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Quest for the Psychology behind Trading Effectively...

  • #61
  • Oct 27, 2011 12:10pm Oct 27, 2011 12:10pm
Quoting monkey@forex
pyschology is a real failing point for me, and the reason why i havent got as far as id like in forex is due to any one of the following:

1) not admitting your wrong, ie, ego, so u end up holding losers till u get a margin call
2) being way too fearful of the profit gained and exiting too early
3) over trading, jumping in without a plan
4) revenge trading, jumping in without a plan, especially after a loss..

The main issues i have is the inability to admit im wrong, and the inability to take a mild loss, waiting till it turns into a major loss...starting...

Honestly, you've just been able to diagnose my real problem in forex trading. Have come a long way in learning the rules, chart patterns trading methodology e.t.c but implementing and sticking with it is the biggest issue. I have observed one thing in my trading, i always have winner when i remove myself from the chart like Mr Marketz said but the urge to look at my trade is too powerful so i end up cutting my winner too fast.
Let God be true, and every other man be a liar
  • #62
  • Oct 28, 2011 12:22am Oct 28, 2011 12:22am
Quoting lkdolzfx
Honestly, you've just been able to diagnose my real problem in forex trading. Have come a long way in learning the rules, chart patterns trading methodology e.t.c but implementing and sticking with it is the biggest issue. I have observed one thing in my trading, i always have winner when i remove myself from the chart like Mr Marketz said but the urge to look at my trade is too powerful so i end up cutting my winner too fast.
If you cut the trade by yourself, obviously this is an emotional based exit (fear of loss) rather than an exit based on a tested strategy; perhaps you need something like " manage the pip " to be able to leave your trades and still be sure of the best exit based on you plan?
OPPORTUNITY IS NOWHERE
  • #63
  • Oct 28, 2011 7:30am Oct 28, 2011 7:30am
'I have observed one thing in my trading, i always have winner when i remove myself from the chart like Mr Marketz said but the urge to look at my trade is too powerful so i end up cutting my winner too fast'- lkdolzfx

I read a lot of books on forex trading specifically and the decent ones often devoted about 1/5 of the book to trading psychology.
I believe knowing yourself is the key. I tried doing the whole watching your trades and manual exiting idea; it didn't work for me, I got too stressed. (I'm sure it works well for others)

I altered my strategy to 'set and forget' - perhaps you should try the same. Use a fixed TP (I.e. open two trades and set your limit at say 2x and 2.5x your SL or whatever you are comfortable with 1x & 1.5x etc...) and then just leave the trade.

That way you remove yourself from a large part of the psychological element of the trade.
And also set yourself a maximum limit of 1,2,3...10 trades a day. Whatever you are comfortable with.

I only look at 4 hr + charts (excluding P&F charting) with a maximum of two trades a day on a low(ish) riskable capital per trade.
Helped me hugely in terms of psychology, profitability and general emotional well being
  • #64
  • Oct 28, 2011 11:14am Oct 28, 2011 11:14am
Quoting Fresh1
'I have observed one thing in my trading, i always have winner when i remove myself from the chart like Mr Marketz said but the urge to look at my trade is too powerful so i end up cutting my winner too fast'- lkdolzfx

I read a lot of books on forex trading specifically and the decent ones often devoted about 1/5 of the book to trading psychology.
I believe knowing yourself is the key. I tried doing the whole watching your trades and manual exiting idea; it didn't work for me, I got too stressed. (I'm sure it works well for others)

I altered...
You have hit the nail on the head so to speak. Set and forget is the way to go and you cannot get dragged into the lower timeframe price action.

Those who sit and watch every pip of a move are often hugely influenced by the normal ebb and flow of the overall move.

You cannot influence the market by watching it so why bother.
Have traded a set and forget approach for years using simple PA set ups.
It completely removes the nail biting.

Rarely take more than two trades per day either.
Can be in one trade all session sometimes.

Happy Trading

makingpips
  • #65
  • Oct 28, 2011 8:19pm Oct 28, 2011 8:19pm
Quoting makingpips
You have hit the nail on the head so to speak. Set and forget is the way to go and you cannot get dragged into the lower timeframe price action.

Those who sit and watch every pip of a move are often hugely influenced by the normal ebb and flow of the overall move.

You cannot influence the market by watching it so why bother.
Have traded a set and forget approach for years using simple PA set ups.
It completely removes the nail biting.

Rarely take more than two trades per day either.
Can be in one trade all session sometimes.

Happy...
This definitely might be the best approach for some, but others can do very well grabbing little moves and watching each of them from start to finish.

If I am getting stressed then there is something out of balance with my psychology. Because this is the way I like to trade and the way I trade best, I choose to rectify that rather than come up with a work around.

Many roads to Rome
  • #66
  • Oct 28, 2011 9:08pm Oct 28, 2011 9:08pm
Quoting makingpips
Set and forget is the way to go and you cannot get dragged into the lower timeframe price action.

Those who sit and watch every pip of a move are often hugely influenced by the normal ebb and flow of the overall move.

You cannot influence the market by watching it so why bother.
I'd much rather be in tune with the market at the 1'TF and have many avenues of possible profit to figure the market's next path,
than sit and let the market go where it wants to with my $.

The other two make sense, though, set and forget and the normal ebb and flow of the overall move influencing how one thinks. When I do watch them in a trade, I find I have to constantly correct my psychological demeanor to get through the charts. That's okay, because of the much larger number of opportunities.
  • #67
  • Oct 29, 2011 4:22am Oct 29, 2011 4:22am
Quoting nhen
This definitely might be the best approach for some, but others can do very well grabbing little moves and watching each of them from start to finish.

If I am getting stressed then there is something out of balance with my psychology. Because this is the way I like to trade and the way I trade best, I choose to rectify that rather than come up with a work around.

Many roads to Rome
As a trader I have developed into someone who trades the move that has set up and confirmed based on Price Action and I ignore the diversions that arise en route to a higher or lower destination. I want to spend as little time at the platform as is possible (just my preference).

I use a limit to take profits on most trades (not always if I think the market is going to fly or tank based on what has happened). Will not enter a trade unless there is at least +47 pips potential on offer and prefer +100 pips potential on offer. You can assess this potential with PA between certain price level zones. Markets can be unpredictable but they are not random in my experience.

My days of stressing are long behind me and I don't think I could trade if I was stressed. Concentrate on what you can lose and the rest takes care of itself.

The trading arena is a place that accommodates all trader types which is just as well since there are many effective ways to profit from your chosen market(s). As traders we all adapt in different ways to a method that suits mind, body and soul and it generally takes anyone a while to get to that point.

Happy Trading

makingpips
  • #68
  • Oct 29, 2011 4:43am Oct 29, 2011 4:43am
Quoting ha-pattern
I'd much rather be in tune with the market at the 1'TF and have many avenues of possible profit to figure the market's next path,
than sit and let the market go where it wants to with my $.

The other two make sense, though, set and forget and the normal ebb and flow of the overall move influencing how one thinks. When I do watch them in a trade, I find I have to constantly correct my psychological demeanor to get through the charts. That's okay, because of the much larger number of opportunities.
Price Action set ups and understanding them allow the trader to take high probability trades. These as you now will form and confirm in lower timeframes. I accept that PA that confirms a set up at A is now going to travel in direction of B (or beyond). These set ups happen everyday, day in day out, always have done and long before charts were
around. Markets do not observe time frames but diffrent times of a session are better to trade than others. I concentrate on price level zones and they have served me well for several years.......takes all the guesswork out of the equation.

I got to this point just by studying the markets after they had closed each day for two years and did lots of chart analysis. It was eye opening and much of what the Price Action demonstrated could be relied upon (simple set ups). Before all this I was a scalper grabbing at pips here and there. Amazing what standing back and looking at the big picture can do for you and your psychology.

I believe there is room for everyone in this arena but real success comes when you can embrace PA and big picture thinking. Plus avoid things that make the markets go random.

We all make things far too complicated and at risk of error when we set out. Less is more and keep it simple is my motto.

Happy Trading

makingpips
  • #69
  • Oct 29, 2011 6:54am Oct 29, 2011 6:54am
I have discovered that I'm a system trader....after basic conditions have been met I can take positions with predetermined tp and sl and walk away.now I don't get that familiar headache and lethargy that comes with watching price move up down.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #70
  • Oct 29, 2011 7:34am Oct 29, 2011 7:34am
Quoting makingpips
You have hit the nail on the head so to speak. Set and forget is the way to go and you cannot get dragged into the lower timeframe price action.

Those who sit and watch every pip of a move are often hugely influenced by the normal ebb and flow of the overall move.

You cannot influence the market by watching it so why bother.
Have traded a set and forget approach for years using simple PA set ups.
It completely removes the nail biting.

Rarely take more than two trades per day either.
Can be in one trade all session sometimes.

Happy Trading...
yep agree on that, not watching every tick and setting stops and limits and just logging off definitely works. i tend to do a lot of high frequency scalping so generally watch the m1 tf like a hawk, but the other night i had an open position in profit, but was so tired my eyes were closing, so set a tp about 10 pips from where i thought price would reasonably go to and made sure my stop was at b/e, then went to sleep...

i woke up and guess what..

yep the tp had filled and it was a tidy trade netting a tidy profit, looking at the bumpy price action i certainly would have taken profit early if i'd been monitoring the trade..
  • #71
  • Nov 1, 2011 10:31am Nov 1, 2011 10:31am
Quoting pemully
I have discovered that I'm a system trader....after basic conditions have been met I can take positions with predetermined tp and sl and walk away.now I don't get that familiar headache and lethargy that comes with watching price move up down.
Indeed I am the same and so is Makingpips by the look of it. As various people have mentioned it just seems to depend on what your comfortable with. Someone mentioned using the 1m timeframe, and if that works for them thats great.
For me it would be too stressful and I would cut profits short. Also if you're using the lower timeframes such as that, then of course your spread eats huge amounts of your profit proportionally per trade, unless you can find a very good good ECN provider I suppose. (Negate paying a spread)

Also 4hr+ timeframes are conducive to my lifestyle. I don't want to be sat infront of the computer all day, much better from my standpoint to find a setup and then just walk away and play some golf or whatever for the rest of the day.
  • #72
  • Nov 22, 2011 10:07pm Nov 22, 2011 10:07pm
Quoting nhen
Great thread guys, really appreciate it.

I have read Mark Douglas's book a few times and agree with Fib about Mark only going so far. I still think there is merit to his work though and it has helped me approach the charts with the right mindset.

Stumbled upon this interview which I found to be worthwhile -

http://www.youtube.com/watch?v=ypCjoH1EsQ4
This is very good thread.
"Trading in the Zone" is sure one of my favorite books to read and it is also easy to read and grasp the ideas what Mark Douglas is saying. But I have to disagree with him on people's mind when "last trade is a loser, the trader fears from the next trade", he also eloborated that eventhough the last trade was a loser, the outcome of the next trade is random. It doesn't have to do anything with previous' loss or win and I am completely agree with this. But personally I get more focused and disciplined after losses, on the other hand while I'm winning I get little fearfull that sometimes I cut my profits short, but it happens when I consistently earn money on regular basis.
I know that having a system including MM makes the job done by 50% and almost sure the other half is in our minds. I know that I can consistently gather the pips, but without keeping the mind in check it hurts the overall equity consistancy.

Here is my thread if you're interested "How to Cope with Winners"
  • #73
  • Dec 27, 2011 3:52am Dec 27, 2011 3:52am
I read the first five posts and had to reply. You guys are so nailing me. I knew this would be a hefty learning curve, so I started out small. I started with a practice account as long as they would let me without putting up any money. Then, when I opened the live account I made two major mistakes:
1. I got too eager to trade "for real", and my system wasn't as refined as it should have been,
2. When my system wasn't perfect, I got frustrated and started revenge trading.
Guess what happenened to that account? Gee, I wonder. But, I at least paid enough attention to realize what I did wrong. So, now I'm back on the practice account, and I think I'll leave the live account balance at zero as long as I can get away with it. I'm not in any hurry to lose any more money.
"The only way to win the game is not to play." - B. S. Miller
  • #74
  • Dec 27, 2011 5:33am Dec 27, 2011 5:33am
it took me over seven years to know, learn and master my emotions on all my interactions in the market. There is a true secret but ONLY few have lasted enough to discover it. Of the truth, 99% of indicators are lagging plus they only show us how to pick crumbs from the market table; which with the right mindset and money management technique, we are able to survive and come out winner.

...
  • #75
  • Jan 13, 2012 4:37pm Jan 13, 2012 4:37pm
bump..
  • #76
  • Jan 14, 2012 6:32am Jan 14, 2012 6:32am
I got some tips from my personal experience, the following checklist probably may help you to identify the psychological obstacles every trader encounters throughout his trading career.

1. After a losing trade, do you have an urge to "revenge" and immediately enter another trade just to regain money lost? If so, do losses often followed by further trading losses? When you are in a "revenge" mode, do you tend to widen your stop loss order or to trade without stop loss at all? You will notice that your trading performance is poor when you are upset or disturbed for any reason.

2. Do you work on yourself mentally while the market is close? Do you analyze your trading activity and try to identify what you're doing right and wrong in your trading each day with specific steps to address both? Good traders always review their latest trades and analyze them. They even keep a trading diary and write down comments, do and don't do. It is called business quality control which enables successful traders to change with the ever changing forex markets.

3. What influence do days where you lacked discipline and/or proper risk control have on your total profit/loss? Do you have and strictly follow risk and money management rules?

4. What is your state-of-mind while you trade? Before you enter a trade: Are you thinking about the money you will make? Does the trade itself excite you? Savvy forex traders do not think in terms of money while they trade. They think in terms of pips. If you think about the money it means that you are not acting from the right motives. In addition, good traders do not look for excitement, self esteem or recognition in the forex market. They trade to make pips. And in most cases you will not be able to tell whether they had a good or bad trading day.

5. Do you have any self-talk while you trade? If so, What is the quality of your self-talk? Is it angry and frustrated; negative and defeated or encouraging and optimistic? Is your self-talk constructive, and would you want others to be talking with you that way while you are trading?

6. Do you exit trades too early just to see the market rally in the direction of your closed position? Do you become stubborn when facing losing positions, turning small losers into large ones?Remember: cut your losses short and let your profits grow. This is a simple rule and a key to success but you will find it very hard to follow.

7. Do you enjoy trading? Are you feeling happy while you trade or trading is a continuing agony for you? Forex trading is a hard, sometimes tedious work. The revenue might be huge but this work is not for every one. Are you built for forex trading?

8. Do you spot real trading opportunities and trade them? Or you have the habit of creating opportunities when they are not there? inexperienced, undisciplined traders have the tendency to push the trigger to often and not according to their trading plan.

9. Do you have a unique trait that gives you an edge over other traders? It might be super tight spreads, fast computer and special tool or an unusual discipline and perseverance. If you are able to identify your special edges and maintain them, you will gradually come close to the top 5 percent of traders who make most of the profits in the forex market.

10. How much are you willing to sacrifice in order to become a successful forex trader? Think of the time and money every professional had to sacrifice in order to make a living from his profession. Forex trading is not exceptional.
  • #77
  • Jan 18, 2012 2:46am Jan 18, 2012 2:46am
what a video - Mark hits alot of the nails on the head

I liked the fact he emphasised the need for a plan.

Personally, my plan developed the more I demoed. My system isnt very complicated but there are 15 points I consider before entering alot of which concern the set-up and the bigger picture.

My advice to beginners is

chart time ( aim is to watch for patterns at the opens)
make rules and stick to them
be open to adding to your rules
read a self-help book x 10
read steenbarger x 10

Anthony


Quoting FibbinArchie
saw this and it sums up what i'm driving at...

http://www.youtube.com/watch?v=K4d6LmNDVFY
  • #78
  • Jan 18, 2012 2:53am Jan 18, 2012 2:53am
Good post Adianto
  • #79
  • Jan 18, 2012 8:32am Jan 18, 2012 8:32am
Quoting antgal23
Good post Adianto
Thanks Antgal...
  • #80
  • Jan 25, 2012 5:06pm Jan 25, 2012 5:06pm
I'm sure the experienced traders will immediately get what I'm talking about, since they've been doing this long enough for the information to "soak in".
I don't believe that the subconscious can be accessed reliably enough to perform trades (entry/exit points, SL, TP, etc.). But, I'm convinced that as we spend more time in the market, watch CNBC, read every book, newspaper, website, we can get our hands on, etc. we absorb bits and pieces that we are not consciously aware of. These pieces are assembled by the subconscious into larger patterns that can give us insight into the big picture that we might otherwise miss "down in the weeds", so to speak. This translates into intuition about other players in the market which affect our trading decisions. Examples I'm sure the pros will attest to:
1. You have a "gut feeling" that Bernanke is getting spooked by inflation and might raise rates this time. (Obviously, you wouldn't trade based on this. But, it's a good direction to point your research in.)
2. You spot a downward trend in USD/JPY, and you get "deja vu". You've seen the BOJ intervene here before. So, you look for and find some news about when it happened last. The valuable clue is knowing their comfort level, allowing you to close your shorts in time. You B/E or even make a few pips while most people have a bad day.

You get the idea. I know the subconscious is like a candle in a window 3 blocks away. It's only good for getting a general direction going. It has to be backed up with research and experience. But, (old-timers help me out here) it can be a valuable resource in shortening the amount of time you need to spend staring at charts. My questions are:
1. How long does it take to develop enough experience to depend on this? (Approximately, in years. SC is the ultimate lagging indicator.)
2. How does one tell the difference between genuine intuition and simply wishful thinking? (This is critical. Without it, everything's a guess.)
"The only way to win the game is not to play." - B. S. Miller
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