[Eiger]

Some of the folks in the VSA II thread began to get into a discussion about trading psychology and how to apply it in a practical manner, including how to apply it on your own. The discussion began to grow and seemed useful enough to warrant a separate thread. The relevant posts will get copied below, and we can then use this thread to continue.

Eiger

Originally Posted by mike_ITL »

Hi Eiger,

that's exactly what I was thinking when this pattern happened: "I'm not going to miss this one: I have to take position". Obviously I took the wrong one.

I find your suggestion wise: I will incorporate this rule into my trading plan ...


Mike

Actually, you are the wise one. Most traders spend most of their time and effort studying charts and trying to improve their technical skills. That's a good thing. But, few spend much time and effort working on themselves. That's not such a good thing.

I say you are wise because you have identified a limitation, figured out how to adjust for it, and then you put it into your plan. You will only improve as a trader by doing this.

What you are doing is a simple, but highly effective way to improve. Here is a little more to consider. First, write stuff down. Keep a journal and write things that are meaningful. Don't just complain, (e.g., "Agh! Another losing trade; I'll never get this."); that kind of writing is rather useless. Be specific about your trading behavior, and include thoughts and feelings. Then, after a while, look for patterns that have a negative impact on your trading, like jumping in because of impatience. This is a "current limitation." Be excited! You've now found something you can work on to get better (how else are you going to improve?). Next, devise a workable plan to neutralize the limitation or even turn it into a strength. Put this into your trading plan and then track your progress on it. Write about it in your journal, and make any adjustments that might be needed.

This is the bare bones of how to use your journal and trading plan to help yourself improve. You have to be your own coach in a lot of ways. That means you have to be able to step back and observe (think witness) your own behaviour. Hard to do, but the journaling can really help.

OK, enough trading psychology. This is, after all, the VSA thread

Hope this is helpful,

Eiger

[Sledge]

Originally Posted by Eiger »

What you are doing is a simple, but highly effective way to improve. Here is a little more to consider. First, write stuff down. Keep a journal and write things that are meaningful. Don't just complain, (e.g., "Agh! Another losing trade; I'll never get this."); that kind of writing is rather useless. Be specific about your trading behavior, and include thoughts and feelings. Then, after a while, look for patterns that have a negative impact on your trading, like jumping in because of impatience. This is a "current limitation." Be excited! You've now found something you can work on to get better (how else are you going to improve?). Next, devise a workable plan to neutralize the limitation or even turn it into a strength. Put this into your trading plan and then track your progress on it. Write about it in your journal, and make any adjustments that might be needed.

This is the bare bones of how to use your journal and trading plan to help yourself improve. You have to be your own coach in a lot of ways. That means you have to be able to step back and observe (think witness) your own behaviour. Hard to do, but the journaling can really help.

Eiger-
This is great advice for ANYONE reading. Some people think "A Journal?- isn't that like High School?" Well let me tell you. I have kept a trade journal from day 1 and it is a wonderful thing to have. I not only place my trades in it, my targets, my reasons for taking the trade and why I exited.
BUT
I also brainstorm ideas in it. I test trading theories, put down a frustration or two, backtest, and backtesting results on theories. I was reading through it about a month ago and said on a few items "HA I can't believe I tried THAT!" I also go back and look at my "frustrations" and make updated notes on them in the margin. Thankfully, I have been able to update them 100% of the time with "Overcame as of X date" or "Have made great strides on accomplishing this- still working on it."

I suggest to anyone who trades to know WHY they are in a trade, learn from their mistakes- believe me I have printouts of days I got murdered. I printed the chart- asked questions here in this forum, and won't make them again!

Enough rambling from me!
Aaron

[tawe trader]

OK, enough trading psychology. This is, after all, the VSA thread

Eiger,

Please keep your psychology observations coming. I am very grateful for them and I am well aware that you are an expert in this field.

Being a proficient VSA'er is nothing without having the right mental make-up to go along with it, IMO this is where the trading holy grail can be found. ie combining the technical skills of VSA (or Wykcoff) with a sound and robust trading mindset.

As you know the 'edge' is inside our head and everyday (well for me anyway) it is a constant battle between our basic emotions of fear, greed, impatience etc.

I guess that if psychology didn't matter in this business, every person who has bought Tradeguider software over the years would now be a multi-millionaire trader.

Regards
Tawe

[Sledge]

Originally Posted by tawe trader »

Eiger,
Please keep your psychology observations coming.

I second this. I don't see much discussions about trading psychology here. But Psychology is AT LEAST 50% of trading- I personally think it is much higher. If you can master the "mechanics of trading" (reading a chart and what it tells you) then you must master your own emotions to be successful.
Been in the "Oooh Ooooh OOOOOH- awesome trade coming up- lets get in NOW" camp and learned to overcome that- but it was tough!

Maybe it would have to be segregated from the VSA thread (even though mechanics without psychology= frustration and loss) But this could go two ways:
We could discuss the psychology of Self
And
The psychology of the herd (and what the pro $ knows about it)

Just a thought!
Aaron

[mike_ITL]

Hi Eiger,

your words incourage me to put effort in what I'm trying to accomplish.

What I found difficult in creating a journal, is to be synthetic when writing notes ... however, I will try to re-introduce this habit, trying to be more schematic. (I used to keep a journal, but as many other Italians, I have the tendency to be lenghty)

As regards trading psychology, I agree with Aaron and Tawe, please keep up the good work !

Have a good day!

Michele

[Eiger]

Originally Posted by mike_ITL »

Hi Eiger,

What I found difficult in creating a journal, is to be synthetic when writing notes ... however, I will try to re-introduce this habit, trying to be more schematic. (I used to keep a journal, but as many other Italians, I have the tendency to be lenghty) ...

Michele

I know about being lengthy. I'm Irish, and my grandmother used to say I could talk the dogs off the meat wagon!

There are lots of different ways to do a journal. The best method is the one that helps you and helps you to do it consistently. Here are a few ideas for consideration:

• State your intention for the day. In Michele's example, it might be something like "Today, I will look left for a SOS or a SOW before I trade a VSA indication."
• Log every trade. In addition to entry, exit, stop, P/L, you can also add thoughts and feelings for each trade, which will later help you see patterns.
• At the end of the day, ask yourself specific things like:

• Did I look left on every VSA indication? If not, why?
• Were all trades taken with appropriate trading plan criteria? If not, why?
• What did I learn from my thoughts and feelings? Was there any pattern that I noticed?
• What did I learn about myself and my trading today that is important to my future performance?
• What steps can I take tomorrow and in the future to improve my 1) mental/emotional skills, 2) trading skills?
  
  

The basic idea of the journal is to help you identify strengths and limitations, address the limitiations, and track your progress over time. It needn't be complicated, and you don't have to write a book. Just jot down a few specific things.

Anyway, just a few thoughts that might be helpful.

Eiger

[Eiger]

Originally Posted by Sledge »

I second this. I don't see much discussions about trading psychology here. But Psychology is AT LEAST 50% of trading- I personally think it is much higher ... Aaron

I always liked Yogi Berra's take on performance psychology:

"Ninety percent of this game is half mental."

That sort of sums it up well, i think

Eiger

[mister ed]

The posts above have been copied over from the VSA2 thread as a seed for this new thread - thank-you Eiger for your insights, advice, and starting this discussion.