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LuKOsro

Trading - a Psychological Game ?

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Hello all!

 

This is Lucian and I`ve been trading for the past 3 years with some modest success. I`ve had my heavy drawback periods and sometimes my portfolio seemed to go underwater. Luckily it didn't. I did all the rookie mistakes of doubling down, of closing down winning positions, of acting impulsively, of getting greedy and forgetting about my system and so, so many more.

 

Reading a lot of trading literature taught me the building blocks of trading, but only experience showed my that the biggest enemy in trading lies within. I considered money lost because of stupid and impulsive moves an expensive tuition fee, but it all paid out eventually.

 

I also recently started a financial commentary blog, but I`m not going to post it here because it would not be alright. I`m glad to be here and to start posting some insights, and if I may be of any help, I'd be glad to do so.

 

 

Cheers,

Lucian

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Hi Lucian,

 

I'm a rookie trader - just broke into the market during the recent slide after months of simulator training, reading, and testing models. All that preparation has taught me just how much I still don't know, and I'm constantly looking for additional perspectives so I'd love to read your blog commentary. If you could kindly pass along the address to me via private message, I'd be obliged.

 

Cheers,

- James

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Greetings Lucian

 

Sounds like I am in the same boat you were. I too, am paying my "tuition," and hopefully, like you, will learn the psych lessons in time. I'm just over a year now, and true to form, the mechanics of trading are coming along ok, it's the pesky little "me" that gets in the way.

Hook me up, I'll follow your blog.

TIA, Vaughn

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While the technical issues can be solved mechanically, the psychological issues are harder to deal with.

 

As mentioned in one of my early posts on this site I had the opportunity to work with Dr. Ari Kiev (since passed away) and that experience was a real turning point in my career. Not only did I learn to deal with my own issues but I also learned how this market can "work on you" in such a way as to make you distrust your judgement, even when you have a good system....For traders who have problems either executing or staying in a trade long enough to profit, I suggest starting by reading the work of Dr. Kiev and Mark Douglas...

 

Hope this helps

Steve

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I find my willingness to take trades and follow my rules is enhanced if I backtest and forward test my edge/strategy and really find out what the expected returns are.

 

For example:

I know that in my setup trading the ES if I use a 6 tick stop, it will get hit 37% of the time but the 63% reaches 12 ticks. So for me, it is easy to set my stop to 6 and target 12 which is a 2:1 RR ratio.

 

Knowing that I can still be a winner if I only get 40% of my trades winning helps take the trade and stay in it.

 

If I use a bigger stop and smaller target I will have a much higher win rate but then I must have a higher win rate just ti break eve\n. That makes me more "nervous" and I end up hesitating on entry or taking short profit both of which are account killers.

 

So - for me - the psychology of knowing my winners when they come will be bigger than my losers helps.

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Good start on a thread with a most important topic.

 

I can relate to what both Lucius and Steve wrote.

 

I've had to recognize which market situations my ego comes into play and what the specific ego-topic was in these situations. I say this because there are situations where I feel completely confident and there is no stress to mention of. In the ego reaction situations I liken them to how the shark research guys on National Geographic have learned to behave when they are in the water with the sharks. Meaning my ego is the shark or a wild animal where I have learned how to handle it in different situations. So when I now see a market situation which relate to this, which can be about both entering or exiting a trade, I am prepared with certain procedures.

 

 

Laurus

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... how this market can "work on you" in such a way as to make you distrust your judgement, even when you have a good system....

 

Thanks for this one Steve.

 

I am wondering if this topic is specifically handled in Kiev's or Douglas' book?

 

Anyhow I am also wondering if there is a specific book you would recommend by Kiev? I did a search on amazon.com and found six by him I think.

 

 

Laurus

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As you may anticipate I am biased towards Kiev's work...Over time I would say a friendship of sorts developed between us and I think that had as much to do with my "improvement" as anything....so it is probably fair to say that you would do well to try to find a good professional to make friends with as well....Needless to say I have read all of his books...but not knowing you I think its impossible to know which you would benefit most from...I would simply pick one and start reading (slowly)....part of the benefit of reading a skilled person's work is the meaning that YOU bring to his words after you have had time to think about the subject.

 

This example may help...I had trouble pulling the trigger even though I had a very good systematic approach that worked profitably for others in my office....Kiev said simply...none of that matters...what you need subconciously is to KNOW that the system works by going back through the data yourself (doing your homework). Instead of taking someone else's word that a system works, or interpreting an automated backtest....going back through the data....seeing how many winners and losers in a row you have (and why the trades failed)....seeing HOW the trade moves when it is a big winner, how it retraces or retests significant highs or lows....just seeing how price behaves over and over while you go through the data will give you the confidence you need to trade it the right way...otherwise you won't be able to stay with a trade long enough for your edge to kick in....

 

He was right and from that point forward I always do at least some manual backtesting before trading a system live.

 

hope this helps

Steve

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Great stuff from both of you Steve and Mitsubishi. Right up my alley. Thanks for taking the time.

 

I have too done a lot of home work with historical data, and the times I have been uncertain I see that I have not done enough. I guess what you are talking about is the same thing the guy in Germany (who has as a single person the largest positions with the DAX today) did from he was about 12 or 13 years old before he started trading.

 

Regarding Dr. Kiev Steve. If there is a book with him that handles exactly the stuff you wrote in last post and the lines I quoted that you could recommend, that would have been very nice. Both tings still applies to me and would be nice to have some more input on.

 

Thanks guys :)

 

Laurus

Edited by laurus12

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Great stuff from both of you Steve and Mitsubishi. Right up my alley. Thanks for taking the time.

 

I have too done a lot of home work with historical data, and the times I have been uncertain I see that I have not done enough. I guess what you are talking about is the same thing the guy in Germany (who has as a single person the largest positions with the DAX today) did from he was about 12 or 13 years old before he started trading.

 

Regarding Dr. Kiev Steve. If there is a book with him that handles exactly the stuff you wrote in last post and the lines I quoted that you could recommend, that would have been very nice. Both tings still applies to me and would be nice to have some more input on.

 

Thanks guys :)

 

Laurus

 

Laurus

 

I'm not familiar with the "guy in Germany." Can you provide more details? Thanks.

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Laurus

 

I'm not familiar with the "guy in Germany." Can you provide more details? Thanks.

 

at a guess it is - Paul Rotter - aka "the Eurex Flipper"

if not he is interesting in itself.

 

I know I have stored a link to the article, but I am not able to find it. The name Paul Rotter does not ring a bell, but from the description on a couple of pages I have found it might as well be him. The thing I remember from the article I read was that the guy was as a twelve or thirteen years old home and studying charts when his friends was out playing. And when he was ready his mother opened a trading account for him before he was old enough. If this fits Paul Rotter, it most probably would be him. I'll keep on looking for the article and post the link if I find it.

 

This is a couple of links on what I found with Paul Rotter:

The Worlds most Successful Trader - Paul Rotter - aka "the Eurex Flipper" -  NQoos-TradingNaked

I found my Holy Grail - No Setup No Trade: World's most successful trader Paul Rotter trades with CCI

 

Laurus

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Would like to add another fantastic book.At least it's part about mind.

 

John Hayden:"The 21 Irrefutable Truths of Trading: A Trader's Guide to Developing a Mind to Win"

 

I am big believer in fact(at least for me:) ) that trading is 90% psychology and 10% the rest.

Have had such experience which made me think like that.To master the market you have to master your self;)

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I've had to recognize which market situations my ego comes into play and what the specific ego-topic was in these situations. I say this because there are situations where I feel completely confident and there is no stress to mention of. In the ego reaction situations I liken them to how the shark research guys on National Geographic have learned to behave when they are in the water with the sharks. Meaning my ego is the shark or a wild animal where I have learned how to handle it in different situations.

 

How about this. Your ego is just your ego. You are however, in a similar way to those Nat Geo guys, swimming with the sharks every single day you are trading. Consistent, well thought out behaviour will allow you to work with them in a seemingly effortless way. However, if you start acting in a way in which they don't expect, they'll eat you alive. Your ego or your laziness or your inability to stick to a plan is the unpredictability I am talking about.

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Would like to add another fantastic book.At least it's part about mind.

 

John Hayden:"The 21 Irrefutable Truths of Trading: A Trader's Guide to Developing a Mind to Win"

 

I am big believer in fact(at least for me:) ) that trading is 90% psychology and 10% the rest.

Have had such experience which made me think like that.To master the market you have to master your self;)

 

Yes. That is a great book. I have been referring to it about 'trading virtues' for some time now, but had forgotten the title name and author. Thanks.

 

re "To master the market you have to master your self"

"To align with the market you have to align with your self" is a little bit better fit for me...

'Control' is still a major player, but is in a more realistic position...etc.

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How about this. Your ego is just your ego. You are however, in a similar way to those Nat Geo guys, swimming with the sharks every single day you are trading. Consistent, well thought out behaviour will allow you to work with them in a seemingly effortless way. However, if you start acting in a way in which they don't expect, they'll eat you alive. Your ego or your laziness or your inability to stick to a plan is the unpredictability I am talking about.

 

Many thanks Negotiator. Another twist and perspective. I appreciate it :)

 

Laurus

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