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Trading Psychology is BS

  • Post #1
  • Quote
  • First Post: Apr 12, 2008 8:05pm Apr 12, 2008 8:05pm
In the spirit of tdion, I would like to have my own Sunday rant thread.
Here is my proposition, trading psychology is BS. You either have a edge or you don't, thinking a certain way about a losing trading system won't somehow magically transform your expectancy, either your system works or it doesn't. Flame away...
The breaking of a wave cannot explain the whole sea.
LOL

the trading edge you have IS your trading psych. There are plenty of people who can be shown a valid trading strategy to minimize risk and increase trade probabilities. The point is that your psych is precisely what lends you the discipline to follow your system accurately.

Most new traders i have ever met go through a lot of the same steps to getting it. They cut their profits short and let their losses ride. Winning trade:cut your losses short and let your profits ride.

If you dont have the psych, you might just sabotage the edge that your system might have.
binary people
And my argument is that any set of rules can be coded into a computer program, and executed WITHOUT psychology.

But that would be too rational, wouldn't it? We like to use words like "discretion" and "psychology" to convolute the process.

The fact is, if we are exploiting weakness (an "edge") then we aren't gambling, we are simply betting on a cause effect situation.

And when we don't have a cause/effect criteria, we are gambling.
Quoting Piitb
Winning trade:cut your losses short and let your profits ride.
I would contend this should be part of your system, not part of your psychology.
The breaking of a wave cannot explain the whole sea.
Quoting tdion
And my argument is that any set of rules can be coded into a computer program, and executed WITHOUT psychology.

But that would be too rational, wouldn't it? We like to use words like "discretion" and "psychology" to convolute the process.

The fact is, if we are exploiting weakness (an "edge") then we aren't gambling, we are simply betting on a cause effect situation.

And when we don't have a cause/effect criteria, we are gambling.
I my view, you are basically correct.
We search for a method, not a psychology.
The breaking of a wave cannot explain the whole sea.
Quoting Craig
I would contend this should be part of your system, not part of your psychology.
Excellently put.

My point is that when people talk about your trading psychology, they are referencing your discipline to a certain degree to follow your system. I would assert that it is not the only function of psych.

example. You have a rule regarding stop loss. price turns against you and you really think that this thing is going your way. And guess what......you are right! but you got stopped out. Bad trading psych would be to move your stop and profit. It creates a bad habbit. then down the road a bit you have a flaw in your psych. You do not have total confidence in your system because it took your powers of analysis to modify the system. This time you move your stop and price goes against you and you get railed.

Frustrated and upset you fail to see the counter trend setup going the opposite direction. Regardless of the win loss ratio of your trades based on you changing your stop from your system guidelines, You miss equity inherent in the next move.
ahhh now I can see what you guys trying say hahaha. I suppose you both (craig & tdion) doesn't need any answers . Its refreshing piece of mind tho
Laff. Of course if every time you take a loss you take it personal you won't be so willing to take the next trade... even if the odds are in your favor. And of course if you're excited about your next trade it's easy to forget about money management all together and poof... here comes the drawdown.

Sure you need an edge, but the brain still has to pull the trigger (hence the appeal of a purely mechanical system).
Quoting Craig
I my view, you are basically correct.
We search for a method, not a psychology.

It sounds to me like you take discipline for granted. Guaranteed discipline is the reason most traders fail.
I take your point, but I think the definition of 'psychology' is becoming a bit blurred, we all know the situation which you describe, the 'newb revenge trade', but is that psychology or inexperience?
The breaking of a wave cannot explain the whole sea.
Quoting Piitb
Guaranteed discipline is the reason most traders fail.
Can you expand on what you mean here?
The breaking of a wave cannot explain the whole sea.
dito that's the scientist in me.

There are folks on this forum that talk about trading based on astrology. Introspection. "The chart told me to do it." Give me a break.

IMHO, relying on yourself is a recipe for disaster. Check this out:

http://www.forexfactory.com/showthread.php?t=62076

Without an unbiased view of your trades, your confidence will be devasted in losing streaks. You will want revenge for losses. You will question your trading abilities.

In fact, I think "trading abilities" should be removed from our vocabularies.

Remember good old Jesse Livermoore? He wasn't relying on what looked good.... he was memorizing number patterns (prices) and trading off of those.... which in those days (the 20s) was an inefficiency. By the way, for all those that worship Livermoore, read about his death at Wikipedia and see how happy the guy was with all his trading success.

Quoting dito
ahhh now I can see what you guys trying say hahaha. I suppose you both (craig & tdion) doesn't need any answers . Its refreshing piece of mind tho
Dont be offended by me asking you how long you have been trading live and if you do it for a living.

Not trying to get petty with you. I think unless you are trading a algorithmic auto system. You have to work your system( if you even have one{and i mean the universal you, not YOU} meaning you have to obey your own rules, and implement your strategies. There are so many different setups qualified in so many different ways, it is always up to your own judgement whether you take the trade. This in turn means are you confident enough to take the trade. Which in turn begs the question are you scared? If you are you will watch the trade go by and be upset about it. On the other hand. If you are over confident you can get hammered in a false sense of command from a system that workd in a consolidating market.

Blah blah blah. My point is discipline is psych. you can disagree if you choose. And in a market that takes analysis and judgment you cannot be scared. You will lose discipline
  • Post #16
  • Quote
  • Edited 9:02pm Apr 12, 2008 8:52pm | Edited 9:02pm
Well, both samples aren't what in my view about relying on ourself. To know ourself well, our weaknesses and strength, and exploit these intrinsic to gain something, is what I call as relying on ourself. (and you know, sometimes we can exploit these traits on other people too

Here's some of my view, and it never changes till now. It will change when it need to be change.

http://www.forexfactory.com/showthre...70#post1440070

http://www.forexfactory.com/showpost...7&postcount=95

http://www.forexfactory.com/showpost...&postcount=102
You're on your own buddy list, dito? lol
Quoting Piitb
Dont be offended by me asking you how long you have been trading live and if you do it for a living.

Not trying to get petty with you. I think unless you are trading a algorithmic auto system. You have to work your system( if you even have one{and i mean the universal you, not YOU} meaning you have to obey your own rules, and implement your strategies. There are so many different setups qualified in so many different ways, it is always up to your own judgement whether you take the trade. This in turn means are you confident enough to take the trade. Which in turn begs the question are you scared? If you are you will watch the trade go by and be upset about it. On the other hand. If you are over confident you can get hammered in a false sense of command from a system that workd in a consolidating market.

Blah blah blah. My point is discipline is psych. you can disagree if you choose. And in a market that takes analysis and judgment you cannot be scared. You will lose discipline
I've been trading live for about 3 years and no I don't make a living off it, but do make profit, it's taken me all this time just to get to the small profit stage. I do use automatic systems. I derive my confidence in what I do by making sure I have done everything I can before I start trading, not by getting in the right mood. Point taken though, you equate discipline with psychology.
The breaking of a wave cannot explain the whole sea.
Quoting dito
Well, both samples aren't what in my view about relying on ourself. To know ourself well, our weaknesses and strength, and exploit these intrinsic to gain something, is what I call as relying on ourself. (and you know, sometimes we can exploit these traits on other people too

Here's some of my view, and it never changes till now. It will change when it need to be change.

http://www.forexfactory.com/showthre...70#post1440070
http://www.forexfactory.com/showpost.php?p=1728424&postcount=102
http://www.forexfactory.com/showpost...7&postcount=95
It looks like you have the potential to be FF's Jack Hershey.
The breaking of a wave cannot explain the whole sea.
It is for most people common knowledge that trading is made up of three major pillars. The most important is your own personal psychology. The next most important is Position Sizing also known as Money Management. And the least important of all is your Method. This is the absolute truth of trading. Psychology by definition means: The study of the mind and mental processes, especially in relation to behavior. This essentially covers every facet of the three pillars. "Trading Psychology" is the part that you have to deal with while you are in a position. The rest of trading is also psychological. When developing a system there are biases to overcome. Even when trading a computer programmed system you must realize that there are psychological biases that you are dealing with. Trading is ultimately a psychological profession because it is an intellectual pursuit, and one must deal with their reoccurring behaviors. If any one of you believe that you can develop a system, create a proper money management plan, and then trade it live, without addressing your own personal psychology, is in for a rude awakening down the road.

One more thing, some people that were saying Psych is not important for an automated system, i do not agree with that. First one must deal with the subconscious biases that come about when developing the method. If you can eventually make a semi-reliable edge, then you might at first think you are good to go. What happens however if you check a trade the computer put on, and SOMETHING HAS GONE WRONG! What do you have to do, how do you react. If you do not rehearse these situations, if you do not know your personal psychology, then you stand no chance whether you trade an automated system or not.

Sorry for the long post but I honestly hate to see people spreading information like this, honestly it is impossible for human beings to operate without psychology being an issue.
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