies are the way to go. You would be hard-pressed to find a stock that is down on the day which didn't test or plow through it's pivot range and/or opening ranges. It's ALMOST a tautology that it would do so. In the rare instance it opens down huge, I wouldn't be involved anyway. So - to the novice, I'd say look for strategies that are as close to tautologies as possible, and you will see the patterns quicker and you will lose your fear as a consequence - as opposed to channel trading or fading ALWAYS - scenarios that are replete with exceptions.
FT wrote "If staying calm is the golden sauce, then you could be commatose but still lose money if you're entries and exits suck." I tent to disagree. If you are calm your entries and exits will never suck. The situation with entries and exits is fairly symmetrical, i.e. these are bad: early exit (left money on the table) late exit (returned (maybe even lost) fair chunk of money) early entry (jumped the market) late entry (chased the market) All these mistakes are for a reason of not staying calm, of not controlling your emotions. Some minimal education is required of course, but much less than people usually think. Try trading the following system: SL = 3 pips, at 5 pips profit move SL to +3 pips, if you cought the big move (e.g 50+ pips) exit at fib retracement of 50% of the last substantial directional move. entry is at will, just have to have a feeling that you might make a profit. your expectancy is negative spread per trade. execute 100 trades over a week or so - you will be pleasantly surprized (i was)