The Winning Trading Psychology - sure way for consistent profits

I know a guy who also swears by it.

http://www.eftuniverse.com/

Hi there Winston and Dopey,

Yes, EFT is not bad, in fact I tried that first and was very pleased at the results...but there's a different technique in using tapping which is truly amazing.

I promise I will post more on this when I have a little time, because to describe it will take a bit of explanation. But the first step is to list everything you feel when you are trading - so you identify the specific feelings and when they come up (everyone feels it differently). You don't even need to have a word for the feeling, just that you feel something when such and such happens is enough. I'm asking this because unless people go through it with an actual example of their own they won't understand how it works!

Well, I'm interested in hearing it. I'd say there are a few people on these boards who would listen with an open mind.

Bring it on, please.

Hi there

Well, here goes...you've identified your emotion, let's say anxiety, you know the situation you get that anxiety, you then try to remember it, bring the feeling back (or if you are actually trading and you feel it, and want to work on it, even better). Then try to locate where it is in your body...e.g. in your stomach, in your chest, or even all over your body. Then try to magnify the feeling as much as possible - if you had to give it a measure from 0 (no feeling) to 10 (maximum feeling), try and make it a ten.

Then take your first two fingers and tap between your eyebrows/centre of forehead several times and say 'let it go'. Then tap on the side of your eye several times and say it again, then under your eye, and say it again, then below your collar bone and say it again. Then grab your wrist and repeat the words again.

Then take a deep breathe in, then breathe it all out, and say 'peace'. Now imagine a peaceful place, visualise it as if you were there.

Right, next step, check back to the feeling, try and get it back again in that place in your body...is it 10 or less? or more? In the same place as before? Start again with the tapping and do another round, and end with 'peace' again. Each time check where it is from 0 to 10...keep doing the rounds until you get to zero.

Then you have to change it...so if you were anxious about price reversing, now you have to have a new way of looking at the same situation...for example, 'I love it when price reverses because it gives me an opportunity to test my skill'. So tap in the same places again, but instead of 'let it go' you say 'I love it when price reverses because it gives me an opportunity to test my skill'.

The last bit is important...you must get a flexible mind at all times when trading, that way you know you are emotionally free (not controlled by your emotions). So when you flip the situation to come at it from a different way, you free yourself. But you do it only after you've gotten rid of all the negative feeling.

It might take 3 or more rounds to get to the last bit, but overall it will probably only take 10 minutes for most ordinary emotions. Emotions that bring up some deeper rooted problems from the past might take a while longer...but you just keep going till you reach zero in any case.

Let me know how you all get on! And if I can help in any way just ask!

By the way, it's called Faster EFT...you can google it and see a few video demonstrations about how it works on youtube.

I would also be interested in hearing about the tapping technique and, if it's too much work for you to explain it in your words, would welcome links to a specialized site in addition to or instead.

This is the most important thread of many, both for its practical implications, i.e. improving the bottom line and for its implications for our journey as traders and people. Keep it flowing and thanks!

Hi Radartrader

Looks like I posted before you, but the mods didn't release it till later...so just look back above your post for the explanation. As I'm considered a 'junior member' I think I can't post links or start a thread...lol. I actually did want a discussion on trading skills...was thinking of starting my own thread on it, not to gatecrash yours Winston, but I'm not allowed

So I hope you don't mind, as I do think learning the skills of trading is partly related to psychology...I'd like to talk about skills development. I do believe that with all good methods, your reading of price action makes them work. Your ability to read and execute trades is the skill. So I'd love ideas on the best ways you've all had in developing your skills. I know from my own analysis that I am at my best in downtrends and in the first part of the trading day from Frankfurt open. I made a fortune in December and lost it all when the markets got choppy after that! I realise I didn't have the trading skills to minimise my losses in choppy markets. So while the work on psychology has made things a lot better...I have a lot of work to do on learning the skills of trading!

Hey...I've just posted this and realised I'm now a member...no longer a junior member!!!

Hey guys,

Good to see this thread back up an running will try and add more to this thread when I have the time.



Just thought you'd like this as a real life example.

Happy viewing.

James.

^^
Wow, he really loves the 'F' word.

Hey guys,

I have been trading full time and managing clients funds for several years. Knowing fully what is Trading Psychology is very important and I would like to add this statement.

"You can trade without knowing fully what is Trading Psychology; but all successful traders understand fully what is Trading Psychology."

Happy trading.

Greetings, to all you brothers and fellow travelers in this journey of self-knowledge. Mine has progressed further to a couple of realizations I want to share:

Even though most of the time I have a good understanding of where the market is going and what it is doing right now, and that already puts me in a good position in this trading game, I behave differently when I'm winning from when I'm losing money in a trade.

Specifically, when I am making money I am impatient to cash in my profits and to avoid them being eaten up by a retracement, so I exit my winning trades within a couple of hundred dollars of entry, content with a little cash and "having been right" which is really the reward I seek. And in fact I am right the majority of the time.

When I'm losing money, though, (and this happens much more rarely, but to devastating extents) I hang on to my previous interpretation of what's happening, find ways of rationalizing my holding on, add to my positions and get wiped out.

In this way, someone who has a good understanding and intuition regarding the market (what Lovinit's calls skill) can end up being a disaster or nearly so.

I am sharing this because I'm very close. I am realizing that being consistently profitable is within reach and that it will mean not only a financial reward, but also the culmination of a personal journey.

For me, separating these two issues has been very useful: being a good analyst (in terms of my understanding of the market) on one side and being a bad overall trader (in terms of my behavior in losing trades). This allows me to retain my confidence and my self-esteem where it's due while identifying the losing strategies where they operate.

I'm experimenting with reversing the psychology when, like now, I'm in a winning trade: what would I be doing if I were short in this rising market? I would hold on, I would add to my position, I would get stubborn and let this thing ride on until I was forced to give up. So, can I do this now that I'm winning? I'll let you know what I did...

It seems you're a boom-and-buster. All you have to do is a small adjustment, become better at losing trades, i.e. cut your losses. Letting losers run can only mean that you haven't fully accepted the risk involved in trading. The market can do anything at any given moment and each price movement is random, so what's the point having expectations? Just focus on your system and your edge, treat the losing trades psychologically the same way as your winning trades. That's all.

WHAT A EXCELLENT THREAD!

what a useful article

I have make a journey like this.. from technical, to fundamental, to market sentiment, and money management..
Now I realize that our minds is the ultimate barrier to succeded in trading condition..
I will wait for the next discussion.. Very useful

Here I would to share with you the Q&A exercise (“Trade Your Way to Financial Freedom” by Tharp, 1998) in setting my own trading objectives and expectations. I hope that you can use these questions to help in setting your own objectives and expectations.
Self-Inventory Check

Q: How much capital do you have?
A: I currently have about $25000 in my account.
Q: How much money do you need to live on each year?
A: About $30,000.
Q: How much of that must come out of your trading profits?
A: Currently, none of it. I earned a salary from my current job.
Self-Assessment

Q: How much time during the day do you have to devote to trading?
A: I allocated 2-3 hours daily.
Q: When you are trading, how many distractions can you expect to have?
A: A lot of distractions.
Q: So obviously, you need a trading methodology that allows you to deal with those distractions.
A: Yes
Q: How much time do you expect to devote to developing your trading system?
A: Currently, I spent approximately 5-8 hours during weekend and 1-2 hours during weekdays in planning and doing research.
Q: How would you rate your market knowledge?
A: I have extensive experience in stock investment and Forex trading.
Q: What are your psychological strengths and weaknesses, especially in terms of trading system development?
A: I am a strategic and patience trader, which I believe are the qualities needed in developing long-term strategies for trading. I’m also self-confident, which gives me a lot of psychological strength in trusting the systems I develop. In terms of weaknesses, I am always striving for perfection therefore sometimes this distract me from my primary mission as a trader.
Q: How about your strengths and weaknesses in terms of personal discipline?
A: I am fairly good at discipline. I have no problems following a system.
Q: Do you tend to get compulsive (i.e., get caught up in the excitement of trading), have personal conflicts (i.e., have a history of conflicts with your family, at your job, or during past trading experience),-or have any emotional issues that constantly crop up, such as fear or anger?
A: I certainly don’t think of myself as compulsive. I do find trading exciting but I am not addicted to it. I don’t think I have any conflicts. My family life is reasonably stable. Moreover, I rarely get angry or frustrated but once a while I do tense up. Whenever I feel tense, I will practice the breathing method that I learnt from Anthony Robbins to relax myself, and convert my state to positive.
Q: Based upon your personal inventory, what did you need to learn, accomplish, or solve prior to beginning trading? How did you do that?
A: I think my personal inventory was and is quite strong. I’m able to trade well.
Define Your Objectives

Q: What is your advantage or edge in trading? What is the particular concept that you are trading that gives you an advantage?
A: I would consider myself a man with quite a number of skill sets that allows me to take advantage of in order to become successful in trading. My number 1 advantage is that I possess strategic thinking due to my high analytical skill set in Computer programming. In fact, I had programmed quite a number of indicators to mechanically identify potential support and resistance levels, and identify price action patterns. While most people don’t take it to the level that I do. I also have the higher advantage in terms of patience and detachment. For example, I am able to sit back and do nothing while waiting for the right opportunities to come along, even if that means not making a trade all day or few days.
Q: Do you have the time to trade short term?
A: As of now, I only trade short-term during holidays.
Q: What do you expect to make each year as a percentage of your trading capital?
A: About 20 percent to 40 percent.
Q: How much money do you need to make each year? Do you need to live off that money? What if you don’t make enough to live off? Can you make more than you need to live off so that your trading capital can grow? Can you stand regular withdrawals from your trading capital to pay your monthly bills?
A: I make it a habit to only spend my living expenses from my current salary, so I won’t need anything additional from my trading income. As of now and until I decided to do full time trading, trading income will simply be a second income for me.
Q: Are you being realistic, or are you expecting to trade like the best trader in the world?
A: I want to achieve financial freedom via investment and trading. I am learning from Market Wizards and trying to emulate them by achieving their standards. However, I am taking one step at a time and will not force myself.
Q: What risk level are you willing to tolerate in order to achieve that?
A: About half the potential gain, so the maximum loss would be 20 percent in a year.
Q: What is the largest peak-to-trough drawdown you are willing to tolerate?
A: About 6 percent. I will commence System Stop if my methodology experience 6% drawdown in a particular month.
Q: How will you know your plan is working, and how will you know when it’s not working? What do you expect from your system in various kinds of markets? Trending? Consolidating? Highly volatile?
A: I plan everything after taking into consideration of all aspects. I set up worst-case scenarios, and I run through them just as an exercise. I have specifications on the best case and the worst case for each scenario. Thus, when something comes along, I have usually planned for it and have a range of expectancy. Therefore, if the results fall within that range, then I know everything is as per plan. However, if the results fall outside that range, then I know that I will need to study what went wrong and get it fixed. Generally, I expect a 40 percent return at the best and a 10 percent return at the worst, with average returns of 15 to 25 percent. We can also conclude that the expected worst-case drawdown will be 6 percent per month.
Money Management Ideas

Q: How much capital will be at risk?
A: I’ve got around $25,000 to trade with, so I will only use $15,000 as at-risk capital, and the remaining $10,000 I will keep in a money market account in case I burn the first $15,000.
Q: How much risk can you afford to take on a given trade?
A: This depends on trading methods use at that time. I will just use 1% risk for short term trading, and 2% for medium term trading.
Q: How much to risk on all open positions?
A: I will not have more than ten open positions at any time and/or will not have more than 20 percent of my capital at risk on open positions. I applied the rule that limits the number of open position size at any given time.
Q: How do you determine position size?
A: I practice different money management strategies – Fixed-Volatility and Fixed-Percentage – respectively for different trading methods.
Q: What is you acceptable risk/reward ratio?
A: I will only make trades that have a risk/reward ratio of 1:3 or higher. No matter how beautiful the outlook may be, but if I can lose more than I can make due to wrong judgment then I will not make the trade.
Q: Will you lower risk parameters?
A: If I lose more than 6 percent of my capital, I will then lower my risk accordingly.
Q: What is your cutoff point before questioning trading plan?
A: If I’m down 35 percent of my capital since I started, I will stop trading until I review my system, risk parameters, and trading plan to determine the root cause.
Trading Ideas

Q: What kind of markets do you want to trade? Do you want to trade only liquid markets, or are there some illiquid markets you’d like to trade?
A: Currently, I am trading Forex and Gold spot which are the most liquidity market in the world.
Q: What beliefs do you have about entering the markets? How important do you believe entry to be?
A: Entries are very important as it directly define our stop placement, initial risk, and potential loss. The size of our losses, compared to our wins, directly affects our expectancy! When we enter a trade, we have no idea whether the trade will enjoy a strong trend as we do not have the crystal ball to visualize the future. We only have present and it is all about controlling risk and trading for the opportunity to earn expectancy. Well since entries define initial risk, it also directly affects the position sizing in money management strategy.
Q: Given your goals in terms of returns and drawdowns, what kind of initial stop loss do you want?
A: My initial stop loss is defined by using volatility measurement (ATR) or the support level.
Q: How do you plan to take profits? Reversal stops? Trailing stops? Technical stops? Price objectives?
A: I am more comfortable in using trailing stops as an effective way to exit profitable positions. I am wary of profit targets as it generally reduces profitability.

I'm going to agree with this. Psychology of trading is only a concern if you don't know how to trade well. If you have a mentor or are being trained to trade(I've heard it takes about 90 days in the big firms), I imagine there is a lot less psychology to work out than when you are trying to teach yourself in spare time.

Hey real pips,

In my humble opinion, psychology is one of the most important thing next to money management. Take it from me, seeing so many traders fail. They underestimate the need for this.

Andrew

yeah, revenge mode tradig will influence directly to our position sizing.. I think it's hard to understand for western people with rigid rational thinking
CMIIW

honeybhi has some excellent PDF files on mental fitness and trading psychology posted here -

http://www.forexfactory.com/showthre...12#post3881212

The Secrets to Emotion Free Trading by Larry Levi is really good and touches upon many aspects posted by others in here.

You are so right about finding a method that works early on. I have mentioned before that I was lucky enough to be shown a brilliant method right from the very start of my trading journey. I am certain had I not seen a trader call his trades live in front of me for a year or so and actually teach me why he entered and where his profit targets were I would have given up years ago.

Belief in the method you trade is essential IMHO. The tricks the market makers and their computerised trading programs play will scare the best of us out of trades unless we have absolute confidence in our methods.

I am not so sure about the school you mention, they work for some and not for others.

My advice would be to learn pure price action, dump all indicators until you understand bars or candlesticks properly, I realised very late that everything else is just a distraction.

To summarise, have confidence in your method and the psychology will take care of it's self.

I think the key to success is in our brain. No, I'm 100% sure. Look, every second person can take deme account and double the balance in a week, how many of us will do this with a real account.

The obstacle is in us and that mean we only we can break it.

I would say believe and image that you are successful trader and you will be!

One example of unreasonable expectations is many investors and traders think they can quit their jobs and start making a living day trading with a “small” $25,000 account. Some even have the silly notion that they can do it with $5000. They read in a book how a trader or two managed to turn $5000 into $10 million and figured that they should be able to do it as well. Yes, it is possible and does happen occasionally, but unknowingly there are also tens of thousands of traders who went bust. By setting their sights lower, people may not make the millions they dreamed of but can end up doing just fine anyway. Whether it’s in real life or in trading, you need to think on a realistic level.