Psychology in trading

Hi everybody.
I can say that I am a rookie, despite of I am trading demos or live more than 2 years.
Problem is, I know my mistakes, but I do them again and again. Do not know why. If somebody can do plus 60 hard made pips during a week, and then loose them in few hours, I think he could do two things...
1. Stop trading or
2. Improve his mind or get some headbuts to the wall and start with demo again...
When he does it again, and made bigger loss then after "improving" his mind
he/she should forget Forex and take showel...
I made mistakes like that few times, few times improved my mind, but did this same mistake again...Why?
I simply do not know... I wanna to be good in this market. But despite of reading a lot of articles about positive thinking, psychology of traiding and so I have no consistent profit and I always have to catch winners of 10 15 pips after lossing of 50 in one trade.... And misery starts again...
Why?
What is that trigger than allow you to go to massive loss and do not allow to be patience and do not exit a trade too early??
Why me, or you, do not wait for proper, confirmed signal for entry? (I use Ichimoku, but does not matter what indi is it)
This is some questions, I probably cant answer them by my own.. Welcome everybody .. Rookies, veterans... Get some advices, headbuts...
To be better traders.

Thanks for replies and good luck everyone.
frank

P.S.: sorry for my english grammar, I am slovakian

i have met many traders who always dont follow their plans and cost them $$

in the end, one way is that they paste their plans on the monitor ! hahaha

I will try this!

once i read here at some thread a thing called "trading buddy" ...

the thread starter said something like picking some plush toy u like and put a name to it... and sit it infront of the monitor while u trade ...

and this buddy will be the one u gotta talk to when u r planning a trade and that sorta stuff ...

keeping in mind that plush is ur investor and u gotta convince IT which ur trade criterion is ...

though i havent tried it ... i think i s a very nice and therapeuctic way to complement posting the written plan infront of u.

You need to be AWARE and COMFORTABLE with precisely(+/- small percentages in slippage, gaps, order fills,. etc..) how much you can lose BEFORE you open any trade, with a risk management system dictating your total risk $$ before entering. I see this over and over with people I know. One of the most basic rules any forum, tutorial, learining guide, etc.. will teach you are some form of money management. We all read this and I believe we tell ourselves that we understand the concept. So why can we not follow our own rules? i would like to point at Greed, Fear, lack of Patients, and a false sense of understanding the risk concepts.

1.Greed - Causes us to over extend our position sizes in pursuit of higher return profits. It also causes us to eat horrible exits and reversals in pursuit of higher returns without using profit protection methods.

2. Fear - Cause us to hold on to bad trades extending drawdowns far beyond our risk management protocol(if we have one!).

3. Lack of Patients - This is a real killer for new traders. Overtrading. Never enter a position without thinking through all the possible aspects of the trade. Never trade in Hopes of what the market can do, trade from what the market IS doing.

4. False sense of understanding - Do not enter a trade with an on-the-fly feel for money management. Money management and risk awareness need to be handled before you enter a trade.


So how do we get ourselves out of this destructive pattern? For myself it is rather simple. Never go into a trade before weighing the possible outcomes.

There is a very large amount of material available(on FF and pretty much everywhere else) on Money Management and Risk calculation, so I wount get to involved in the details. You need to discover a system built for you personally.

Quick and dirty here are some steps which may help you out. Do this Before opening any trade.

1. Choose a risk percentage - Higher risk == more profit potential but more drawdown potential from losses. Starting out, I would not exceed 1-2% of your account balance.

2. Stop Losses - This is an entire thread discussion by itself. SL's have a huge false understanding for their role in MM RR. Forget what people talk about by setting this at some default pip level. The stop loss value needs to be determined dependent on what your trading system REQUIRES. A manual 40 pips may work one week, but not the next. Analyze the market before every trade and write down the SL pip value you need.

3. Position Sizing - Now based on the SL that your system requires you need to calculate the position lot sizing. You need to calculate your lot size so that the SL if hit will not exceed your risk percentage. THIS IS VERY IMPORTANT TO YOUR MM. Note that your position sizing may need to be reduced to lower levels which results in hurting your $$ amount profit potential. This is OK. We are building our accounts on % returns not $$ amount profit. Get rich slow.

4. RR - You now know your SL required from earlier. You need to analyze the market conditions to determine if it Does in fact have the potential to overcome your SL value in terms of Profit points. What I mean is, if your system required an SL of 55 pips, does the market have the potential of gaining you over 55 pips TP? If it does not then you are trading in a negative RR situation. NEVER do this! Why would you open a position if the risk was greater than the reward potential?

5. Exits - This is the tricky aspect of trading, and in my opinion the one that gets most of us on the P/L statements. Already going in with the above steps we can be very confident in our projected Risk. you should have a solid piece of mind of the possibilities involved. Managing exits poorly can turn winning trades into losses and vice versa. There are also multiple techniques you can find using forms profit protection. Stay in winning trades as long as possible while protecting them from loss. This is done primarily with a trailing stop. Continue analysis of your open positions for unpredicted market moves. If you have to cut off losing trade, you have at least now done so at Below your MM threshold!

I hope any of this rambling can help you.

Take only the A+ setups according to your plan. Don't over-trade! This was huge for me. My thoughts before deciding to enter are "what am I risking" instead of "how much can I make".

Exactly. This approach will hopefully take the majority of the "Psychology" out of the equation. From here you can focus on trading strategy rules to maximize your strategy expectation.

Not repeating the same mistakes is easier said than done. In trading contrary to the physical world, every situation is unique. It's not like sticking your finger into an electrical socket, hating it and then vowing to never do that again. It will be easy to avoid the finger+socket combination in the future but in the market the socket sometimes looks like a twinkie, sometimes an apple pie but not often an actual socket with a current.

The only thing I can think of which might help you is to practice on a micro account and ease up on the demo because when you get electrocuted on demo you don't feel the shock so there is nothing to 'avoid' in the future, especially as youve been getting shocked for 2 years and felt nothing, perhaps this approach will help identify and remember what a socket looks like.

I like this. I try to talk to myself when I'm looking for setups. But sometimes I forget to do it. I wonder what the wife will think if I chain the baby to my monitor?

Every point here is spot on the money. Very well written post, bobb. Took me back to the time when I jammed a screw driver into a wall socket. Only once to figure out that's not such a good idea.

But trading is different. I've been snake bit by over trading more times than I care to admit. I know it's wrong but it's one of those things I have to make myself avoid by constant force of will. God knows I just looooove twinkies!

She'll call the police and send you to the nuthouse in a pip.

i suggest that u never try to know the answer ... LOL

As hard as it may sound you really need to do something drastic to make you feel the need to trade with more discipline. Trading is a business and if you try going about it without a plan that involves all aspects of a successful model then you will more often than not bleed money, much the same as you are doing now.

The other side is your capital. You have been trading Demo which is easy to re top when you blow it, a small micro account is also very easy to ignore. A sufficient account with risk management in place can be, as tough as it sounds, a way to make the reality and severity of trading as apparent as the rising sun each morning. This does not mean go and get a loan or mortgage your property, it means an amount that in the context of trading recklessly will cause you to stand up and take a look.

Small accounts, from a phychological POV are very easy to just trade randomly, Not by all but by quite a number and I believe this is to do with the ideology that forex is get rich quick. A substantial account will make you stand up and take the situation more seriously. If that is not possible then you will either blow a wad or quit while doing it.

A last point I will make is that trading your model will include taking losses from time to time. Dont be discourage by loosing. If you have risk management in place then you will know before hitting the execute button what it is you are going to loose if the trade goes against you. Dont aim for 1:1 either, you will head backward and emotionally your thought process will deter you from your plan as you will now be looking to make up pips to gain for the losses. Employee a long term profit plan and you may just make it.

Send me a PM if you need more insight.

Razor

Hi all,

Sounds like I am in good company - some like me (need/want to improve) and those who have 'fixed' themselves as good traders.

So i am going to admit my faults in the hopes I can start to amend my faults by admitting them in public.

I can't seem to get away from 1 minute charts - i love scalping.

But I make a "bad" scalper because:

1. I am trigger happy and only like it when i am in the market on a trade.

2. I hate missing pips when i get out of a trade too early. So I get back in only to be whipsawed to death and give back my pips.

3. I like a new system and trade it well first day - then start second guessing and trying to get in earlier to get more pips. Only to find signal wasn't really there yet and it reverses for a loss. Get disappointed with page of losses and look for a new system.

4. In demo I move stop loss when it gets close, have been known to remove all together and hope for a reversal later. Can't/won't do that with real account. Even though it worked today in demo lol.

5. Demo trading seems to be getting me into bad habits - would love to go live (again) to see if my habits improve but can't/won't until can prove I can trade profitably. Catch 22.

I am sure I have more faults but these are what come to mind at present. I can't work due to injury and would love to supplement my meager income and eventually trade for a living. Obviously impossible at present with all the bad habits I have picked up.

But I love Forex and never get bored with it. Even after a year of 'trying' I haven't gone live this year at all due to losing 2 small accounts last year.

I actually did better when I first went live had no idea about indicators and traded by feel. I was up 50-60% then got over confident and blew it. After doing research and training and learning stuff - cannot replicate that gut feeling trading lol. Seems the more I know, the more I know I don't know and the market always knows more.

Ho Hum theres always another day and another demo account. Maybe tomorrow. I quite like the idea of talking the trade out loud - I may try it, where's that pink teddy bear someone gave me?

Thanks for listening. Good luck all.

Razor thank you very very much, I have to read your post few times more, iwrote I am Slovakian, so I need to translate it... And then I will react, but 1st...
What is PM....? Please...

before i take a trade i ask myself:

- is this the right time to trade? i prefer to trade in london session, then ny else in moving markets, check the news, check if there are better countercurrencies, ie. lately i often trade eurgbp instead of eurusd if i want to trade euro

- how much do i risk to lose? this has to be an amount where i dont give a shit if i lose or not or where i dont care if i cant check the trade (broken connection, or too much other work)

- how much is the profit potential? on countertrend trades im very very selective, in trend direction or strong moves, where i can move to BE fast, i can risk more or trade more setups

- do i have any emotions about that trade? if my heartbeat is up, if i feel physically not well, my breath is irregular, if i feel fear or greed or hope or revenge or boredom, if i think about the money or i am uncomfortable with other open trades then i know its not good to take the trade

if i do or after a bad decision, where i didnt stick to my plan i ask myself this:

- why do i want to hurt myself? because by not sticking to the plan, by overtrading, overleveraging, ... in the end i will do myself harm
by asking this question i make conscious, what is in my best interest and what is not, you can also ask this question before taking the trade: if you get greedy for instance, you can ask: if i do this, im not sticking to my plan, i know the most time i do something like this it goes wrong, why do i want to put myself into a position where i feel bad for myself? i want to do well, so i wont take the trade.

- how can i do better?
how can i improve myself, my plan, my discipline? that is a task which never ends

Just stands for Private Message and it is available in the users screen (click on there name and down the bottom, provided they have it activate, is "Send private Message"

It is just a way to interact with a person in private

Razor

What helped me the most is keeping trading journal...thats how you become decipline and highly selfaware. i take a screen shot of every trade i take and paste it on MS word, the same whn i close them with my reasons for entry and exits.
I was very impulsive when i first started looking for action all the time. Trading Journal will take all those undiciplined and impulsive behaviour away if you keep it long enough and review them.

Good luck.

so, I am back to trade....
My big problem was, that, however minor lose, I stopped trading to get my mind right.. Bit reset... You know.
Now, I started again.
I will welcome everybody who will post here..
Your xperiences and so.
Thanks to everybody. A lot of pips to you.

I agree with this. A demo account is good only to test current strategies and not emotions.

To train and help deal with your emotions especially fears, you should use a mini account (real money). Playing roulette for real is alot different to playing for practice. If you are serious about your trading you are going to end up spending money on books etc.... so why not factor in say £500 in a mini account. And if you blow it up then so be it...

Leverage... High leverage is only bad if you decide to place a trade lot of 100,000 or more with a £500 account. I use a 1:400 leverage and trade using lots of 10,000s. I rarely go past 2 x 10,000 per trade. I have not blown my account... I have doubled it. Some of this is luck with the odd good planned out trade. I still have to deal with fear and exiting trades early etc....Its a fight. A fight against myself..not the market.

I am at the Conscious Incompetence stage. Although I can feel myself moulding and realising that using indicators alone is not a valid confident way to trade.

Enjoy the process, and enjoy learning about yourself. Ive learned so much about myself through trading. It's great

Good luck