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Ingredients of Trading Success

  • Poll

  • Psychology Ingredients of Trading Success
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  • #1
  • First Post: Edited Apr 9, 2010 9:41am Apr 6, 2010 6:26am | Edited Apr 9, 2010 9:41am
In Van Tharp's discussion of the ingredients of Trading (Trade your Way to Financial Freedom), he said that some senior traders have an importance weighing scale:

Psychology..................60%
Money Management......30%
System.......................10%

He commented that actually all are Psychology - even Money Management and System are contributed by Psychology.

In this polling, I want to get the general opinion about the importance of Psychology on this forum.

Remarks:

Site Administrator has accidentially erased the initial polling (16 votes made), upon my request to clear typo mistakes on the options (Member cannot edit polling options)! I know it is not a good thing. I was so sad about it (This bit is not very serious). I have no way but reposting the polling. But now, I think it is a good idea to distinguish between already profitable traders and not yet profitable traders for this polling. Hope to continue recieve your support, despite the eariler accident.
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  • #2
  • Apr 6, 2010 6:42am Apr 6, 2010 6:42am
U like the poll tool!!!!

Lubo.
If I know how, I tell You!! Few but Good!!
  • #3
  • Apr 6, 2010 6:48am Apr 6, 2010 6:48am
you have my votes... but I'm not a successful trader yet
  • #4
  • Apr 6, 2010 6:58am Apr 6, 2010 6:58am
it's that simple.

it takes time... no short cuts.

pivot video

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  • #5
  • Apr 6, 2010 7:09am Apr 6, 2010 7:09am
Quoting LuboLabo
U like the poll tool!!!!

Lubo.
Yes. I like it; cannot live without it.
  • #6
  • Apr 6, 2010 7:29am Apr 6, 2010 7:29am
I've never understood how (good) psychology could compensate for a bad system. IMO you need all 3 factors and you cannot do trading without 1 of them (there are always exceptions but lets keep it simple). Find a system to learn (method), apply MM and stick with it 100% (psychology).

The theory of trading is really simple yet in practice most fail to follow some simple rules like in many other aspects of life, not only trading.
Measure twice, cut once
  • #7
  • Apr 6, 2010 8:16am Apr 6, 2010 8:16am
Quoting aediaz1
I've never understood how (good) psychology could compensate for a bad system. IMO you need all 3 factors and you cannot do trading without 1 of them (there are always exceptions but lets keep it simple). Find a system to learn (method), apply MM and stick with it 100% (psychology).

The theory of trading is really simple yet in practice most fail to follow some simple rules like in many other aspects of life, not only trading.
U know if u have good psychology u can loose your account with bad method and still be happy about that.
  • #8
  • Apr 6, 2010 8:27am Apr 6, 2010 8:27am
Quoting aediaz1
I've never understood how (good) psychology could compensate for a bad system. IMO you need all 3 factors and you cannot do trading without 1 of them (there are always exceptions but lets keep it simple). Find a system to learn (method), apply MM and stick with it 100% (psychology).

The theory of trading is really simple yet in practice most fail to follow some simple rules like in many other aspects of life, not only trading.
No one can be profitable with an unprofitable system. I think good psychology could compensate for a less-better system not a bad system. A trader with bad psychology can be unprofitable even with the best system.
  • #9
  • Apr 6, 2010 8:40am Apr 6, 2010 8:40am
Genius is 99% perspiration and 10% inspiration.

Trading is hard work. Hard work rewire your brain.

Doctor, Engineer, CPA, Teacher, truck driver etc have rewired their brain through advance training (both theory and practical)

Learn the trading. Rewire your brain. Once your brain gets rewired, you will feel delighted.
  • #10
  • Apr 6, 2010 8:43am Apr 6, 2010 8:43am
Quote
kk007;3612386]In Van Tharp's discussion of the ingredients of Trading (Trade your Way to Financial Freedom), he said that some senior traders have an importance weighing scale:

Psychology..................60%
Money Management......30%
System.......................10%

Nah mates, these number are outdated, he's revised them in his latest book that trading is 100% psychology.....
Trading is the game of fear and greed.
  • #11
  • Apr 6, 2010 8:48am Apr 6, 2010 8:48am
Quoting Fx chartist
Nah mates, these number are outdated, he's revised them in his latest book that trading is 100% psychology.....
Nah mates, have you read through the post#1????????????

Quoting kk007
In Van Tharp's discussion of the ingredients of Trading (Trade your Way to Financial Freedom), he said that some senior traders have an importance weighing scale:

Psychology..................60%
Money Management......30%
System.......................10%

He commented that actually all are Psychology - even Money Management and System are contributed by Psychology.

In this polling, I want to get the general opinion on this forum.

Rules of the Polling:

Note that you are allowed to select multiple options. I have...
  • #12
  • Apr 6, 2010 8:56am Apr 6, 2010 8:56am
System 90%
Money Mangement 10%
Psychology I put in the same bracket as being human or not being paralysed, i.e. unless you are a raving nut job then it isnt worth mentioning.
Economists have forecast 9 out of the last 5 recessions
  • #13
  • Edited 6:13pm Apr 6, 2010 9:04am | Edited 6:13pm
Another opinion (demo) --

40 mindset, 10 money/risk management, 50 method.

The technical method decreases fear and confusion through a high, consistent percent chance of working, makes mindset even possible to work.
A chart study - based SL and a little more is enough for mm.
  • #14
  • Apr 8, 2010 12:20am Apr 8, 2010 12:20am
IMO these abstracts can't possibly be quantified.

Method (or 'strategy', 'approach', 'plan', 'system' – call it what you will) can't be less important than 100%, because if the method is incapable of overcoming the inherent negative expectancy across the long term, you must eventually lose. (By 'method' I'm referring to both entries and exits).

Beyond that, MM (position size) determines the rate at which you lose. Bigger size = faster path to ruin. Ironically, even with a profitable method, oversizing runs the risk that an 'unlikely' series of losses will ruin you.

Re mindset, if you're not implementing your method properly and consistently, then any value provided by the method is effectively negated.

Dr Alex Elder (author of Trading for a Living and Come Into My Trading Room) likened the three Ms to a three-legged stool - break any one of the legs, and the stool collapses.
  • #15
  • Apr 8, 2010 12:41am Apr 8, 2010 12:41am
Quote (from somebody who trades for a living).

"Early on, I was in nasty drawdown period and I was having trouble figuring out what was off. I made the same mistake virtually all traders make, I caved to the vast collection of trading psychology books. When the guy mentoring me found out what I was reading, he gave me the following gem: Only pikers worry about psychology, either you have an edge and you exploit it, or you don't have one and you lose and chase every other excuse."
The breaking of a wave cannot explain the whole sea.
  • #16
  • Apr 8, 2010 1:23am Apr 8, 2010 1:23am
Quoting kingfisher
Genius is 99% perspiration and 10% inspiration
Is it really?
Living the adventure in my head.
  • #17
  • Apr 8, 2010 1:53am Apr 8, 2010 1:53am
Quoting kingfisher
Genius is 99% perspiration and 10% inspiration.
"I'm 80% logical and 80% emotional. ........ What d'ya mean, that doesn't add up? That's the emotional part speaking."
_______________________________

The problem with the people in this country is that half of them can't read, half can't write, and the other half can't do math.
  • #18
  • Apr 8, 2010 5:26am Apr 8, 2010 5:26am
The polling is up again and modified. The eariler one was accidential erased by site administration.
  • #19
  • Edited 5:22pm Apr 8, 2010 4:57pm | Edited 5:22pm
Quoting hanover
IMO these abstracts can't possibly be quantified.

Method (or 'strategy', 'approach', 'plan', 'system' – call it what you will) can't be less important than 100%, because if the method is incapable of overcoming the inherent negative expectancy across the long term, you must eventually lose. (By 'method' I'm referring to both entries and exits).

Beyond that, MM (position size) determines the rate at which you lose. Bigger size = faster path to ruin....
Honors and agreed, of course.

What you're suggesting, though -- an on-average effective condensing of the market's next direction -- is admirable but not often attainable with one method used one way. A method only be useful for a short while, on occasion, or a little bit, and how it affects what you're saying (while retaining the general sense of it). Using more than one method, then, turns trading into more of an art.

First, consider this:
"Remember it is quite possible to make large sums trading/investing if we are 'right' only 30% of the time, as long as our losses are small and our profits are large." -- Dennis Gartman, "The 22 Rules of Trading"

Next, if you have a grounding of, say, 1K trades and 10K hrs chart study, then experience is in play. With the increased surity experience brings, psychology then does have a certain determinability.
Not necessarily of profits, though. You end up trying to match your method's conscious, logical understanding of the chart with some intuitive ah-ha! using experience after a bit of study. This process of changing one's method can last forever.

Then, a number of reasons can work at any time. Degrees of use of a proper method and/or mindset can still work, given one adjusts mm to what's used. The chart will react to a particular trendline you pick on a lesser use of your method, only take its time about it, say after a 140-pip turn in the opposite direction.

Lastly, a method can have and need high exactitude, and yet work only in rare situations.
Overall, you'd need a polyglot of methods, each with a different mm.

The Serenity Prayer each trade seems more appropriate, to consider the worth of one's reasons.
Not saying I don't have a prayer... Anyhow, agreed, only with a caveat as to what a method is.
  • #20
  • Apr 8, 2010 9:34pm Apr 8, 2010 9:34pm
I think method does play a role, but it is not too difficult to find a method with positive expectancy. A system with trend-following characteristics for example. Many others are taught, if you read a technical book or attend a seminar. However, without the proper mental capacity, such methods are useless for a person.

Quoting hanover
IMO these abstracts can't possibly be quantified.

Method (or 'strategy', 'approach', 'plan', 'system' – call it what you will) can't be less important than 100%, because if the method is incapable of overcoming the inherent negative expectancy across the long term, you must eventually lose. (By 'method' I'm referring to both entries and exits).

Beyond that, MM (position size) determines the rate at which you lose. Bigger size = faster path to ruin. Ironically,...
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