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Trading Psychology is BS

  • #21
  • Apr 12, 2008 8:13pm Apr 12, 2008 8:13pm
Well, its possible haha, but I hope not. At least I've provided some live call in the past, and my setups are easy to read too.
  • #22
  • Apr 12, 2008 8:14pm Apr 12, 2008 8:14pm
Quote
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.

I would be equating discipline and psychology too I suppose. Not so much "oh am I in the mood to trade?" as much as "I just took a $5000 loss but I'm still under my daily draw down limit and should take that breakout" or "I'm past my weekly drawdown limit and need to close some trades" or "I'm in this trade to 2% equity but this bounce is a great chance to double up! Oh man..."

Psychology is the force behind being comfortable with making uncomfortable decisions.
  • #23
  • Apr 12, 2008 8:15pm Apr 12, 2008 8:15pm
Quoting redsox326
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.
What you do is turn the system off and analyze what has happened, I'm still failing to see what that has to do with my state of mind.
The breaking of a wave cannot explain the whole sea.
  • #24
  • Apr 12, 2008 8:18pm Apr 12, 2008 8:18pm
Quoting Rabid
I would be equating discipline and psychology too I suppose. Not so much "oh am I in the mood to trade?" as much as "I just took a $5000 loss but I'm still under my daily draw down limit and should take that breakout" or "I'm past my weekly drawdown limit and need to close some trades" or "I'm in this trade to 2% equity but this bounce is a great chance to double up! Oh man..."
These are the sort of things I would try to think though before using real money and as such I would view them as part of having a comprehensive plan of attack.
The breaking of a wave cannot explain the whole sea.
  • #25
  • Apr 12, 2008 8:20pm Apr 12, 2008 8:20pm
Here is a thought, are we confusing 'trading psychology' with 'problem solving ability'?
The breaking of a wave cannot explain the whole sea.
  • #26
  • Apr 12, 2008 8:21pm Apr 12, 2008 8:21pm
I do not believe you understand trading psychology then. Believing in a poor or losing system is not necessarily good trading psychology. The concept is basically to understand that you WILL have bad trades even in the best system. You need to understand, accept and plan for this. If you let those trades hurt you mentally or influence your next trade, you have bad trading psychology.

As far as what you are saying. Anyone who blindly believes in a system to the detriment of there bank account ALSO has bad trading psychology.

I think it would be wise to read up on trading psychology before calling BS.
Que
  • #27
  • Apr 12, 2008 8:26pm Apr 12, 2008 8:26pm
I not sure of the point your trying to make. What inspired this thread was a comment on another thread, paraphrasing 'good psychology will make this into a profitable system', I say BS. Also, before anybody else gets their tits all a twist, it's a deliberately provocative title to inspire some debate, but all in good fun. Remember kids, it's only my opinion.
The breaking of a wave cannot explain the whole sea.
  • #28
  • Apr 12, 2008 8:26pm Apr 12, 2008 8:26pm
Craig, you say you would shut off the system, and then what would be making your decisions? You would, your mind, your thoughts, your decisions. You cannot make a decision with out being influenced by your personal psychology. It is possible that you are perfectly unbiased already and you can make on objective decision without ever having thought of your own personal biases, but I kinda doubt it.
  • #29
  • Apr 12, 2008 8:26pm Apr 12, 2008 8:26pm
I think Craig means that the system is what's important, not the person trading it.

Reality is reality. Psychology is, well, imaginary. So what counts is the cold hard execution of trades, which is not affected by a person's psychology.

Of course, this means there is a recipe for the entries and exits, which ultimately could be coded into software.

Bottom line: either your system works, or it doesn't. Your mentality in executing the system can only hurt you, if you fail to execute the strategy like a cyborg.

Quoting Que
I do not believe you understand trading psychology then. Believing in a poor or losing system is not necessarily good trading psychology. The concept is basically to understand that you WILL have bad trades even in the best system. You need to understand, accept and plan for this. If you let those trades hurt you mentally or influence your next trade, you have bad trading psychology.

As far as what you are saying. Anyone who blindly believes in a system to the detriment of there bank account ALSO has bad trading psychology.

I think it would be wise to read up on trading psychology before calling BS.
  • #30
  • Apr 12, 2008 8:28pm Apr 12, 2008 8:28pm
Quoting Craig
I not sure of the point your trying to make. What inspired this thread was a comment on another thread, paraphrasing 'good psychology will make this into a profitable system', I say BS. Also, before anybody else gets their tits all a twist, it's a deliberately provocative title to inspire some debate, but all in good fun. Remember kids, it's only my opinion.
Tits were not in a twist. I made a point based off of the first post in the thread.
Que
  • #31
  • Apr 12, 2008 8:33pm Apr 12, 2008 8:33pm
Quoting tdion
Reality is reality. Psychology is, well, imaginary. So what counts is the cold hard execution of trades, which is not affected by a person's psychology.

Of course, this means there is a recipe for the entries and exits, which ultimately could be coded into software.
This is the point. If there were such a definitive system then an EA could and would be programmed to execute without fail. As such a system does not exist. Trading psychology is absolutely necessary. Human emotion plays a part in every trade you execute manually. This is unavoidable. The object is to it make it have the least impact as possible given that you can not remove it entirely.
Que
  • #32
  • Apr 12, 2008 8:35pm Apr 12, 2008 8:35pm
Well what advantage is it to bring psychology into the picture? In other words, are you trying to imply that trading without EAs removes luck? Just asking...

Quoting Que
This is the point. If there were such a definitive system then an EA could and would be programmed to execute without fail. As such a system does not exist. Trading psychology is absolutely necessary. Human emotion plays a part in every trade you execute manually. This is unavoidable. The object is to it make it have the least impact as possible given that you can not remove it entirely.
  • #33
  • Apr 12, 2008 8:37pm Apr 12, 2008 8:37pm
There can be advantages to using an EA but can you tell me how you plan to create an EA system completely bias free?
  • #34
  • Apr 12, 2008 8:37pm Apr 12, 2008 8:37pm
Quote
These are the sort of things I would try to think though before using real money and as such I would view them as part of having a comprehensive plan of attack.

Of course you think thru them, that's the whole part of having a money management strategy. But it takes discipline and a strong psychology to follow that strategy despite the emotional drive to do the exact opposite.

When a person takes a loss they instinctively react, usually it's a bad reaction. When a person takes a gain they do the same, and it's usually bad too. Having the discipline to stick with your game plan is what good psychology is all about.

Quote
Here is a thought, are we confusing 'trading psychology' with 'problem solving ability'?

I smell a tint of autism or asperger's in that question... =)

Quote
I not sure of the point your trying to make. What inspired this thread was a comment on another thread, paraphrasing 'good psychology will make this into a profitable system', I say BS. Also, before anybody else gets their tits all a twist, it's a deliberately provocative title to inspire some debate, but all in good fun. Remember kids, it's only my opinion.

Nod, and it's certainly a good debate. Obviously good psychology can't turn a negative expectancy into a positive one... just like having good money management can't magically turn a loss into a profit.

But even if you've tested the crap out of your system and know for certain that if properly played exactly as designed the system has a positive expectancy and a low enough drawdown to survive the bad times doesn't mean that anyone can just come along and make that system work. A lot of people will not have the emotional discipline to overcome the mental challenges of variable rewards and punishment, they simply will not be able to follow the rules well enough and will have a negative expectancy regardless of their system edge.
  • #35
  • Apr 12, 2008 8:42pm Apr 12, 2008 8:42pm
Quoting tdion
Well what advantage is it to bring psychology into the picture? In other words, are you trying to imply that trading without EAs removes luck? Just asking...
I am implying without an EA you can make bad decisions.

Take your son (If you have one). Watch a young child play a video game. Sooner or later they are going to make a mistake on a hard level. The emotional maturity of the child will dictate the results. But more times then not that child will get more upset and make more mistakes each time they attempt that level eventually giving up.

This is not uncommon. Adults tend to have the same problem when dealing with stressful situations dealing with money specifically. They will make a mistake, but not have the mental discipline to look at that mistake rationally and proceed to make the mistake over and over while compounding on the mistake they have originally made.

Mental discipline is really what trading psychology is really about.
Que
  • #36
  • Apr 12, 2008 8:43pm Apr 12, 2008 8:43pm
Quote
But even if you've tested the crap out of your system and know for certain that if properly played exactly as designed the system has a positive expectancy and a low enough drawdown to survive the bad times doesn't mean that anyone can just come along and make that system work. A lot of people will not have the emotional discipline to overcome the mental challenges of variable rewards and punishment, they simply will not be able to follow the rules well enough and will have a negative expectancy regardless of their system edge.

Well said
  • #37
  • Apr 12, 2008 8:55pm Apr 12, 2008 8:55pm
Quoting redsox326
Well said
Agreed
Que
  • #38
  • Apr 12, 2008 9:11pm Apr 12, 2008 9:11pm
Quoting Craig
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...

I agree, it's about the system, analysis, and money management. Psychology has very little do with it. Put it this way...how many people fail on a diet? Hundreds of thousands every year. They didn't fail because they had the right psych, they failed because they didn't follow the system, didn't do their analysis, or failed in dietary management.
  • #39
  • Apr 12, 2008 9:16pm Apr 12, 2008 9:16pm
Quoting GulfCoastPip
I agree, it's about the system, analysis, and money management. Psychology has very little do with it. Put it this way...how many people fail on a diet? Hundreds of thousands every year. They didn't fail because they had the right psych, they failed because they didn't follow the system, didn't do their analysis, or failed in dietary management.
They fail because they lacked the willpower to succeed and follow through with the plan they set forth. If the plan was a bad plan then they lack the mental discipline to not blindly follow a system but instead chose to believe in miracles.

Every decision we make has a large part of mental makeup to it. Can I do it? Should I do it? Am I right? Are you right? What if xxxxxx? etc...

All of this falls into mental discipline and mental discipline falls into psychology. Trading Psychology or general psychology is an irrelevant term. It is all about your discipline to appropriately control your emotions in a stressful situation and follow through with your plan.
Que
  • #40
  • Apr 12, 2008 9:19pm Apr 12, 2008 9:19pm
For the record. This is not to say mental discipline (Psychology) can improve a losing system. But it will prevent you from turning a wining system into a losing one because you were unable to control your emotions when you took a couple bad hits.
Que
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