It's A Heart-Mind Game... Are You Ready? | Page 4 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

When do you know you ready to go from demo to real trading? 61 replies

Trading: A Mind Game 15 replies

When and how do you know you are ready to invest real money? 61 replies

Relaxing the heart and mind while trading 12 replies

Trading is a mind game - by Forex Mind Games 2 replies

Attachments: It's A Heart-Mind Game... Are You Ready?
Exit Attachments

It's A Heart-Mind Game... Are You Ready?

  • #61
  • Edited 9:56am Jan 14, 2012 8:06am | Edited 9:56am
Quoting Whistlepips
Good points. I have noticed the same with news and because I often trade on M1 with tight stops, it really pays to mind the news. Maybe not so much effect, when trading on larger TFs. Also noticed that atleast on M1 trends, fakes seem to occur especially after long & fast runs. The trend/consolidation pattern of a kind I think....
Using M1 is not a bad idea if a trader can stand it. Sometimes the moves there are so fast, it makes some traders nervous. But, during news, if a trader plans to trade it, they had better be looking at M1...mho. Fades are on every time frame...smaller emotional effect on the larger time frame, and they (the fade/counter-move) may actually be more tradeable. But, for a position trader, having a long-term trade in mind on a fade, on an H4 for example, may be just as costly or more so depending on their position size. Get my drift here?

Yes, these fades/fakes will come along the way...those "short-lived" counter-trend moves. I think they are there for the pigs to get slaughtered. Know the saying right, "Bulls make money. Bears make money. Pigs (those trying to trade every little move) get slaughtered". I think the slaughtering comes because when trading the fades, traders end up in these short/long squeezes that immediately catch them off-guard so they become emotionally flat-footed, and they were not emotionally prepared for that. End result: they are no longer in a position to fight/trade effectively in that moment. Meantime, the market is gone with their money...bye b-y-e.

You mentioned the term "panic reaction"...another trading adage: "Money is made when there is blood in the streets"... (figuratively speaking). When the market move causes traders to panic, warrior traders (the emotionally and mentally nimble ones) make a killing!

I knew someone once who had to take some training to have good defensive driving skills. One day on the freeway someone cut us off, and those skills came in without a second thought and did their part to keep us from the accident. We were spared by maybe an inch, it was that close. We might need emotional pip-reflex training or something . Any ideas anyone? Maybe trading using a playback software at an accelerated speed might help build reflexes, and the emotional training part may just come along with the exercise. Has anyone tried it?

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #62
  • Edited Jan 15, 2012 6:12am Jan 14, 2012 9:08am | Edited Jan 15, 2012 6:12am
Hello traders,

In Trading Challenge 1A and 1B we discussed Letting Profits Run: Cutting Losses Short. Comments on this topic are still welcomed. Here's an outline for Trading Challenge 2: When, Where and Under What Conditions To Take The Loss.

Here we go...

When: It is best, from an emotional standpoint, as soon as you know that you are right about being wrong, cut the loss and get out!!! Protect your emotional equity and take your head out of that loin's mouth so-to-speak. How many times just after you've clicked, and looked at where your order was in the market, your gut got tight, your breathing got heavier, your shoulder muscles got a bit tense and stiff, and hope (the crossing of the fingers) began to set in, as you could "see" (perceptive blink moment here) that you are not going the right way? Getting back to an emotionally neutral trading zone, so you can think clearly and objectively is CRITICAL to your survival. Wouldn't hurt either to have the market out of your pocket as you get your bearings again .

NOTE: If you are in the right direction, but your timing was a little off, you need to have a strategy to deal with that as well. That is where using rescues can come in handy, if that is your trading style. But, you still need to know where to rescue. If your direction is wrong, then you need to know where to flip. Most traders I think will be using stops or be looking for an exit in order to regroup.

If you have the emotional equity to spare, try to look for an exit that would allow for minimum damage to your trading capital, but do it quickly. Maybe you're the James Bond style trader with several exits in mind before entering the trade . The longer you wait and hope for things to go back to + pips so you can exit (and the market knows you will try to do that to perhaps boost your ego or your trading stats or whatever), you will find yourself frozen like a deer in headlights. Hope in that situation is like an aspirin: it takes the headache away (minimizing the pain), but the source of it still remains. The market will try to lock you out of the + pips arena, because it knows the longer you are there hoping, they've got you because you'll get numb: and at the very least, they want their spread! How many times has your buy order become the market's resistance price level and vice-versa...especially when the market is dead, for example, between the US and Asian Session? Then there's the crazy price action at times when the manipulators show up in thin markets on holidays. No time to be paralyzed!!!

Where: At the price that confirms to you, per your system, that the bias of the market has shifted against your trade direction. You should have an idea at what that looks like and at what price your trade is no longer valid. Your trading system should be so finely tuned, that it can give you a tell in the opposite direction if you want to flip. Being emotionally capable of doing so is another issue. We'll be getting to that a little later.

Under What Conditions: That really depends on the features of your "taking-the-loss parachute". But overall, it should be in sync with your money/risk management goals.

I'll let these ideas brew and see how else they may be fleshed out by myself or by other posters.

Take care,

FX4

P.S. After the poll, we'll discuss the issue of Letting Go...
Trade what you see, not what you think or feel. Let the market come to you.
  • #63
  • Edited Jan 16, 2012 2:11am Jan 15, 2012 8:18am | Edited Jan 16, 2012 2:11am
It was mentioned in an earlier post about the psychological benefits of back-testing your trading system/method. Some of you may not know how that is done.

Basically you would go back in time on your charts and look for your trading edge: your reason for entering the trade. Whenever you see it, you trade it on paper: write down the details of the entry etc. etc. using your stops or exit parameters of your system. Record the outcome. The more information you collect, the better statistics you can produce. It's like taking a blood test of your trading. Knowing when to enter and not knowing when to exit is not a complete system. Also, if you have less discretion involved, you should have an easier time testing your trading approach. Your results should be more objective. Here's an example. I am not offering this as a system to be traded.

I will trade the M10 chart.

I will trade the US Session between 8am EST and noon EST.

Entry: I will enter a long position when the 8SMA crosses above the 45 SMA and the candle after the crossing of the MAs opens higher than the previous open. (The opposite for a short, but you should spell it out).

Exit: I will exit if price goes 3 pips + the spread below my entry price. (The opposite for a short, but you should spell it out).

Target: I will take profit if/when price reaches the 61.8% Fib level of the prior, major swing.

NOTE: Your back-testing results will very likely be free of much of the heart-mind influence. That is where forward-testing comes in. If your back-testing says 75% Win/Loss Ratio and with forward testing, you get 55%...hmm...where did the other 20% go? Maybe you cherry-picked a bit, or you are being affected in the heart-mind area more than you thought during live trading. In my opinion, forward-testing is checking the You component of your trading more than anything.

This week, I want to encourage traders to forward-test their system. Hopefully you already know what your system "should" produce. The earlier posts, I hope, would be good trading food-for-thought as you go through this week.

When trading/forward-testing:

1. Trade ONLY when you see your edge or trading advantage. Trade without hesitation as best as you can.

2. Know at what price your trade direction would no longer be valid.

3. Take the loss if necessary: pull the "chute". Rescue well if your system allows for it.

4. Take your profit and don't get greedy.

5. Clear your emotional cache after each trade, regardless of the outcome as soon as possible and keep going.

To come...

_ After the poll (which ends on Tuesday)...the discussion on Letting Go...

_ The second most difficult thing for traders to do...imho. Should have some details on that going into the weekend.

Take care,

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #64
  • Jan 15, 2012 8:29am Jan 15, 2012 8:29am
Quoting FX4Newbies
It was mentioned in an earlier post about the psychological benefits of back-testing your trading system/method. Some of you may not know how that is done.

Basically you would go back in time on your charts and look for your trading edge. Whenever you see it, you trade it on paper: write down the details of the entry etc. etc. using your stops or exit parameters of your system. Record the outcome. The more information you collect, the better statistics you can produce. It's like taking a blood test of your trading. Knowing when to enter...
I think manual backtesting is pretty much impossible to do accurately. Ever heard anything of researcher bias? You will subconsciously affect the outcome of your research. The results will be worthless or at best misleading.
Only a backtest done by a computer will cancel out the researcher bias.
  • #65
  • Jan 15, 2012 8:46am Jan 15, 2012 8:46am
Quoting Custos
I think manual backtesting is pretty much impossible to do accurately. Ever heard anything of researcher bias? You will subconsciously affect the outcome of your research. The results will be worthless or at best misleading.
Only a backtest done by a computer will cancel out the researcher bias.
I agree Custos that it is impossible to have 0% researcher bias in manual back-testing. The best a trader can do, if they are not able to do it via a computer, is to have a system that requires the least amount of discretion.

The example of the system I gave is specific enough that most people with those two MAs crossing on an M10 chart, with the candle after the crossing opening higher than the previous is "universal" in its message. The difference in data feeds might create some discrepancy in results among traders, but if all the traders had the same data feed, most, if not all traders will be recording a long around the same time.

To say the results will be worthless...I don't think so. It will give more information than the trader had before. Misleading? Within a reasonable margin of error (which means several tries), some good benefit may be derived.

Do you know of a computer method that would allow for a more reliable back-testing scenario?

Thanks for posting,

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #66
  • Jan 15, 2012 8:48am Jan 15, 2012 8:48am
Quoting FX4Newbies
I agree Custos that it is "impossible" to have 0% researcher bias. The best a trader can do, if they are not able to do it via a computer is to have a system that requires the least amount of discretion.

The example of the system I gave is specific enough that most people with two MAs crossing on an M10 chart, with the candle after the crossing opening higher than the previous is "universal" in its message.

To say the results will be worthless...don't think so. Misleading? Within a reasonable margin of error (which means several tries),...
well, I use multicharts to backtest my systems. But it requires you to learn a bit of programming.
  • #67
  • Edited 9:11am Jan 15, 2012 8:57am | Edited 9:11am
Quoting Custos
well, I use multicharts to backtest my systems. But it requires you to learn a bit of programming.
Just checked it out briefly on the web...looks interesting. Maybe some traders will try it. Are your systems so specific that it makes it easy for you to back-test and trade live, or do you use auto-trading systems or robots to eliminate the emotion since you are using mechanical back-testing methods? Hanover discussed them earlier in the thread.

Since you have back-tested, what would you say is a good minimum amount of time to research? Hope I'm not asking you too many questions, but I believe good traders back-test so they can know what their system should give . It's like buying a car and wanting to know the gas mileage.

Thanks,

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #68
  • Jan 15, 2012 9:20am Jan 15, 2012 9:20am
Quoting FX4Newbies
Just checked it out briefly on the web...looks interesting. Maybe some traders will try it. Are your systems so specific that it makes it easy for you to back-test and trade live, or do you use auto-trading systems or robots to eliminate the emotion since you are using mechanical back-testing methods? Hanover discussed them earlier in the thread.

Since you have back-tested, what would you say is a good minimum amount of time to research? Hope I'm not asking you too many questions, but I believe good traders back-test so they can know what their...
Yeah, I am thinking about everything I do very hard and extrapolate rules out of my ideas. In the end my rules become so specific that the system can be accurately backtested.
When I got a good system, I let the computer trade it (auto trading system).

Not sure what you mean with good amount of time. My initial backtesting is on +10.000 trades. If the system passes this stage I will test it on around + 100.000 trades and if it passes that stage, I will look for ways to incorporate it into my portfolio.
If you mean how much time I spend on research / backtesting, I must say it is a 100% of my time. I don't do anything else besides research / backtesting with regards to trading.
  • #69
  • Edited 9:44am Jan 15, 2012 9:29am | Edited 9:44am
Quoting Custos
Yeah, I am thinking about everything I do very hard and extrapolate rules out of my ideas. In the end my rules become so specific that the system can be accurately backtested.
When I got a good system, I let the computer trade it (auto trading system).

Not sure what you mean with good amount of time. My initial backtesting is on +10.000 trades. If the system passes this stage I will test it on around + 100.000 trades and if it passes that stage, I will look for ways to incorporate it into my portfolio.
If you mean how much time I spend on research...
So glad you said that because so many traders are not aware of what successful traders go through. And this thread is about The Heart-Mind Game. Back-testing and forward testing are bigs part of the path that leads to success. By amount of time I meant 3 months, 2 years ...but you put it in number of trades.

FX4

NOTE: For recent readers, earlier posts discussed the value of back-testing to foster courage and confidence.
Trade what you see, not what you think or feel. Let the market come to you.
  • #70
  • Jan 15, 2012 9:35am Jan 15, 2012 9:35am
Quoting FX4Newbies
So glad you said that because so many traders are not aware of what successful traders go through. And this thread is about The Heart-Mind Game. This is a big part of the path that leads to success. By amount of time I meant 3 months, 2 years ...but you put it in number of trades.

FX4
well, problem is you can't measure such things in months to years. If I have a system on the daily chart, I would maybe get 200 trades over 10 years, but 200 trades is far from anything statistical. Any stats books will tell you, that you need at least 10.000 data points to be able to have some kind of certainty that the system you have is not just a lucky streak, but has a real edge.
  • #71
  • Jan 15, 2012 9:38am Jan 15, 2012 9:38am
Quoting Custos
well, problem is you can't measure such things in months to years. If I have a system on the daily chart, I would maybe get 200 trades over 10 years, but 200 trades is far from anything statistical. Any stats books will tell you, that you need at least 10.000 data points to be able to have some kind of certainty that the system you have is not just a lucky streak, but has a real edge.
The more trades tested favourably, the sharper the edge; I hear that. If you don't mind, what time-frame(s) do you normally test?

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #72
  • Jan 15, 2012 9:44am Jan 15, 2012 9:44am
Quoting FX4Newbies
The more trades tested favourably, the sharper the edge. I hear that. If you don't mind, what time-frame(s) do you normally test?

FX4
Really depends. But I tend to go with H4+ time-frames. The problem with lower time-frames is that trade costs eat up a big portion of the profits and make systems only mediocre at best.

Most systems anyways don't have a real edge. Most have just a lucky run over a couple of months to years at best and then go back to random at one point. That is then the point when most traders question their abilities when in fact they never had a good system to begin with. From my experience there are only a handful of systems that work for decades.
  • #73
  • Jan 15, 2012 9:50am Jan 15, 2012 9:50am
Quoting Custos
Really depends. But I tend to go with H4+ time-frames. The problem with lower time-frames is that trade costs eat up a big portion of the profits and make systems only mediocre at best.

And most systems don't have a real edge. Most have just a lucky run over a couple of months to years at best and then go back to random at one point. That is then the point when most traders question their abilities when in fact they never had a good system to begin with. From my experience there are only a handful of systems that work for decades.
Really appreciate you sharing. So, all these systems for sale everywhere... what's a trader to do if a system works well for a couple of years, start the hunt over? These days when you buy an electronic device, it is an "old version" within months if you're lucky. I suppose there are traders who use more discretion in their trading and less of a mechanical approach. Whatever works for the trader, right?

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #74
  • Jan 15, 2012 9:58am Jan 15, 2012 9:58am
Quoting FX4Newbies
Really appreciate you sharing. So, all these systems for sale everywhere... what's a trader to do if a system works well for a couple of years, start the hunt over? I suppose there are traders who use more discretion in their trading and less of a mechanical approach. Whatever works for the trader, right?

FX4
I guess if a system stops working, then you have to think hard why it doesn't work anymore. Were your premises wrong? Did something change in the game?
For me my systems have to make complete sense. Just buying because an indicator says so is definitely not enough. There has to be an inherent logic in the system that relies on market structure and how market participants are operating. But in the end, if it stops working, then you have to start the hunt all over again.
Hm, well, my opinion on discretion is that these are rules that have not been formulated yet. You can systematize almost anything. So in fact successful discretionary traders are also following a mechanical approach, in my opinion, but their own rules are not clear to them.
  • #75
  • Edited 2:46pm Jan 15, 2012 10:04am | Edited 2:46pm
Quoting Custos
I guess if a system stops working, then you have to think hard why it doesn't work anymore. Were your premises wrong? Did something change in the game?
For me my systems have to make complete sense. Just buying because an indicator says so is definitely not enough. There has to be an inherent logic in the system. But in the end, if it stops working, then you have to start the hunt all over again.
Hm, well, my opinion on discretion is that these are rules that have not been formulated yet. You can systematize almost anything. So in fact successful...
...successful discretionary traders are also following a mechanical approach, in my opinion, but their own rules are not clear to them.

I certainly think they have a systematic approach: Step1, Step 2...etc. Might even be mechanical. Maybe their eyes are also so trained that they can spot what is or isn't "IT". Sometimes it may even be hard to "tell" another trader what they are seeing, that makes them say, "Aha! There it is!!!", and other traders go, "Where...What?...." They just don't see it, much less feel it. And if they see "IT", they go, "Huh?..."

...just pictured a scenario in my mind that looked really funny.

FX4

P.S. Hope this discussion with Custos will motivate more of you to back-test the system you are putting your money on. Always check the gas mileage when buying a car.
Trade what you see, not what you think or feel. Let the market come to you.
  • #76
  • Jan 15, 2012 10:08am Jan 15, 2012 10:08am
Quoting FX4Newbies
...successful discretionary traders are also following a mechanical approach, in my opinion, but their own rules are not clear to them.

I certainly think they have a systematic approach: Step1, Step 2...etc. Maybe their eyes are also so trained that they can spot what is or isn't "IT". Sometimes it may be hard to "tell" another trader what they are seeing, that makes them say, "Aha! There it is!!!", and other traders go, "Where...What?"

...just pictured a scenario in my mind that looked really funny.

FX4...
exactly
  • #77
  • Edited 3:41pm Jan 15, 2012 10:20am | Edited 3:41pm
Well traders,

I have heard it said that good trading comes from hard work. That's very true. The reason so many systems are on the market is because traders don't have time or don't want to take the time. That's fine too, but at least back-test what you did buy for yourself, and maybe get something you can tweak to your satisfaction.

There are many choices out there...maybe even too many. But, to help build your courage and confidence as a trader, you need a trading approach that you know about, especially the reliability of it.

Enjoy the rest of your weekend. Poll ends on Tuesday.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #78
  • Edited Jan 17, 2012 2:50am Jan 16, 2012 12:30pm | Edited Jan 17, 2012 2:50am
A quiet day in the market today. Good time to:

1. Refresh and fill up your emotional equity tank: have a little fun; read a good book.

2. Review the rules of your system: exactly what you are looking for to enter and exit your trades.

3. Take an honest look at your trading results and try to find the "why" behind any negative patterns.

4. Start your first back-test . Define your rules as clearly as possible so that anyone can follow them (without your help) and get the same or very similar result.

5. Work on your emotional trading plan: what you read to yourself to start your trading day. Your emotional boost and guidelines to keep you pumped and in the right frame of mind. Could go something like this:

Today I will follow my rules. I will not be afraid to trade because I will trade when and only when I see my trading edge. I will let the market perform. There is no need for me to become fearful of losing, because my exit strategy is good and I will follow it. I feel safe using it.

I will not dwell on the outcome of my last trade...

 I can do this...one trade at a time...

You get the idea...

Trading is like stepping into the ring with a Tsunami wrestler...a David and Goliath scenario if you will.

Wishing you good prep time before your next session with the "giants".

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #79
  • Edited 11:26pm Jan 17, 2012 5:01pm | Edited 11:26pm
Poll results are in. Here was the question:

In a long trade. Price never goes above my entry. Can I still profit?

Results: Yes 72.73% No 27.27%

Which answer is correct? Well, it all depends on what you read into the question. We tend to trade the way we think.

If you read..."In a long trade. Price never goes above my entry. Can I still profit (on that trade)?" then the answer would be an obvious "No".

If you read..."In a long trade. Price never goes above my entry. Can I still profit (in my account)?" then the answer is "Yes".

Why is this important? How many times have we locked ourselves out of profit because we're stuck on a trade that is going nowhere? We need to remain flexible in our mindsets and remember what we're really after.

Now to the poll question...

1. In a long trade. Price never goes above the entry. That means that the trade direction is definitely wrong. So if we are looking for profit, there are a few things we can do:

_ Exit with as minimal a loss as possible and look for an entry to short. Consider slightly increasing your position size to cover the loss.

_ Try to rescue the long by buying at support areas on the way down using the Fibonacci Summation series for the rescue position sizes. This I have done successfully before in the identical situation I have described. That experience was really an eye-opener to the fact that we are trading to make money, not to win a trade. There are also traders who have made money in strong downtrends placing buy orders. Not recommended as it can be very tricky, but just saying it here that there is money to be made regardless of the direction if you know how. Don't get me wrong, it's way easier to go with the trend, but, if you find yourself on the wrong side of the fence, your account doesn't have to take a hit.

2. Can I still profit? Absolutely!!! Never be married to any position. Never be married to a currency pair. So you traded Eur-Chf and made money shorting a few times. Don't go back looking for a short again and again. Take them as they come, because the day you hold on to them and won't let go, is the day they don't go your way and they won't be letting you go either, until you get a margin call or you blow up your account.

3. Find another pair that is ready to go somewhere so you can make some pips.

Our goal is to win the war...to make money. This was mentioned in Post 34 http://www.forexfactory.com/showthre...ar#post5284013. Individual trades are just the scaffolding to get the desired end. If they can't get you there, find something else to trade that will.

More to come later in the week on "Letting Go"...and the second hardest thing (I think) for traders to do routinely.

Thanks to those of you who took the time to take the poll.

Take care,


FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #80
  • Edited 4:09am Jan 19, 2012 3:16am | Edited 4:09am
Looking for a set of trading rules to follow to help keep your trading heart-mind in check? Found one here on FF by Linda Raschke:

Something to note. She has managed OPM (Other People's Money). That is like adding another 100 lbs or more to your emotional weight. Just because you are trading well for yourself and decide to do it for someone else, does not mean that you won't find strange things happening with you and to you...all tied to the emotions etc. The more "emotional weight" you carry, the more numerous the rules and the more closely you must follow. Why? Because more is at stake and the slightest "failure" can send a trader into a tailspin easily...like having too much weight in the back of the car: more prone to fishtailing. Haven't you seen those guys at the gym with the belt around their lower-back/hip area? Added support for the heavier weight. That's what rules do for the trader: provide added support for the "emotional weight" the trader is dealing with. If not, something else will give, and it will be seen in your actions as a trader: your trading results will tell the story. You don't feel the weight like you do in a gym, but "emotional weight" is VERY REAL!!! Don't underestimate its effects.

Thought I should mention here...not because you see someone trading a system well means that all you need is to use their system. You will need to be developed to the level they had to come to as they went through the painful valleys developing the system you want to implement. Nothing in this business comes easy. A good system without a solid trader behind it will more than likely give bad results...not referring to robots etc. here: people doing the trading.

Hope that helps. Thought most of the rules were spot on!! Following good rules will build in you the trader you need to become...as you are following them. Have rules for everything!!! Be like the trainer at the gym who puts your workout regimen on a chart, and monitors your progress. Take them to heart, will ya? I will too .

http://www.forexfactory.com/showthread.php?t=5875

FX4

P.S. Leading up to "Letting Go..." and other stuff .
Trade what you see, not what you think or feel. Let the market come to you.
2 traders viewing now