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Traders :It’s OK To Be Emotional

Read any book or blog about trading and you’ll be told controlling one’s emotions is a key skill needed to trade well. On the surface, this sounds like good advice. After all, greed and fear are killers at a trading desk right? 
But the evidence doesn’t back up such a notion.

These writers are saying you must be very calm and not get too excited. You must keep an even keel and not ride an emotional roller coaster – as if to imply emotional restraint is a desired state.

I’ve never completely agreed with this concept because I know from casual observation most successful people are very emotional.

SOME EXAMPLES

  • Michael Jordan, Tiger Woods – very intense, very emotional!
  • Bobby Knight, Coach K – love them or hate them, they’re extremely emotional and extremely successful.
  • Muhammad Ali – intensity, passion, showmanship and yes, emotion.
  • Paul Tudor Jones – if you can get your hands on a copy of the PTJ 60-minute documentary the subject supposedly bought up, you’d learn he has off-the-charts competitiveness, intensity and is very emotional.

THE TRADING TEMPERAMENT

Yet it’s a rarity to meet a calm trader, who doesn’t seem to be overly intense or competitive, become successful. This doesn’t mean you have to hurl your keyboard out the window every time you lose money.It’s just means you aren’t likely to succeed if you don’t have a little fire in your gut.

Trading is tough. It takes years of study and practice. Without a strong emotional drive, it’s unlikely a newbie would be willing to put in the time necessary to get good. (more…)

Trading is all about YOURSELF

lgBelieveInYourselfTrading has to do a lot with yourself. Trading is not about the market.

You have to get your emotion and psychology right before you go to trade. Without the good emotion or feeling of the day, you will be most likely be losing during that day.

Do Not Trade, If …
– You cannot afford to lose the money. (Prepare to lose)
– You have a Bad day (quarrel with wife/child/boss).
– You are Sleepy
– You are Not comfortable in trading
– Technology failed You

Do not be afraid that you will lose the opportunity for the ride up or down. There are plenty of opportunity out there in the market everyday.

Remember: If you trade, you will lose money. If you don’t trade, at least you wont lose money.

The funny thing that i found out … People will lose money if they care about their money but people will make money if they don’t care about the money.
Get yourself right first and the money will come to you.

The trading curve.

I really like this visual because if you turn your head enough it looks like a face hitting the wall. Not sure if that was intentional but that is how I would best describe what trading is like when you are new and/or struggling.

There are subtle but important difference. Yes there are no clients or employees but that means that you have to rely on your own feedback mechanisms. Money is not as effective as one would think.

Initiation- Every trader comes in thinking they will make money, in fact if they have never traded, they probably have convinced themselves fully. They spend time looking for all the answers in charts but it is in the process. It seems like easy money. It is not easy but it is probably the best way to make money. The best of anything takes more work.

Wearing off of novelty– This is a critical time for any trader. This is where the hole gets deeper or ideally the trader stops and starts to work more efficient. Process and not charts. This is the motivation to understand what trading really is and who they really are.

Trough of sorrow- This is also a critical point. Now you have done some work but it has not paid off yet. Do you keep working? Do you get some help? Can you continue to improve?

Crash of ineptitude- You are starting to gain some experience and confidence. But you have a bad day and lose too much. Back to the drawing table.

Wiggles of false hope- This is where you understand what not to do so you are floating along again. The problem is you are only starting to understand what to do. You have corrected the big mistakes and now start down the path of correcting the small ones.

The promise land- Now you understand what not to do and what to do. Now it is up to you to actually do it. You are in the best position of your trading career.

Acquisition of liquidity- Now you are a self sustaining trader. You have the ability to make x amount of dollars to survive. This is what you have to lean on now. This is when trading begins to get real. You are methodically improving.

Upside of buyer- Not only do you understand what not to do and what to do, you always do it. Now the sky is the limit. You control your destiny.

The difference between trading and a start up is you are not looking to be acquired. You have to do this day in and day out, make a career. This does not stop but the process and progressions become second nature and you are seeing positive results. This is not the time to relax but the time to put the foot on the gas pedal. This is true about all of the stages except the first one.

Trading is also different in that any day you can put yourself back into one of the stages. That is why it is important to never forget that the purpose is to make money. As you gain experience you will spend less time in the early stages. The early stages will start to feel like touching a hot stove. You will recognized the situations more quickly and have the strength to make a change immediately.

The trading curve.

Initiation-  Every trader comes in thinking they will make money, in fact if they have never traded, they probably have convinced themselves fully. They spend time looking for all the answers in charts but it is in the process. It seems like easy money.  It is not easy but it is probably the best way to make money.  The best of anything takes more work.

Wearing off of novelty– This is a critical time for any trader.  This is where the hole gets deeper or ideally the trader stops and starts to work more efficient.  Process and not charts. This is the motivation to understand what trading really is and who they really are.

Trough of sorrow-  This is also a critical point.  Now you have done some work but it has not paid off yet.  Do you keep working?  Do you get some help?  Can you continue to improve? (more…)

Money solves all of your problems.

It is often said, trading introduces you to yourself. I was in my second year of trading when I heard that phrase.  She would go on to ultimately teach me much about life and myself.  The benefit of being in my early 20′s and teaching people in their 40′s and 50′s.  I helped them with trading, they helped me grow up.

What that phrase means is that who ever you are that day will show up in your trading.  This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment.  In trading, a “bad” day can  create a cascading effect. You lost when you should have made money.  You created a bad habit.  Losing doesn’t trigger the right response, etc.

A trader views the market through themselves.  Now, most of the time it is little things that can be easily passed over.  Human beings are always going to have to deal with things they rather would not have to.  Every person has a bad day. (more…)

Trading is all about YOURSELF

Trading has to do a lot with yourself. Trading is not about the market.

You have to get your emotion and psychology right before you go to trade. Without the good emotion or feeling of the day, you will be most likely be losing during that day.

Do Not Trade, If …
– You cannot afford to lose the money. (Prepare to lose)
– You have a Bad day (quarrel with wife/child/boss).
– You are Sleepy
– You are Not comfortable in trading
– Technology failed You

Do not be afraid that you will lose the opportunity for the ride up or down. There are plenty of opportunity out there in the market everyday.

Remember: If you trade, you will lose money. If you don’t trade, at least you wont lose money.

The funny thing that i found out … People will lose money if they care about their money but people will make money if they don’t care about the money.
Get yourself right first and the money will come to you.

The trading curve.

Initiation-  Every trader comes in thinking they will make money, in fact if they have never traded, they probably have convinced themselves fully. They spend time looking for all the answers in charts but it is in the process. It seems like easy money.  It is not easy but it is probably the best way to make money.  The best of anything takes more work.

Wearing off of novelty– This is a critical time for any trader.  This is where the hole gets deeper or ideally the trader stops and starts to work more efficient.  Process and not charts. This is the motivation to understand what trading really is and who they really are. (more…)

The Goldman Sachs Careers Page

 gs-carrers
 

Look, I help my readers out. Here’s the Goldman Sachs “Careers” part of their website.

Be sure to tell them that you read this blog religiously — and you’ll be so in.

One more thing, here are the Do’s and Don’ts for your Goldman internship:

No matter where your summer experience takes you, you can benefit from these useful tips and hints. They may seem simple, but your colleagues will notice if you aren’t acting on them.The Do’s
* Be eager for a challenge
* Be yourself
* Be open-minded
* Be on time
* Know the dress code
* Observe and ask thoughtful questions
* Treat everyone you meet with respect and professionalism
* Understand that everyone makes mistakes
* Carry a notebook with you at all times
* Pay attention to the details
* Be proactive
* Show energy and interest
* Set goals for yourself
The Don’ts

* Let a bad day get you down
* Take on more than you can handle
* Pretend to know something you don’t
* Have nothing to do
* Ask everyone the same questions
* Take yourself too seriously
* Talk negatively about co-workers
* Focus all of your attention on senior management
* Bring your personal life into the office
* Surf the web all day (BWAHAHAHAHA – Eddy)
* Spend working hours on social networking sites or texting friends

Ego & Nervous Traders

There are a whole host of characters who regularly lose money in the market place, and most fall into two catogories:

False Ego Traders

& Nervous Traders The false ego mistakes come from a mixture of false pride and bravado and are the most dangerous mistakes to make. The trader, generally a beginner or intermediate — call him Tader A — gets an opinion in his head about market direction. His analysis may have even been sound, but his opinion keeps him from reading/seeing the signs that a change is occuring in the market he has targeted. He subconsciously see the changes, but false pride is the devil, and blocks the information from making it into his conscious decision making process. The change he needs to see may even be pointed out to him by a fellow trader –Trader B– but Trader A’s false ego blocks this because he knows “I’m smarter than Trader B…In fact I think its a good idea to fade Trader B”.

Trader A is also likely someone who is accustomed to being listened to. He may have been upper management in a company, or even owned the company. “People better listen to me” is how he sees it. He is likely more accustomed to talking rather then listening.

Despite trader A’s previous success’ Mother Market will bring him down quickly. Any early success he has in the market will only make for bigger losses down the road as he gets caught in the spiral of trying to make up for lost money and still make money. He doesn’t just want to get his money back, he wants that and then some. His time is valuable. He is going to make the market pay.

Well we all know how that works out, which is to say we won’t be seeing Trader A around for long. (more…)

Money solves all of your problems.

What that phrase means is that who ever you are that day will show up in your trading.  This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment.  In trading, a “bad” day can  create a cascading effect. You lost when you should have made money.  You created a bad habit.  Losing doesn’t trigger the right response, etc.

A trader views the market through themselves.  Now, most of the time it is little things that can be easily passed over.  Human beings are always going to have to deal with things they rather would not have to.  Every person has a bad day.

Money solves all of your problems, till it doesn’t.  The difficult part about trading is the problems start and the money (win or loss) CAN come at different times.  Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst).  Well it turns out the headline is old and everyone already knew about it.  The story/money and what it bears can often come at the “wrong” or different times.  You are rewarded or punished just not always easy to connect the actions in real time.

Money does not necessarily mean your actions are correct.  Yes over time it evens out but some run out of money, patience, emotional currency before it corrects.  They weren’t honest about who they were that day.  It is prudent to always look a gift horse in the mouth.