Bigwal on Psychology | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

The Secret: How to break through your psychology 8 replies

Psychology matters most! 30 replies

Trader Psychology - Understanding Yourself 30 replies

Psychology, Trading and You 32 replies

The Psychology of Support / Resistance 14 replies

Bigwal on Psychology

  • #1
  • First Post: Edited Mar 18, 2015 3:40am Mar 17, 2015 4:34pm | Edited Mar 18, 2015 3:40am
There is much talk of charts when learning to trade, it is my view that this is only part of the story.

Technically talking the market is quite precise, once coupled with the who is doing what and why it is simple by nature.

"The battle is with ourself, not the market"

I wanted to create a thread where i could share my opinion as to how this all fits in with your trading journey. Other threads i enjoy to post in are chart based and therefore cluttering with text, video and pictures are not in line with the thread authors wishes.

This is not a chart based thread. I am looking to build a story from beginning to end of the challenges you face in your journey as a trader. Some articles will not seem related, but if you read between the lines you will see.

Trading will expose you for what you are, it has a brutal way of showing all your weaknesses.

If you want to view my technical thoughts, this is possibly the best thread in FF and this place is where it all started for me: http://www.forexfactory.com/showthread.php?t=230888

Warren

ead
I need to finish something i started
  • #2
  • Mar 17, 2015 4:39pm Mar 17, 2015 4:39pm
Good luck with your thread Bigwal! I've learned a lot from your posts
  • #3
  • Mar 18, 2015 3:36am Mar 18, 2015 3:36am
The Bandwagon Theory

“Imagine a bandwagon that is rolling forward at a quickened pace. Music that is very pleasing to the ear is being played from speakers on each side of this bandwagon, and a few people currently on the back of the wagon are partying, having the time of their lives. The music, loud and clear, starts to attract many other onlookers that happen to be idly standing on the sidelines. These onlookers, unable to resist the sweet sounds being played, run to join the party that seems to be going on.

Progressively, more and more onlookers jump on the back of this bandwagon, and those few who were initially enjoying the first phase of the party begin to leave. As the crowd of new party animals on this bandwagon grows larger, the bandwagon finds it harder and harder to move forward at the same pace. It slows, enabling more and more late onlookers, witnessing the great fun, the chance to jump on. The crowd grows even larger. Larger and larger this crowd grows, until the bandwagon, heavily laden with the bodies of drunken party animals, can no longer move forward. It finally comes to a complete stop. Now that the bandwagon is at a complete standstill, more people jump on. And why not? At this point, joining the fun is easy. Absolutely no work is required, for individuals wanting to join the crowd no longer have to run to jump on board.

The nature of the bandwagon is to move forward. Its motionless state is unnatural, and therefore cannot last. It tries to move forward again, but can’t. The crowd, piled on back, is much too large. It must free itself of the heavy burden. And it does. It quickly shifts into reverse, and jolts backward, knocking a few of the party animals off the back. The music stops. Puzzled faces from the crowd begin to emerge. Before anyone figures out what’s going on, another backward jerk takes place, only this one is more violent. Another large group of people gets thrown off the back. Now, reality sets in. The fun has turned into a nightmare of epic proportions, and panic begins to run rampant. Some decide to jump to their deaths. Another thrust backwards sends an even larger group of drunken, off balance people, hurling to the muddy ground. It doesn’t stop. The jolts backward continue, each successive one more violent than the last. At this point, only a few die-hard wagon dwellers are holding on, their very lives hanging in the balance by a very thin thread. Failing to be completely free, the bandwagon angrily puts the pedal to the metal, and this final thrust backward is so vicious that its front wheels lift high off the ground, momentarily suspending the wagon in a perpendicular position. The last of the hangers-on crash to the ground, broken and maimed to no end.

At this point, a new group of onlookers emerge from the nearby woods. They are clean and serene. Each movement they make is deliberate and powerfully energetic, for they did not take part in the tragedy that just transpired. Or did they? A few of the dejected souls lying on the ground take a closer look, a look that reveals something very interesting. This seemingly new group is not new at all. It is the same group that was seen quietly exiting the party before it came to its violent end. An even closer examination by a few more beaten-down onlookers reveals something even more stunning. This group not only exited the party early, they were the originators of it! “My God,” someone exclaims.

Paralyzed, and unable to move freely, all these dejected souls can do is watch, as the masters of the game go to work, again. No sooner does the bandwagon’s wheels hit the ground than this professional platoon bolts for the wagon. In a flash they are on board. Easy. The bandwagon, now free of the larger crowd, can move forward freely and gracefully, comfortably carrying the more astute group with it. Its pace quickens, and before long a smooth elegant stride is in place. After a few miles of uninterrupted movement, someone from this masterful group flips on a switch, and suddenly the loud sounds of entertaining music start again. Someone yells, “OK everyone. Here they come. Let’s do it again.” Within moments, those who were the former victims of the backward crash become interested again. The music almost calling them from the grave. And once more, the never-ending cycle repeats.”
I need to finish something i started
  • #4
  • Mar 18, 2015 9:11am Mar 18, 2015 9:11am
Thanks for sharing.
Very interesting story... indeed it is the reflection of trading experience we have encountered.
  • #5
  • Mar 18, 2015 12:15pm Mar 18, 2015 12:15pm
Quoting bigwal
The Bandwagon Theory Imagine a bandwagon that is rolling forward at a quickened pace. Music that is very pleasing to the ear is being played from speakers on each side of this bandwagon, and a few people currently on the back of the wagon are partying, having the time of their lives. The music, loud and clear, starts to attract many other onlookers that happen to be idly standing on the sidelines. These onlookers, unable to resist the sweet sounds being played, run to join the party that seems to be going on. Progressively, more and more onlookers...
Agree with opening statement that most Forex chat concerns TA and FA but not much on the psych side (which for me = 70% of my trading plan)

The Bandwagon theory is interesting but is the experience as predictable as that though? I am not so sure

I'd suggest focusing on why traders feel the need to follow? Or better still - why do people follow? Does the average retail trader have a plan? If so, do they stick to it?

Just finished Cialdini's book on Influence - there is more beneficial information info there for traders than any $99 Frorex ebook but gladly they wont read it
  • #6
  • Mar 20, 2015 12:22am Mar 20, 2015 12:22am
Damn, just started reading your thread not realizing you just recently started it up. Haha, was expecting to see like 50 pages when I got to the bottom of the last post. Always interested in learning and seeing if I can complete the puzzle for myself. Looking forward to this thread: )
“Every single day, ordinary people do extraordinary things"
  • #7
  • Mar 20, 2015 10:18pm Mar 20, 2015 10:18pm
Excellent reading as always.
Thank you
  • #8
  • Mar 21, 2015 7:05am Mar 21, 2015 7:05am
Quoting antgal23
{quote} Agree with opening statement that most Forex chat concerns TA and FA but not much on the psych side (which for me = 70% of my trading plan)

The Bandwagon theory is interesting but is the experience as predictable as that though? You are either in the 5% or the 95%, this example highlights that. It is the market workings in a raw state. The market is more precise than most think, we must understand the basic rules before we can ever hope to make a profit.

I am not talking about a wishy washy 50% with 2:1 reward, trailing a stop and hesitant to enter at high volume times such as news. This shows no understanding or confidence in what is actually moving the market, how and why?


I am not so sure I'd suggest focusing on why traders feel the need to follow? Or better still - why do people follow? People follow because of a herd mentality. If price is going up they buy, more people join in as at becomes a frenzy of buying right into a place where the market movers are taking the opposite position. They need to trick you into thinking buy so they can fill huge orders going the other way. This is expressed in "the bandwagon theory"

Does the average retail trader have a plan? Unfortunately most do not, ruled by fear, greed and doomed to fail. Others that think they have a plan, is it the same plan as the market movers or are they just on the bandwagon?

If so, do they stick to it? No

Just finished Cialdini's book on Influence - there is more beneficial information info there for traders than any $99 Frorex ebook but gladly they wont read it
I have read a number of books and as you say most will not put into practice what is there. That is if the book is factual in what is proposed or not.

I will add some more material this weekend, no doubt it will raise more questions.

Warren
I need to finish something i started
  • #9
  • Mar 23, 2015 1:28pm Mar 23, 2015 1:28pm
Bigwal - much to chat about - looking forward to it

I remember sitting trading day trading 4HR TFs like 4 years ago and remember always losing, buying tops and selling bottoms

After a while of being eaten alive it dawned on me I was being played, so I drew a diagram of what I thought was happening

I suppose you could call it the Block Order Theory.

1. Market Mover has to buy whatever currency . They know potential impact on market so they buy in blocks

2. They estimate how much each block will drive up price so they set profit-taking points unknown to most traders

3. The informed traders get in early but as the move gets stronger the weaker uninformed traders enter and begin buying tops

4. Market Mover realises the weak longs and sells / takes profit - in turn this triggers the SLs of the weak sending price half-way down the original buy move

5. When the retail crowd see this they begin selling but just when they sell the Market Mover puts in his/her Block 2 Order and it repeats until the last order hits and the Mover sells or enough people sell

In other words, combine the MM's need to purchase, market experience and buying strength with the inexperienced uninformed trader, his SLs and emotions of greed and guilt we get a moving market
  • #10
  • Mar 24, 2015 2:57pm Mar 24, 2015 2:57pm
Quoting antgal23
Bigwal - much to chat about - looking forward to it I remember sitting trading day trading 4HR TFs like 4 years ago and remember always losing, buying tops and selling bottoms After a while of being eaten alive it dawned on me I was being played, so I drew a diagram of what I thought was happening I suppose you could call it the Block Order Theory. 1. Market Mover has to buy whatever currency . They know potential impact on market so they buy in blocks 2. They estimate how much each block will drive up price so they set profit-taking points...
We are indeed being played, until enough orders are filled by the market movers. By the time the untrained eyes see what is happening it is already to late.

Great explanation in trading terms.

Warren
I need to finish something i started
  • #11
  • Apr 9, 2015 7:37pm Apr 9, 2015 7:37pm
The Habit

I am your constant companion,
I am your greatest helper or heaviest burden.
I will push you onward or drag you down to failure.
I am completely at your command.
Half the things you do might just as well turn over to me
and I will be able to do them quickly and correctly.

I am easily managed -
you must merely be firm with me.
Show me exactly how you want something done
and after a few lessons, I will do it automatically.
I am the servant of all great people;
and alas, of all failures as well.
Those who are great,
I have made great.
Those who are failures,
I have made failures.

I am not a machine,
though I work with all the precision of a machine
plus the intelligence of a human.
You may run me for a profit or run me for ruin -
it makes no difference to me.

Take me,
train me,
be firm with me,
And I will place the world at your feet.
Be easy with me,
and I will destroy you.

WHO AM I?

I AM HABIT.
(Author Unknown)
Illegitimi non carborundum - Noli pati a scelestis opprimi.
  • #12
  • Last Post: Apr 9, 2015 7:41pm Apr 9, 2015 7:41pm
Hey Warren and all


Looking forward to what this thread will grow into.

I contend that trading is 90% mental....The other half is technical....




Baseball is ninety percent mental and the other half is physical.
Yogi Berra
Illegitimi non carborundum - Noli pati a scelestis opprimi.
0 traders viewing now