Something most traders miss... (psychology) | Forex Factory

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Something most traders miss... (psychology)

  • #1
  • First Post: May 18, 2007 10:36am May 18, 2007 10:36am
I have talked with many traders and a lot of them are like " WHATS THE BEST STRATEGY!?" .... the answer is re-wiring your mind ... if your success comes from 50% of your mind or probably even more... and the rest would be money management and following your plan ... then why don't most traders focus on healing their minds? you cannot expect to become a pro after so many years of crap in your mind... we all have a echo of perception which means are past affects the present so we're constantly in reaction until we go into the sub concious mind and detach our selfs from events in the past... anyone follow what I'm saying ? study our minds more then the set up and stuff
  • #2
  • May 18, 2007 10:47am May 18, 2007 10:47am
I belive trading has to do a lot with your inner self and your mind plays a big role in it. Try Dr. Maxwell Maltz's Psycho Cybernetics, great book to get if you are interested in the study of what he calls: "auto success mechanism".
  • #3
  • May 18, 2007 11:56am May 18, 2007 11:56am
Couldn't agree more, psychology is a huge factor. I'm still working on myself. It's sometimes ruff to detach emotions from trading. Like today I didn't even trade because of self doubt, although a coupe days with no sleep might have been a contributing factor. I tried running and mountain biking to change my frame of mind but even those didn't truly snap me out of my emotions, although it did help. I do have faith in my system of trading, but doubt causes me to pull the trigger too soon or late.

It's the hardest part for me personally working on myself. There's so many things from our past that can interfere with our trading. I've often talked with my father about it, also a new trader, although he has a year on me. He still suffers from some of the same issues as myself. Self worth (doubt) being one of the bigger ones for me, often causing me to get out of trades too soon. At least I have have 1/2 of that issue mostly taken care of I have no problem cutting my loses, I just need to learn to let the winners run. I've been focusing on some exit strategies to help my trading more mechanical. But I know it will take time to over come these obstacles.
  • #4
  • May 18, 2007 12:07pm May 18, 2007 12:07pm
yeah , me too , I'm luckily only 18 years old but I've had a lot of shit that has hurt me in my childhood and I am trying to get on good terms with all that because it's affecting my self-worth A LOT ... I hate it .. I am almost always right of which way the market is going and yet I doubt myself ... Like yesterday, I was going to trade the CHF and EUR but I doubted myself and it cost me 60 pip profit ...

oh yeah, just cause I'm 18 doesnt mean anything , I've been studying and trading full time since I was 15

we have to realize that blocking out emotions is impossible ,
we have to learn to control our actions not emotion because the action is the thing that makes the trade...it's ideal to have a plan to manage emotions while trading so that u don't trade on a set up that isnt yours ...

if we try to control our emotions that well actually lead to a lot of suppressed feelings and eventually will be thrown into a bunch of compulsion and impulse trades ...

as for the book, I will look at that and thanks a lot for the tip !
  • #5
  • May 18, 2007 1:38pm May 18, 2007 1:38pm
Try the articles at this site:

http://www.brettsteenbarger.com/

The guy knows what he is talking about in both Psychology and trading.
sans peur et sans reproche
  • #6
  • May 18, 2007 1:55pm May 18, 2007 1:55pm
Quoting ilanr
Try the articles at this site:

http://www.brettsteenbarger.com/

The guy knows what he is talking about in both Psychology and trading.

I have his book... highly recommended.

For me, trading is at least 90% psychology. I know how to trade for profit, but I'm just now learning how to let myself trade for profit.
  • #7
  • May 18, 2007 2:08pm May 18, 2007 2:08pm
Quoting AggieTrader
I have his book... highly recommended.

For me, trading is at least 90% psychology. I know how to trade for profit, but I'm just now learning how to let myself trade for profit.
Trouble is, you can only get to grips with the whole psychology thing by trading with real money. There's no substitute for experience.
  • #8
  • May 18, 2007 2:09pm May 18, 2007 2:09pm
Quoting Castlemain
Trouble is, you can only get to grips with the whole psychology thing by trading with real money. There's no substitute for experience.
Start small and build up slowly - best to 'discover' yourself with losses that won't be too painful...
  • #9
  • May 18, 2007 2:18pm May 18, 2007 2:18pm
i think the mental side of trading is a lot more simple than it's made out to be. once you have a true understanding of probability theory, the mental side of the game follows naturally. once you realize how cold of a bitch probability is, you understand it doesnt help to throw your emotions into the mix.
Relax and be happy.
  • #10
  • May 18, 2007 2:30pm May 18, 2007 2:30pm
Quoting merlin
i think the mental side of trading is a lot more simple than it's made out to be. once you have a true understanding of probability theory, the mental side of the game follows naturally. once you realize how cold of a bitch probability is, you understand it doesnt help to throw your emotions into the mix.
That's very true. It's kinda like you have to learn to give up the struggle. Once you realize the market is as it is... pips begin to flow. Once I stopped fighting the damn current and just went with it... my world changed.

Also agreed that you can really only learn this from real money... a $300 mini account will teach more than a $50,000 (as far as the mental side of things).
  • #11
  • May 18, 2007 4:00pm May 18, 2007 4:00pm
Quoting merlin
i think the mental side of trading is a lot more simple than it's made out to be. once you have a true understanding of probability theory, the mental side of the game follows naturally. once you realize how cold of a bitch probability is, you understand it doesnt help to throw your emotions into the mix.
I agree, and would take this further. Psychology shouldn’t be an issue.

The Blackjack pros of the 1980’s knew that counting cards gave them, at best, a 0.5% edge over the house, and any lapse in discipline (i.e. rigidly following their gameplay formula) would destroy that edge, and make the hours and hours of dedicated card-counting practice a complete waste of time.

They weren’t swayed by hunches or emotion, simply because they knew their formula had proven mathematical backing, they kept their bet size small relative to total bankroll, and they played with money they could afford to lose.

Hopefully the parallel with trading should be obvious.

I suspect that many folk say that trading is “all about psychology” because the reality is that they don’t have a method of entry and exit that gives them a demonstrable edge. Exit demands that the brain make a decision while there is money at risk, and if there is anything less than total confidence in a clearly defined method, then the decision must come from elsewhere.

Very simply, if my method has no objectively provable edge, then I'm only guessing.

I also suspect that many also fail because they’re not prepared to wait several years to reach financial freedom, hence they start undercapitalized relative to the position sizes that leverage allows them to take. Positions should be sized small enough to allow emotional detachment. Scared money never wins.

Gil Blake, interviewed in Jack Schwager’s New Market Wizards (Harper Business, 1992), attributed his success to the following formula (see p 248):

1. Focus on trading vehicles, strategies, and time horizons that suit your personality.

2. Identify non-random price behavior, while recognizing that markets are random most of the time (hence Merlin's statement that probability is indeed a cold bitch).

3. Absolutely convince yourself that what you’ve found is statistically valid.

4. Use this to set up trading (entry and exit) rules.

5. Follow these rules.

It is both as simple, and as difficult, as that.

David
  • #12
  • May 18, 2007 4:18pm May 18, 2007 4:18pm
Here's the Paradox.
Trading in general, nevermind the vinegar acidity of Spot Currencies, attracts those of us that believe we can be successfull at anything we put our mind to. Some would say; those that consider themselves Winners.

So how does a Winner feel when s/he is 100Pips in the hole? Does s/he feel like a Winner?
Depends: {not the garment although sometimes...}
Is the Account Up 1,000Pips overall? Or, is the account now down 50Pips.

The toughest part for a Winning Trader to assimilate is the Fact that they will not Win them all. That occasionally, even, they will be a Loser.
So, in fact, to be a Winner in this game, it is crucial that you learn how to handle the loser.
Handling it on the Money side is easy. At least the math is.
Handling it on the Mental side is a little more complex.
Math is a science and therefore absolute.
The Mental side has to accomodate for errors and accept it.
Try measuring your errors as a method of tracking your success rate.
Less errors this month v last month = progress.

As Diallist has repeated to this type of question numerous numerous times.

Measure youre results over the long haul
  • #13
  • May 19, 2007 9:37am May 19, 2007 9:37am
Quoting merlin
i think the mental side of trading is a lot more simple than it's made out to be. once you have a true understanding of probability theory, the mental side of the game follows naturally. once you realize how cold of a bitch probability is, you understand it doesnt help to throw your emotions into the mix.
Merlin, if things were so simple, most of my colleagues the shrinks would be unemployed. Most people with addiction problems have perfect understanding of the probabilities for earlier deaths [for binge eaters, smokers, alcoholics, substance addicts, etc.], losing all their money [gamblers, shopping and substance addicts, etc], or other negative outcomes. Yet, they persist in their disfunctional and, frequently, self-destructive behaviors. These behaviors, for some people, are so deeply rooted in their emotional and/or cognitive "wiring" that huge efforts are needed to change them.

Take me as an example. I'm a social psychologist, and I probably know most of the theories in the fields of self-control, as well as judgment, decision-making, etc. In addition, I'm a specialist in statistics/probability theory, using/teaching it every day for 25 years. I have a sound, thoroughly back- and forward- and sideways-tested trading system. Yet, I'm still not earning all the money I should because of this "simple" problem: trading impulsively / not according to my own rules...
sans peur et sans reproche
  • #14
  • May 20, 2007 3:32pm May 20, 2007 3:32pm
Quoting ilanr
Merlin, if things were so simple, most of my colleagues the shrinks would be unemployed. Most people with addiction problems have perfect understanding of the probabilities for earlier deaths [for binge eaters, smokers, alcoholics, substance addicts, etc.], losing all their money [gamblers, shopping and substance addicts, etc], or other negative outcomes. Yet, they persist in their disfunctional and, frequently, self-destructive behaviors. These behaviors, for some people, are so deeply rooted in their emotional and/or cognitive "wiring" that huge efforts are needed to change them.

Take me as an example. I'm a social psychologist, and I probably know most of the theories in the fields of self-control, as well as judgment, decision-making, etc. In addition, I'm a specialist in statistics/probability theory, using/teaching it every day for 25 years. I have a sound, thoroughly back- and forward- and sideways-tested trading system. Yet, I'm still not earning all the money I should because of this "simple" problem: trading impulsively / not according to my own rules...
Great thread everyone.

I think that the impact of psychology in trading is significantly reduced if you see the consistency you have spotted in the market (i.e. your trading edge/strategy/system) occur time and time again. The stronger the pattern, the more focussed you are on it, the more likely you are to keep to it.

The surer you are of your system, and importantly, the more familiar and experienced you are with it, the less likely you are to trade impulsively, simply because you are absolutely clear about what is a good entry/exit and what is a bad one.
  • #15
  • Edited 3:57pm May 20, 2007 3:55pm | Edited 3:57pm
I am not a professional trader, but aspire to become one. My ability to overcome the psychological issues associated with trading professionally is therefore unproven. I am naturally cautious and don't have a gambling instinct.

As such, I have developed a trading system/strategy that will allow me to trade and continue to successfully fulfil the requirements of my day job (which I enjoy tremendously).

I consider this to be my edge. I can trade without the psychological burden of being dependent on my trading for my livelihood. It's my hobby and will remain so until (if ever) the financial rewards of trading significantly outstrip that of my day job.
  • #16
  • Last Post: May 20, 2007 5:22pm May 20, 2007 5:22pm
good for you castlemain, creating a system is pretty challenging , I created my own too but I'm 18 so I had 3 years ( i started young) to prepare myself... real kudos to the guys that have full time jobs and are striving to do the forex!
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