DislikedThe 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.Ignored
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
This idea helps me alot. The more we attach ourselves to something the harder it is to be disciplined, hence the reason we should be less emotional. I remember the first time I traded on a live account, I thought that I was pretty confident having succedded somewhat on a demo. But even with my trading rules and plan, when I traded with real money I discovered that I was very attached emotionally to my money. I got stuck in this wierd tunnel vision and could not think straight. Even though in theory it should have been the same as with a demo it...
The next post might also help there PsionMind. Let me know
.FX4
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
Okay traders,
The attachment below is an image of a spreadsheet showing some trades. Only a portion of the spreadsheet data is shown. Alot about the heart-mind of this trader can be seen if you look closely. The pip-curve (the graph) below is very important. The break of the thinner red line should have alerted the trader, not just to keep following their system closely, but to watch themselves even closer. Notice the thicker red line. That is a psychological level for this trader (a balance line if your will) and they have already crossed it. Time for them to be very careful on their next two or three trades. Gotta know when you are getting weak. Emotionally, they are driving almost on 'E': on fumes. If they can't get back above 70 pips, and find solid support (in themselves as a trader), they very well might lose the rest of their pips.
Might make the spreadsheet available either today or tomorrow (polishing it a bit). It's part of the next trading challenge: the second thing traders find hard to do...the first is being able/willing to take the loss (after their first click of course).
Enjoy!
FX4
P.S. SPECIAL THANKS to a trading buddy who took my really rough spreadsheet and turned it into this beauty!!!
The attachment below is an image of a spreadsheet showing some trades. Only a portion of the spreadsheet data is shown. Alot about the heart-mind of this trader can be seen if you look closely. The pip-curve (the graph) below is very important. The break of the thinner red line should have alerted the trader, not just to keep following their system closely, but to watch themselves even closer. Notice the thicker red line. That is a psychological level for this trader (a balance line if your will) and they have already crossed it. Time for them to be very careful on their next two or three trades. Gotta know when you are getting weak. Emotionally, they are driving almost on 'E': on fumes. If they can't get back above 70 pips, and find solid support (in themselves as a trader), they very well might lose the rest of their pips.
Might make the spreadsheet available either today or tomorrow (polishing it a bit). It's part of the next trading challenge: the second thing traders find hard to do...the first is being able/willing to take the loss (after their first click of course
).Enjoy!
FX4
P.S. SPECIAL THANKS to a trading buddy who took my really rough spreadsheet and turned it into this beauty!!!
The key here is not to try to have no emotional response because that is impossible ,despite what many books say, but to recognize that you are emotional and ask yourself how is your emotional state affecting your trading.
This is not to say however that you don't need to keep your emotions in check. If you let emotions dictate trading decisions then you are bound to fail. I am just saying that you can't eliminate them completely.
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
Spot on buddy. The gurus chant 'remove emotions'. This is not practical advise for most people. I even go so far as to incorperate aspects into my trading strategy to satisfy emotional responses. This may actually lower my profits if I were a robot with no emotions, but since I am a human it increases my profits by addressing my weaknesses. My favourite example is taking partial profits which satisfies fear of losing the profits gained AND satisfies greed because I still have some of the position running for even more pips
This is...
Smart guys here!!! One other thing is when you first start trading for the day or session, take some "easy pips" with a small position as a "trading vitamin": a confidence booster. Might help some. Just to see it in your Account History would be like a shot in the arm to your ego. We do need to be careful not to become too overconfident and egotistical, but your ego needs the appropriate boost to get the job done.
Will leave some ideas for others to post. Don't want to let them all out of the bag now
.FX4
P.S. Another trick...watching one or two positive trades in your Account History instead of watching the "Trade" tab where you can see your fluctuating P & L can be more helpful at being a source of en-courage-ment. We've already talked about the need for courage, right? O-kay, closing my trick bag again.
@ Jzw and Agro...
Smart guys here!!! One other thing is when you first start trading for the day or session, take some "easy pips" just as a "trading vitamin": a confidence booster. Might help some.
Will leave some ideas for others to post. Don't want to let them all out of the bag now
FX4
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
Why is letting go of a losing trade such a problem? Well, for starters, for some reason when we click, we immediately have an emotional attachment to that trade. Somehow we see it as an extension of ourselves. If that trade fails, we feel that we also have failed. But there are other reasons we can develop that emotional bond to a trade. Let us look at our trader's spreadsheet again.
I circled the trade in question in blue and noted it in the margin. That was the largest losing trade so far for this trader, whom I will call Target Hitter. There must have been some reason(s) why they held that trade.
First of all, notice that they flipped from short to long. Most of their recent trades on Eur-Usd had been short. When they lost on the short, they flipped to long and took a hit there. Was that a desperate move to stay above the thin blue line?
Secondly, they had just made a new high on their pip-curve. Took some days to get there but they did it...and probably didn't want to lose any progress made. That was the trade they had hoped would put them over the top...finally.
Thirdly, when they took the loss on the short, their pip-curve was just above the thin, horizontal, blue line that they had been trying so hard to stay above. Taking another loss (see blue arrow) was something they really didn't want to have to do...so they held off for as long as they could, hoping for a change. Exited at their "ouch spot". Notice how gun shy they were on the long right after?
That losing trade took them out of the battle emotionally. Look at the slope of the pip-curve on that one trade: straight down. They had a major heart-mind drawdown and went full-blown into the Cycle of Market Emotions (Post 47):
Anxiety >> Denial >> Fear >> Desperation >> Panic >> Capitulation (for sure) >> Despondency.
Target Hitter managed to pull the plug on the trade when they realized they were giving back half of their remaining pips on one trade and beginning to break the thicker red line. The blue arrow in the chart shows the start of the loss with the long on Eur-Usd. In the last trade shown on the spreadsheet, they're not too sure of themselves. "Time to refresh and re-group Target Hitter. We're still pullin' for ya!"
How to let go?
1. Never take a trade too personally. Protect your account, not the trade or your ego.
2. Stick to your rules.
3. As soon as you realize the trade isn't working out, get out. Don't allow that paralyzing hope to set in. (This point was discussed in more detail earlier). To make your response more automatic, just practise letting go in your demo account or live with mirco-lots over and over again.
4. If you realize that you are in a potentially vulnerable place per your pip-curve (or equity curve if you use one), exercise extreme caution. Maybe even take a break until you feel like your trading self again, and you have mustered up the emotional energy to push through new barriers to better profits, or keep any losses to a minimum. Good place to reduce exposure (smaller position sizes).
5. Don't allow anything or anyone to drive you beyond your comfort zone at any given time. No stresses. Don't worry about another person's opinion: it's your account.
The reasons why traders become attached to a trade can be numerous and quite varied. Review some of your more devastating losses and examine yourself for the reasons that may have tied you to that trade. Sometimes the reason may not even be directly related to trading so be a good detective here. HINT: Look for things that have strong emotional value for you.
Next...the second most challenging thing for a trader to do.
Take care,
FX4
I circled the trade in question in blue and noted it in the margin. That was the largest losing trade so far for this trader, whom I will call Target Hitter. There must have been some reason(s) why they held that trade.
First of all, notice that they flipped from short to long. Most of their recent trades on Eur-Usd had been short. When they lost on the short, they flipped to long and took a hit there. Was that a desperate move to stay above the thin blue line?
Secondly, they had just made a new high on their pip-curve. Took some days to get there but they did it...and probably didn't want to lose any progress made. That was the trade they had hoped would put them over the top...finally.
Thirdly, when they took the loss on the short, their pip-curve was just above the thin, horizontal, blue line that they had been trying so hard to stay above. Taking another loss (see blue arrow) was something they really didn't want to have to do...so they held off for as long as they could, hoping for a change. Exited at their "ouch spot". Notice how gun shy they were on the long right after?
That losing trade took them out of the battle emotionally. Look at the slope of the pip-curve on that one trade: straight down. They had a major heart-mind drawdown and went full-blown into the Cycle of Market Emotions (Post 47):
Anxiety >> Denial >> Fear >> Desperation >> Panic >> Capitulation (for sure) >> Despondency.
Target Hitter managed to pull the plug on the trade when they realized they were giving back half of their remaining pips on one trade and beginning to break the thicker red line. The blue arrow in the chart shows the start of the loss with the long on Eur-Usd. In the last trade shown on the spreadsheet, they're not too sure of themselves. "Time to refresh and re-group Target Hitter. We're still pullin' for ya!"
How to let go?
1. Never take a trade too personally. Protect your account, not the trade or your ego.
2. Stick to your rules.
3. As soon as you realize the trade isn't working out, get out. Don't allow that paralyzing hope to set in. (This point was discussed in more detail earlier). To make your response more automatic, just practise letting go in your demo account or live with mirco-lots over and over again.
4. If you realize that you are in a potentially vulnerable place per your pip-curve (or equity curve if you use one), exercise extreme caution. Maybe even take a break until you feel like your trading self again, and you have mustered up the emotional energy to push through new barriers to better profits, or keep any losses to a minimum. Good place to reduce exposure (smaller position sizes).
5. Don't allow anything or anyone to drive you beyond your comfort zone at any given time. No stresses. Don't worry about another person's opinion: it's your account.
The reasons why traders become attached to a trade can be numerous and quite varied. Review some of your more devastating losses and examine yourself for the reasons that may have tied you to that trade. Sometimes the reason may not even be directly related to trading so be a good detective here
. HINT: Look for things that have strong emotional value for you.Next...the second most challenging thing for a trader to do.
Take care,
FX4
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
Okay warrior traders,
Here is the spreadsheet file that was used to create the image you see below. Not all of the data is shown in the image. The trendlines were drawn using Paint.
Some features to be aware of:
1. The columns with the blue headings are the input areas. The columns with the green headings, the Trading Statistics table and the Pip-Curve will be calculated automatically.
2. Once you enter the FX Pair, Direction and Limit or Target Hit (shown here as just 'Target Hit') columns, you should be able to "right-click" and have the option to Pick from drop-down list, any prior entries made under those headings. That way, when you go to make the next entry, you don't have to keep typing in the same info. every time. Some versions may even have a drop-down menu arrow appear in the spreadsheet.
3. Use the date format shown in the data first. Entered it as: 01/02/2012 for example. If it does not work for you, find the one based on your version that would give correct results.
This is the beginning step in figuring out your trading mind. Traders who manage big bucks get a "photo" of their trading mind handed to them or placed on their desk. Exposure to trading capital is adjusted based on the output of their trading "brain waves". If you don't like your trading results, there's an internal coding error or connectivity issue somewhere. Find the problem and use whatever tool you can to help troubleshoot. Here's something for your toolbox.
Hope traders will pay more attention to the heart-mind game which is really what is behind that rising (or falling) equity curve everybody is so focused on. You can download the .xlsx file here.
NOTE: The spreadsheet fields were extended to Row 500.
Enjoy,
FX4
P.S. Could not upload the .xlsx file here.
P.P.S. Got the .xls version uploaded here. Hope it works on your system. I had some compatibility concerns, but everything seemed okay when I tested it. Both versions are available on the blog.
Here is the spreadsheet file that was used to create the image you see below. Not all of the data is shown in the image. The trendlines were drawn using Paint.
Some features to be aware of:
1. The columns with the blue headings are the input areas. The columns with the green headings, the Trading Statistics table and the Pip-Curve will be calculated automatically.
2. Once you enter the FX Pair, Direction and Limit or Target Hit (shown here as just 'Target Hit') columns, you should be able to "right-click" and have the option to Pick from drop-down list, any prior entries made under those headings. That way, when you go to make the next entry, you don't have to keep typing in the same info. every time. Some versions may even have a drop-down menu arrow appear in the spreadsheet.
3. Use the date format shown in the data first. Entered it as: 01/02/2012 for example. If it does not work for you, find the one based on your version that would give correct results.
This is the beginning step in figuring out your trading mind. Traders who manage big bucks get a "photo" of their trading mind handed to them or placed on their desk. Exposure to trading capital is adjusted based on the output of their trading "brain waves". If you don't like your trading results, there's an internal coding error or connectivity issue somewhere. Find the problem and use whatever tool you can to help troubleshoot. Here's something for your toolbox
.Hope traders will pay more attention to the heart-mind game which is really what is behind that rising (or falling) equity curve everybody is so focused on. You can download the .xlsx file here.
NOTE: The spreadsheet fields were extended to Row 500.
Enjoy,
FX4
P.S. Could not upload the .xlsx file here.
P.P.S. Got the .xls version uploaded here. Hope it works on your system. I had some compatibility concerns, but everything seemed okay when I tested it. Both versions are available on the blog.
- | Commercial Member | Joined Apr 2010 | 2,826 Posts
okay, I made now trendlines that would all be valid too, but would not allow me to participate in the subsequent winning trades that will get me out of my drawdown.
I believe it's like with any technical tool on charts. In hindsight almost everything works, but if you don't know the future, then the trendlines might hinder us to get to new equity highs.
I don't wanna annoy you. Just expressing my opinion and I like the debate here, cause your responses are constructive and helpful.
. It's a good discussion on how we can use technical analysis on our emotional trading mind.If a trader is looking for a futuristic outlook from most TA tools and indicators then of course there are challenges. However, technical analysis helps a trader see where they are in the now. I drew in another support level which seems to have "more" touches...maybe more credibility...maybe. If a trader's equity curve went below your black horizontal line, it is just a caution, not a sign to quit outright. Look at what has been happening overall. Note also the blue horizontal line just below it. It should be a sign to them to trade with caution, maybe reduce exposure, demo-trade or examine themselves to see what is happening on the inside or in their immediate surroundings.
Interestingly enough, this concept can also help traders determine their "emotional stop level" in pips when approaching a touchy area.
You just gotta do it to understand the finer points. It's like seeing a chart after the fact: only so much info. there. But when you were there watching as each candle formed...IN THE NOW, and you can see the volatility and momentum (price emotion if you will), it is another story. I'm sure you can agree with that
. Not trying to poke fun at you here. Having a way to see where you are trade by trade is powerful (like you'd see the gas level in your car as you drive). That's how I think most traders have been trading...with no emotional gas gauge. The tool above I think can help traders with that. Just my 3 1/2 cents. The truth is, if a trader wants to profit in this business and has a system with the capabilities of doing so, but they're not, something is wrong with them...something else is going on, and they need to find a way to address it.When someone goes to the doctor because they don't feel well, the doctor takes some tests and asks questions trying to find the probable cause. Where does the doctor get the information? From the patient, right? And then the patient has to pay the doctor for processing his/her information to give him/her a solution. So, traders pay the market to tell them that something is wrong: but not what is wrong. We know this because over 90% of traders lose money but they want to make money; so something is definitely wrong. So, why shouldn't the trader learn to make sense of the information they already have, keep from making some unnecessary "doctor visits" and keep some more money in their pocket? There are emergencies of course, but we should at least be wise enough to know the difference. Some people go to the doctor for everything....and I mean everything. Would be interesting to see what kinds of stats brokers have on newer traders...the sandboxed ones
. For example, heard it said that "newbies" like to enter at the very beginning of the trend. How do they know that? Hmm... They're using traders' stats to get what they want from this business. Why shouldn't a trader use their own information to get want they say they want from this business as well. My 10 cents .Interesting discussion topics for sure...but for now, trying to find a way to help traders troubleshoot from home.
FX4
- Joined Sep 2008 | Status: hardcore chartist | 2,173 Posts
.
Also, great quote, even tho I only do discretionary:
Hello Custos,
The underlying reality is that people are trading and their state of mind will affect their results. I believe you mentioned in an earlier post that you back-test your systems then auto-trade them. Back-testing the system like we discussed earlier in the thread will help to determine the expectancy of the system etc. Forward testing and live trading shows more of the "trader's expectancy" if you will. Therein lies the problem: many traders are still thinking it's their system, when, in some cases, it's them.
It's something I've found where the real training and study are.