Archives of “emotions” tag

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Three Myths of Trading Psychology

  
  Education
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Myth #1: Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts.Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.

 Myth #2: Anyone, with dedicated effort, can get to the point of trading for a living. That is nonsense. How many people make their living from acting or musical performance? What proportion of people playing sports can actually make their livelihood from athletics? Many people play chess or poker, but how many can sustain a living from it?Quite simply, to make a living from any performance activity means that you are consistently good at what you do. Not everyone has the talent, skill, or drive to be that successful—in any field. Across the many traders I’ve met in various settings, from home-based, independent traders to professional ones in firms, the best predictors of trading success have been the size of the trader’s account and the resources available to the trader. If a person were to make 30% per year on their accounts year after year, they would be among the world’s most successful money managers. Most money managers of mutual funds, hedge funds, and pension funds cannot sustain such performance. This leads the trader to accept huge leverage and court a risk of ruin when an inevitable string of losing trades occurs. Indeed, such excess leverage is a main cause of emotional distress in trading. Take a look at how the Turtles made their money: they learned a trading method, learned to be consistent with that method, and were given enough money by Richard Dennis that they could trade multiple markets with enough size to scale into positions in each. Even with those resources, not all of the Turtle students could succeed. Talent, skill, and opportunity are the ingredients of success, and these are relatively normally distributed in the trading population, just as they are relatively normally distributed in the population at large. (more…)

The power of fear

  
  Education
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Fear is the emotion of survival.

Before every game or before the first trade of the day there is always that little bit of uncertainty. That feeling in your stomach. For me it always went away as soon as the first hit or the dink of my first order getting filled. Same is true with my fear of public speaking.

It was not always that way. I had to do the work, be prepared, and convince myself whatever the outcome I would work to achieve a better outcome the next time. Eventually the fear of not doing became worse than the fear of doing.

Like I always say, do it once, the good habits that is. (more…)

Forgiveness

  
  Education
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One of Napoleon’s soldiers committed a crime — the story doesn’t tell which crime — and he was sentenced to death.

On the eve of his execution, the soldier’s mother implored that the life of her son be spared.

“Dear lady, what your son did doesn’t deserve clemency.”

“I know,” said the mother, “If it deserved, it wouldn’t really mean forgiveness. Forgiving is the capacity of going beyond vengeance and justice.”

As he heard these words, Napoleon reduced the soldier’s death sentence to exile.

The mark of a professional Trader

  
  Education
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proffesional

  • It is my fault. I traded this position too large for my account size.
  • It is my fault. I didn’t stick to my own risk parameters.
  • It is my fault. I allowed my emotions to dictate my day trading.
  • It is my fault. I was not disciplined in my trades.
  • It is my fault. I knew there was a risk in holding this trade into earnings, and I didn’t fully comprehend them when I took this trade.

The influence Of Hope & Fear

  
  Education
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In trading psychology, two emotions that are constantly to the fore are hope and fear. One of the traders who recognised this was the legendary trader W D Gann. 

“Hope and fear: I have written about this often in my books and I feel I cannot repeat it too often. The average person buys commodities because they hope they will go up, or because someone advises them, they will go up. This is the most dangerous thing to do, never trade on hope. Hope wrecks more people’s lives than anything else. Face the facts, and when you trade, trade on the facts, eliminating hope”
“Fear causes many losses. People sell out because they fear commodities are going lower, but they often wait until the decline has run its course and sell near the bottom – never make a trade on fear”

Law suit? Porn addict? Divorcing? Seeking investment ideas? Worried about the world?-Just Spare 5-10 minutes to read this sermon

  
  Education
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Jesus of Nazareth was a Jewish carpenter that was born about 2,000 years ago in Bethlehem, which is now a Palestinian city located in the central West Bank about 10 kilometers south of Jerusalem.  Over the course of a very short period of time (about a year) Jesus developed a large following as a miracle worker and religious teacher.  He was publicly executed by crucifixion around the year 35, and many millions believe the historical narrative that he was raised from the dead after three days in a tomb, and later ascended into the heavens.

Below is an English translation of one of Jesus’ very famous outdoor lectures, which was widely shared by his disciples that were present, and eventually written down circa 70-90. 

If you take 5-10 minutes to read this sermon, then you will know what being a Christian is actually supposed to mean. 

I like to read this first thing in the morning, immediately followed by a few minutes of meditation where I sit quietly listening.  I would not expect everything in the reading to speak to you, but I believe something will, as is always the case for me.

Jesus’ Sermon on the Mount

Excerpted the Gospel of Matthew – Chapters 5-7 (more…)

The Ten Cardinal Rules

  
  Education
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10rules

1. Learn to function in a tense, unstructured, and unpredictable environment.
2. Be an independent thinker versus a conventional thinker.
3. Work out a way to handle your emotions and maintain objectivity.
4. Don’t rely on hope and fear in the conventional sense.
5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
6. Modify your normal responses to certain events.
7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
9. Understand the larger framework in which trading occurs— how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your ego and your need to have things your way.

Thinking Can Make Impossible Become Possible

  
  Education
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I am sure that all of us have seen the statue of The Thinking Man. It is an amazing sculpture that evokes in individuals many different emotions and ideas.

As a trader, if we are always worrying about what might happen if we do this or do that and if it is wrong that we will lose money, then we will rarely if ever have a successful session.

I submit that if we take time before we begin a trading session to think about all of the correct decisions we will make, all of the good trades we will execute, all of the money management actions that we will adhere to and so much more, then we will be so far ahead of multitudes of other traders.

When we take time to think about what we desire to accomplish and what skill sets we have and how we will put them to use while we trade, when the session is over we will many times be amazed at what we have accomplished.

Don’t begin trading with thoughts of it being impossible to succeed or else your results will match those thoughts. Fill your thoughts with confidence and focus on what you truly desire to happen and then let yourself just go ahead and make it happen.

Concept of Risk

  
  Education
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concept of riskSuccessful trading has absolutely nothing to do with making money and everything to do with trading successfully. Making money will only ever be a by-product of successful trading. Successful trading is not a by-product of making money. When you attach trading to money and money to emotions and emotions to money you’ll have taken your first loss but you won’t know it yet.

Trading has everything to do with personal psychology, rules, systems, discipline, focus and skill. Like anything else that’s skill based, once you start it takes time and practice to become skilful. Ultimately trading is about making decisions between two choices, to buy or sell. As simple as these two choices are the variables that effect the decisions surrounding them can be as complex as the human mind can make them.

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