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psychological biases affecting trading

  • #1
  • First Post: Jan 30, 2018 12:43pm Jan 30, 2018 12:43pm
I have been trading for quite a while. No problem to see what's going on, I generally read the day very well.

I notice that I have some bias... when the day is easy and my profit is small or reasonable I do not want to take the risk to lose it. I should make a killing on these days but I don't. I don't trade or just very small, taking very quick profits even though I know I should let it run.

On the other hand, when the day is hard, I lose some, I want to make up for it. Start trading big...and bigger.

It's ridiculous, my motivation seems to be to deal with (instead of get out of) a hard situation instead of just picking the low hanging fruit.

Can anyone recommend some exercises, some ritual to battle this?

Thanks,
Ivo
Trouble lies in what we believe to know for sure that just ain't so.
  • #2
  • Jan 30, 2018 2:37pm Jan 30, 2018 2:37pm
Try having a couple of sessions a week were you don't allow yourself to trade even if you see a golden opportunity. Just watch the market and take mental trades only.make sure you set the same allotted periods each week.do this for a number of months every week.eventually you will hopefully have learned self control and adjust your mindset to be in controll of every action you take .
to not take a trade is more important than taking one
  • #3
  • Jan 30, 2018 3:53pm Jan 30, 2018 3:53pm
Thanks but I am profitable just nowhere near what it could be. Today 47 pips in EURUSD (my only pair) but should have been 100 at least.

Mental trades go even better, lol
Trouble lies in what we believe to know for sure that just ain't so.
  • #4
  • Edited 4:37am Jan 31, 2018 2:25am | Edited 4:37am
Quoting ivob
I have been trading for quite a while. No problem to see what's going on, I generally read the day very well. I notice that I have some bias... when the day is easy and my profit is small or reasonable I do not want to take the risk to lose it. I should make a killing on these days but I don't. I don't trade or just very small, taking very quick profits even though I know I should let it run. On the other hand, when the day is hard, I lose some, I want to make up for it. Start trading big...and bigger. It's ridiculous, my motivation seems to be...
I became also very quickly cautious on my winning days and on shitty days I traded like a maniac.
My problem was simply fear, I was scared of giving my wins back and of cutting losses.

I then started trying to slowly overcome my fears. On my winning days when I normally would've stopped trading after a win/few little wins, I continued trading with 25% of my normal size (Just to keep trading and not thinking about the money at all)

After a few weeks I became a lot more comfortable and started to bet more and more.
You need to have confidence in your strategy and eliminate all emotions to really make the most of your winning days and not to do anything stupid when you have a bad day.

For me reducing the trading size and practicing was the key.
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"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #5
  • Jan 31, 2018 2:56am Jan 31, 2018 2:56am
Oh yes, psychology and self control is everything in trading. Even if you trade with EA's, and even if you invest in some fund, you are still deeply affected by your biases. And once you lose control you can get into trouble very quickly.

With discretionary trading one day you may feel like the master of the universe, the next day the sky is falling. It happens to everyone. Its part of the game, or as they say occupational hazard.

In 2015 I wrote a few things on this topic here. You may find something useful in my ramblings.
  • #6
  • Jan 31, 2018 3:18am Jan 31, 2018 3:18am
Quoting michisuperfr
{quote} I became also very quickly cautious on my winning days and on shitty days I traded like a maniac. My problem was simply fear, I was scared of giving my wins back and of cutting losses. I then started trying to slowly overcome my fears. On my winning days when I normally would've stopped trading after a win/few little wins, I continued trading with 25% of my normal size (Just to keep trading and not thinking about the money at all) After a few weeks I became a lot more comfortable and started to bet more and more. You need to have confidence...
Thanks.. I agree that somewhere, somehow it has to do with confidence..
Trouble lies in what we believe to know for sure that just ain't so.
  • #7
  • Jan 31, 2018 3:18am Jan 31, 2018 3:18am
Quoting alphaomega
Oh yes, psychology and self control is everything in trading. Even if you trade with EA's, and even if you invest in some fund, you are still deeply affected by your biases. And once you lose control you can get into trouble very quickly. With discretionary trading one day you may feel like the master of the universe, the next day the sky is falling. It happens to everyone. Its part of the game, or as they say occupational hazard. In 2015 I wrote a few things on this topic here. You...
Thank you, will definately check it out..
Ivo
Trouble lies in what we believe to know for sure that just ain't so.
  • #8
  • Edited 5:57am Jan 31, 2018 3:27am | Edited 5:57am
Quoting alphaomega
Oh yes, psychology and self control is everything in trading. Even if you trade with EA's, and even if you invest in some fund, you are still deeply affected by your biases. And once you lose control you can get into trouble very quickly. With discretionary trading one day you may feel like the master of the universe, the next day the sky is falling. It happens to everyone. Its part of the game, or as they say occupational hazard. In 2015 I wrote a few things on this topic here. You...
Awesome post (The thread) !!!
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #9
  • Jan 31, 2018 4:05am Jan 31, 2018 4:05am
Quoting ivob
I have been trading for quite a while. No problem to see what's going on, I generally read the day very well. I notice that I have some bias... when the day is easy and my profit is small or reasonable I do not want to take the risk to lose it. I should make a killing on these days but I don't. I don't trade or just very small, taking very quick profits even though I know I should let it run. On the other hand, when the day is hard, I lose some, I want to make up for it. Start trading big...and bigger. It's ridiculous, my motivation seems to be...
Hi ivob,
What you describe is something most of us have to deal with at some point, it's normal human nature based on our loss avoidance psychological bias being rather stronger than our profit maximisation one.

I suffer from pretty much the exact same mentality and I deal with it by having a daily profit target. When I reach my target, that's it for the day. If I fall significantly behind then I look to get back to scratch or a loss no bigger than my daily target. This helps to keep revenge trading urges in check; just keep trading normally until the day isn't so bad anymore and, again, then stop for the day. Just in case, have a maximum acceptable daily loss limit and if you hit that, quit for the day and allow yourself to recover emotionally. You can always get it back tomorrow if you don't let it get out of control today. It's a marathon, not a sprint, just make sure you stay in the race.

The ideal pattern I'm looking for is each day being a scratch or a target winner though in practice there has to be some losing days on the way. This best suits intraday trading with multiple trades daily but the principle can be extended to longer timeframes in an equivalent way.

The really key thing is something you have already mentioned - keep the risk control very strict. NEVER increase the trading size just to recover, inevitably one day you will martingale yourself into the mother of all losers and that will be the end of your account. All trades should be equal maximum risk. Risk control is paramount, never forget that and you'll be OK if your method has any validity.
  • #10
  • Jan 31, 2018 4:28am Jan 31, 2018 4:28am
Quoting marcmarc
{quote} Hi ivob, What you describe is something most of us have to deal with at some point, it's normal human nature based on our loss avoidance psychological bias being rather stronger than our profit maximisation one. I suffer from pretty much the exact same mentality and I deal with it by having a daily profit target. When I reach my target, that's it for the day. If I fall significantly behind then I look to get back to scratch or a loss no bigger than my daily target. This helps to keep revenge trading urges in check; just keep trading normally...
Thank you... I just can't stand myself for not taking advantage of those good days...and then see myself struggling the next day to make a big profit in a hard market.

Ivo
Trouble lies in what we believe to know for sure that just ain't so.
  • #11
  • Jan 31, 2018 4:29am Jan 31, 2018 4:29am
Quoting alphaomega
Oh yes, psychology and self control is everything in trading. Even if you trade with EA's, and even if you invest in some fund, you are still deeply affected by your biases. And once you lose control you can get into trouble very quickly. With discretionary trading one day you may feel like the master of the universe, the next day the sky is falling. It happens to everyone. Its part of the game, or as they say occupational hazard. In 2015 I wrote a few things on this topic here. You...
Nice.. I kinda know all that, I am struggling with the HOW.. ;-)
Trouble lies in what we believe to know for sure that just ain't so.
  • #12
  • Jan 31, 2018 5:56am Jan 31, 2018 5:56am
Quoting ivob
{quote} Thank you... I just can't stand myself for not taking advantage of those good days...and then see myself struggling the next day to make a big profit in a hard market. Ivo
Hi Ivo,
This is where you have to stop beating yourself up for not being perfect. Few of us are!
You don't need to take the max out of every trade and grab every opportunity that comes your way, you just have to do well enough. The market will offer you an endless stream of possibilities and you only need to take out what you need to keep you happy. It doesn't really matter if today you only end up taking 2 points out of an easy 100 point move, there will be another good opportunity along shortly and you can try to do better with that. The point is to keep plodding on, try over and over and eventually - out of dumb luck if nothing else - one will work for you.

The key - and sorry to repeat - is to control the risk. Don't let frustration, regret, revenge get to you. Just keep taking the trades with care and control, and work at getting better. Perfection you can happily leave to someone else, you only need to be good enough.

If I took all my good opportunities anywhere near perfectly, I'd have booked my total target profit for the year already by now. Sadly, I haven't, but I am happy to keep on trying and I'm not beating myself up. Nor should you.
  • #13
  • Feb 1, 2018 6:19am Feb 1, 2018 6:19am
Quoting marcmarc
{quote} Hi Ivo, This is where you have to stop beating yourself up for not being perfect. Few of us are! You don't need to take the max out of every trade and grab every opportunity that comes your way, you just have to do well enough. The market will offer you an endless stream of possibilities and you only need to take out what you need to keep you happy. It doesn't really matter if today you only end up taking 2 points out of an easy 100 point move, there will be another good opportunity along shortly and you can try to do better with that. The...
Thank you for your kind words. I do think I need to be able to let it run if there's really no reason to close. That's where the big money is.
Doing ok today, +62 pips so far while high minus low is 65 pips right now :-)
Ivo
Trouble lies in what we believe to know for sure that just ain't so.
  • #14
  • Feb 2, 2018 4:26am Feb 2, 2018 4:26am
Quoting ivob
I have been trading for quite a while. No problem to see what's going on, I generally read the day very well. I notice that I have some bias... when the day is easy and my profit is small or reasonable I do not want to take the risk to lose it. I should make a killing on these days but I don't. I don't trade or just very small, taking very quick profits even though I know I should let it run. On the other hand, when the day is hard, I lose some, I want to make up for it. Start trading big...and bigger. It's ridiculous, my motivation seems to be...
To begin with, you should understand that losing is part of the game. The rule of not trading after losses is an important detail in managing your risk.
In order to get used to this rule, make small pauses after losses, then more and more until you achieve that during a pause, you completely restore your moral strength.
If you trade profitable, then I see no reason to force yourself to trade more than comfortably.
Comfort is first of all.
Dont hurry in three situations: marriage, sex, trade.
  • #15
  • Feb 4, 2018 5:08am Feb 4, 2018 5:08am
Of course they influence, I'd say they very strongly influence the trader. Because many traders can be selfish, and because of that are suseptible to such manipulations.
  • #16
  • Feb 4, 2018 6:01am Feb 4, 2018 6:01am
Quoting Hunterr
Of course they influence, I'd say they very strongly influence the trader. Because many traders can be selfish, and because of that are suseptible to such manipulations.
Well it's mostly self-deception.. There's just this huge bias in me to trade good upportunities very small and do all or nothing when fighting the market and trying to proof myself..... for for instance I also start the day very small whereas actually the best opportunity is in the beginning of the day.. Anyway, it's a work in progress and there is progression albeit slowly
Trouble lies in what we believe to know for sure that just ain't so.
  • #17
  • Feb 4, 2018 6:13am Feb 4, 2018 6:13am
Quoting ivob
I have been trading for quite a while. No problem to see what's going on, I generally read the day very well. I notice that I have some bias... when the day is easy and my profit is small or reasonable I do not want to take the risk to lose it. I should make a killing on these days but I don't. I don't trade or just very small, taking very quick profits even though I know I should let it run. On the other hand, when the day is hard, I lose some, I want to make up for it. Start trading big...and bigger. It's ridiculous, my motivation seems to be...
if u continue trading, after 3-5 years u will come to my words. u either learn by doing [u might fail at d half way n quit] or u get help
if u cant bring together strategy+management+mental it wont work.

most try by their own n fail
so d reason brokers spend their 1/2 income to find new clients

good luck
WaBaS Where are Buyers and Sellers
  • #18
  • Edited 6:27am Feb 4, 2018 6:15am | Edited 6:27am
Quoting ivob
{quote} Well it's mostly self-deception.. There's just this huge bias in me to trade good upportunities very small and do all or nothing when fighting the market and trying to proof myself..... for for instance I also start the day very small whereas actually the best opportunity is in the beginning of the day.. Anyway, it's a work in progress and there is progression albeit slowly
You poor man... You need to think like a rich man. You let the market get inside your head and beat you down. But the market is just a reflection of self.

mr.brown was just kind enough to give you the golden goose. You should thank him.
"The fun is in the hunt. Not the kill."
  • #19
  • Feb 4, 2018 7:47am Feb 4, 2018 7:47am
This is so good to read here that all of us struggle these psychological battles. I have traded with live account now for about 3 months. I am on the plus side, but I have taken a drawdown as much as 25% and then back up to 25% from my initial account size and now I went back again 10% from my last win, so I am about +12,5% atm, but I am learning so much in this process. I have learned so much about myself and I have started to discipline myself so much more. I have changed some of my strategies to count the trades acceptable or losses acceptable, as wins can go as long as they are going. My risk management needs some work, but I am pretty strict with this anyway, just sometimes I lose it and psychology kicks in. And sometimes I just want to try out some new stuff. Usually I lose and then I promise myself never to do these foolish things again. I will continue trading as I find it a nice little hobby to have
  • #20
  • Edited 8:11pm Feb 4, 2018 7:50pm | Edited 8:11pm
Quoting ivob
Can anyone recommend some exercises, some ritual to battle this?
Ivo,

There have been some very good replies so far IMHO, but I will add my two cents worth:

First I would try to identify the source of your anxiety: is it fear of being wrong, or is it the money? (Perhaps the simplest way to find out is to place a couple of demo trades, where there's no money involved, and test your reaction). If it's the money that's the problem, then downsize your positions to a point where you're comfortable. If your strategy allows it, make as many decisions as you can at the point of entry, when your emotions are less compelling.

Second, I would ascertain exactly what parts of your exit strategy can be automated. If the exit rules are simple enough, then a TP or trailing SL might suffice; if more complex, like scaling out, then you could use an EA to execute the rules. Then simply walk away from the computer, where you can't possibly interfere. Unless your exit strategy requires that you consider new information (example: new S/R levels or candle patterns forming) as your trade unfolds, then there's no need for you to be at the computer. Of course this means that you'll also miss new entry setups, but you must weigh this up and decide whether it's worth it or not.

Finally, you might like to find yourself a trading buddy, somebody with a similar enough approach, philosophy, timetable, and native language, and who is also humble and honest enough, so that you can work effectively and harmoniously together. The idea is that you support each other, keeping each other positive, motivated, disciplined and accountable, possibly even to the point where your exits require a joint decision, if necessary. Also, two heads are often better than one, when it comes to spotting price activity and behaviour. Applications like Skype allow free computer-to-computer communication, and screen sharing, anywhere across the world, and there are 470,000 FF members for you to choose from, as a starting point. If you have a profitable strategy, and are willing to share it with a trustworthy person, then doubtless there are thousands of aspiring traders out there who would be happy to learn from you, as your apprentice partner. You could start a thread here soliciting candidates, specifying your requirements.

Good luck,
David
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