Aliassmith Psychology 101 and other stuff

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aliassmith
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Postby aliassmith » Sun Mar 14, 2010 3:13 pm

Jalarupa wrote:
aliassmith wrote:
Jalarupa wrote: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


Some of the psychology stuff I have been researching recommends to
practice the fundamentals a lot. While doing the fundamentals (following
the trading plan) conjur up positive emotions every time you follow the
plan win or lose.

When you don't follow the plan conjur up negative emotions stronger than the positive ones you made for following the plan.
Trade Your Way as Long as It Makes Money!

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newschool
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Postby newschool » Sun Mar 14, 2010 5:33 pm

aliassmith wrote:
When you don't follow the plan conjur up negative emotions stronger than the positive ones you made for following the plan.


That can be good for a veteran trader, but for a beginner wich WILL change his plan many times (forex is such a high volatily market thus many strategies can be seen), im not sure its a great strategy.

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Postby Jalarupa » Sun Mar 14, 2010 5:42 pm

My one friend after sheer loss frustration decided to trade the Forex markets on a demo account for a year doing the exact opposite that his method told him to do, suffice to say he made a lot of money on that demo account... Eventually the brokerage called him and asked him to come and work for them... :lol:
"our deepest fear is not that we are inadequate... our deepest fear is that we are powerful beyond measure... It is our light, not our darkness that most frightens us..."

I trade using <<FX SYNERGY>>

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Postby newschool » Sun Mar 14, 2010 5:43 pm

Jalarupa,

I think the most important thing is to remove any kind of emotions. Because the problem with having a rigid plan for gain, is that it doesnt take in account how the market is moving. The market is alive, and the job of a trader is to adapt (Phantom Of the Pits). Thats why if I see a good opportunity that I dont usually trade, I dont want to kick my self later for not taking it.
But it should be a quick action from the head, and not an insecure decision with the heart...

Example: http://i40.tinypic.com/2rw2vkl.png

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Postby es/pip » Sun Mar 14, 2010 8:40 pm

aliassmith wrote:
Jalarupa wrote: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 :)


everyone is different and there are a 1000 different ways to trade successfully

as far as targets go ---- and this is just how i feel about it--- not saying i am right and anyone else is wrong

i dont like a set target for a day week or whatever. creates too many emotions when you miss or obtain the said target.

" my target is 10 a day, crap i just lost 5 now i have to make 15 to get to my goal. Man i was at 8 for the day and i just lost 3. I was only 2 away from my goal now i am 5 away" etc etc--- creates too many emotions

i have an "idea" of where i would like to be/ think i should be able to be at the end of the week

i want to get in a zone of taking all the trades no matter where i am at for the day, week etc etc. After all, the market has no idea if you are at your goal or not, and will continue to move regardless.

scalping i would like to think i can average 100-150 pips per week at 2% per 10

sometimes i make that in a day, other days i break even, dont lose on too many days---------- but when the dust settles i would like to be at least 100-150 net for the week.

I do not trade to reach that 100-150 per week. i take every trade independent of where i am for the day/week. after all, we have no idea of knowing which trades will work and which will not, and whether you are at your goal for the day sure as hell doesn't have any effect on the outcome of any given trade.

i would rather just trade each trade instead of worrying about anything else

thats just me though
Bend over and assume the position for another 4 years of hope and change.

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Postby aliassmith » Mon Mar 15, 2010 2:06 pm

newschool wrote:
aliassmith wrote:
When you don't follow the plan conjur up negative emotions stronger than the positive ones you made for following the plan.


That can be good for a veteran trader, but for a beginner wich WILL change his plan many times (forex is such a high volatily market thus many strategies can be seen), im not sure its a great strategy.


I believe interferring with your plan is a big psychological issue. I know
from testing and such that a method will have an edge. If you let emotions
make you do things not according to plan then you will not have any
discipline.

Wouldn't this be true especially for purely mechanical approaches?

Interferring with my plan equals Break Even day when it should be
5.5% :oops:
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Postby aliassmith » Tue Mar 16, 2010 2:47 pm

The first +15 trade is one I was feeling greedy, fear of missing out,
stubborn. I should have took the +15 instead of being mental which
would have allowed me to take the trade marked +20. I did eventually
take +15 from the first entry point.

Having those emotions are counter productive in trading. At least I did
get my "daily goal".

I don't actually have a daily goal, but I do have a Monthly "want".

Similar to MightyOne's goal, 250 pips (10 pips equals 1%).

65 pips a week
13 pips a day

NOT goals just averages.
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Postby aliassmith » Tue Mar 16, 2010 3:54 pm

Have to get this drilled into the grey matter :)

Cut loss short and let profit run.

StopLoss Take Profit Break Even Accuracy
5...............25................16.67%
5...............20................20.00%
5...............15................25.00%
5...............10................33.33%
5...............5..................50.00%
5...............3..................62.50%

Makes it easier it be profitable if you only need to be right 33.33% of
the time or better. I think it is clear that I need to perform at around
15 pips Take Profit.

Helps the mind and emotions to know these things, at least I hope. :wink:
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Postby newschool » Tue Mar 16, 2010 9:34 pm

Instead of using a TP, wich as you can see I dont like at all, I simply move my SL to major resistances/supports. Like a trailing stop, but manually. That way I secure some pips, but if the price continues to go my way, I'm still in the trade.

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Postby gfg1 » Tue Mar 16, 2010 10:04 pm

aliassmith wrote:The first +15 trade is one I was feeling greedy, fear of missing out,
stubborn. I should have took the +15 instead of being mental which
would have allowed me to take the trade marked +20. I did eventually
take +15 from the first entry point.



Alias, do you filter those trades based on hour, daily, etc. or take them as they come? TIA

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