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Self-help mentality

  • #1
  • First Post: Feb 5, 2011 12:58pm Feb 5, 2011 12:58pm
It is quite interesting that more and more trading psychology threads pop up. Almost like in the book market, where all the self-help books come up.

One can really see a lot of parallels with the advice given.
"You have to set realistic daily goals" - "you have to plan how you will achieve it" - "you have to follow your plan" - and all this other crap.

I don't know, don't people see that trading is a business like any other. And a very highly competitive one. It's not a job, it's a business.

And running a successful business has mostly to do with finding a niche, which the majority of already established businesses have overlooked. Or just doing things in a smarter and more appealing way to the customers than the already established ones. You can have the best business owner and manager mentality, but if you don't have a unique niche, business model or product, you will not make it in any business.

Now here in this forum people seem to think that you can just take any method and just need the right psychology to make it work. Are people really so delusional, especially in the trading industry? This industry really seems to attract a lot of mentally weak people, otherwise they wouldn't require so much assistance in developing psychology.
You need a niche, something most people are not looking at or has a high barrier of entry. Not all this psychology crap.

Feel free to criticize.
  • #2
  • Feb 5, 2011 1:05pm Feb 5, 2011 1:05pm
Oh oh Wait till Beeman gets a look at this

Tson like Donkey Kong

You already know that I agree with this, psychology does nothing to put the odds in your favor and if they're not in your favor having a strong Psychological mind won't turn that equity curve around, maybe just help you to persist in blowing your account.

It does play its role of course but its the last thing you should be worried about as anew guy IMO. I think its only important once you actually HAVE an edge and you need to ride out a losing streak or to keep your feet on the ground through a winning streak. Or stay disciplined in managing the trade correctly despite the rises and falls of your position.

If psychology is your whole reason for success then you're entire edge must be based on money management.
Time hides Nothing
  • #3
  • Feb 5, 2011 1:10pm Feb 5, 2011 1:10pm
Quoting CindyXXXX
Oh oh Wait till Beeman gets a look at this

Tson like Donkey Kong

You already know that I agree with this, psychology does nothing to put the odds in your favor and if they're not in your favor having a strong Psychological mind won't turn that equity curve around, maybe just help you to persist in blowing your account.

It does play its role of course but its the last thing you should be worried about as anew guy IMO. I think its only important once you actually HAVE an edge and you need to ride out a losing streak or to keep your feet on...
haha, yeah, maybe he gives also a response

yeah, of course, again, it's like with any other business. First you need a product and then you need the energy/psychology/... to build up a business around the product.
But without the product, all the energy is really wasted.

And concerning money management. I think money management itself is not an edge. Search for posts from "hanover". He writes some intriguing posts about what an edge is and what is definitely not an edge. And money management is not one.
  • #4
  • Feb 5, 2011 1:12pm Feb 5, 2011 1:12pm
i don't understand why people always need to find an edge, i guess they rather mean holy grail not edge, since there are enough edges to reap money off the markets
Invincibility lies in the defence, the possibility of victory in the attack
  • #5
  • Feb 5, 2011 1:18pm Feb 5, 2011 1:18pm
Quoting silverheat
i don't understand why people always need to find an edge, i guess they rather mean holy grail not edge, since there are enough edges to reap money off the markets
Well, cause from my experience only an over the long-term net-profitable method will make one profitable.
Good to hear that there are more than enough edges in the market apparently
  • #6
  • Feb 5, 2011 1:19pm Feb 5, 2011 1:19pm
Quoting silverheat
i don't understand why people always need to find an edge, i guess they rather mean holy grail not edge, since there are enough edges to reap money off the markets
Depends what you define as edge I guess
Time hides Nothing
  • #7
  • Feb 5, 2011 1:26pm Feb 5, 2011 1:26pm
Quoting CindyXXXX
Depends what you define as edge I guess
effectiveness of a rule set in a specific environment
Invincibility lies in the defence, the possibility of victory in the attack
  • #8
  • Feb 5, 2011 1:31pm Feb 5, 2011 1:31pm
Quoting silverheat
effectivness of a rule set in a specific environment
Without something along those lines wouldn't you simply be flipping a coin and then managing the trade not caring if you're long or short?

I agree that the mechanical approach of most systems is illogical in today's markets

if any approach exists long term its a game only fit for a BOT who can proces the amount of volume of information not possible for a loan human brain.

But surely SOME inference must be made to determine a bias? Whatever that may be even just entering based on a coin flip out of high volume areas this is still an "edge" by your definition there.
Time hides Nothing
  • #9
  • Feb 5, 2011 1:31pm Feb 5, 2011 1:31pm
Quoting silverheat
i don't understand why people always need to find an edge, i guess they rather mean holy grail not edge, since there are enough edges to reap money off the markets
So post just one of those many edges here then...

The more I play this game, the more I realize how true it is that you need an edge. You have absolutely no chance long-term without one.

This business requires as much hard work as any other. There really is no free lunch. When I see a post from someone asking for a working system that requires just one hour of work each day, I feel sorry for them. There is so much that they don't know that they don't know...

Nobody would line up next to Usain Bolt and bet money that they would win a sprint against him.

Yet hordes of people with no trading experience line up next to banks, hedge-funds and the like and try to take money from them in this zero-sum game. For some reason, the same people which know that they couldn't win a 100m dash against Bolt, believe that they can beat the professionals paid top dollar and spending 10 hours/day who have access to the best information and expertise.

Why would the professionals work so hard to extract money from the market, if the only thing required would be to find a method which "suits your personality", add some money management on top and sprinkle that with some "winning psychology"?

But I can understand them, at first I also thought that this would be so easy...

Quoting silverheat
effectivness of a rule set in a specific environment
This is only a small set of the possible types of edges - you can have a system like you said, but you can also be the fastest, or have access to hard to get information (order-flow, "expert networks", ...), ...
  • #10
  • Feb 5, 2011 1:42pm Feb 5, 2011 1:42pm
Quoting Adal
So post just one of those many edges here then...

The more I play this game, the more I realize how true it is that you need an edge. You have absolutely no chance long-term without one.

This business requires as much hard work as any other. There really is no free lunch. When I see a post from someone asking for a working system that requires just one hour of work each day, I feel sorry for them. There is so much that they don't know that they don't know...

Nobody would line up next to Usain Bolt and bet money that they would win a sprint against...
nice post, totally agree on all your points! Also a good analogy on sprinting against a world-class sprinter.
  • #11
  • Feb 5, 2011 1:58pm Feb 5, 2011 1:58pm
Quoting Adal
So post just one of those many edges here then...

The more I play this game, the more I realize how true it is that you need an edge. You have absolutely no chance long-term without one.
buy euros when its all over the newspapers that the euro is doomed
sell euros when its all over the newspapers that the eurozone is safe

that maybe no long-term edge, but i believe there is no edge which works indefinitely, one must be adaptive

a simple TA-egde would be a trendline break, aediaz1 has a good thread about it

Quoting Adal
Why would the professionals work so hard to extract money from the market, if the only thing required would be to find a method which "suits your personality", add some money management on top and sprinkle that with some "winning psychology"?
what professionals are you talking about? there are different market players with different objectives, retail traders have in a way an edge over institutional traders as well

Quoting Adal
This is only a small set of the possible types of edges - you can have a system like you said, but you can also be the fastest, or have access to hard to get information (order-flow, "expert networks", ...), ...
ok, but being the fastest is only necessary when your system depends on it, the thing about the market is that it gives you an unlimited array of possibilities to approach it, there is no need to be the fastest

and talking about edge and psychology, consider the turtle traders, they were given a simple set of rules to follow and yet only little of them made it, how do you explain this?
Invincibility lies in the defence, the possibility of victory in the attack
  • #12
  • Feb 5, 2011 2:01pm Feb 5, 2011 2:01pm
Quoting silverheat
one must be adaptive
This is still an edge and a set of rules though in the sense that the rule is there is no set rules
Time hides Nothing
  • #13
  • Feb 5, 2011 2:21pm Feb 5, 2011 2:21pm
Quoting silverheat
and talking about edge and psychology, consider the turtle traders, they were given a simple set of rules to follow and yet only little of them made it, how do you explain this?
well, but the system they were given still had an edge. Having the discipline to execute it even during drawdown is secondary.
First you need a system that will not fail in the long-term. It's amazing how many people disregard statistics and think it doesn't apply to them. Any system has certain statistics and most of them have unfavorable statistics.
If you trade a system with unfavorable stats, you will lose.
  • #14
  • Feb 5, 2011 2:33pm Feb 5, 2011 2:33pm
Quoting Custos
well, but the system they were given still had an edge. Having the discipline to execute it even during drawdown is secondary.
but that's exactly the use of psychology, execution is not secondary, it's mandatory for the edge to work itself out

i agree that you need a system with favorable statistics, my point is there are enough of this systems, also they have different rates of decay and the whole market structure changes as old edges die and new ones turn up
Invincibility lies in the defence, the possibility of victory in the attack
  • #15
  • Feb 5, 2011 2:48pm Feb 5, 2011 2:48pm
Quoting Adal
The more I play this game, the more I realize how true it is that you need an edge. You have absolutely no chance long-term without one......
Very good post, sums it up nicely IMO.
  • #16
  • Feb 5, 2011 3:11pm Feb 5, 2011 3:11pm
according to your post in the trading psychology - greed thread, hanover

Quote
If psychology is the only real problem, then why isn't every EA profitable?
because the real edges dont fit into an EA, the human brain is the ultimate edge, the whole market is a collective decision process rolling over each tick, i don't see where even a sophisticated EA can beat the human brain in extracting the relevant information out of context
Invincibility lies in the defence, the possibility of victory in the attack
  • #17
  • Feb 5, 2011 3:17pm Feb 5, 2011 3:17pm
Any EDGE (method with positive expectancy) is completely useless if a Trader doesn't have the psychology to trade it.

Let's say you have a trader and a method with an EDGE, but only trades 1 lot a time. This trader is now asked to trade 10 lots at a time. All of sudden he starts losing because his psychology can't handle the draw downs of the larger lot trades and starts to kill his trades early. That is psychology.

A trader has a method with an EDGE and loses 10 million dollars 3 times in row (all within the parameters of his method which can have a 5 loss streak), but starts to freak out and can't pull the trigger anymore. That is psychology.

The list goes on and on and on. People are not robots and have emotions, you either have your emotions in check or you don't. That will ultimately decide if you are successful in the long run with your positive expectancy method and your money management.

The other thing is that IT ISN'T JUST ONE THING. It is a cocktail, a mix of things. You need it all, a positive expectancy method, money management, and psychology. You need them all and they work hand in hand. To say you only need an EDGE is like saying you only need 1 tire on your car.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #18
  • Feb 5, 2011 3:24pm Feb 5, 2011 3:24pm
Quoting silverheat
according to your post in the trading psychology - greed thread, hanover

because the real edges dont fit into an EA, the human brain is the ultimate edge, the whole market is a collective decision process rolling over each tick, i don't see where even a sophisticated EA can beat the human brain in extracting the relevant information out of context

Don't let the quants hear you. Bloomberg's currency fund of the year is a quant fund with 1Bn+ AUM returning 30%+ a year at 1:1 leverage after fees and charges

(and to add; at the standard fees that is 150Mn+ for the manager....)
  • #19
  • Feb 5, 2011 3:28pm Feb 5, 2011 3:28pm
Quoting cloggie
Don't let the quants hear you. Bloomberg's currency fund of the year is a quant fund with 1Bn+ AUM returning 30%+ a year at 1:1 leverage.
Most quants blow up given enough time (I actually believe they all do, but I'll temper my statement and stick with most do).
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #20
  • Feb 5, 2011 3:29pm Feb 5, 2011 3:29pm
Quoting cloggie
Don't let the quants hear you. Bloomberg's currency fund of the year is a quant fund with 1Bn+ AUM returning 30%+ a year at 1:1 leverage.
well, yes, there are quantifiable edges out there, since i am enfp i don't see them, you intj's are better in this regard
Invincibility lies in the defence, the possibility of victory in the attack
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