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Trading psychology - GREED - A trader's malady

  • #21
  • Feb 6, 2011 4:19pm Feb 6, 2011 4:19pm
Quoting -nate-dogg-
I've attached an excellent PDF regarding trading psychology, I hope you find it as useful as I have.

Found it somewhere on FF, but can't remember the source.

Thanks nate-dogg.
  • #22
  • Feb 6, 2011 4:19pm Feb 6, 2011 4:19pm
Hey Phanti. I can assure you that the journey you have taken WILL guide you to even greener pastures. I cannot comment much without deviating from the main purpose of the thread and because I am not good at explaining stuff to other people. But I would like to share this with you. I'll go dig out some more but in the meantime this should keep you brains busy

Keep it up buddy
Attached File(s)
File Type: pdf 7_Habits_Of_A_Successful_Trader.pdf   62 KB | 406 downloads
  • #23
  • Feb 6, 2011 4:23pm Feb 6, 2011 4:23pm
Quoting momento
Hey Phanti. I can assure you that the journey you have taken WILL guide you to even greener pastures. I cannot comment much without deviating from the main purpose of the thread and because I am not good at explaining stuff to other people. But I would like to share this with you. I'll go dig out some more but in the meantime this should keep you brains busy

Keep it up buddy
alright,will check it as well.
thanks bro !
Hero calls followed by margin calls...
  • #24
  • Feb 6, 2011 4:47pm Feb 6, 2011 4:47pm
Quoting puffy
- shutting down the computer after entering the trade. Don't look, don't see, don't interfere.
I agree with most of the points except for this one. That is for if you are trading machanical with set SL and TP and/or if you're still novice and learning like me. But if you're actively engaged with the market, there's always a need to manage a position/s as situations constantly change by the minute. Closing your eyes could mean something else.
Attached File(s)
File Type: pdf What a Trader Really Needs to be Successful.pdf   186 KB | 1,125 downloads
File Type: pdf 25_Rules_Of_Forex_Trading_Discipline.pdf   122 KB | 420 downloads
File Type: pdf mantra.pdf   122 KB | 515 downloads
  • #25
  • Feb 6, 2011 6:21pm Feb 6, 2011 6:21pm
Quoting momento
25_Rules_Of_Forex_Trading_Discipline.pdf
Zalesky also ran a thread at EliteTrader on this paper, and lots of pro traders made informative notes about the list.
  • #26
  • Feb 6, 2011 6:26pm Feb 6, 2011 6:26pm
I put ''trading psychology'' in FF site search engine and got 913 hits!!!!!!!!!!!!!!!!!
  • #27
  • Feb 7, 2011 1:28am Feb 7, 2011 1:28am
Quoting momento
I agree with most of the points except for this one. That is for if you are trading machanical with set SL and TP and/or if you're still novice and learning like me. But if you're actively engaged with the market, there's always a need to manage a position/s as situations constantly change by the minute. Closing your eyes could mean something else.
I think that there were several brilliant ideas in this thread:
- you should always know how much you are ready to lose;
- you should set SL and TP orders and not to change them during your trade. It is better to open another position if you want to modify your trading strategy.

As for automated trading, it is great but in this case we let other people manage our funds and I am not sure that they will not make a mistake ))) And we can always modify these positions manualy (and I always do so)

At the same time when we trade our own funds we are afraid to lose them and at the same time want to get as much as possible, that is why we make so many mistakes.
  • #28
  • Feb 7, 2011 2:40am Feb 7, 2011 2:40am
When it comes to money, it's the master of us all. It doesn't matter what walk of life we hold, we are taught that money is the only way to reflect us as successful and accomplished people. But in the end, does it come down to money to become successful in trading?

The answer is no. Why? Success comes from loving what you do, not from doing what you're doing for the sake of money. There are people who work at jobs they don't like. Many do it just to get by but do not have the drive to excel. People who love their jobs have higher probability to excel in their work because they don't see it as work but something they love to do. Many of us enter the market to make money, not lured by the challenge of figuring out how the market works. It is the reason why new investors and traders start by placing a large position thinking the trade in monetary value, profit or loss. They think will be quick and easy, not really giving thought on how to figure out this complex but interesting market first before committing money in there. By committing money, it's about the money, not the pleasure of learning about the markets.

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Hero calls followed by margin calls...
  • #29
  • Feb 7, 2011 2:41am Feb 7, 2011 2:41am
This is where fear and greed comes in. This very first thought people make when entering is 'how much can I make?' and not 'I wonder how this market works?' There is a big difference in this mindset. When we don't worry about the money, we can view things in a more objective way. Believe it or not, there is a fine line from being in a trade and out of a trade, especially holding a big position. The emotions overtake judgment very quickly when a major loss is on the line with the prices fluctuating rapidly.
Hero calls followed by margin calls...
  • #30
  • Feb 7, 2011 3:54am Feb 7, 2011 3:54am
Hi PhanTi

great thread so far, thanks for getting it started.
There are so many lessons to learn in this business, and the most important ones can't be represented by a chart.

They are in your mind.

I've been trading and learning for less than a year now, enticed by the m5 lifestyle it promised. Of course I blew my first couple of accounts with ease.

To cut a long story short, I am now trading profitably, not a pip lost this year. The odd thing is that I'm basically taking the same trades I used to lose on, but now I'm profiting from them.

Panic and fear regularly made me close trades that were going against me, moments before they turned in my direction and sprinted to my targets.
Solution: I learned more about Price Action and support and resistance. I learned where to put my Stop Loss to give the trade room to breathe, but never past the point of where the setup has obviously failed.
Now I can walk away from the screen once the trade is on, knowing that I have picked an high odds trade and given it the best possible chance to succeed. This has brought serenity back into my life.

I used to tell myself that I must make 80 pips per day. Such stupid trades I took trying to achieve this. I'll never do that again.

I still have many problems with my trading, and maybe this thread is where I can face them and fix them.

One of the problems I'm working on at the moment is greed. This is no small problem, but it's getting better. I know that as soon as price hits the first trouble area that I should take some profits and move my stop loss to break even, but it still irks me to take partial profits when the possibility for a runner is still there. Instead of being happy that part of my position is running on for another 100 pips or more, I resent myself for taking some off the table. This I must overcome.

My next psychological challenge will be to decide whether I should take many 'dead cert' trades with 60-80 pip profits and a strictly academic SL of perhaps twice that, or to stick to the rarer A+ setups with the best chance of running

Just one point I'd like to stress, if I may. It regards the psychology of guesswork:
If you use guesswork in your trading, do not trade with real money. Period

Thanks again for a great thread. I'll be keeping it open

Michael


PS. I absolutely love trading now. I can't wait to get to it every morning, and couldn't imagine ever leaving it
  • #31
  • Feb 7, 2011 4:10am Feb 7, 2011 4:10am
Quoting Ifmyante
Hi PhanTi

great thread so far, thanks for getting it started.
There are so many lessons to learn in this business, and the most important ones can't be represented by a chart.

They are in your mind.

I've been trading and learning for less than a year now, enticed by the m5 lifestyle it promised. Of course I blew my first couple of accounts with ease.

To cut a long story short, I am now trading profitably, not a pip lost this year. The odd thing is that I'm basically taking the same trades I used to lose on, but now I'm profiting from...

Quote
Now I can walk away from the screen once the trade is on, knowing that I have picked an high odds trade and given it the best possible chance to succeed. This has brought serenity back into my life.

This is a very central point i guess. To know that you entered completely ok and that you are willing to take the loss.
As mentioned earlier, it's quiet important to expect losses....but they should be included in the trading plan. ( max 1 % of MM , 2 %...etc. ).

Quote
I used to tell myself that I must make 80 pips per day. Such stupid trades I took trying to achieve this. I'll never do that again.

i dont like daily targets at all.
I take setups when they occure, not when i NEED to do 30 more pips to achieve the daily target.
Sure you should have some targets , ( i think weekly ones are the best ) ... but thats not the necessary thing to become solid profitable.

Quote
I know that as soon as price hits the first trouble area that I should take some profits and move my stop loss to break even, but it still irks me to take partial profits when the possibility for a runner is still there

Thats up to everyone himself. I'd like to move sl to be and bank at least 10 % of units ...then u got a free trade, perhaps a nice target hit and if not u still had profit trade.
Thats my line, up to everyone himself....
but NEVER let a winner turn into a loser......thats kinda shit : /

Quote
If you use guesswork in your trading, do not trade with real money.
Well if we define guesswork as prediction, than we need to guess....but instead we could flip a coin .

Let's say we dont use charts, we just see the current pricelevel of e.g eurusd and somebody would ask us where price will go....up or down?
so we just have the 50/50.... no more indicators...

our aim is to maximize the possible directions probability with charts,technicals,fundies.... Thats why we are profitable or not and thats why each succesful trader do have losses and even losing days.
Losing is part of it.

Got one question for you Michael, do u evrn trade for a living?

Kindest regards

Ph.
Hero calls followed by margin calls...
  • #32
  • Feb 7, 2011 4:20am Feb 7, 2011 4:20am
Please note that the following concept is very very basic and directed to the rookies !

So how do deal with this? There are several things we can do keep greed and fear out of the trading plan:

1. Start trading smallest positions possible -The idea is to learn, improve and perfect trading while not thinking about the importance of gains or losses. This should subdue if not remove the fear and the greed.
2. Use stop loss order - Believe it or not, stop loss orders bring comfort and peace of mind that would otherwise bring many traders sleepless nights. Why? Not knowing how much the loss is, which can be unlimited, carry a major concern. This method will get rid of the fear factor.
3. Create a trading plan - Having a plan of attack, where to get in and where to get out in a certain market condition relieves the trader from having to think on his feet; without a plan will cause the trader to freeze and be indecisive and in turn cause more emotional stress.
4. Set target price - This may help in deciding before the trade when to take profits, not leaving to decide when to exit. Target profits helps against greedy feelings on thinking that the profits will continue to rise. When it doesn't and profits turning into losses, the tendency is to freeze and not take action. Having profit targets also help prevent the taking profits too early. This is also a fear stemming from being afraid the profits will disappear and turn into a loss.

This is the worst aspect of the trading: lack of self-control. Trading gives total freedom on deciding when and where to buy and sell but this is also why freedom becomes a hindrance. Discipline is the only method to alleviate fear and greed. Without it, it will set the tone a fear of losing everything and greed will prevent from taking profits when it's right the time to do so.
Hero calls followed by margin calls...
  • #33
  • Feb 7, 2011 4:56am Feb 7, 2011 4:56am
Quoting PhAnTi'
but NEVER let a winner turn into a loser.....

Amen to that. If price is coming back at you, get out. Take 2 pips profit with you if you can. I know you put your hopes into this trade, but if it's meant to be, you'll get another signal to enter, perhaps at an even better price.

To answer your question, yes I trade live the setups I know and am completely happy to go with. I'm demoing all I haven't mastered yet. There's a good living to be made from the few live A+ trades per month though.

This reminds me of something I think is important for learners to ask themselves.
How much time do I have to learn trading?
When will I need money next?
Am I profiting consistently on demo or micro account?
How much money do I have to invest?
Have I done the math on compounding?
When will I need money next?
When will I need money next?

The market is a cut-throat competition, so please don't imagine that you can walk right in to claim the prize. It takes alot of practice and patience, and the understanding that in the beginning your greatest adversary is you.
  • #34
  • Feb 7, 2011 6:30am Feb 7, 2011 6:30am
Quoting Ifmyante
Amen to that. If price is coming back at you, get out. Take 2 pips profit with you if you can. I know you put your hopes into this trade, but if it's meant to be, you'll get another signal to enter, perhaps at an even better price.

To answer your question, yes I trade live the setups I know and am completely happy to go with. I'm demoing all I haven't mastered yet. There's a good living to be made from the few live A+ trades per month though.

This reminds me of something I think is important for learners to ask themselves.
How much time do...
Well said.
It's all about the basic questions of MM,mindset etc. once you got them you will be succesful.
Most important thing are experiences in forex....
e.g blowing up some accounts....lol...
to be honest i talked to several succesful traders who blowed up some accounts at their very career beginning as well....
thats part of the game..

sticky thing : U need to learn out of each failure,false trades, breaking of rules etc. and you will master the game.

Think in pips, not in bucks.
Hero calls followed by margin calls...
  • #35
  • Feb 7, 2011 9:43am Feb 7, 2011 9:43am
Here is an interview that i uploaded to youtube a while ago with Mark Douglas, author of trading in the zone. I have listened to this an unbelievable number of times. I find his wisdom inspiring.

I hope i am not in conflict with the rules of this forum. these are a must see as far as im concerned. start at the top and skip the first 1/3 of the first one.

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  • #36
  • Feb 7, 2011 9:54am Feb 7, 2011 9:54am
Quoting highlander2
Here is an interview that i uploaded to youtube a while ago with Mark Douglas, author of trading in the zone. I have listened to this an unbelievable number of times. I find his wisdom inspiring.

I hope i am not in conflict with the rules of this forum. these are a must see as far as im concerned. start at the top and skip the first 1/3 of the first one.

http://www.youtube.com/watch?v=xEcZQdCEiKE
http://www.youtube.com/watch?v=vP47LbbvuBA
http://www.youtube.com/watch?v=NL6r7TSVa2w
http://www.youtube.com/watch?v=hTs1leWymfE
http://www.youtube.com/watch?v=CahlZN5KXn8
http://www.youtube.com/watch?v=nuQRKt4tOHw...
even watched them, great summary of his book
Hero calls followed by margin calls...
  • #37
  • Feb 7, 2011 6:55pm Feb 7, 2011 6:55pm
Quoting PhAnTi'

This is the worst aspect of the trading: lack of self-control. Trading gives total freedom on deciding when and where to buy and sell but this is also why freedom becomes a hindrance. Discipline is the only method to alleviate fear and greed. Without it, it will set the tone a fear of losing everything and greed will prevent from taking profits when it's right the time to do so.
When Odysseus wanted to hear the Sirens' songs, he ordered his men to tie him to the mast and to put wax in their own ears. Odysseus heard the Sirens' song but survived because he could not jump. You ensure your survival as a trader when on a clear day you tie yourself to the mast of a trading plan and money management rules. (by Alexander Elder)

TRUST THE PROCESS !
  • #38
  • Feb 8, 2011 3:57am Feb 8, 2011 3:57am
PhAnTi, this is a great thread, i have a few things to add, but i would like to ask a question if its ok.

nearly every book i have read, or website i have visited will tell you that when a trader has a string of winners, they become increasingly confident, and can become euphoric, and they start to forget that the chance of losing even exists, as a result they may take larger and larger positions, maybe risking 10% or more on a trade. eventually they lose and are back to square one.

However-

when i have a string of winners, this is NOT how i feel. I become increasingly of the opinion that the next trade will be a loser, simply because i know i cannot keep winning forever. yet i also know that recent trades have no bearing on the outcome of this next trade, every trade is unique, and has a unique outcome.

this is one of the chalenges i have to overcome this year. and i know this is a trading error.

i rarely read this in trading psychology articles.

what does this reveal about my mindset, please give opinions.
  • #39
  • Feb 8, 2011 4:05am Feb 8, 2011 4:05am
Quoting highlander2
PhAnTi, this is a great thread, i have a few things to add, but i would like to ask a question if its ok.

nearly every book i have read, or website i have visited will tell you that when a trader has a string of winners, they become increasingly confident, and can become euphoric, and they start to forget that the chance of losing even exists, as a result they may take larger and larger positions, maybe risking 10% or more on a trade. eventually they lose and are back to square one.

However-

when i have a string of winners, this is NOT...

Quote
nearly every book i have read, or website i have visited will tell you that when a trader has a string of winners, they become increasingly confident, and can become euphoric

That's true. The more you win,the more confident and self-secure you gonna be, just because you know and you see that your method is working and you will have a lot of succes with it.
Compare it to Poker , where a chipleader starts to play weak hands and gonna lose a lot of his stake again just because he thinks he gonna win again and again , so he increases his risk by playing bad hands.

Quote
I become increasingly of the opinion that the next trade will be a loser, simply because i know i cannot keep winning forever

Losing is part of the game, everybody will have some losers in his trade history. To expect losses is a important virute of trading.

Quote
every trade is unique, and has a unique outcome.

Correct.But we can handle losses and possible wins by calculating and srtting up a MoneyManagement plan.

......
i lost 70 pips by eu longs today and stopped trading half an hour ago.... will restart tomorrow at zero.
......

Thanks for your reply,
kindest regards
PhAnTi
Hero calls followed by margin calls...
  • #40
  • Feb 8, 2011 4:13am Feb 8, 2011 4:13am
a wise man once said to me
"Its not what u do,its how u do it"

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