In this post you are going to be looking into the nature of impulse and fear as the trader is experiencing them. The trader points out two problematic areas of his trading that he is working on. Earlier, he did not know why he was failing to perform. In his observation he is becoming mindful of what he has been blind to. It will also contain archetypal language towards the end that you may not be familiar with.
The Trader
1. When what I am trading is not moving, I need to get better at sitting on my hands. Something in me keeps pushing me to pull the trigger -- and it often wins.
2. For every trade, I need to place my stop at the "If the price gets here, I was wrong" location and no closer. If the size of that stop is just too scary, I need to pass on the trade. This is the way he sets his stop.
This is my response to this client
I think trading live for you is important. Though good for learning methodology, learning psychology does not happen when trading simulated. Different worlds. When risk enters the picture, our hidden assumptions about uncertainty comes to light -- if you're looking for them. In your scheme this is how you are discovering your placement of stops from what I can see. They appear to be a mixture of standard textbook knowledge of stop strategy and your emotional reaction to them.
Most traders I work with will create their stops based on a cognitive strategy that pre-sets the level of lose. They are setting their stops as a way to cut losses quickly in trades that go against them. (This is called the Destroyer acting with good awareness). They are doing this because their assumptions are built to create a win to loss ration of 2:1 to 3:1 --thus playing the edge they have in probability. They know probability is on their side, and that there will be losses -- so they are managing the probability that actually does go against them. This sets up stops as more of a standard practice mentality (probably boring for you) than a creative endeavor. My position is that the Destoyer (cut losses quickly) has more dominion that the Creator (what does my intuition or impulse say). If you are producing "scared", this would make it difficult to separate intuition from impulse under trying conditions. "Scared" indicates you are trading with the Orphan being in charge of the trading committee in the mind.
The other point is "sitting on hands" as a way to manage impulse. Fear of missing out has already grabbed the brain/mind when this is happening. The important thing here is to trace the impulse back to its arousal phase before the motivation is urging you to act or worse -- acting. It is immensely important to be in a calm, detached, confident state of mind as you move through the process of watching set ups to evaluating set up to committing capital and risk by pulling the trigger.
If impulse is there, the biology (at least) needs to be cooled down and a bouncer needs to be at the door of your trading committee that stops any part of the self from corrupting the mindset of calm, detached, confident.
Destoyer, Creator, and Bouncer are part of the inner life of this trader based on Jungian archetypes. is learning how use these different parts of th self effectively that defines success in trading.
Rande Howell
04-24-2012, 11:42 PM
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