when I focused on trading well ( following my plan) instead of the monetary value of the trade, I started to trade well. I was able to hold my winners longer
Jem, Psychology in and of itself is not an edge. Position sizing / Money management in and of itself is not an edge. You have to understand how the market works and most importantly learn how to act in accord with that understanding. An optimal mind state is the by-product of successful trading and you can't will yourself into this state. Money management is nothing more than a method of optimizing the bets you make on the understanding you have and the actions manifested from such. If the action is in discord with her way then you get got, and if your head is so fucked up that you can't act in the first place -- then again you get got. There is absolutely NO substitute for understanding. I could be the daili lama and Pascal resurrected, but if I still have the same level of understanding that Gordon Gekko does, then I'm still gonna get my lunch eaten the way Gordon Gekko does... PEACE and good speculation
specula8tor- You get no arguments from me I have made your same points in the past. I was stating that there a lot of people without an edge blaming their psyche instead of their approach. As far as money management. If you are in a diverisifed basket of comodities that may have a built in bias to trend, you may only need good money management if you have enough cash. I.e. cut losses let winners run avoid big drawdowns. That is why I said it is a lot of work.
I believe it is a chicken/egg argument. I needed to have the psychology part down before I could even recognize what an edge is. Also I suspect that all edges are temporary so you need to have the proper psyche to recognize when an edge is not working anymore. I think the key psyche is true objectivity, focus, and decisiveness.
"There is absolutely NO substitute for understanding." (Specul8r) Amen. Emotional f**ked-upness is a measurement: the greater it is the greater is the extent to which you do not know and do not understand the market in which you have chosen to trade. Your psychology is a by-product .. not a cause.
Major Dallas, you have been selected for a mission of the utmost importance. What mission? Save the world. --from The Fifth Element
Hey Jem! If I stepped into the batter's box against even a poor minor league pitcher, I would probably fail to get a hit. I have neither the reflex's, form, nor experience to complete the skill set needed to successfully hit professional pitching. However if I was seasoned and had a large enough sample of at-bats that seemingly proved that I was a competitive hitter and then I went into a slump, I would guess that my problems were more a symptom of diminished "inner game" preparation than "outer game" mechanics. Certainly in trading we all go through spells where we hit line drives right at the shortstop, or we nail one but the wind keeps the ball in the park. We also make the bad trade that still works, i.e. the dribbler up the middle. Most commonly though streakiness is part of our psyche. We have a certain level of competence and with maximum concentration we perform at the level our personal adeptness allows us. At some point we begin to exceed what we believe to be our performance limits. That limiting belief may be based on bias derived from historical standards, or we may "top out" because of various guilt discomforts regarding success. Even those who regard themselves as steely, remorseless, cold blooded warriors will at some point succumb to the most dreaded disease of all, over confidence. For over confidence not only in quick fashion causes actions such as over-trading, and poorly adjusted position sizing, but over confidence today may breed lack of confidence in to-morrow. So now instead of being that disciplined hitter who demands a perfect pitch, we start swinging at balls out of the strike zone because as we all know, you can't hit a home run if you're not swinging. The great hitters know that personal ebbs and flows are part of not only the game, but of their game. An all-star knows that plateaus are inevitable and that the troughs must be minimized. What a hitter/trader must not do, is jeopardize his season or his career by engaging in past revisitation, that vain effort of ego defense that always fails to eradicate the consequences of natural setbacks in performance. We've all seen how a dropped pass causes even a great quarterback to throw an interception into triple coverage, or how a close point on the line creates such havoc with a tennis player that a previously winnable match becomes a series of unforced errors. The market is nothing but a game. She may be as unpredictable as whether the next pitch will be a knuckler or a curve, or she may look like a beach ball coming toward the plate. She is what she is, afterall it's our perception that's variable. We are merely athletes. Perhaps we're sedentary folks, sitting in a chair all day but we have the same emotions and hindrances as that free throw shooter on the line with no time left on the clock and a championship resting literally on his fingertips. For the trader not yet competent or skillfully to be trading in the "big leagues", the psychological aspects of life (yes life, even bad relationships have the nuances of bad trades) need be secondary to developing form. But not too far behind, for in an endeavor that has roughly a 50/50 probable outcome on each shot, if played masterfully you can still outshoot Shaq from the line.
I keep it mental and keep it simple. I don't let myself enjoy it too very much. (Endorphins are my enemy.) I take planned profits with satisfaction rather than elation. I dispassionately place a stop loss. I protect my personal process: ie., I don't say a word to anyone about my trades. I don't listen to other's opinions about an anticipated or ongoing trade. I face my losses as the friends who would tell me what I may not want to know, and review a losing trade for how it could have been better executed, if possible. I stay in touch with the fact that I can be the worst enemy I could ever know. Sounds pretty dry, but this is pretty much it. I guess, keeping strong emotions and needs out of it is the way to go.
Endorphins are my enemy, interesting. I have never looked at it like that.. something to think about. I have always seen them as my reward for a good trade.. kind of a natural high.