Aliassmith Psychology 101 and other stuff

[newschool]

You nailed it bredin.

I acted with my heart, remembering a loss I probably took after price went my way then down.

But logically, price was bullish, and a trend was there.

The "take action" cure looks very interesting to me. I mean it can be applied literally anytime, in everyday life. It can be as simple as what you gonna eat for supper.
By acting quick, perhaps we remove the time needed for the emotionnal triger, and only look at the facts right in front of us.

[aliassmith]

Thank you everyone for your contributions.

I know some people say oh it is just fear and greed that control us.
That may be true, but it seems to be a bit more complicated than that.

Fear and Greed manifest themselves in different ways for each person
based my on their personal belief structure.

Thought Possibilities Situation #2:
**** A trade is in loss by (x) amount *****

if (x) is small;
-not a bad loss it will recover
-nervous it won't go back to profit
-Don't want to be wrong by closing
-maybe I'll move my SL to give it more room
-damn it the SL will take care of it

if (x) is medium;
-give it a minute it will work
-maybe it will go back to zero
-nervous it won't recover
-why did I let it go this far
-maybe I was early, move the SL

if (x) is large;
-it will make a correction
-if I can just get back to break even
-i am an idiot for lossing this much
-i can't take it anymore, close it
-i can't keep letting it go back, let me out

Seems to me that letting price go to a negative amount you never
intended such as medium and large level is a BAD TRADER move.

So why do we let this happen?

[aliassmith]

You nailed it bredin.

I acted with my heart, remembering a loss I probably took after price went my way then down.

But logically, price was bullish, and a trend was there.

The "take action" cure looks very interesting to me. I mean it can be applied literally anytime, in everyday life. It can be as simple as what you gonna eat for supper.
By acting quick, perhaps we remove the time needed for the emotionnal triger, and only look at the facts right in front of us.

Acting with your heart (emotions) typically is caused from previous
experience. If you had a similar experience and it caused big enough
emotions then it will affect you again and again until you change the
condition of that trigger.

A plan of action is a good combatant, but you have to still train yourself
to follow said plan and be happy about the outcome win or loss.

[newschool]

Finally big pullback on Citigroup.... my heart was just delayed by 1 day with my head hehe.

[bredin]

We act with (only) Greed and Fear with regards to money because we have been taught to do so our whole lives, either deliberately or inadvertantly, by parents, teachers, advisors, bank managers, politicians and many others.

In school we are taught it is bad to be wrong, we learn to fear it through group humiliation.
We are taught Greed with stories of lottery winners (and never hear that 95% of those that win 1000000 or more are worse off only 5 years later, broke again), by 'guidance councilors' who tell you how much money you can make if you 'study hard' (so you'll not be wrong) and 'get good grades' (prove you can do something dull for 5 years) so you can go to a 'good university' (achieve some ultimately meaningless goal).

All this takes some serious undoing. Our hearts are under constant bombardment with information contrary to our best interests. (edit: remember that the best advertising is emotional, not factual)

We must teach our hearts to use the twins to our advantage in trading, as it is virtually impossible to eliminate them completely and the result isnt necessarily a good move: Removing Fear makes us careless, removing Greed destroys desire.
Become an observer to the twins, listen to their advice, and make decisions from a position of knowledge.

aliassmith, you are right that at some point the rubber must meet the road, steps must be taken to get the twins under control. In this instance Yoda is right: "Do or Do Not, there is no Try."

I had a conversation a few months ago with a guy who worked for S&P, he was QA manager for their IT department. Him and a couple of guys in IT were trying to write a robot. In short they had made some very bad decisions (it martingaled, used set sl and tp, they were testing with real money cos they had never heard of demo accounts, and a host of other newbie mistakes). I asked him how many of his team were profitable traders in their own right. "None" was the reply I expected, and got. So I told him that the odds of his group writing a successful robot was almost zero, and that he should learn to trade profitably, then return to the project. So he tells me that hes very busy with his job, family, a host of hobbies etc etc, and that is why they are writing a robot: "HE DOESNT HAVE THE TIME TO LEARN TO TRADE".
My point here is that he is 'trying' to achieve his goal, but not 'doing' what was necessary to achieve it. He thought he was fixing his problem, but is only exacerbating it.

G (the long winded)

[aliassmith]

We act with (only) Greed and Fear with regards to money because we have been taught to do so our whole lives, either deliberately or inadvertantly, by parents, teachers, advisors, bank managers, politicians and many others.

In school we are taught it is bad to be wrong, we learn to fear it through group humiliation.
We are taught Greed with stories of lottery winners (and never hear that 95% of those that win 1000000 or more are worse off only 5 years later, broke again), by 'guidance councilors' who tell you how much money you can make if you 'study hard' (so you'll not be wrong) and 'get good grades' (prove you can do something dull for 5 years) so you can go to a 'good university' (achieve some ultimately meaningless goal).

All this takes some serious undoing. Our hearts are under constant bombardment with information contrary to our best interests. (edit: remember that the best advertising is emotional, not factual)

We must teach our hearts to use the twins to our advantage in trading, as it is virtually impossible to eliminate them completely and the result isnt necessarily a good move: Removing Fear makes us careless, removing Greed destroys desire.
Become an observer to the twins, listen to their advice, and make decisions from a position of knowledge.

aliassmith, you are right that at some point the rubber must meet the road, steps must be taken to get the twins under control. In this instance Yoda is right: "Do or Do Not, there is no Try."

I had a conversation a few months ago with a guy who worked for S&P, he was QA manager for their IT department. Him and a couple of guys in IT were trying to write a robot. In short they had made some very bad decisions (it martingaled, used set sl and tp, they were testing with real money cos they had never heard of demo accounts, and a host of other newbie mistakes). I asked him how many of his team were profitable traders in their own right. "None" was the reply I expected, and got. So I told him that the odds of his group writing a successful robot was almost zero, and that he should learn to trade profitably, then return to the project. So he tells me that hes very busy with his job, family, a host of hobbies etc etc, and that is why they are writing a robot: "HE DOESNT HAVE THE TIME TO LEARN TO TRADE".
My point here is that he is 'trying' to achieve his goal, but not 'doing' what was necessary to achieve it. He thought he was fixing his problem, but is only exacerbating it.

G (the long winded)

"HE DOESNT HAVE THE TIME TO LEARN TO TRADE"

How do you teach someone to drive a car without knowing how to drive a car?

It is clear to me that to be successful as a trader you have to learn an
edge. You will also need to learn how to condition your emotions to not
respond like the herd collective.

[Jalarupa]

Nice Topic!

Great posts all, I especially like bredin's approach to trading psychology

Its a very tangible experience when one becomes aware of the way the body's natural chemicals begin to react in the brain when one is in the process of anticipation of risk vs reward, and yes we must always listen to our heads... THINK TWICE! Check your entry rules, are you trading with the predicted price action and not against it? (unless taking a quick counter trade)

I am busy reading a very interesting book that I would recommend to anyone who is serious about learning more about what goes on inside the investor brain whilst the trade is on...

Your Money & Your Brain

I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained...

[aliassmith]

Nice Topic!

Great posts all, I especially like bredin's approach to trading psychology

Its a very tangible experience when one becomes aware of the way the body's natural chemicals begin to react in the brain when one is in the process of anticipation of risk vs reward, and yes we must always listen to our heads... THINK TWICE! Check your entry rules, are you trading with the predicted price action and not against it? (unless taking a quick counter trade)

I am busy reading a very interesting book that I would recommend to anyone who is serious about learning more about what goes on inside the investor brain whilst the trade is on...

Your Money & Your Brain

I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained...

"I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained..."

If you think about how you react emotionally having a specific goal
on a daily basis, what do you really think about it?

How about possible stress, pressure, failure if it isn't obtained?

I am sure these emotions will cause you to trade in an unintended
manner unless you are conditioned properly, maybe cloud your vision.

I didn't make my goal on Monday, so I feel ____________ !
I didn't make my goal on Tuesday, so I feel ____________ !
I didn't make my goal on Wednesday, so I feel ____________ !
etc.

How about daily time limits and/or you reward yourself with time off
after you "net" (x) profitable trades.

BTW, thanks for the book recommendation

[tmanbone]

I believe a daily log is important. I think each and every trade should be logged along with the way you are feeling at the start, during, and end of the trade. It may not seem like it's doing any good at first but if you'll summarize weekly/monthly, then study your logs you'll be able to see what and how you are doing. You can then study your weak points and start eliminating them. It's hard to see yourself. I feel this is a way to do it. I learned this from a professional trader that told me he thought it was a waste of time, when he first started, till he started doing it, then he realized that it helped him fine tune his trading more that anything else he'd done. In summary trade, log, review, and learn. Hope this helps.

[Jalarupa]

Nice Topic!

Great posts all, I especially like bredin's approach to trading psychology

Its a very tangible experience when one becomes aware of the way the body's natural chemicals begin to react in the brain when one is in the process of anticipation of risk vs reward, and yes we must always listen to our heads... THINK TWICE! Check your entry rules, are you trading with the predicted price action and not against it? (unless taking a quick counter trade)

I am busy reading a very interesting book that I would recommend to anyone who is serious about learning more about what goes on inside the investor brain whilst the trade is on...

Your Money & Your Brain

I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained...

"I also like the approach that one should have a daily target that compounds as a percentage (2% Club for instance) and stick to it, as this allows you to exit once the goal is attained..."

If you think about how you react emotionally having a specific goal
on a daily basis, what do you really think about it?

How about possible stress, pressure, failure if it isn't obtained?

I am sure these emotions will cause you to trade in an unintended
manner unless you are conditioned properly, maybe cloud your vision.

I didn't make my goal on Monday, so I feel ____________ !
I didn't make my goal on Tuesday, so I feel ____________ !
I didn't make my goal on Wednesday, so I feel ____________ !
etc.

How about daily time limits and/or you reward yourself with time off
after you "net" (x) profitable trades.

BTW, thanks for the book recommendation

Yeah, to tell you the truth, I have definitely considered what you are referring to above. You first have to get your trading right and also your mind so that you can deal with or detach yourselves from such things as loss and even from such things as gain... I believe this comes with the development of your trading method, and only if this method becomes profitable over the long run will you be able to detach and say "Well tomorrow's another day... I didn't make it today..." I believe capping your losses at 2% is also a great way of getting out before your emotions, desperation and ego get the better of you and causing you to loose more... IF this happens for three days in a row, consider going over your trades, see what went wrong and consider going back to demo trading till these 'bugs' get ironed out.

I have also considered the nature of the market to be one not to be argued with, and having said that I believe that we all have a lot of work to do, to really detach ourselves from our emotions, ego and mixed perceptions of what should be going on...

If your trading method is solid, you should with a certain degree of certainty be able to 'predict' where the market is most probable to be moving next and follow that. Now you just need the patience and resolve to follow your method.

Chapter 6. Sankhya-yoga
Text 36

For one whose mind is unbridled, self-realization is difficult work. But he whose mind is controlled and who strives by right means is assured of success. That is My opinion.

Bhagavad-Gita Web Page