Archives of “ego” tag

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Ego in Trading -Anirudh Sethi

  
Analysis, Education
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There is something about yourself that you may really not know. Something that you will deny even exists in you until it’s too late to do anything about it. It’s among the reason you rise up in the morning, the sole reason you suffer the shitty boss, the sweat, the blood and also the tears. This is because you would like people to understand how attractive, good, generous, wild, funny and clever you actually are. “Fear or revere me, but please think I’m special”. We share an addiction. We’re approval junkies. We’re all in it for the pat on the back and the gifts. The “hip, hip, hoo-rah.” check out the clever boy with the badge, polishing his trophy.

 

Because we are all human, we do not want to accept that we are wrong about anything, including trades. The ego wants to uphold a perfect version of ourselves allows nothing more but successes not failures. Many traders collectively lose many dollars trying to guard the ego’s version of reality. Our goal should be to trade without ego.

 

“The greatest enemy will hide in the last place you’d ever look.” Caesar 75 BC

 

You must recognize what’s keeping you from taking your trading to another level. The majority of the time, it’s your ego. How many times have you made a great trade and walked away with your chest puffed out thinking ‘I am the greatest trader in the world?’

 

“The only way to get smarter is by playing a smarter opponent.” Fundamentals of Chess 1883

 

The market always reminds you the person in charge. Try to always use same way to approach each trade, ditch each previous trade when entering a current one. Reset your mind and expect to lose money on each trade, and this could assist you recover from the super-trader ego after  a pleasant winning trade! Ego must be left out of your trading. Check your ego at the door, have a stop loss, and stick with your plan.

 

The ego may be a person’s sense of self-esteem or self-importance. The ego is a mental construct that can be both on a conscious and unconscious level. An ego is that the self-concept that an individual tries to guard and keep safe from pain and destruction. A trader has got to trade the maths and their own trading system and abandoning signals and their trading plan in favor of their own ego may result in stubbornness, self-delusion, and big losses.

  1. Most market predictions are ego based. A trader wants to be ready to say they called a top or a bottom or had an excellent stock pick. Signal and system-based trading may be a path that removes the necessity to predict you simply
  2. Stubbornness is an emotion that flows from the ego as it does not want to be proven wrong. Many times, this results in letting a losing trade still run against a trader. Egos do get trouble taking stop losses because they hate to be

 

  1. Egos lock into being bearish or bullish and let their opinions lead their trading. Following the particular price trend creates better odds of success than having an opinion on what should happen
  2. You should not let trading consume your entire life. The markets should be just one of several belongings you neutralize life. A diversified life outside the markets with friends, families, hobbies, learning new things, and staying healthy will assist you keep perspective during losing streaks and draw downs in trading
  3. A profit and loss statement can not define your self worth. Your profits are more of a mirrored image of whether the worth action is conducive to your method currently not whether you’re an honest trader or not. Your egos have got to be determined by whether or not you followed your trading system with discipline, consistency, and risk management.

 

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Marty Schwartz Quotes

  
  Education
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Marty has scored enormous percentage gains in every year since he turned full time trader in 1979, but he has done so without ever losing more than 3 percent of his equity on a month-end to month-end basis. In the US Investing Championships held by Stanford University Professor Norm Zadeh, his performance was nothing short of astounding. In nine of the ten four-month championships he entered, he made more money than all the other traders combined. His average return in these nine contests was 210 percent – non annualized! In his single entry in a one-year contest, he scored a 781 percent return.  

“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing the money.” 
”When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.”
”By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what! “
”Before taking a position always know the amount you are willing to lose.”
”The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.”
”I always take my losses quickly. That is probably the key to my success.”
”The best advice I can give to the ordinary guy trying to become a better trader is Learn to take losses. The most important thing in making money is not letting your losses get out of hand.

Trading obstacles

  
  Education
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Trading obstacles

Have you ever been to a situation when you moved the stop because you couldn’t accept the lose, but ended up losing big chunk. Or you were too sure about the direction of the trade, you didn’t even put a stop loss but trade went opposite your way and ended up losing ten times more then what you suppose to lose. What about this scenario, you were sitting on big profit; you didn’t partial because of greed or overconfidence and ended up giving every thing to the market. Never been to this kind of situation, that’s great, but if been through this kind of horrible situation and still having this problem then you are not alone. We human naturally like that, can’t accept loses or in other word we like to win. In the trading word it is impossible to win 100% of the time, trading is game of probability .Very simple concept which part of the probability we don’t understand. Probably we understand probability but when we involve in a trade our ego overleaps the logical part of our brain.
What should we do, we will let our ego to ruin our trading career or we will say good bye to our ego.

1.Be honest to your self
2.Admit you mistake
3.Overconfidence is you enemy
4.Think logically
5.Try to keep record of every trade
6.Never revenge trade
7.Market is always right not you.

Overcoming the top 10 Pains of Trading.

  
  Education
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PAIN-ASE

Here are 7 painful aspects of trading and what to do about them.

  1. The pain of losing money. (Trade smaller so it is not painful, it is just an outcome)
  2. The pain of being wrong about a trade you were sure about. (You lost simply because the market didn’t match your trade, trend followers lose money in choppy markets, swing traders lose money in trending markets, it’s the market not you.)
  3. The pain of a draw down in capital.(Even the world’s best money managers do not continually hit all time equity highs. Your path may look like this $10,000 to $20,000 to $15,000 to $25,000 to $20,000 to $30,000.  Mine was rockier than most, and after blood, sweat and tears I am now able to trade with $250,000.)
  4. Consecutive trading losses hurt. They make you doubt yourself, your method, and your system. (You need to remember your winning trades, your winning years, or your back-testing, or paper trading of the method.)
  5. The embarrassment of public losses. You told everyone who would listen about a great trade, and you were wrong. (Never be overconfident in any trade, but always be sure of your stop loss.)
  6. The pain of of admitting you were wrong. (Cut your loss and move on to the next trade, trade reality not your ego.)
  7. Losing paper profits, you are up 20% on a trade then a massive whip saw takes back those profits in one move. (Take your trailing stop and move on to the next trade, there is truly no reason to cry over spilled milk.)
  8. You are following a guru and come to realize he truly is a salesman not a trader. (You stop following gurus and look to learn how to trade you yourself.)
  9. You buy a super hot stock that you have researched for many weeks then it goes down due to a bear market. (Only trade stocks long in up-trending markets)
  10. You start trading a system that did amazing in back-testing and promptly lose 10% of your account. (You have to stick with it so it can win in the long term, you may need to make slight adjustments in position sizing or stops to account for volatility that you may have missed.)

Whatever the pain, just don’t quit, there is gold to be found in trading right over the long term.

10 Trading -Wisdom Quotes

  
  Education
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  1. Ignore hearsay and don’t let your ego get the better of you.

“I learned that an opinion isn’t worth that much. It is more important to listen to the market.”
“Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.”

Brian Gelber

  1. Timing is paramount.

“I don’t lose much on trades, because I wait for the exact right moment.”

Mark Weinstein

  1. Accept full responsibility for your actions and don’t fall prey to self-sabotage.

“Many people actually want to lose on a subconscious level.”

“The realization that you are responsible for your results is the key to successful investing. Winners know they are responsible for their results; losers think they are not.”

Dr. Van K. Tharp (more…)

CHANGE IS ESSENTIAL

  
  Education
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The stock market, just like life, can change on a dime.  In the market, just as in life, we must learn to adapt to change.  What separates the great trader from the rest of the crowd is his or her ability to change based on current market conditions.  In other words, NO EGO ALLOWED.  Mark Douglas, in his first book entitled The Disciplined Trader writes,

“There must be a difference between these two types of traders-the small majority of winners and the vast majority of losers who want to know what the winners know. The difference is that the traders who can make money consistently on a weekly, monthly, and yearly basis approach trading from the perspective of a mental discipline.  When asked for their secrets of success, they categorically state that they didn’t achieve any measure of consistency in accumulating wealth from trading until they learned self-discipline, emotional control, and the ability to change their minds to flow with the markets.”

We trade the current market conditions as they unfold with a plan to trade one way or the other.  To do otherwise would be to fight an undefeated foe.

A Lesson from Einstein

  
  Education
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A lesson I learned from Einstein is the benefit of being able and willing to changes one’s mind. At times a pacifist, he changed after witnessing the rearmament in Europe. In physics and science in general when presented with new evidence it is quite normal to revise theories and mathematical proofs, or even to reverse a position entirely. Putting ego aside, he did this many times, most famously dropping his famous Constant variable regarding a static universe when through experiment it was proved no longer necessary. This is skill which comes more naturally at a younger age, but is quite possible for the post 40 crowd as he demonstrated in his long career.

The realization that you are alone

  
  Education
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 At some point in time the realization strikes that you are alone in the market – there is only you. The illusion that the market can ‘do’ anything to you falls away and it becomes obvious that you are 100% responsible for everything that happens to your account. You either give yourself money, or else you give your money away – there is nothing else.

The market is one of the few arenas where there are no external constraints, except in the case of a margin call. It never forces you to take a position, long or short, or tells you to get out of your position. It does not say how long to stay in a position or what time to exit, how much profit or loss is enough. There are no external constraints at all, and as such people run riot. You are relying on yourself 100% and there is only ever you to blame.

The above is a core part of a winning trading psychology, yet its difficult to adopt. Shifting the blame is a basic way we defend our ego every single day of the week – yet in the market this practice is absolutely unsupported by price action. How can any other market participant be doing something to you if he is totally unaware of your existence or what position you hold?

Its necessary to really ponder this until the truth of it shines out:

You are alone…

10 Mental Errors

  
  Education
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The weakest link to any trading strategy is the trader that is suppose to be executing it. It is usually the mental and emotional errors of the trader that cause the 90% of unprofitable traders to lose money. Trading success is determined more by the mindset of the trader than their skills with math, economics, or macro knowledge.

  1. The ego takes over the trader and being right becomes the #1 priority. This causes the trader not to take losses becasue they don’t want to be proven wrong.
  2. Greed causes traders to trade too big because they want to make a huge amount of money in one trade.
  3. Fear causes a trader to exit to early with a very small profit because they are afraid it will disappear.
  4. Discouragement causes a trader to quit before they have given themselves or their systems enough time to win.
  5. Coat tailing is when a trader follows a guru’s trades instead of learning to trade correctly themselves.
  6. Style drift is when a trader changes their method instead of sticking to it and letting it play out when the right market environment emerges.
  7. Arrogance leads a trader to trade too big and take on too much risk, this usually happens after a big winning streak or outsized win. (more…)

Let the market make the decisions, not your ego.

  
  Education
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The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.

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