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Why thinking is bad for your trading

  • #1
  • First Post: Nov 27, 2013 4:17am Nov 27, 2013 4:17am
It's known by all traders that trading a demo account once you have found a methodology that works is easy, those profits just keep escalating. But when it comes to trading a live account, all the common pitfalls come into play - failing to pull the trigger, taking profits too soon etc etc. What's going on here is that we start thinking, something we don't do when we place a demo trade, when we just see the opportunity and go for it, without the " it doesn't look quite right ", or " that MA needs to be a bit lower " etc. We all know that this is fatal, causing frustration, anger at oneself, and ultimately, negative trading results when we know that we are far better than that.

I'm not about to propose a solution as we all have faced/are facing/will face these problems, but I will say that the best traders don't think too much, if at all when it comes to pulling the trigger, they just go for it, following their plan trade after trade. It is the only way to succeed in this game.

I'm attaching a short video from one of my favourite sports, Biathlon, which demonstrates how biathletes can routinely hit five shots out of five when they are training, but as soon as they are in competition, where each and every shot they make counts, they can easily miss all five if they let their thoughts get in the way. It is the same with trading, and therefore I think it is a very good analogy.

Any comments are welcome.
Inserted Video
  • #2
  • Nov 27, 2013 5:07am Nov 27, 2013 5:07am
Nice video, I think haha it's true to a point, I over thunk gbp today and missed pulling the trigger long
  • #3
  • Nov 27, 2013 5:13am Nov 27, 2013 5:13am
Quoting e30life
Nice video, I think haha it's true to a point, I over thunk gbp today and missed pulling the trigger long
there you are you see, and overthunking is especially bad for your trading. Better luck next time
  • #4
  • Nov 27, 2013 6:29am Nov 27, 2013 6:29am
Nice video and a great analogy... the psychological pressures certainly do build up when trading for real bucks. With competition pressure some people cave and others thrive. With financial pressure most people cave and those that thrive usually have some stories to tell or to put it another way they have a lot of experience, other that are good have never experienced financial pressure so it doesn't worry them and are mathematically excellent.
I find trading difficult even with a demo account. If we setup a demo account with $1,000 and try to grow it, its not so easy. If we set up a demo account with $1,000,000 then its not so difficult to make it grow as we only have to risk a fraction of the capital to make decent gains.
  • #5
  • Nov 27, 2013 6:48am Nov 27, 2013 6:48am
I would say thinking is never bad. Questioning your actions in the process, that's bad.
  • #6
  • Edited 1:57pm Dec 3, 2013 1:36pm | Edited 1:57pm
Quoting cat
It's known by all traders that trading a demo account once you have found a methodology that works is easy, those profits just keep escalating. But when it comes to trading a live account, all the common pitfalls come into play - failing to pull the trigger, taking profits too soon etc etc.
Neither it applies to me nor to ALL the traders.
If you have such a problem go read psychology-related stuff.:nerd:
Quoting cat
What's going on here is that we start thinking, something we don't do when we place a demo trade
Well, I doubt you'll EVER manage to get over demo unless you start to think when you place your trade.
Quoting cat
We all know that this is fatal, causing frustration, anger at oneself, and ultimately, negative trading results when we know that we are far better than that.
Well, if you don't think or have the same problem as a guy below - probably yes
http://www.bulletproofexec.com/wp-co.../homer.jp_.jpg
Quoting cat
I'm not about to propose a solution
Already done that.
Quoting cat
best traders don't think too much, if at all
That is the point you're missing. There's HUGE difference between these two.
Quoting cat
I'm attaching a short video from one of my favourite sports, Biathlon, which demonstrates how biathletes can routinely hit five shots out of five when they are training, but as soon as they are in competition, where each and every shot they make counts, they can easily miss all five if they let their thoughts get in the way. It is the same with trading, and therefore I think it is a very good analogy.
http://www.youtube.com/watch?v=qwJh2JUfzfc
Analogy will do but you're missing the point anyway.

EDIT: quote on my profile [see below] as well as status and signature apply somewhat
The more closely the conscious mind is aligned with the subconscious, the easier it is to generate winnings. To keep those winnings, however, your subconscious mind must believe only one thing: that you deserve your winnings. (Robert Krausz)
The single most important factor is having control of your own life.
  • #7
  • Dec 3, 2013 6:26pm Dec 3, 2013 6:26pm
human have limited brain resources
they can't control their body and thinking at the same time as 2 separated process.

at least for me that is
remember that test about swinging your feet in circular and drawing number 6 and 9?
  • #8
  • Dec 3, 2013 7:12pm Dec 3, 2013 7:12pm
Quoting Gwan
human have limited brain resources they can't control their body and thinking at the same time as 2 separated process.
Surely not. Only when you're aware of the mess going on in your head and in control [really in control], not like that:
https://fbexternal-a.akamaihd.net/sa...&sw=605&sh=316

Thet you can be somewhat better than this:
https://fbcdn-sphotos-h-a.akamaihd.n...41415860_n.jpg
The single most important factor is having control of your own life.
  • #9
  • Dec 3, 2013 7:37pm Dec 3, 2013 7:37pm
Quoting Gwan
human have limited brain resources they can't control their body and thinking at the same time as 2 separated process. at least for me that is remember that test about swinging your feet in circular and drawing number 6 and 9?
Quoting Mikkk01
{quote} Surely not. Only when you're aware of the mess going on in your head and in control [really in control], not like that: Thet you can be somewhat better than this:
Hi guys,

Gwan, I agree with what you say, except human not being able to do two things at once. Mikkk is right on that one. Take driving as an example. Drivers with experience are able to have a well paced coherent conversation while they drive. They have been driving for so long that driving has become mostly an automated nearly effortless activity for them, leaving enough capacity available for having a conversation. Assuming there's a trading plan with edge, and lots of experience executing this plan, then trading should not be that different from driving. It too can become like a second nature.

Btw, the test example you gave should be overcome through training too. But I have to tell you, that test is designed in a particularly nasty way. Our brain is wired in such a way that it will automatically spend extra resources matching the circle with the 6 or 9, and trying to solve the resultant contradiction. Poor brain rants "Why..Oh why... are these so similar yet not the same thing? Where do I put these now? Why does my job - ordering things on shelves - have to be so difficult?"

Here's a video with Daniel Kahneman explaining the 'dual' process:
Inserted Video


Cheers
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #10
  • Dec 3, 2013 10:46pm Dec 3, 2013 10:46pm
ah, maybe my statement has goes to the extreme,
my point is, like body language , our thought are expressed subconsciously by our body.

we are emotional creature, it is not that easy when the scale are escalate.
  • #11
  • Dec 3, 2013 10:52pm Dec 3, 2013 10:52pm
Hello to everyone! I have never thought that thinking is bad for trading. Thinking is very good, you should think well before making a decision to start this or that trading. May be thinking too much is not really good, but hoping only on you luck will never lead you to success.
  • #12
  • Dec 4, 2013 12:53am Dec 4, 2013 12:53am
thinking less, has never been the solution to any human endeavour.....
AVT INVENIAM VIAM AVT FACIAM
  • #13
  • Dec 4, 2013 1:36am Dec 4, 2013 1:36am
Quoting the redlion
thinking less, has never been the solution to any human endeavour.....
I think one or two people are taking me too literally here looking back at some of the posts. Of course we need to think, we are not robots, but the point I was making, taken from my own experience trading for over 5 years, is that the thinking, or rather the analyzing is done prior to pulling the trigger, not at the time of pulling the trigger. This was something that it took me quite awhile to overcome, as I could always find a reason not to trade, and needless to say, many lovely trades went off without me. Decisiveness combined with a proven ( by you) methodology is key in trading. The famous aphorism by Joseph Addison, " He who hesitates is lost", could not be truer in this regard.
  • #14
  • Dec 4, 2013 1:40am Dec 4, 2013 1:40am
Quoting Gwan
ah, maybe my statement has goes to the extreme, my point is, like body language , our thought are expressed subconsciously by our body. we are emotional creature, it is not that easy when the scale are escalate.
All right Gwan, I get what you meant.

Quoting RobDil
Hello to everyone! I have never thought that thinking is bad for trading. Thinking is very good, you should think well before making a decision to start this or that trading. May be thinking too much is not really good, but hoping only on you luck will never lead you to success.
Hi Rob,

You have answered your own doubt. Thinking too much (overthinking) is not good. Thinking should be put into a sound trading plan well before taking any trade. Executing the plan, requires controlled processing at first, but after learned it becomes essentially automatic. Thinking the trade, always requires some degree of controlled processing. Our brain is wired in such a way that we are unable of running 2 controlled activities in parallel. That said, when new to a trade plan one should focus solely in learning flawless execution at first, cause that's when one's brain is the most vulnerable to being overloaded with thinking about the trade.

Cheers
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #15
  • Dec 4, 2013 1:44am Dec 4, 2013 1:44am
Quoting cat
{quote} I think one or two people are taking me too literally here looking back at some of the posts. Of course we need to think, we are not robots, but the point I was making, taken from my own experience trading for over 5 years, is that the thinking, or rather the analyzing is done prior to pulling the trigger, not at the time of pulling the trigger. This was something that it took me quite awhile to overcome, as I could always find a reason not to trade, and needless to say, many lovely trades went off without me. Decisiveness combined with...
Hi Cat,

Excellent post

(you've posted while I was writing)
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #16
  • Edited 1:58am Dec 4, 2013 1:48am | Edited 1:58am
Should I buy or should I sell ...

Attached Image


oops .. too late

Would've could've should've

... and the cycle continues..
  • #17
  • Dec 4, 2013 2:11am Dec 4, 2013 2:11am
Inserted Video
  • #18
  • Dec 4, 2013 2:38am Dec 4, 2013 2:38am
Quoting vox dei
Hi Rob, You have answered your own doubt. Thinking too much (overthinking) is not good. Thinking should be put into a sound trading plan well before taking any trade. Executing the plan, requires controlled processing at first, but after learned it becomes essentially automatic. Thinking the trade, always requires some degree of controlled processing. Our brain is wired in such a way that we are unable of running 2 controlled activities in parallel. That said, when new to a trade plan one should focus solely in learning flawless execution at first,...
Yes, this is soo true. One more thing that will not help you is your emotions, expecially the greed. At first I hold my profitable positions too long waiting for the higher profit, but then the market was not in my direction and I was loosing and loosing, and I hold the position because wanted to wait until it was the same level profitable....
Ugg.. It awful anyway. Now I learned how to control myself.
  • #19
  • Dec 4, 2013 3:40am Dec 4, 2013 3:40am
Every trader has losing trades that would even eventually have turned back in their favor had they not closed them. However, the important thing to consider is if the risk justifies the potential rewards. If you don't think in terms of risk and reward, you open yourself up to the possibility of taking a huge loss on a single trade.
  • #20
  • Dec 4, 2013 5:05am Dec 4, 2013 5:05am
Quoting cat
{quote} I think one or two people are taking me too literally here looking back at some of the posts.
Ain't gonna speak about others but I doubt that's me.
Don't get me wrong - that stuff varies greatly [the extent of *control*]. I was never claiming you don't have it at all or anything.
Quoting cat
{quote} thinking, or rather the analyzing is done prior to pulling the trigger, not at the time of pulling the trigger.
If you're really in sync with yourself that doesn't need to be controlled. Furthermore, as a human you think continuously - even if you [think] you're not analyzing you're probably doing that but your subconscious is pretty satisfied with the result. That, however, may become just a habit which is what more likely happened. Not that it's bad but I prefer that *in sync* thing not out of habit but naturally.
The single most important factor is having control of your own life.
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