My mentality - my problem

Hello All

I remember when I moved to another town, my flatmate (and a good friend) took me by car to local jobcentre and left me there. he asked me if I will find a way back home, and I said yes. It was new place to me, new situation, and I was starting my life from the beginning.
So after sorting my business at local jobcentre I went out heading home (I was living in this town for 3 days and I went to town just once before). So I was going, and going, seeking for proper way back, some places seemed to be familiar (hey, I've been here yesterday) and finally I found a main street I was living of (a small street going of the main one). I knew I was less than 1 mile away from my home, but went the opossite way. hey, I've never been here, it doesn't look familiar. So I went to tourist information (at the same main street). I sat in the park with a town map, found the name of the street I live on (just a small street off the main one), and I realised I was going wrong direction. I was so close and so far. It was about 6 years ago, now I feel exactly the same with my trading. I feel so close to being constantly profitable, and nowhere close at the same time. I've read quite a few books about trading (list here: http://www.forexfactory.com/showthread.php?t=367514). I know exactly how to manage risk, how to set trades with proper mm, and I can give advice about it for others. somehow I can't stick to it myself. it's my mentality - it affects my trading. it is last piece of puzzle.

It won't be a strict journal, so please leave it in here. I want to share my experience with people with similar problems, help some newbies, help myself.

So what are the main mentality problems?

greed - it is this feeling when you want to get rich fast. many newbies who try forex have beginners luck. they gain 20-50% of profit in just 3 trades and they think: woooow - I must be really good. without testing the system for long enough time they go it with real cash, and suddenly they realise they are crap - I was like that (and sometimes I still am) – In my first 2 weeks of trading real account I made about 700-800% profit. Where are the money now? I'm not sure, but 1 thing I know – I don't have them. So if you think you will get rich within few months – forget it and I really mean FORGET IT.

revenge – you just lost 10% of your account – how come? You HAVE TO get it back, NOW!. So you go for another trade, with all your account balance, and you lose 20% more – WTF??!! this time I will get it back, I have to, I know how to trade...... how do you feel now, when you lost within minutes 90% of your account balance? Disappointed, sad, all your dreams about easy life are buried, within minutes. You can't win with market, market always knows best when to go. You lost the trade? Stand up, do some press ups, go for a walk, go for a coffee, switch the computer off, there will be another day tomorrow

I know better than the market – it is a behaviour where trader is trying to give market order, where trader says: IT HAS TO GO NORTH and bet's so. Market and only market decides where to go (plus few powerful people)

I'll show them – typical revenge/show off trading where trader tries to get good performance to impress others by performance itself (I will get 20% profit today to show them all that I can) or by gaining financial independence (my boss will see my middle finger when I'll quit) – remember that you trade only for yourself, you don't need to impress people who don't like you, you don't need to impress people met in internet, you do it for YOURSELF

I am not sure what to do – if you're not sure what to do, don;t trade. You need to know what to do and just do it (like nike), if you don;t know how to trade, why trading? If you can't drive a car get a bus

I missed so good opportunity to earn – so what???!!!! you miss life changing opportunities every day without even knowing it. You miss opportunities for a better job, to meet a love of your life, opportunities for profitable business. It happens every day that you miss opportunities, and you don't even know it. Chart shows you that you missed opportunity to gain 200pips – so? You missed it this time, next time you may have more luck – keep trying don't give up. None of us has crystal ball to predict future – live with it.

Round numbers - behaviour that tells you to go to round numbers, for example quite often I wanted (sometimes still want) to achieve a round percent profit. let's say I did 6,7% daily profit - in this situation something pushes me to get to 7% (round number) - why? it is so silly, as the final score should matter, not the daily one

Just this one time - it may be a good think or bad one - depends on circumstances. Let's say I got 5% profit today - seems good, but I want some more, if the greed won;t kick in and you'll do the trade according to all rules - all is fine. but If suddenly greed will kick in and you, ll put too much on risk - this may lead you to loss, sometimes big loss, especially when few of above will take part - like greed+revenge+I'll show them all. you may loose a lot

It is market's fault – loosing is never market's fault – it is YOUR FAULT! ALWAYS! You and only you are responsible for your losses. You lack knowledge, you lack patience, you're not calm. Stop blaming others – your fate is in your hands

I know how to trade - at the moment I did 27 trades and got almost 20% profit in 3 days - If I were a noob I'd say - I know what I do, I am great trader - REALLY? NO SHIT MATE! - this behaviour has wiped quite a few of my accounts - both real and demo. you can't judge (at least not for daily systems/methods) the reliability of the method by so few trades. I think in this case 300 trades will prove if the system/method and ME can bring profits

Trading without stop loss - this one is a proper killer, it's like driving home without stopping on red lights, you'll get there much faster, but you may cause fatal accident - and it will happen sooner or later. It is very bad and I still do it sometimes. A lot of newbies do it for different reasons - lack of knowledge, lack of risk management skills, lack of brain. some of them say they will stop manually - they won't as they'll keep hoping the trade will go as they order. besides market is hard to predict and may surprise you, for example few days ago EUR/JPY went down about 200 pips within just a few minutes - surprise, surprise, I wonder how many newbies have wiped their account. Being on a loss makes you nervous, you keep staring at the chart and pray for the win, kicks head quite hard
IT IS A MUST to use wise s/l with risk not exceeding 3% (of course different methods/systems may require different risk, but can you afford to loose more?)

Don't listen to forex factory "market wizzards" - a lot of people on forex factory "predict" next movement of the currency - don't listen to people of this kind. Most of the time they are talking bullshit, plus you have to bear in mind that even if they know what they are saying their information may be not useful to you at all as your trading style may be different from others. Clear your mind, don't listen to fortune tellers, do your own homework, read the chart and trade what you see

I did sort out most of above problems except greed and revenge – I lack patience, I keep trying but still lack it. The good thing is that I eliminate obstacles all the time, every day I am closer, I am too close to turn around.

why do I trade? It is not my target to be rich. All I want is mortgage free house, small car, some savings, and retirement fund, secure my son's future, help my close family and retirement fund for my parents. As you see I don't want a lot but still seems like I need 2-3mln$ LOL


My trading rules?
I trade with choros/dance system
- I trade only on days when I am off work (I have 1-4 days to trade each week, what gives me 100-120 trading days a year). I can access my fx account from work, but it affects me. I loose this way
- 1% of risk every trade, 2-3% (I set 2 or 3 same trades with same tp and sl) if I see better opportunity
- 3% daily profit as daily target, and then I take a rest
- few hundred trades on demo account to check my performance (it will take me about 3 months) – If I'll be profitable I'll go for it with real cash – I lost too much to risk more.

I hope I will get there in about 3 years if I won't screw this time ;-)

Best of luck with your effort. From the above analysis, it seems you have a handle on the worst enemy of forex trading....yourself!
Therefore, I believe you are on the correct street to find your house this time.

cheers kostas - I needed some good words from somebody like you (or just from you ;-)). I hope to get some day to a point you are now ;-)

I hope the best for you.

I had a similar planing.

After five years of struggling in trading....

1. I developed a simple & clear trading system myself
2. I tested it on demo for 3 months in profit
3. I started trading live starting with 0.01 of standard lot (as minimum as possible) to make the emotional influence as low as it could be.
4. Increased my volume as it felt OK to me in steps.
5. Six month has passed from that time. Now I could easily risk 4~5% without hesitation. I still have lots of emotional issues that you have defined here. BUT I have also developed some mental tools for myself to help me.
6. I have managed Draw Down very well now as my primary focus was on "NOT LOSING" -> Preserving Capital
7. Nowadays, My major problem is letting the profits grow. Improving the "Profit Factor", Improving the R:R,...

Progress goes on....

Hi and thanks for the answer - what tools are they?

that's what I am talking about. I made a huge mistake. made a fool of myself. I had nice 8% of profit today (at3% of target) but I wanted more, so I made silly trades without s/l. why am I so silly

very nice i with you the best

FIRST I ASSUME THAT YOU HAVE A VALID, CLEAR TRADING PLAN.

By VALID: means it gives you an edge.
By CLEAR: means that you could follow it easily without a lot of thinking when trading.

These works for me:

Step ONE: Concentrate: I trade ONLY one pair ONLY on one time frame. This gives me a feel of the commodity I trade & a feel of what it will probably do next.
Step TWO: Patience for the A+ setup: IF you have traded enough, open a clean chart and use the MT4 history to put all trades that has been done for the past month on the chart. You could drag the trade on the chart & it will show you everything. This will clearly show you entrance, exit, SL & TP and finally what market did.
Now look at what you have done in the past month. You should at least take a day off to analysis your past month trades. I want you to stare at your trades and market reaction. You will notice that lots of trades even in profit was no A+ trades. You will also notice that in a month you will have around 15 A+ trades.(I'm a day trader & what I'm talking about is in H1 but this is the same in higher time frames too just the time range expands)
Step THREE: repeat step two
Step FOUR: repeat step two till you master it.
...
I want this feeling gets deep in your unconscious mind so that you could feel it with every grey cellule you have.
By A+ trades: I mean the trades with minimum Draw Down & fast moving in profit never looking back.
====================================================================================

This will make a conclusion deeply in you:
1. There is no need to take all of the trade setups.
2. IF I ONLY trade the A+ setups I will have enough profit with minimum Draw Down.

After you understand the conclusion and after some time passes:
--> You understand that greed is a good thing & you get greedy when the A+ setup appears. This is why I don't have any problem risking 5% of my account on a A+ trade.

Than some time passes more!
--> Now you understand that you shouldn't increase your risk more BUT to allow your profit grows.


********************
You see IF you follow this algorithm and allow time to pass letting you feel each of these steps => You will grow. Than TRADING will be enjoyable & boring!!!
Hope this helps you & everyone that read it.

Discipline is a real problem for all of us.

Forget about greed and focus on locking your earnings. Define a % when to stop trading for the current day ... Doesn't matter the incoming opportunities. The best is to close the platform untill the next day.

Good luck on your trading mate. Looking forward for more analysis about the market.

I made almost 7% of profit today which is over 2x my daily target. time to rest and time for a walk with my son. Later on I'll see if there are any more opportunities.
What I noticed is I am sick of trading, I don;t like to stare on chart anymore. I ve read it is good, as then emotions don't play the part anymore

This is greed

Why not stop as you reached your daily goal ?

you're right I am afraid. The point is I just spotted something that looks like opportunity ;-)

but that's always this last opportunity which takes back our profits

true, but I risk only 1% on this one, so If I loose I go away with nice profit, higher than target anyway (and this is one of my rules), If I win I go away as well ;-)

to the top I'll add few more bad habbits:

just this last time
round numbers

IMO every trader needs to embrace trading as an exercise in probability. Do this, and I believe a lot of the items in your list will disappear.

If I may use myself as an example, I’m a trend trader. The way that I currently trade, I have dozens of tiny losses, and relatively few medium to big winners. To help sway the odds as far as possible in my favor, I choose the strongest trending pair(s) on the D1/W1 timeframes, at the current point in time. Then, provided that macroeconomic factors sustain these moves for another 1-2 days, I win; more than 2 days, I win BIG. If the move dissipates immediately, then I have a number of small losses. In other words:

1. I’m very familiar with the strengths and weaknesses of my approach: the market conditions that cause it to win, and the market conditions that cause losses. So when it loses (not looses, btw), it’s NOT my fault; rather, it’s merely statistical fluctuation caused by a period of adverse market conditions. Losses are my fault only when I fail to follow my plan.

2. Even more importantly, I’ve satisfied myself (at least sufficiently, for the level of stakes that I trade for), that the market behaves ‘favorably’, for long enough and often enough, to provide an overall ‘edge’. And if it eventually turns out that I’m wrong (as Keynes wryly observed: “markets can remain irrational longer than the trader can remain solvent”), then my small sizing ensures that overall drawdown will not be catastrophic.

3. Because I have so many losses, they’ve become second nature to me, and I've found it easier not to become emotionally 'married' to the outcome of individual trades. Moreover, it is only the possibility of loss that creates the opportunity for the winners that eventually occur.

4. A little off-topic, but a nice spin-off of keeping losses small is that I'm protected against any one-off 'black swan' type events, e.g. unscheduled high-impact news announcements.

I could eliminate a huge number of my losses by simply setting a wider stoploss (in fact, I started out that way). But that would reduce the size (RR) of the winning trades to the extent that the overall result would be less profitable. Or at least that’s what my research, and experience to date, tells me.


The benefits, as I see them, are:

1. There’s virtually no guesswork involved, or need to forecast anything. Just follow the already proven plan.

2. I have reasonably grounded confidence that the system will, over time, deliver profit, provided that I continue to follow the plan. Ultimately, discipline can result only from confidence. The promise of profit provides good motivation to remain disciplined.


Let’s look at each item in your list, and contemplate how the approach I’ve suggested might help to overcome them:

 

1. Greed — there’s no scope for greed, provided that I continue to follow my plan.
2. Revenge — ditto; no need for revenge, because the plan promises to deliver profit (over time, I will get my revenge ).
3. I know better than the market — doesn’t apply, because there’s minimal guesswork or forecasting involved.
4. I’ll show them — I don’t run a Trade Explorer, or share my performance with anybody, except a few close trading buddies. That way, there’s no added stress trying to prove anything to anybody else.
5. I am not sure what to do — doesn’t apply, I just follow my plan.
6. I missed a good opportunity to earn — my plan ensures that I take every opportunity that it deems to be valid.
7. Round numbers — no need for me to focus on any performance figures (in fact, setting targets is a really BAD idea IMO, for the reasons that you give) because my plan will, over time, deliver profit.
8. Just this one time — every setup/opportunity is equal, in that I have no real idea which ones will end up as wins, and which as losses.
9. It’s the market’s fault — losses are most definitely NOT my fault.
10. I know how to trade — this becomes "I know how to implement a probability-based plan that delivers an edge".

There’s an excellent post by topherhk88 here, that takes all of this to a higher level.

Of course you don't have to be a trend trader to have a proven plan. I'm not familiar with the choros/dance system, but I've read good things about it. IMO a good system should be mechanical enough to eliminate the guesswork from trading — FOR BOTH ENTRIES AND EXITS — and ultimately allow the trader to embrace trading as an exercise in probability; which is the best (or perhaps the only) possible antidote to emotional decision-making, especially when the occasional sequences of losses inevitably occur. Pragmatism rules.

^^^ fantastic, printing that out and posting it on my trade wall. Thanks for your perspective Hanover.


I didn't start making money until I took minimum 3:1 trades, maximum of 10:1. When profit from trade hit 3:1 I lock the trailing stop at 2:1.

Also I realized I only needed to take a few trades a day at most and could be very profitable. I don't need to scalp every little move. It would be nice if I was skilled enough to do so, but I am not. I am only skilled enough to trade the high probability setups.

In addition, Ihave a strategy (with separate capital devoted to it) that looks for one specific setup per day. RR probability is a minimum of 5:1. Risk on the trade = 1%, target = 5%. No lock on trailing stop.

If it wins, great, if it loses, whatever. That's the beauty of 5:1.

With even a 20% win ratio, you are looking 1% profit per week. Not too shabby...

With a 40% win ratio, you are looking at 7% profit per week. Really, really not shabby..

With a 60% win ratio.... 13% a week. Legendary status.

If you're batting at 40% while maintaining 5:1 RR then you're massively ahead of where I'm currently at. Something for me to work toward.

thanks all for the discussion.
I'll add one more today: trading without s/l or with far s/l
I'll keep adding them to the first post in this thread, just to keep it all in one place. I hate when thread has 20000 replies and if you ask something you get a reply: we already spoke about it - cool, Bible is shorter than this thread, thanks for help ;-)