[DugDug]

Originally Posted by james_gsx »

But what if that's really just all in our head? What if we've heard so much of this "traders psychology" jargon and we force ourselves to pay attention to it - thus causing more problems. Could it really be as simple as walking up to it and saying, "I am here to make money, I will find my profitable niche and adapt when necessary."

I am coming to the conclusion that as in trading, the simple things work best, dont reinvent the wheel and if it aint broke dont fix it. Initially there is no substitute for hard work, planning, trading time, and understanding and analysis of the past trades in order to improve them, until it becomes that unconscious competence (I think that is what is its referred to). Find a setup, trading style that works for you - dont try and fit a square peg into a round hole, and most of all be determined/persistent and really commit to making it work - learn, practice, get a mentor, get help (dont waste money on quick fix seminars).

Finally give yourself a set date to take time off, analyse and realise that sometimes certain things may or may not be suited to you.
If you find that trading does work for you and you are successful continue - otherwise stop and do something else.

I think that many people have to realise that while trading may sound glamourous, exciting etc; etc; the reality is different and that it just does not suit everybody, most people are not prepared to really change themselves (if this is what is required) and its as simple as that.
While I know I can generally do anything I set my mind to - I might not be the best at it - there are certain things I just dont wish to do. eg; dressmaking, missionary work, political life, lawyer.

By looking for reasons of why we are doing, or not doing things, sometimes we miss the important question of why we are doing the actual process in the first place. I dont trade to make myself a better man - I trade to make money, so I can take holidays, buy art, feed myself etc.

[james_gsx]

Well I have noticed trading brings in many crowds. People who want to make a quick buck to one up their neighbor - they often lose. But they are also the ones who pay for the seminars, take hot stock tips, etc. Then there are those who are naturally attracted to risk, if intelligent, they often succeed. They come to make money, obviously, but the initial attraction is risk.

I've also learned that understanding markets really is about understanding what people are doing. I feel technical analysis is really analyzing the psychology of other people. The other portion, is mathematic. While I'm not far enough in my study of math, I do feel one of the biggest components to risk management and trading is the human psychological element - and I'm not sure there is a formula for that yet. Someone with a stronger mathematical background feel free to chime in. I am pursuing a degree in applied mathematics, so perhaps one day I will be able to figure it out - but I'm sure it's much more complex then I think.

Moral of the story, stop worrying about yourself. Figure out what other people are doing, make a strategy, stick to it. You find yourself making dumb moves? Ask yourself, do you want to keep losing money? If no, then stop making stupid mistakes repeatedly. Trust me, I speak from experience - as do many. Of course, it's not really that black and white, but we can try can't we?

After several years of trading I have learned more about myself then I would have otherwise, but that was all in the first year or so when I thought it mattered. Since then, I've pondered more about the chaos of trading crowds and asked myself why people act in certain ways - this has led to a more clear thinking of markets, for me personally. Also, the more I learn about math and see how I can apply it to trading, the more it all makes sense. Essentially eliminating the "self psychology" piece entirely (I still get emotional obviously, but I don't question why - rather I ask if the crowd is doing the same thing).

Apologies in advance if this derails the thread, if so, mods feel free to move this to a new thread.

[DugDug]

James- "Moral of the story, stop worrying about yourself. Figure out what other people are doing, make a strategy, stick to it."

if you cant figure out why you are doing things, how in the hell are you going to figure out why the rest of the world are doing things.
(I have enough trouble working out my girlfriend, so I now just say "yes dear", go with the flow and do what I want anyway..... it works without much analysis of what she wants)

[BlowFish]

Originally Posted by FXGirl »

Dear BlowFish: Thanks for calling our attention to Anna-Maria's post - very interesting, and obviously it works well for her. We probably all have our own metaphor for trading the market. For me, it's surfing.

.

I am not a surfer but really like that metaphor. One of my favourite little books is called channel surfing (about channels needless to say) the author uses the metaphor liberally.

I am quite wary of 'trading as war', or 'trading as combat' metaphors. That's just not me and whilst I enjoy a good argument (err I mean debate) I find 'real' conflict distressing, especially violent conflict.

That was (as you might guess by now) not my main reason for linking the post. What I liked was the 'no nonsense' attitude to trading. Having read AM's posts in the thread I first mentioned (busy day tomorrow) I get the impression that this was deliberately pitched to be a 'harsh wake up call'' kind of post. I dunno. It is an interesting view in a thread that is quite similar to this one and does present the other side of the coin.

Rather than know yourself perhaps know why you are trading, know what you want from the market, as Sekoyta intimates. I guess it is money that originally attracts people to the markets but once they are there they play out all sorts of other dramas. Is it even money that people really want (which is just bits in a bank) or the things that go with it? A sense of self worth, a job done well, respect of your peers, dare I say power?

I guess you only need to know the bits of yourself that motivate and effect your interaction with the markets?

I guess knowing your strengths and weaknesses is a plus but that is helpful for most endeavours isn't it?

[james_gsx]

Originally Posted by DugDug »

James- "Moral of the story, stop worrying about yourself. Figure out what other people are doing, make a strategy, stick to it."

if you cant figure out why you are doing things, how in the hell are you going to figure out why the rest of the world are doing things.
(I have enough trouble working out my girlfriend, so I now just say "yes dear", go with the flow and do what I want anyway..... it works without much analysis of what she wants)

Well like blowflish said, you should know your strengths, weaknesses - what motivates you to trade, etc.

I sometimes feel that maybe people spend too much time on this idea that you need to fully understand yourself to trade. That might be if your practice is entirely discretionary, but I also feel like you may be missing the big picture in the process.

[FXGirl]

Dear James: I wanted to comment on several of your posts. Your statements are in quotes.

“I understand some new research points to taking financial risk may be processed in the amygdala of the brain - in which case, those people simply shouldn't trade.” Which people are those, James? We all have amygdalas and if it is a threat, it goes through the amygdala. It’s what happens after the frontal lobes get a hold of the information that determines whether the subsequent behavior works for us or against us.

“What if we've heard so much of this "traders psychology" jargon and we force ourselves to pay attention to it - thus causing more problems.” I think that there is plenty of evidence that emotions drive behavior in trading with moving stops, adding to a losing trade and getting out too early as only a few examples. These behaviors aren’t a result of “traders psychology jargon”; they are the result of not having a strategy that adequately handles the emotional aspects of trading.

“You find yourself making dumb moves? Ask yourself, do you want to keep losing money? If no, then stop making stupid mistakes repeatedly. Trust me, I speak from experience - as do many. Of course, it's not really that black and white, but we can try can't we?” Ah, yes, if it were only black and white. Unfortunately, many people can’t just command themselves to ‘stop making stupid mistakes’ and have that work for them. If they could, we’d have a much better world…and certainly no need for a Trading Psychology Forum.

Trading psychology is ultimately about learning to manage the inevitable emotions generated by trading in an ambiguous and risk-filled environment in a way that supports your trading goals. If you have a trading plan that works, and you are able to follow that plan, then you have developed a successful psychological strategy. However, if you are moving your stops, getting out too soon, or hesitating to take a trade that meets your criteria, then your psychology strategy needs some work.

[james_gsx]

“I understand some new research points to taking financial risk may be processed in the amygdala of the brain - in which case, those people simply shouldn't trade.” Which people are those, James? We all have amygdalas and if it is a threat, it goes through the amygdala. It’s what happens after the frontal lobes get a hold of the information that determines whether the subsequent behavior works for us or against us.

Brain location for fear of losing money pinpointed -- the amygdala

Assuming of course, that you have had some traumatic experience losing money and now this can be akin to something like death, then the whole approach of a trading coach, journal, etc, won't work the vast majority of the time.

The point I was trying to get across, and it was poorly worded, was that if you are in fact one of those people, why waste the money trying to trade a discretionary strategy profitably when the odds are stacked incredibly against you? I would admire you for it, but I wouldn't understand the point of throwing that money down the drain.

(not you in particular, you is meant as the subject in this case who could be anyone dealing with this problem.)

“What if we've heard so much of this "traders psychology" jargon and we force ourselves to pay attention to it - thus causing more problems.” I think that there is plenty of evidence that emotions drive behavior in trading with moving stops, adding to a losing trade and getting out too early as only a few examples. These behaviors aren’t a result of “traders psychology jargon”; they are the result of not having a strategy that adequately handles the emotional aspects of trading.

“You find yourself making dumb moves? Ask yourself, do you want to keep losing money? If no, then stop making stupid mistakes repeatedly. Trust me, I speak from experience - as do many. Of course, it's not really that black and white, but we can try can't we?” Ah, yes, if it were only black and white. Unfortunately, many people can’t just command themselves to ‘stop making stupid mistakes’ and have that work for them. If they could, we’d have a much better world…and certainly no need for a Trading Psychology Forum.

Trading psychology is ultimately about learning to manage the inevitable emotions generated by trading in an ambiguous and risk-filled environment in a way that supports your trading goals. If you have a trading plan that works, and you are able to follow that plan, then you have developed a successful psychological strategy. However, if you are moving your stops, getting out too soon, or hesitating to take a trade that meets your criteria, then your psychology strategy needs some work.

I believe that is where we disagree. Most traders aren't profitable, and it's not because they can't read charts and get a feel for the market, or because they move stops or have bad entries, and it's not because of their personal emotions that occur during trading. In my opinion.... it's because they ignore how complicated the market really is. They don't really take the time to realize the forces around them and how that's impacting the markets.

When I said people focus too much on the "psychological jargon" that doesn't mean that we should not know ourselves. We should do that as a daily practice, not because we trade. Absolutely you should know when you're getting disgruntled and should walk away - you'd do the same thing at a poker table. But you wouldn't sit at a poker table dissecting yourself, you'd be looking for profitable niches at the table to exploit then adapting as participants come and go.

There are some exceptional discretionary traders, and some of them post on this forum. I applaud everything they do, and I enjoy reading what they have to say. But for everyone else, they need to realize the huge disadvantage they have. You will be very hard pressed to find any institutions (with legit big money, not prop shops) who have traders making any discretionary trades - especially since everything can be done in the blink of an eye with computers. They have algorithms, and understand the silly mistakes many retail traders make, and exploit those opportunities before you even know what happen - then just toss it off as another stop loss.

That doesn't mean you shouldn't trade, it just means you need to understand fully what's going on. Not just acknowledge it, but really understand it. All the journals and everything else are useless if you don't know why your trading plan is designed to fail from the beginning. If you're a retail trader and you truly believe the chance of losing every penny, whether at once or consistently over a long period of time because of "risk management" (and not have any real clue what risk is) and "understanding personal psychology", then you should really ask if you know what you're doing.

I said earlier that TA is really like psychology of the entire market, and I still stand by that. You should know yourself, but not because of your trading plan, just because we should all do that regardless of profession. In order to win in this business you must take risk, and that risk is very real. You could fail, and you have to accept that. In my opinion, focusing too much on how you react in various situations instead of looking at the market and being open is a very big risk.

I say all of this because I see too many newbie traders (including myself) come into this forum excited to learn. They are quickly directed to the whole psychology aspect, then they read Trading in the Zone, etc, and think trading is some big zen like focus on personal emotions game. It's not that at all, and they all leave 6 months later never to be heard of again. They can't figure out why they lose so much money, after 20 hour days studying VSA, Candles, Wyckoff, etc. Then they just think it's because they can't control their emotions or they're undisciplined. The problem was because they never really took the time to understand how the markets work - and they never took full appreciation of the risk. They had "risk management" but never really accepted it.

[DugDug]

James - "Then they just think it's because they can't control their emotions or they're undisciplined. The problem was because they never really took the time to understand how the markets work - and they never took full appreciation of the risk. They had "risk management" but never really accepted it."

Not to get into an argument James but I think you are actually agreeing to disagree with yourself if that makes sense..

To trade and to understand the markets does take discipline and emotional control. Many rush in, develop bad habits then wonder how to fix it and look for quick fixes. Many never develop a truly comprehensive trading plan from the get go, instead its done on the run.

You are 100% correct, but I think the point when most older traders direct new people to the psyc and discipline part of the process it is to tell people that if you dont get this part of it and dont understand that self control and the goals and reasons for why they are trading is an integral part of the initial understanding of risk management and also the ongoing risk management and self control that is required (hence journals, reviews etc; to ensure you continue to improve or dont drift into bad habits), then you will make things harder for yourself. Its all part of the big picture. Both understanding yourself, understanding how the market works, understanding the mechanics of the trading platform, understanding the strategy you adopt. This is why trading is often referred to as a business.... and not a hobby (except for some).
I know one of the biggest risks to my business is me - not just the market.