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james_gsx

Developing a Consistent Attitude

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Over the last 8 months that I have been trading I have gone through several clear stages of development. Most of you know what they are, so theres no purpose in laying them out here again. But I have noticed one thing that I do over and over, and I finally came to realize that it's been hurting me all along - to an extent.

 

I have been reading Mark Douglas Trading in the Zone and I most of what he says is spot on, at least with me. I have realized the single biggest problem I have is my attitude, and this extends beyond trading. At work if I don't have a clear state of mind and an attitude to be confident and successful then I will have a bad day. The same is with the markets, if I start the morning confident, and I feel successful and I am able to take FULL responsibility of my trades then I have a wonderful day. My problem is these days are few and far between, most of the time my head feels cloudy and the second I start trading with real capital fear takes over and I don't properly perceive the information the market presents. At the end of the day when I do my daily analysis obviously everything is fine and as most of you know I do a good job analyzing the markets.

 

In the past when this happened I assumed it was because I didn't know enough about the markets so I went on a search for the holy grail. Not necessarily one indicator, but I felt I needed to learn how to analyze the markets better. Well it finally hit me, I can analyze the market just fine. Am I the best? Absolutely not, but I am better than most and I am good enough to make a fair amount of money on a consistent basis. I don't need advice on how to take the plunge into trading full time, or even how to create a system.

 

I now realize that I don't need to know what the market will do next. I know I can be a good trader and I know my trades won't work every single time. My problem is simply accepting that without emotion.

 

I have a few questions for every one who has gone through this.

 

1 - What did you do that helped you create a consistent attitude of confidence, success, and ultimately being able to accept full responsibility of your trading. In essence, how were you able to accept the risk without any emotion?

 

2 - How silly did you feel after you figured it out :o

 

I have a journal to take notes and I can identify when emotion is taking over. The only problem is I don't know how to eliminate that emotion aside from just walking away for the rest of the day. Avoiding a trade is a good way to avoid a loss, but I can't make any money that way. I feel as if I'm so close, yet so far away.

 

Thanks for the help.

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Hey James - -

 

this line said it "and the second I start trading with real capital fear takes over". The problem is likely that you are under-capitalized. You worked hard for that $ and realize how quickly you could lose it.

 

If you had total confidence in your approach and its consistency, then you would execute without emotion (ironic we want to operate like robots).

 

I had the same issue, worrying about rent, food. Keeping a notebook is good, summarizing your problems and being aware of them. If that doesn't work, try NLP or some type of auto suggestion.

 

2. You don't feel silly once you figure it out. You feel relieved, and if you are not a disciplined person (like me) then emotions will always be an issue.

 

I pull money out of the market every day, but I trade primarily mechanically. That might be an option for you too..

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It all comes down to this in my humble opinion. You must be 100% sure that you can make money every day in the market. Ofcourse, this can never happen because as we all know each trade is unique and anything can happen. But, you still must beleive in yourself. I think I have a good analogy. Your trust in your trading plan must be water tight. If one takes a boat out thats not water tight it will eventually sink. The same is with ones trading operations if your beleif in your trading plan is not water tight. Everything will sink eventually. The real truth is one has no business trading large sums of money unless they have a demonstrated winning edge. Getting a edge that fits you is very difficult, it most definitly will not come from any book or internet site. It took me three years of trading at $1 per point in the Dow Jones at a spread betting company to finally develop an edge. Three full years of trading five days a week. It sounds to most like a waste of time for such small sums of money but now I have an edge that is demonstarted and fully belived in by myself. And to share with you where the most progress for me personally took place was when I had an enormous winning streak. Once you have a winning streak of twenty plus trades with no losers and only wins and scratches you will have the feeling every mourning that you are capable of winning in the market every day.

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I had forgotten to mention my one affirmation. I only use one because I don't want to bog down my brain. I say many times during the day it really helps me. With my stop I'm invincible.

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I came at this game differently than most. I retired from a different industry and began full time trading without the worry of feeding my family, and I never excede 15% of my investible assets in my trading portfolio. I trade Stocks and options only.

So to answer James's points:

1) Being an Aikido practitioner gives me the confidence to face anything, find something in your life that does the same thing. Being a husband and father forces one to take responsibility for ones actions in all things. I endeavor to remove emotion from all my decisions but I can't say that I am 100% up to doing so, the markets are emotion driven and my emotions allow me to react to that component of things.

 

2) I don't know about feeling silly, but there was a sort of apotheosis in my life where I knew I had figured things out and would never want for anything again. Funny, but I have been more successful since then, than I was before. Something about a sense of confidence and inner peace that makes ones decisions more clear.

 

 

I'll add one more thing. I believe you have to be disciplined, willing to be self critical, and focused. The other key, in my opinion, to success is research. A methodical approach to researching positions and re-evaluating the positions post trading lends itself to a logical rather than emotional style. It requires time and effort, premarket prep and postmarket analysis.

My trading day is 14hrs long, maybe a smarter person could do it in less.

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Hey James,

 

Great topic. Glad to see you've read Trading in the Zone. It's a simple yet effective read in regards to trading psychology.

So you want to develope a consistently successful traders mindset. First you need to understand there is no such thing as faliure. Every action you take is a lesson learned. And being in action is always better than inaction. You can always make adjustments once you've got things moving.

 

You consistent success will start with your belief system, the way you frame the game of trading and what you do consistently on a daily basis. Rememeber, repetition is the mother of learning, taking correct action in line with your system on a daily basis will stack up associations in your brain to control your unconscious actions. This is why Mark Douglas is so strict about the 20 sample sizes. Having very strict rigid rules over time, you will begin to train your mind in taking the correct actions.

 

Here's a little insight for everyone. When an adult is learning something new, it takes 50 attemps to prove they cannot tackle that new endeavour. However, many people will rarely go over 2-3 attemps before they believe they are not capable of doing it. In trading many times it's 2 steps forward, 1 step back. 2 steps forward, 1 step back. Those steps back may look like faliures, but what they really are is lessons to be learned we missed the first time around.

 

If your interested in understanding more about trading psychology I've written a few posts on my blog.

http://www.evolvedtrader.com

 

Best of luck on gaining your consistent trading success,

 

Ryan

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Assuming you have a clearly defined Edge and have the discpiline to execute the trade knowing "anything can happen", you are well ahead of the game.

 

Since "fear" sets in when executing the trade, try adjusting entry size. Sounds easy, but that will allow additional "mental comfort" while you maintain full perception of what is happening before your eyes. Without this perception, your mind will find all the reasons to verify you were "right" despite maintaining a losing trade.

 

There are many discussions of "pyramiding" or "scaling in". As the trade develops, add more shares. Never average down. Don't begin pyramiding or scaling until your confidence is back.

 

I will say that the additional "comfort level" with the initial reduced share amount should NOT allow you to break your rules. Execute the stop (or proft) as planned. I believe you will find the probabilities and edge still exist (if you have a defined edge), but the mental "imprints" of fear will be reduced.

 

One drop at a time.

 

Speaking from experience.

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The doors to consistency were hidden behind an unrealistic pre-conception of mine that if I only watch it long enough through experience I will get the ability to enter and exit right on the money. Once I realized that this is not possible (or perhaps it is but only if I will keep losing for 10 years or so:) I resigned myself to the wisdom of Douglas, Livermore etc. and the doors to consistency got opened. Getting tired is an effective educational device in the markets.

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I hate to say it, but for me, consistency is establishing the discipline to keep records. I hate keeping records.

 

Keeping records leads to consistency because those records will point out in black and white when something is out of the ordinary.

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Nice topic.

 

I agree with everything that you guys have written above.

 

Something I would like to add that wasn't mentioned:

 

Trading is just like any other business and we are the entrepreneurs of that business. Hence, we must set realistic goals to keep the business going and growing consistently.

 

I believe setting goals is a crucial aspect of discipline.

 

If we set goals too high, we may never meet our expectations and we may take it as a failure, pushing ourselves over the limit and taking unnecessary risks.

 

If we set goals too low, we may not have the necessary drive to reach them because they are too easy, so we may end up feeling a bit unmotivated.

 

Setting realistic goals is crucial to maintain growth, discipline and emotional balance.

 

If you are a 1-contract YM daytrader, it would be unrealistic to set a $1K daily goal as well as it would be too little to set a $50 daily goal.

 

Finding the right balance can tremendously help us keep our head straight.

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