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

Thanks for your 2 cents; actually worth alot more .

Like the idea of the Balance Line very much and also your addition of the Range-Momentum cycles below. The inclusion of the concept of "compromise" is interesting. Imagine a pip or equity curve showing a trader's emotional-mental mapping? How fun! There are ways . I think if a trader has good TA skills, there's alot they can do for themselves when analyzing their own performance to help them navigate their way through to positive pip/equity curves. That is the REAL training on the road to success.

Great stuff Ha-Pattern!

FX4

Trading Challenge Contest #1 is on!!! Time to challenge yourself. Hilmy83 was interested in a trading challenge in an earlier post. Maybe not this kind, but here it is...

The second most difficult thing for traders to do (taking the loss is #1), is to keep track of their trades. Also happens to be the second rule in the list by Linda Raschke posted earlier. So, here's the challenge:

For February, the shortest month of the year, track EVERY trade, and use the spreadsheet (Post 91 above) to take an X-ray of your trading self. Try to enter each trade as it is closed. Then, do TA (technical analysis) as you go, to see what your pip level is telling you. I think there will be key benefit to help you to achieve better results, because you will have a way to gauge the level of your "emotional-mental gas tank". If you're on 'E', no wonderful trading system can help you in that condition.

By the way, manually entering your trade data has a greater impact on you as it brings you up close and personal to what is going on. It's like the difference between driving down a street everyday and taking a walk. You see so much more when you're walking by compared to when you're driving...and what you're just noticing was always there . Do the work. Your sub-conscious will benefit so much more. It'll be worth it.

You have next week to gear up and practise. Would be neat to see what more traders actually get for their results.

FX4

Hello traders,

Made some improvements to the spreadsheet uploaded in Post 91:

1. Added a column on the left to number the trades.

2. Added small markers for data points. When new data is being entered, the data point will go to zero first then to the actual overall pip value when it has been calculated.

3. The Pip-Curve entries will show markers for data to Row 500.

4. Updated .xlsx and .xls files are also available on the blog.

For those using Excel 97-2003...hope the differences will not be too great as this was created as an Excel .xlsx document.

FX4

Here's a way you can use your Overall Pip-Curve to find your Emotional-Mental (Heart-Mind) Stop in pips. Why do you need one? 'Cause you need to protect your emotional equity as well.

The account history that generated this pip-curve was produced by a trader who had taken a trading challenge last year. Their only goals were to follow their method as best as they could and, in the process, make as many pips. But the main goal was to trade better. They did not know that any stats were going to be done. Don't think they even knew things like that could be done. Nevertheless, there are some interesting things to observe. The gold stars are suggested emotional-mental stop areas. Don't just keep trading: take a break.

We'll go through the Pip-Curve from left to right:

Day 1: Started off very carefully...slowly building some pips. Notice the closeness of the markers? Lots of trades, but little pips each.

Day 2: Tried to push but had to fight to add some more pips overall. Looks like a Doji huh...

Day 3: Gave back some. Took Friday and Saturday off.

Day 4: Came back renewed and was able to push through the thin red line: a "mental resistance" area. Now, look at the "re-test" on Day 7!!! Looks familiar? Trader took a time out. Took three days off. Really. They did.

Day 8: Came back and pushed higher. Notice they were not burning up too much energy by over-trading?

Day 10: Nice! A new high...finally. Whew! Then the tumble. Overconfidence? Who knows. They should.

NOTE: Suggestion: The overall pips should not be allowed to go lower than that green line. Time for an Emotional-Mental Stop. Don't trade live! This trader took about 3 weeks off. Don't know what else might have been going on at that time.

Day 13: Trader returned to the market and started with a little loser (tested the low of Day 11), then started moving up again. The red arrow shows that they were testing their maximum pip level again. They did not know this was going on in their mind at the time, but subconsciously, something was going on. They were just trading. The breaking of the gray trendline on Day 15 was a warning. Another Emotional-Mental rest stop should be nearby. Preserve those pips! Protect your progress!!!

Day 15: Trader regrouped, and pushed to the red line (again) on Day 16, then broke through to higher pip totals in their account on Day 17.

Want to have an increasing pip-curve and the resulting rising equity-curve? Find a way to see how you're doing on the inside. You produce the pips using a trading system; not the other way around.

Just amazing stuff!!! And you can check yourself after every trade by doing some technical analysis on you. .

FX4

P.S. Spreadsheet file is uploaded in the post above.

Here's an email I received recently from a trader who has their method down, but has been losing over the years. By the way, they were not aware that I started this thread. I thank them for allowing me to post this as it represents the majority of FX traders:

I only check at hourly, put my stop and target (prior resistance/support) and just forget about it. It's working much better then when i closely monitor. My demo account is at 61k, started a 10k in Jan 2011.

I went live this summer (2011) with 5k. Suddenly i forgot all that i know. It all went out through the window. I Lost 1300$ and then withdrew the rest of my money. I had to take time to calm down and figure this out. As soon as i was live i couldn't just let it go, nor respect my money management rules. So my problem is discipline.

Stay in touch!

Bye FX4!

This is a major issue with traders: to stay sober and not let the heart-mind connection rule. Being afraid to take the loss(es) that came, resulted in over 25% of the capital being lost.

Will be discussing next the issue of grief in trading. Might sound strange but it is a reality that shouldn't be ignored.

FX4

when i first starting trading in the forex market, things were so exciting, because i would trade 50 pound a pip, and just scalp the market a few pips and call it a day. But when it went against me really fast, i did not know when to call it a day, so no stop loss plus stupid position size.

If some of you guys are past the early stage and have a stop loss, then you should consider lessons in trade risk management, many traders can lose 55% and still be profitable with their trade management techniques.

Hello Mr. Alum,

Appreciate your comments. I have made mention of risk management (also said the same about losing 50% or so, and still a trader can be profitable). However, the topic of Risk Management/Equity Management/Trade Management needs some focused attention, which I do not feel I can give to it in this thread topic. There are just so many valid approaches to consider and compare.

Also, if traders can't pull the trigger on a losing trade (and they have good MM rules); or they move or remove their stops, what use is that info. to them anyway? First I want to help traders get over the heart-mind game, then we can talk about managing their rising equity. Just can't manage what a trader won't keep.

Thanks for your honest post.

FX4

Grief? What? Trader Grief? Yes.

Grief is a multi-faceted response to loss, particularly to the loss of someone or something to which a bond was formed. Although conventionally focused on the emotional response to loss, it also has physical, cognitive, behavioral, social, and philosophical dimensions. While the terms are often used interchangeably, bereavement refers to the state of loss, and grief is the reaction to loss. (Taken from Wikipedia).

I like this definition because it defines grief as a "response to loss...of something to which a bond was formed". Needless to say, the stronger the bond, the deeper the grief when "that something" is lost. Unless traders have a means by which they can process through the effects of losing trades (and there will be many opportunities to do so), their cognitive abilities can remain impaired.

Every person responds to grief/loss differently. Some traders are able to shake it off and bounce right back emotionally and mentally (resilience). Others carry the pain for days, weeks even months depending on the degree of the hurt associated with the amount of the loss. By the way, when you trade large positions for your account size, the dealer already knows you are prime for an emotional melt-down because your losses can snowball easily. That is one reason major draw-downs are not good...too much emotional hurt, and continual losses become much easier in a relatively short time with continued trading.

If you have been trading and you've experienced losses that hurt...not just your pocket or account...but hurt YOU, take a break. You need to get past the pain. If not, you'll be like a bloody-faced fighter still in the ring, holding up some weak hands and not even knowing he's just waiting for the knockout punch to hit him.

The five stages of grief by Kubler-Ross (originally applied to people suffering from terminal illness) might help:

The stages, popularly known by the acronym DABDA, include:[2]

 

1. Denial — "I feel fine."; "This can't be happening, not to me." [The loss to my account isn't that bad. I'm still okay].
   Denial is usually only a temporary defense for the individual. This feeling is generally replaced with heightened awareness of possessions and individuals that will be left behind after death.
2. Anger — "Why me? It's not fair!"; "How can this happen to me?"; '"Who is to blame?" ["I did everything right...everything. Somebody didn't tell me what I needed to know. The market doesn't play fair"].
   Once in the second stage, the individual recognizes that denial cannot continue. Because of anger, the person is very difficult to care for due to misplaced feelings of rage and envy.
3. Bargaining — "I'll do anything for a few more years."; "I will give my life savings if..." ["Gonna keep trading because I know I can make it back. Still have some money in my account. Gotta turn this thing around"].
   The third stage involves the hope that the individual can somehow postpone or delay death. Usually, the negotiation for an extended life is made with a higher power in exchange for a reformed lifestyle. Psychologically, the individual is saying, "I understand I will die, but if I could just do something to buy more time..."
4. Depression — "I'm so sad, why bother with anything?"; "I'm going to die soon so what's the point... What's the point?"; "I miss my loved one, why go on?" [As the account declines further..."They've got so much of my money now. I can't fight back"].
   During the fourth stage, the dying person begins to understand the certainty of death. Because of this, the individual may become silent, refuse visitors and spend much of the time crying and grieving. This process allows the dying person to disconnect from things of love and affection. It is not recommended to attempt to cheer up an individual who is in this stage. It is an important time for grieving that must be processed.
5. Acceptance — "It's going to be okay."; "I can't fight it, I may as well prepare for it." ["I can't fight the market. The market is always right. The most I can do is to trade a reliable system well, and keep my losses to a minimum. No time to try to be a hero here"].
   In this last stage, individuals begin to come to terms with their mortality, or that of a loved one, or other tragic event.

...another quote from Wikipedia.

Never advisable to get back into a relationship soon after the break-up of another. If Eur-Usd just tore your heart to pieces, don't just go after Gbp-Usd in that heart-mind state. Though you could make some money, the slightest adverse situation could make you unbalanced in your trading outlook and approach. Your emotional wounds need to heal first. The goal is to find a way to process through the hurt as quickly as possible (discussed earlier: http://www.forexfactory.com/showthre...=335152&page=3 Post #34).

One of the reasons trading is not easy (though simple) is because the trader has to develop aspects of themselves that are not "comfortable" for them given their survival and security needs as humans. Nobody likes losing money, but in this business, you've gotta like taking losses so you can win...and that's just one example. What about stability? Up today, maybe down tomorrow...or maybe not. Guarantees? None, only varying probabilities. Opposition? All the time. Think you get what I mean here...

Go easy on yourself,

FX4

P.S. By Friday, GW, a little something ..."Are You Stressed?"

Looking to ride that wave? Think twice. Here is a great picture of what you're up against in trading. According to Fudomyo..."Know your wave". Good advice!!! Per FX4...[1. Know your system (back-test/forward-test). 2. Have a VERY sharp and powerful trading edge (to skin that shark 'cause you will need it) or pass on the wave. 3. Know yourself]. Not saying MM is not important...just not the focus here.

Found this on a thread: Is trading FX for living a myth? Here's the link: http://www.forexfactory.com/showthre...57#post3170457: Post 112.

...and don't let that shark smell a bleeding trader (or a bleeding live account) or a nearby...even a sizable stop loss. If so, watch out!

You might also find some other interesting pointers there. Not sure how I ended up there in Rookie Discussion...but it's all good . I guess we're all rookies in one area or another .

FX4

Are you a stressed out trader?

How should we define stress. It certainly isn't "something" we can physically hold, but its effects are real. A simple definition would be: Our physical and emotional response to pressure. Have you ever tried to open a new browser window or another document, and you get that blue circle (sometimes an hour-glass) that just won't stop? I usually say to myself that the computer is thinking. However, if it takes too long, it could mean that too many demands are being made on the computer's resources at the same time.

Sometimes life's demands can take us there. You're sitting staring at the screen but not really seeing what price is doing. You're thinking...and thinking... but not about price action. You're overloaded and deadlocked. Your mental and emotional faculties can't process anything more. Here's a simple questionnaire to help you find out if you're over-stressed.

Trading can be a very stressful situation. For some traders, they hyper-ventilate, which can become a life-threatening situation if proper stress management techniques are not implemented. Here's an article from the University of Maryland Medical Center on Stress that gives some good information.

How can you tell if your stress level is affecting your trading? The list is not in any order of importance. Ask yourself...

1. Am I able to concentrate?

2. Do my shoulder/neck muscles feel tense or tight?

3. Am I feeling tired too quickly?

4. Am I making lots of silly mistakes?

5. Am I having more emotional outbursts than usual for my overall temperament? Am I becoming short-tempered.

6. Do I dread when the time comes for my trading session? (Other things could be going on there).

7. Am I allowing myself to be easily distracted or are there too many "important" distractions competing constantly for my attention?

If you know you are on "overload" and would like to have some tools to help, this may provide some assistance. No affiliation...just know of traders who have used that device.

Take some time to figure out where you are and trade accordingly. You might need to take some time off to clear some things off of your mental "desktop" in order to regain a calm and balanced trading mindset. Whatever it takes (within sane reason of course) to get the best out of your trading this year....do it. My 2 cents.

FX4

I noticed a connection between DABDA, the market emotion cycle you posted earlier, and a mec I found googling. I believe that such a more flexible combination of highly-related emotional models increases a trader's resources.

DABDA:
Resembles mec, in that it uses both sides of the cycle at once, as if with levels, at the same time it uses the cycle.
Also, if a close person dies, it's a certainty, and at first with high excitation; from there, one goes slowly between levels and cycle to depression.

market emotion cycle (of several posts ago):
To margin call one's account could also mean lots of years of hardship. Except, the emotional certainty is not there, since money doesn't return emotions. Frustration, excitation, highs and lows do oft apply: Money does have precise, fast, one-on-one actions to respond personally to.

this version of mec (also shown below):
As to the fear-based mec, I've felt that cycle several times before. It happens to me sometimes when I get a deep in-trade loss and then price returns to BE or TP.

Is my temperament suited to this kind of risk-taking business? Here is a personality test you can take that might clear up some things for you...if you have any doubts, or just wanna know. Once you complete the test and see your results after you Score It, be sure to click on the Risk Attitudes Profiler toward the bottom of the results page... and also check your Risk Type Profile: Type Description.

@ Ha_Pattern...will comment a bit later.

FX4

that is Forex Psychology)))

Maybe so...as they say, "Whatever works is good martial arts."

Thanks for stopping by.

FX4

So you want to be a confident trader? I heard someone say that they wanted to develop a system that would give the trader confidence. That is a noble goal, but for the trader with little or no courage, confidence doesn't even enter the picture. This is where it starts and how it can be sustained...through courage. (Courage has been discussed several times already in earlier posts. A quick thread search would locate those posts).

Confidence can be defined as "the belief or feeling that something can be trusted or relied upon." The definition is closely tied to self-esteem and the feeling of being capable. If you don't trust yourself or your system, you have major problems already. (I believe Hanover and RedLion made some comments earlier about confidence and the benefits that can be derived from testing your system or method thoroughly). In trading, confidence "comes" (or should I say "is activated") and increases when you take your profits. Now here is an important quote (one typo was corrected):

Let's put it all together. What is confidence? To have confidence ultimately means that you have a feeling of certainty that you have the ability to succeed and can succeed in what you are attempting. Now note that it states that you ‘have a feeling of certainty’ rather than 'having certainty’. That "feeling of certainty" can only have a chance to make an impact when exercised through courageous endeavours. Otherwise, you'll be sitting at your trading desk saying for a long time to come saying, "I 'knew' price was going to do that...". The article quoted goes on to say that confidence is a matter of perception. What may convince one person may not convince another. An interesting read.

The second attachment is a line chart of a Live account showing the increase in the account balance vs. the number of trades. "Larger doses" of courage push the trader higher and higher as they break through more barriers of fear or timidity. That's the part a trader must bring to the trading platform every time: courage. The resulting confidence-levels from each successful attempt will work to help them maintain a positive outlook and expectation (mental perception) about their trading abilities. This trader may have a different style of trading than most, but it works for them...and they use no stops or take-profit orders. Yes, it can be done!!! Money can be made in FX. The market pays you to take on risk and it takes courage to do that. That is one of the main contributions speculators make to the market: their willingness to assume risk.

If you have the courage to click, and receive a negative trading result, regroup and muster up the courage to try again. If you have taken some profit, don't allow overconfidence to step in. Clear your emotional cache and start the cycle again. Regardless of your trading approach or method, the goal is to remain in the flow of the 1-2-3-4 loop.

FX4

Thanks Ha-Pattern for that great post...right in sync with the flow. I too have felt the fear-based mec you referred to in similar trading scenarios.

I found this next statement quite thought provoking:

To margin call one's account could also mean lots of years of hardship. Except, the emotional certainty is not there, since money doesn't return emotions.

...money doesn't return emotions. What a statement and implication about the effects of losing...especially all the way to a margin call. Should get a trader thinking...which equity account should be guarded more seriously, trading equity or emotional equity?

Thanks again. Great food for thought.

FX4

In preparation for next week...

I just want to encourage those of you who are going to take up the challenge in February and use the spreadsheet to track your pips: do the analysis. Look for your emotional-mental stops. Make the effort: it can only help. My 2 cents. If you feel up to it, post your pip-curve and let's see how we can brainstorm to help make sense of it.

Some time next week I want to touch on a little more of a heavy-duty topic: Self-Destructive Behaviour. I think certain key aspects of what is behind it could expose a smokescreen, and perhaps help some traders go beyond a mental-emotional block within themselves.

Until then, enjoy your weekend.

FX4

How one trader overcame the mental block of taking the loss:

... I was having trouble with taking losses and it was causing me to take profits even though my method had a target much farther away. I knew through backtesting that my target would be hit over 60% of the time so I had to come up with something to allow me to leave that stoploss alone and let the trade run.

I ended up opening a small 100.00 account with Oanda. I then took a trade every hour. When the hour bar opened I would wait five minutes. As soon as the bar crossed its open after the five minute time period in the opposite direction I would open a trade with ten units. I used a stoploss above the end of the wick. I as you might imagine took plenty of losses with that one and after a couple of weeks the mental block on losses was erased.

That was posted by Seneca Pilot: Post 138.

http://www.forexfactory.com/showthread.php?p=5334822#post5334822

Trading "entertainment" for your weekend:

An interview with Mark Cook...one of the traders in the Market Wizards book.

Interviews with Mark Douglas ...author of Trading In The Zone.

How Do Successful and Profitable Traders Think. A good discussion about how memory works. This 9-minute video is right in line and adds valuable uses and benefits of the pip/equity curve we have been discussing. A good reason presented here to take the Challenge in February. You'll understand why after watching the video .

Enjoy!

FX4

A trading word to the wise...

As you use your pip-curve (or equity-curve) to find support in yourself where needed so you can continue to climb higher, you may need to make some mental adjustments. Have you ever had to climb a ladder on the outside of a house to reach the second level or even a third level? Going up the first few rungs may not be bad. But when you start clearing the first level and you look down, and realize how far you have moved from your "secure"comfort zone, it could become emotionally harder to climb. Fear could begin to set in. And don't let a little breeze blow just then...Yikes!!! Seeing that you may be within reach of another support area (a ledge or window) might help to eliminate those fears. But if there's nothing ahead, you've gotta get it from within.

So, to climb higher on your pip-curve, you've got to reset your comfort zone in pips...move your current pip-support level on your pip-curve UP (as indicated by the curve itself), as well as in your mind as you climb. Reset your 'ground-zero' pip level. See Post 104. If you've been "addicted" to losing, winning may not feel right. Don't pay attention to all the pips you've made 'cause you just might get scared, and sabotage your efforts because you're not yet used to feeling comfortable making money...seeing your pip/equity curve with a positive slope. Just move the ground and grass below (in your mind's eye), up to where your feet are on the ladder at that time, and keep climbing...and, in the same fashion, keep climbing up your pip-curve. After a while, "feeling the air up there" won't feel any differently. You might actually be able to enjoy and appreciate the view from that vantage point . It's a sub-conscious re-programming that needs to take place. If for some reason you do not feel comfortable at your increased pip-level, consider taking a trading break (or trading smaller positions) until you have internalized your new levels of achievement. You'll know when it begins to feel like "old hat" to be there.

One other approach is simply to take some money out of your trading account so you are trading with an account balance that you feel comfortable with again. If your desire is to trade with a larger trading account, then leave a slightly larger balance every now and then...as often as you feel you are able to handle the "increased emotional weight" until your desired trading account goal is reached. You never know, you might just opt to keep on going....

All this is leading up to my discussion this week on Self-Destructive Behaviour.

Wishing you a better trading week than the last one.

FX4