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'Try to Lose Money' Experiment

  • #1
  • First Post: Mar 4, 2007 10:35am Mar 4, 2007 10:35am
Has anyone done this yet? I'm sure it has crossed people's minds before or been done.

This kind of experiment could shed great insights into one's own psychology and if done by several people we could learn about some universal problems in our trading psychology. We would do this on a demo account, though as with all lab experiments we would have to carefully correlate the results with reality. Though the fact that no real value of money is riding on this will make the experiment more powerful in describing trading psychology!

I guess the easiest way to lose money is by the spread, so that would have to not count. We could invert the spread or not count it at all.

We would also have to divide testers by their real trading records. People who lose money due to weak psychology, poor risk management, and poor understanding of the market would have to be distinct from those who have been consistently successful. We will say the former is Group A and the latter is Group B. We could also have a third group of people who have never traded at all.

My hypothesis is this: When Group A tries to lose money, most will be able to lose money! When Group B tries to lose money, they will also be able to lose money!

If this hypothesis is proved true, then it would certainly be great evidence in asserting the power of psychology in trading. You would think that it would be easy to invert your losing methods and become successful, but of course it is not that easy exactly because psychology is so powerful that we cannot conquer it merely with knowledge of it. Fears and desires are like intoxicants, you are no longer able to use your knowledge under their influence. It takes discipline, and methods of discipline, to conquer our fears and desires.

Process: I am going to see how fast I can blow out a $50,000 demo account. I would have to differentiate whether or not I am going to use poor risk management or just try to make bad trades based on inverting a method. I could easily take a humongous lot and close it as it moves enough pips to cover an inverted spread and more in the wrong direction. But this is exactly what some people do when they try to win, so perhaps I should let my losses run! Hmm....

One test wont be enough, I'll have to do this several times over a period of time to truly see if I can consistently blow out an account. I will think of a criteria to write down my thoughts and feelings as well as some emperical data. Then, at least for myself, I will be able to understand how my psychology can hurt me.

Any inputs? Thanks
  • #2
  • Mar 4, 2007 10:52am Mar 4, 2007 10:52am
I've thought, at several times during my learning phase, that I could do exactly what I most thought I should in my demo account, and do the opposite in my real account.

But I was pretty sure that would hijack my learning process. Maybe not, maybe it would have lead to the "aha!" sooner.

It might be a real eye-opener to do your best to lose. Get it out of your system. See how it feels to take win on a loss, and get frustrated when it makes money.
  • #3
  • Mar 4, 2007 10:59am Mar 4, 2007 10:59am
Quoting blueruby
I've thought, at several times during my learning phase, that I could do exactly what I most thought I should in my demo account, and do the opposite in my real account.

But I was pretty sure that would hijack my learning process. Maybe not, maybe it would have lead to the "aha!" sooner.

It might be a real eye-opener to do your best to lose. Get it out of your system. See how it feels to take win on a loss, and get frustrated when it makes money.
Thanks for the comments.

I wonder whether or not the psychology would be inverted as you say. I don't think it would be, because while I would be trying to lose, seeing +2355 wouldn't make me unhappy! It would still have that tingle of happiness, I know it sounds strange. I think the success of the experiment would need one not to have an inverted psychology and eagerly desire to lose, rather you would have to approach it in a playful way where you have no desire to lose or gain rather you just want to lose for fun. 'Completely Carefree' is a better word. I don't think you can approach demo trading carefree when you are trying to gain, but you can when you are trying to lose.
  • #4
  • Mar 4, 2007 11:32am Mar 4, 2007 11:32am
To lose money intentionally in real trading is as difficult as to make them only if to apply the same money management strategy. Trading on demo account has nothing to do with psychology.
  • #5
  • Mar 4, 2007 11:34am Mar 4, 2007 11:34am
Personnally I think that "psychology" has absolutely, positively, NOTHING to do with winning in the forex market.

To make money trading you need two things, and two things only:

1/ A backtested forex system that gives you a mathematical edge.
2/ Enough money in your account, at least twice the maximum drawdown.

Then as soon as your system signals a trade you simply place your bet, simple as that, psychology has nothing to do in that matter.

Do casino or race track owners need "psychology" or "discipline" to make billions over the years? No, they just need a mathematical edge to consistently fatten their bank accounts, day after day, month after month, year after year, period and end of story !!

This discipline-psychology-in the zone-zen-mumbojumbo is way overrated and I am sick of reading about it in every darn technical analysis book.
  • #6
  • Mar 4, 2007 11:38am Mar 4, 2007 11:38am
Quoting FXTerminator
Personnally I think that "psychology" has absolutely, positively, NOTHING to do with winning in the forex market.

To make money trading you need two things, and two things only:

1/ A backtested forex system that gives you a mathematical edge.
2/ Enough money in your account, at least twice the maximum drawdown.

Then as soon as your system signals a trade you simply place your bet, simple as that, psychology has nothing to do in that matter.

Do casinos or race track owners need "psychology" or "discipline" to make billions over the years? No, they just need a mathematical edge to consistently fatten their bank accounts, day after day, month after month, year after year, period and end of story !!

So in my opinion this discipline-psychology-in the zone-zen-mumbo-jumbo is way overrated and I am sick of reading about it in every darn technical analysis book.
Every single act you do has a psychological aspect.
When you see -50 on your P/L and you feel a cringe and a terror inside you, that is psychology at work. When you see +20 and you feel a tingle of joy that is psychology. To not feel those things or to keep them in control means you are withdrawn from the act. The point of all this psychology talk is: when you are withdrawn, you can make better decisions.
  • #7
  • Mar 4, 2007 11:43am Mar 4, 2007 11:43am
Quoting Igrok
To lose money intentionally in real trading is as difficult as to make them only if to apply the same money management strategy. Trading on demo account has nothing to do with psychology.
That's what this test will try to determine. The irony is that it seems easy to lose money, but if its easy to lose money in theory it should be easy to gain money! Of course this is not true, so we should determine why.

If a person is trying to lose money, then trading becomes a farce for which you have no emotions invested. So having no fear/desire forces would be correct. This would be used as a juxtaposition to understand real trading where fear/desire play a huge part.
  • #8
  • Mar 4, 2007 11:46am Mar 4, 2007 11:46am
Quoting zamakhtar
The point of all this psychology talk is: when you are withdrawn, you can make better decisions.
I think you are missing the whole point.

When your system tells you to buy/sell with a specific pre-calculated limit/stoploss, you simply place the trade, end of story.

Being happy or sad or high or drunk while you place the trade is TOTALLY irrelevant, just place the darn trade. Then repeat this simple process again during the next 1000 trades.
  • #9
  • Mar 4, 2007 12:08pm Mar 4, 2007 12:08pm
Quoting Igrok
To lose money intentionally in real trading is as difficult as to make them
Excellent point, but this is true only if the spread is zero.

If the spread is not zero then the fastest way to lose money is to set your target limit at 1 pip and your stoploss at 20, 50, 100 or more pips.

In all my years of backtesting forex systems, this way of trading has proven to blow up accounts faster than anything else.
  • #10
  • Mar 4, 2007 12:17pm Mar 4, 2007 12:17pm
Quoting zamakhtar
I am going to see how fast I can blow out a $50,000 demo account.
I salute your sense of humor... and I know that I'll be keeping track of your descent to zero.

But in terms of real trading, FXTerminator is right (except, perhaps, managing a long-term winning trade). But if you're an intra-day trader, as the Terminator says, it's pretty cut and dry.

For example, a successful EA doesn't need no stinking psychology - and neither should you. A decent system that's chained to discipline is all you need.
  • #11
  • Mar 4, 2007 1:10pm Mar 4, 2007 1:10pm
no psychology in trading? That's like saying people are emotionless beings

How many times have you gone to racetrack and see the people sitting still and watch the races go by calmly? How many times people simply sit around calmly around the roullette table while watching their 5th straight winner or losing bets. How many times you've seen pit trader go wild with emotions when a major market movement occur (and these are the usual players in the market who is actually making money off of it) How many times have you seen people moved by simply watching television, real accidents..etc. etc. etc.

We are HUMAN beings. We are embedded with emotions for SURVIVAL. Emotions help us relate to others and it helps guide us towards our goals in life. Without emotions, we are not capable of love, hate, or even serenity.

True, that success in trading depends on that edge, but o completely disregard psychology is just blatant. I know I read it here that to be successful in trading is to trade without emotions, in other words, emotions are the major cause of failure IS A MYTH. So they would say, trade without emotions, as if we're the EA's themselves :-)

There is no way in the world one can elimante emotions, but you can CONTROL it. When people say that emotions cause failure in trading is because you GIVE INTO these emotions. I've had my share of roller coaster moments as I trade. I feel quite excited watching trades go up, and feel quite disturbed when trades go down. But you should NEVER give into these fear, greed, jubiliation etc. on your trades. THAT is psychology in action because you are showing control over yourselves and able to take rational decisions

I believe following your plan and if that plan has the edge you will be successful in trading. I'ts fine to have emotions when you check on your trades, that's normal. But when act out your emotions (greed, anger, fear, etc.) that's when it becomes a problem. It takes 'skill' to control your emotions. There has many time i've think about kicking somebody's ass cause the way they act, but of course I don't do it or act on that urge. That's how you should treat your trading.
  • #12
  • Mar 4, 2007 1:29pm Mar 4, 2007 1:29pm
Quoting hilmy83
no psychology in trading? That's like saying people are emotionless beings

How many times have you gone to racetrack and see the people sitting still and watch the races go by calmly? How many times people simply sit around calmly around the roullette table while watching their 5th straight winner or losing bets.
Have you ever seen a casino owner (let's say Donald Trump) losing his temper and crying like a baby because someone is winning at the roulette table?

Yes we are humans, but if you have a good trading system either you follow the signals or you don't.

Because if you don't then you (not you hilmy) are a loser and trading is not for you, for me it IS that simple.

The only problem that do require psychology is when you have to decide what to do with all that freaking money you are winning on the forex hahahaha :-)
  • #13
  • Mar 4, 2007 2:11pm Mar 4, 2007 2:11pm
Quoting FXTerminator
Have you ever seen a casino owner (let's say Donald Trump) losing his temper and crying like a baby because someone is winning at the roulette table?

Yes we are humans, but if you have a good trading system either you follow the signals or you don't.

Because if you don't then you (not you hilmy) are a loser and trading is not for you, for me it IS that simple.

The only problem that do require psychology is when you have to decide what to do with all that freaking money you are winning on the forex hahahaha :-)
of course you never see them losing tempers and all..cause they got their emotions under control..that's why they're the casino owners :-)

But hey, it's the emotions that we feel inside that I'm talking about. I just cannot believe anyone can eliminate their emotions completely. Some express it, and some really negatively affected by it
  • #14
  • Mar 4, 2007 3:09pm Mar 4, 2007 3:09pm
Quoting FXTerminator
Excellent point, but this is true only if the spread is zero.
The statistics that I have shows that only about 40-45% of the traders' losses should be attributed to the spreads. The rest is lost because of the wrong market decision making.
  • #15
  • Mar 4, 2007 3:30pm Mar 4, 2007 3:30pm
Quoting zamakhtar
That's what this test will try to determine. The irony is that it seems easy to lose money, but if its easy to lose money in theory it should be easy to gain money! Of course this is not true, so we should determine why.

If a person is trying to lose money, then trading becomes a farce for which you have no emotions invested. So having no fear/desire forces would be correct. This would be used as a juxtaposition to understand real trading where fear/desire play a huge part.
With meditation u can minimize the fell of anger or greed,...but this teory should be a good example of how to stay focus...so before u enter u should look for both sides thats what ur tread is all about,...but there are different time frames, so its confusing even without this teory,...but at the begining, i did do that... after u achive some deep knowledge of market acts, ....

u know why?
because u need to hurt someone for u to win in 90% of the trades,...se its easy...but its easier not to...so thats why...lol
its just money
  • #16
  • Mar 4, 2007 11:37pm Mar 4, 2007 11:37pm
Quoting Igrok
The statistics that I have shows that only about 40-45% of the traders' losses should be attributed to the spreads. The rest is lost because of the wrong market decision making.
Igrok my friend, where did you get those numbers from ?

First of all, it all depends on your time frame.

If you are a position trader,trading only once or twice a year, then you should not care about the spread.

If you are a day-trader (like me), that's another story.

Even worse, if you are a scalper (500 trades or more a month) then the spread IS a big deal.

Let me add something else : even if the spread is zero, your forex account will still be depleted, you want to know why... ?
  • #17
  • Mar 5, 2007 4:25am Mar 5, 2007 4:25am
Quoting FXTerminator
Igrok my friend, where did you get those numbers from ?

First of all, it all depends on your time frame.

If you are a position trader,trading only once or twice a year, then you should not care about the spread.

If you are a day-trader (like me), that's another story.

Even worse, if you are a scalper (500 trades or more a month) then the spread IS a big deal.

Let me add something else : even if the spread is zero, your forex account will still be depleted, you want to know why... ?
why?

is there any account without spread?
  • #18
  • Mar 5, 2007 7:02am Mar 5, 2007 7:02am
Quoting FXTerminator
Igrok my friend, where did you get those numbers from ?
Those numbers I took directly from the back office of a major London based dealing company. It was their actual statistics. That time I offered them a new joint venture project that would generate trading signals based entirely on the sentiment of their retail clientele. Each retail customer position had to be mirrored, reversed and then sent into the real market automatically. Eliminating the spreads was one of the problems we had to deal with.
  • #19
  • Mar 5, 2007 7:15am Mar 5, 2007 7:15am
Quoting Igrok
The statistics that I have shows that only about 40-45% of the traders' losses should be attributed to the spreads. The rest is lost because of the wrong market decision making.
I pay $1 commission per mini lot, and so far these commissions have accounted for 30% of my losses. So I see the strength in your arguement.
  • #20
  • Mar 5, 2007 7:19am Mar 5, 2007 7:19am
Quoting zamakhtar
I pay $1 commission per mini lot, and so far these commissions have accounted for 30% of my losses. So I see the strength in your arguement.
You are an individual and thus represent only yourself. I was talking about the actual statistics of the company that has thousands of retail clients.
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