emotions

Time and time again I see trading strategies that mention "control your emotions"..."trade what you see and not what you feel". I find this rule that was created long ago as totally pointless. For those of you who know me...you know by now psychology is the name of my game...analyzing market sentiment and price action psychology.

To further elaborate...we all have our indicators..we all have our strategies and methods for entering the market. If indicator X does this...i do this and so on...for those who trade with the naked eye like myself...if this support is broken...i do this...if that resistance is tapped...i do this. Whatever my eyes see. We all are the masters of our accounts and trade as we see fit.

Forex is NOT a mechanical system. If that was true...all EA would bring in millions to each individual trader. The markets are highly erratic and without logic at times...especially this past year. We all get emotional at such times.
The only intent of this post is to let others embrace the idea of listening to emotions.

Ask yourself...how many times have you placed an order because your strategy indicated you should even though you didnt "feel" it was right and that trade would later come back and turn into "stop loss hit". How many times have you left a position open and said "my take profit was twice what my stop loss is or whatever your strategy says" and yet you felt after only a small gain that you should shouldnt have been in that trade in the first place? And then later instead of closing position because you "felt" it... pa came back and did indeed hit your stop loss. How many times did your indicators say that no setup for a trade is appearing yet your gut feeling or observations "felt" like it was a good opportunity to enter a trade and when you didn't enter because your indicators did not give a signal you only regretted that you would have indeed made a profit later?

Emotions are what define us as humans. Our ability to feel is something that should be embraced not ignored. It is our perceptions that push us ahead in life, whether it's to take a career decision or pursue that one girl of your dreams. We all are emotional at all times and to deny this most basic of human characteristics is a big mistake. Instead learn to use it to your advantage.

If you are in a position and fear comes to mind...close your position. If you are in a profitable position that made a profit yet you feel are starting to get greedy...at least reduce the size of your position locking in some of the profit. If you feel that the setup your strategy has created for you will not turn into a profit...do not take that trade. If you are in a losing position yet you "feel" pa will go in your favor in the long run...stick to your position until you are absolutely proven wrong especially if you use wide stops (proper mm of course).

I may be only 22 but I have embraced the psychological side of life since an early age and fully employ my emotions. My drive is to become a profitable trader forever, to never hold a real job, to never worry about an insufferable boss, to not worry about the boundaries of countries or oceans or the limits set of not having money. I have had my down times in trading...there were times when I hit rock bottom..yet...never...have i ...said to myself....I quit. I know I am meant for this... I know I will succeed in Forex...no matter how long it takes. And now...lets use last month as an example...90% winning trades...3000pips gained...250% equity increase with proper mm. My drive to succeed which is the most powerful emotion for me got me to the endline. And this is only the beggining

I only hope that others embrace their emotions too..and break a ridiculous taboo. No emotions while trading?...to me its like going to a gunfight without the gun...reconsider this issue.

well it is very nicely presented... But what is difference between Feel and emotion for me i take it as same.. My Feel comes from my emotion...

I am a big follower of FEEL of the market.. is it emotion or not i dont know..


V

you just said it...one feeds upon the other...they are intertwined

i tell to my self many times, before going to work, which is similary if not more stresfull then forex is ,...train to kill...especially in this blody bath we are all into,...to motivate me, in order to succeed...thanks psiholog for your view...

Well then question becomes how to Improve this feel...

I think the best way is to "FEEL THE MARKET AT THIS TIME" not related to the past ... not in future... what is it doing now...

If any one understand Concept of "NOW"

And i can assure you one thing... Humans dont want to live in PRESENT either they are regretting PAST or they are Planning for Future.. but no time for PRESENT/NOW....

And whenever i trade it is based on NOW Trade...

ANy inputs.. hope i am not diverting the topic..


V

Hi!

Nice post!

Psychology is very important to understand trading.

When people are talking about controlling their emotions, I guess it`s because emotions is another name for impulse (impulse is under the umbrella of emotions). The urge to take a trade, even it`s not a good setup. Being in the game for the exitement, wich is said to be a bad idea, is also about emotions. Volatile emotions wich are a common addictive "substance" in many peoples lifes, control a lot of our actions. Lots of people are in the game for a kick from a good trade, and some are even in it for the downside kick. Emotions are a very broad category, and the way you argue for the constructive use of these, you are talking about a "gut feeling", wich is a common feeling for traders as well as gamblers wich also fits under the umbrella of an emotion.

I would argue that emotions in general are inhibiting the right (statistically correct) decision. If you look at the experiments made by Kahneman and Tversky, you`ll see that most humans really suck at making statistically correct decisions. Also there is a priming effect from emotions in other fields of life wich is commonly dragged along to the next situation, colouring the decision you make in trading as well as other aspects of your life.

Do you read a lot of behavioral finance?

Controlling your emotions means blocking out fear and greed that can distort your ability to make objective, reflexive decisions - I do not see how anyone can dispute that fear and greed effect long term performance in a negative way. The most obvious example is getting out of trades early for fear of the market turning and shooting off to the stop loss, incurring another financial loss and another crippling emotional blow that further perpetuates this habit. And then we have greed, when the trader tries to hit the home run and dismisses the signals that momentum is waning and watches all their modest, unrealized profits drain away as the market turns, with their greed telling them that it is just a minor pullback.

In the absence of fear and greed the trader sticks to their long term tested strategy, takes profits as dictated in the trading plan or exits when the market yields legitimate information that the trade could be done. Eliminating fear and greed can only occur once the trader has absolute faith in their strategy/ability to interpret market information so their emotional wellbeing is not a function of the performance of the last two trades. In fact, I'd say fear and greed could even be distilled to emotional self-preservation and ego-feeding respectively.

It strikes to me that what you are talking about is trader instinct, built up by experience in the markets when you get a sense that the market is not right or primed for picking. If there is any quality in these predictive instincts it is likely that the subconscious is still basing it upon past experiences and checking it against all the information that the market is constantly throwing out. Of course the trader should not suppress these instincts (if they do have predictive and profit making value) but these should be distinguished from the emotions that cause the trader to stray from their trading plan.

the best way i can explain the NOW is by presenting my scalping strategy. First i take a panoramic look at all that is going on. As all pairs correlate to each other and forex correlates to the us stock market and the us stock market correlates to what paulson or bernanke or trichet said and all they say correlates to any shocker news that may affect the markets like the newest bailout plan last week. There are a few other correlations as well like commodities (especially oil and gold) and some data that comes out like non farm payrolls. I use this to get a "feel" for the current market sentiment...what is most likely to happen next..this in turn creates my bias for the "now"..long or short or undecided if all data does not correlate (like sunday/monday..eur/usd did nothing while the dow dropped 650points and pairs like gbp/jpy dropped 1000pips and usd/cad did nothing except continue a possible h&s pattern or double top on the longer timeframe when oil dropped to major lows yet only one pair making a new low...the gbp/jpy which tells me we are in a ranging market). After developing my bias i look closely at the pair I am trading...eur/usd 99.9% of the time. I check major supports and resistance..any patterns developing and place my trades according to my bias or "feel" for the market. I have been bullish all week so all my trades have been buys...picking lows and so on. Entries were simple like that repeated retest of the 1.2580 level which has acted as major support/resistance for the past 3 weeks. When it came to exit though...this is where the true feel of the market came in...we had been ranging for 24 hours + so what did that mean...we would likely continue ranging probably until ny session as it often happens lately is the leading indicator to any future breakouts. SO when i scalped...i always employ 50pip stop loss (sometimes adjust if needed and i still feel strongly about my direction)..but my take profits were maybe 20pips at a time...sometimes less..sometimes more. Close position when I "felt" the pair ran out of steam upwards before the retracements and reload again when i felt the downside move is finished.

Conclusion: The now is determined by taking a bird's eye view first and closing in until you get to the part where your strategy kicks in...never losing sight of the bigger picture but not getting over confident in your interpration of the markets either...especially these days when markets have a way of turning around like never in history.

I am the direct reverse of you Psiholog. Yes, I am very good at "feeling" the market and it makes me plenty pips. But my psychology is very bad at handling losses. Yes I know the rules people harp about, but in my case, its easier said than done. I simply tend to want to fight back when I make a loosing trade, and this undoes most of my gains from feeling the market.

For me now, I rely on a combination of ea's that work in different ways, to take out my psychological drawback of manual trading, while I keep my eyes open for signs of "market shift", in which case, i would have to recalibrate the operating parameters of my experts.

Like the saying goes, one man's meat, is another mans poison. ha ha.

I refuse to believe people "suck" at making correct decisions. Instead I believe the society that we live in implies us to not make any correct decisions for ourselves and only listen to the "experts". The way i see things..everyone can make the correct decision its just that so few people do this in real life as well as trading..they probably dont even understand this concept. All i hope i did is to open the eyes of at least one person out there that is willing to start thinking and feeling for themselves if they never knew how.

you are not the reverse of me at all. the only difference is instead of facing your emotional problems you like to run away from them. if thats what you want...it is up to you and i wont criticize..to each his own right? Still...if I were in your shoes I'd try to understand the reasons behind your "revenge trading"...not the what happened...the "why" it happened. Trading is not a 100% win system. Knowing yourself is key here and i dont think you know yourself that well

I think so you agree with me... it is the FEEL and FEEL IS NOW... BASED ON YOUR ANALYSIS...


well for me i take a bird eye view too.. and some time i wait some time i take the profit early it depends .. sometime i jsut flip my position... i am the NOW FEEL guy...

Am i wrong ... Sure... Am i profitable .. yes....

so for me i have this simple philosphy inspired by some one its in ff only ....

" INVEST in yourself... not in indicators"...

so investing in myself is getting to know the feel of the market better....
Right... you win... Wrong ...You learn.... i take it this way...

rest i think if you can control yourself... guess you can control trading.. i can point to 10s of literature telling the biggest challenge in trading is you...

Anyhow psi i agree with you... i hope we can keep this conversation going..

FYI i cant trade till i dont do my meditation... helps to see the things happening NOW


V

very interesting and amusing at the same time (not in a bad way). you found your way to prepare yourself for trading...awesome

I have never subscribed to the idea that traders need to suppress their emotions. Emotions are essential to the functioning of the intellectual side of our brain.

Instead we need to learn to steer, redirect, balance our emotions or simply trade on emotion for another. I believe that success in any field is helped by not suppressing emotions, but channeling them in the most useful way.

I totally agree with you. I just don't get why people state that is a must to keep emotions away from trades. Even though bad handles emotion may take you to an economical disaster a well balanced mood might just be the key to become some pips richer.

"Push it to the limits" That means keep it simple - find methodology that works for you and descrbes the current market conditions and stick with it. Have a set of rules and keep it simple. Simple is profitable. As for the discipline, we need practice. Practise means screentime. Countless hours of screentime will get you there sooner or later. Keeping in mind the safe MM of course. Thats what i learned after burning my first account, is to keep your MM straight. Dont overleverage yourself and go with the flow.

Hi,

Pardon the morbid analogy but emotions can be left at the door when trading. (like a government assassin - shoot when told by the system)

First of all, you have to get through many, many trades - if you are always confronted with emotions before every entry or exit, you're in the shit.

If you have a statistical edge, its the perfect replication of hundreds or thousands of trades that will make the difference if you're profitable or not - profitability has nothing to do with how much you sweat before any trade or while you're in it.

Why do people always say: ugh, if I only would have taken this one....or why didn't I stay in that one longer......blah blah.

Also, a mechanichal method is NOT the same as a black-box...I think the thread starter mentioned this. I run a 100% mechanical method which has different entries every day - still I trade as dictated every day and have plenty of losing trades during a sequence of 1300 trades per year....and still, the returns are high. I never think at all - I just execute without any worry because I know at the end I win - I don't care what the maket might do or not do because over a sequence of over 1000 trades per year it d o e s NOT m a t t e r !!! Where is there a need to be emotional? Are you emotional when you drive a car? Are you afraid every time you sit behind the wheel that you might crash? If so, don't drive - and if so in trading, don't trade!

regards
daytrading

Straight forward post. Cheers

I couldn't agree with you more. I know I have a perfectly good system and must always remind myself that my emotions have nothing to do with how the system perform. I just get in the way.

It's all about execution. I'm the EA.

This is so true. If you have a good system and a trading plan that you stick to with good results, there is no substitute. I think for most people finding the edge they can trust that works in many market conditions or knowing which conditions it works is the toughest. We'll that and overleveraging themselves to the max looking for the "big payoff" (and wipe out their account)...