- “There is only one thing that makes a dream impossible to achieve: the fear of failure.” -Paulo Coelho
- You win by living on your own terms–as well and as fully as you can, for as long as you can.
- If you’re chasing someone else’s goal, you always lose.
- Most people overestimate what they can do in a year, and they massively underestimate what they can accomplish in a decade or two.
Archives of “fear” tag
rssThe 10 Scariest Things in Trading
I was reading this article and started thinking about the ten scariest things in trading: The Top Ten Things That Make Horror Movies Scary.
1. Fear of Death. This is the ultimate fear, both existentially and psychologically. It isn’t really a horror movie if people don’t get killed.
In Trading: fear of depletion of assets.
2. The Dark. From our earliest childhood we are afraid of the dark – not the dark itself, but what it hides. It makes horror movies even scarier to watch them in a darkened theater, or a dark living room, right?
In Trading: not knowing enough news
3. Creepy, Crawly Things. Snakes, spiders, rats, and other crawling things are scary in and of themselves, but when they touch the skin, in the dark, it amplifies this common phobia.
In Trading: monthly expenses
4. Scary Places. Horror movies are full of scary places – graveyards, old houses, overgrown forests, dungeons, attics, basements. These are dark places, where evil things can hide.
In Trading: instruments or markets that one had very bad experiences with.
5. Disfigurement. Many horror movies feature grotesquely disfigured antagonists (think Frankenstein’s monster, the Phantom of the Opera, zombies). Studies in early development have found that young infants will react with fear to asymmetrical or disordered faces. (more…)
Trading Wisdom-Different Walks of Life
We come to the market from different walks of life and bring with us the mental baggage of our upbringing and prior experiences. Most of us find that when we act in the market the way we do in our everyday life, we lose money.
You success or failure in the market depends on your thoughts and feelings. It depends on your attitudes towards gain and risk, fear and greed, and on how you handle the excitement of trading and risk.
Most of all, your success or failure depends on your ability to use your intellect rather than act out your emotions. A trader who feels overjoyed when he wins and depressed when he loses cannot accumulate equity because he is controlled by his emotions. If you let the market make you feel high or low, you will lose money. (more…)
The Wisdom of Jesse Livermore
Here are seven lessons from Jesse Livermore who is considered by many as one of the greatest traders who ever lived.
Lesson Number One: Cut your losses quickly.
As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. Risk management should dictate the size of the trade and how much you can lose. Deciding where to exit when a position is going against you is not a winning strategy.
Lesson Number Two: Confirm your judgment before trading a larger than average position.
Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed by it going in his favor. Once the stock was traveling in the direction he desired, Livermore would maximize his trading size for out sized wins.
There are many ways to add to a winning position — pyramiding up at key pivot points, building a position as the trade goes in your favor, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade – never when it goes against you. Never add to a losing position.
Lesson Number Three: Watch leading stocks for the best action.
Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. Shorting monster stocks is a very dangerous undertaking when they are under accumulation by large funds. (more…)
Does your brain accept randomness?
Everybody knows this feeling and also knows it is a false feeling. You’re in a casino, and the roulette hits red. Then again and again. After three, four maybe five times red in a row, you start to think it’s time for the roulette to hit black. Now, in this simple case, you know that’s not true.
The roulette has no memory and we assume it’s fair. So every round offers an equal chance for red and black (as well as green, 0, the casino takes it all). So the roulette may hit red 20 times in a row. The chance of that happening is very small, but once it has reached 19 times in a row, going from 19 to 20 is just as likely as going from 1 to 2 times red in a row.
Although we know this, our brain doesn’t feel comfortable accepting it. If you had to write down a random sequence of ‘red’ and ‘black’, it would probably not be as random as the roulette. Our brain is a bad randomizer, it wants the sequence to look ‘realistic’ and ‘fair’.
Now look at the markets where things are only a bit different. Unlike the roulette, the market has a memory. That market-memory determines where a feeling of greed pushes the feeling of fear away or vice versa. In between major greed/fear moments, there are up and down days. When we look at several up days in a row, a trader may expect a down day very soon simply because the market went up too many days in a row. This is our brain saying it’s ‘not fair and not realistic’. The brain wants the up and down days to be more alternating to make it ‘more realistic’. What this hypothetical trader is trying to do is go short in strong uptrending market. Not good for your trading account.
Trading Success, Fear, and Endurance
“What makes a great endurance athlete is the ability to absorb potential embarrassment, and to suffer without complaint. I was discovering that if it was a matter of gritting my teeth, not caring how it looked, and outlasting everyone else, I won. It didn’t seem to matter what the sport was–in a straight-ahead, long-distance race, I could beat anybody.
If it was a suffer-fest, I was good at it.”
Lance Armstrong
It’s Not About the Bike
p. 23
It’s Not About the Bike
p. 23
“You can lash out at people, you can get mad at yourself–you can even end up hating yourself without ever realizing that fear is the interference, the block in the road of progress. Fear only causes me to react. Fear only causes me to wait. Fear moves me away from effective action. When you find yourself acting like a jerk, stop for a second and just ask yourself, What am I afraid of here?”
Richard Machowicz
Unleash the Warrior Within
p. 61
Unleash the Warrior Within
p. 61
What do you fear most as a trader?
Embarrassment of loss?
Being wrong?
Losing a dream?
How does your fear manifest itself?
What negative trading behaviors do you engage in to mask your fears? Getting mad? Walking away?
There’s much to be said for trading as an endurance sport. One of the things successful traders learn to endure–and overcome–is fear. And that starts with a simple question: What am I afraid of here?
Essentials of a Winning Psychology
Four fears that block a winning psychology:
- Fear of Loss
- Fear of being wrong
- Fear of missing out
- Fear of leaving money on the table.
Realize that trading is based on probabilities, as such, every trade is unique. In other words, the past does not equal the future.
Probability thinking manifest other states and beliefs:
- Because we know that we will succeed in the long run and because we know we will protect ourselves no matter what the market does, we acquire the state of “self trust” and the state of being “carefree”.
In turn these states allow us to remain….
- Focused, confident and carefree when we are experiencing the inevitable prolonged drawdown.
- Because at the micro level we know that the market is random, we will not allow euphoria to set in and lead us to reckless trades. Each trade will only be one in a series of probabilities.
- We will view market information not as a source of pleasure or pain but merely as data providing us with opportunities.
Personal Attributes Essential to a Winning Mentality
- Awareness – the ability to step outside ourselves and observe. The more effectively we can do this, the easier our progress to “Acceptance”.
- Honesty – the ability to seek to perceive reality in spite of our filters.
- Courage – the willingness to bear the pain brought about by our awareness and honesty.
- Commitment – the willingness to do whatever is necessary to achieve our goals
To succeed, a trader must have a vision about where he is heading, and must internalise that a winning attitude is total submission to the trading outcome.
This means managing Fear and Euphoria. To do this, we need to ACCEPT, with every fibre of our body, the belief that at the micro level the market is uncertain and unpredictable and at the macro level it is relatively certain and predictable.
Control Your Emotion or Other People Will Control You
Many people are controlled by fear. Fear of losing an opportunity causes you to act in haste. Fear of losing your paper profit causes you to sell out too early. And fear of losing everything causes you to sell right at the bottom. Although selling right at the bottom is caused more by frustration than anything else, fear also plays a part. How do we overcome these kind of fears? Knowledge is the best weapon. When you know, people cannot scare, frighten or intimidate you. They can’t con you in anyway. Knowledge is your first key to success.
Hope causes you to hold on to a falling stock. Sometimes your hope is rewarded; your stock turns around and you make a profit. Unfortunately, hope often becomes hopeless. Experience tells me that it is much better to keep an uptrend stock and let go a falling one. This strategy is vital, simply because a trend in motion is likely to continue. Hope also causes people to buy into excessively high PE stocks. I prefer what is good today and better tomorrow. (more…)
Trading On Fear & Panic
First, no matter what, as a trader it is your #1 job never to put yourself in a “panic” position. No trade, no matter what you think of its future potential, outweighs that rule. If you trade for a living, your goal is always to “live to trade another day” which means tight risk management and taking every step to avoid this situation.
On every trade I make, I know where I have to exit no matter what before I make the trade. If I can’t figure that out, then I don’t make the trade. I learned, like you are right now, that trying to figure out an exit after you’re down significantly in a position never is to your advantage. Right now, you’re emotionally connected to that trade, if not trapped by it. (more…)
Common Mistakes for losing Money
Trading is an evolutionary process. Nobody can wake up being a Master Trader. Unfortunately there is no book or magic trick that can turn you into the highly profitable trader. Although the belief and the hope to obtain those skills instantly is still in place.
The statistics say that only the ones with the self-dedication and discipline succeed in this business.
The most common mistakes leading to losses:
-Trading against the market;
-No trade potential;
-No serious buyers or sellers in the stock;
-Wide stop-loss;
-Fear of loss.
Traders should stay calm during the trading, this helps to observe and analyze the situation on the market much better, see some small details and make a competent decision.
Panic, stress or fear, always lead to mistakes.
One of the serious problems in trading is rush and mania to be present on the market all the times, opening positions when there is no potential for a trade or where the market is either flat or going the other direction.
Tips to resolve the mistakes:
1. Always look at the market. If there is no clear picture of the market’s behavior, don’t risk your money.
2. Always look at a trade potential. If you look at the daily charts and see that the daily bars are just 20 cents long, then look for other stocks, where the potential is at least 40 cents.
3. Always look either at the Open Book or Market Maker window and Tape. If you don’t see any order flow on the Tape or the order sizes are small (less than a 1000 shares), then don’t enter the trade.
4. Always know where you are going to place you stop-loss order. If it is more than 10 cents away from your entry point, don’t enter the trade.
5. If you’re just not sure, or if the situation is uncertain, don’t enter the trade.
Following these tips requires some work and changes to our habits. It is not easy at all! We always hear sayings that the trader should be disciplined. What it actually means is changing your old habits and training yourself to have new ones. It is not comfortable, but it brings positive results, which will be noticeable on your month-end P/L report.