# Trading psychology



## fallenangel22 (29 January 2009)

Ok I have had a few losses lately.. That's fine  haven't put a great dint in my capital yet.... but!  I have been paper trading for a little while to get my confidence back and yes I would have been doing quite well if I had executed those trades .... but now when I go to place trades i find I do not have the guts to push the button!  What the!  Does this phenomenon have a name. It is killing me, I am meticulous in checking my sums chart analysis fundamental reasons stop loss win loss ratios etc etc etc everything adds up and if I pushed the button would be doing well but I just can't do it.  anyone else been through this?


----------



## beerwm (29 January 2009)

maybe you should lower your risk, [atleast in the inital stage]
0.5% risk would be enough to execute 10 trades and lose 5% of your capital [worse case] - bar slippage


personally, i push the button to often :


----------



## tech/a (29 January 2009)

Firstly I agree with deminishing your risk.
Secondly understand you will always have losses and often a long string of losses.No matter how "Right" your analysis is.

The only time a loss should get to you is when you've let that loss turn into a nasty loss!

Someone smarter than I said.

"It doesnt matter that your wrong
but it does matter how long you stay wrong"!

Taking very small managable losses arent painfull,taking many many of them and your clearly doing something very wrong.

You need to test your methodology over as long a period as you can to have confidence that 
(1) You either trade more wins than losses and your accumulated losses are less than your accumulated wins. (Higher in rates less profit each win)
(2) You wins are far bigger than your accumulated losses. (Lower win rates much more profit each win).

Today and tommorows win or loss isnt the issue its the monthly result that really matters---well to me anyway.


----------



## Cartman (29 January 2009)

fallenangel22 said:


> Ok I have had a few losses lately.. That's fine  haven't put a great dint in my capital yet....
> 
> but I just can't do it.  *anyone else been through this*?




lol ----- 

Angel ----  any trader who hasnt been thru  it is either very lucky or so goddamn rich that it doesnt matter  ------ 

if u can afford to lose it (on more than just monetary levels ----- then just pull the trigger ---- if u cant afford it ( on more than just monetary levels  ---*dont !!!* ------ you'll work it out ---- just give yrself a bit of time and breathing space ------  good luck


----------



## tech/a (29 January 2009)

> if u can afford to lose it




Cartman.

Your not the first to post this.
I really cant get my head around the implication.
Sounds like an old gamblers saying.

So if you cant afford losses then dont trade?
Infact dont take any monetary risk what so ever---if you cant afford to lose it?

No one would ever get married!


----------



## Cartman (29 January 2009)

tech/a said:


> So if you cant afford losses then dont trade?




thats exactly what i'm saying Tech --- particularly after a run of losses !!




tech/a said:


> Infact dont take any monetary risk what so ever---if you cant afford to lose it?




nah not saying that ----- trading is different to buying a house for eg. --- i was more thinking the effect that 'losing' due to poor trading might have on an individuals family or their own self esteem ---- psych stuff ---- 





tech/a said:


> No one would ever get married!




lol ---- i understand what yr saying ------ but some may misconstrue that statement as a wife being a liability  ----  husbands might fit that description more often though ---

ps   i may be in the minority here --- but the importance of money/wealth is way overrated when assessing the value of an individual --------- i actually respect poor bast*rds a lot more than rich ones !!!


----------



## jonnycage (29 January 2009)

who knows maybe give it another shot, with an amount your comfortable with


----------



## Nick Radge (29 January 2009)

Not being able to pull the trigger is usually related to the fear of losing money. It can be related to ego if you have been telling others about your trading endeavors, but it does sound like the fear of losing money.


----------



## tech/a (29 January 2009)

The 2 quickest ways to go broke.

(1) Marrying too early.
(2) Divorcing too late.


----------



## Stormin_Norman (29 January 2009)

you gotta be a little bit crazy to be a good trader.

psychopathic even.


----------



## Cartman (29 January 2009)

tech/a said:


> The 2 quickest ways to go broke.
> 
> (1) Marrying too early.
> (2) Divorcing too late.




 ---- u on yr 1st or 2nd marriage Tech !! ----- 

dont tell me yr on yr 3rd !!


----------



## Cartman (29 January 2009)

Stormin_Norman said:


> you gotta be a little bit crazy to be a good trader.
> 
> *psychopathic* even.




i'm set then !! :taz:


----------



## tech/a (30 January 2009)

Cartman

Maybe its a case of undercapitalization in the first place rather than trading with money you can afford to lose.

Most commercial ventures fail due to this.
Fallen Angel has stated that they have done the math!


----------



## julius (30 January 2009)

fallenangel,

Nick got through to me with the idea that you should trade at risk level where losses simply don't hurt. You really do need to not 'care' what the outcome of any individual trade is.

I'd be thankful you're at the overcautious end of the spectrum - it's much less dangerous!


----------



## investorpaul (30 January 2009)

I had a similar experience in that I traded CFDs using a demo account for a while I consistently made the correct call and made money over a period of time.

I then opened a real account and for the first couple of trading sessions I would see buy signals but not pull the trigger. I then just had to say to myself if this was a demo account would I buy and why, if it was a good answer I would buy using my real money account.

I now have a one page printed sheet with a couple of questions which i fill out just prior to a trade it states the justification for my trades and i find by writing it down I have enough conviction to pull the trigger.


----------



## Cartman (30 January 2009)

tech/a said:


> Cartman
> 
> Maybe its a case of undercapitalization in the first place rather than trading with money you can afford to lose.




possibly ---- but from my experience a high% of traders bust their first account regardless of how much capital they have ---- new traders are better off with limited capital for that reason --- 




tech/a said:


> Cartman
> 
> Most commercial ventures fail due to this.
> Fallen Angel has stated that they have done the math!




i think most commercial ventures fail from lack of experience not lack of money --- trading in particular

having a string of losses/or a large loss  can do yr head in if yr not used to it ---  F/angel needs to 'get back on the horse' but *only* with 'available' cash till confidence returns --


----------



## peter2 (30 January 2009)

"Failing to pull the trigger" is a common response to fear. It is usually fear of being wrong or fear of losing money. Reducing risk would minimise the fear of losing money but if you still won't trade then it is more likely a fear of being wrong. This is a tougher emotional block to master as all types of trading have losses which we associate with being wrong. 

You have to come to realise that the losses you create by following your plan are not mistakes. You were not wrong to enter and you were not wrong to exit even with a loss. 

You must know that your trading plan has a positive edge. Re-test on current data to make sure that your edge is still there. It is vital to know that your edge is still present. If you don't or can't test it then you will never be sure. Your mind will seize on any doubt and you will find a reason to not pull the trigger. 

Get onto a demo platform and do a "TH". Start heaps of demo trades to practise pulling the trigger. Ignore the results as you are just practising random trade starts. Pretty soon you will get back into a more normal trading mindset and realise that the entry is only an action or a process. Entries are only one part of your trading plan.

Try and avoid thinking in terms of right and wrong. Your pre-trade analysis is never right or wrong. The purpose of this analysis is to identify trading opportunities. Every trading setup that you find is a successful outcome of your pre-trade analysis. Finding them is good. Finding them is part of your job. 

Consider any occasion that you don't follow your trading plan as a mistake. If you identified an entry and don't take it then this is a mistake. Every time you don't exit at the correct time is a mistake. Not using the correct position size is a mistake. Everyone makes mistakes but the profitable traders make very few of them. Keep track of the number of mistakes you make and try hard to lower this number each month. 

It is important that you do something to address this problem quickly.


----------



## sails (30 January 2009)

I went through a similar problem, Fallenangel.  At the time I had been learning to trade the SPI and had been at it for a couple of years.  Was pretty much break-even stuff.  Then we went into business for a couple of years, and I paper traded on the side just to keep my hand in and keep up with the learning process.  Was doing great with paper trading and then when we decided to sell the business, the plan was for me to go live again.

With no other income, I found exactly as you have described!  Suddenly with capital to protect and yet needing to generate income from trading, I would literally freeze at the trigger.

In hindsight, it was totally unrealistic to try and replace our full income without any prior live results or live experience.   Hubby was bored with retirement anyway, so he went back to work and that took some of the pressure off.  I also worked on risk and money management plans (thanks to posts by Tech/A and others at the time) which help to reduce the fear of a few losses in a row.  I also found Nick Radge's book extremely helpful - especially the first 40 or so pages.  It's packed away in storage at the moment - so can't remember the exact title - maybe someone else can post it.

I also had about six sessions with an excellent psychologist.  She knew nothing about trading, but understood fear perfectly.   Although we didn't touch a lot on trading much, somehow those sessions taught me to tackle trading differently.

That said, I'm conservative in my trading at present and I guess that means I'm trading within a certain comfort level.  There are other family factors that make it difficult to focus to the degree that I would like, but the goal is challenge that comfort level by degrees.

It's an unpleasant thing to go through and I wish you all the best working through it.


----------



## awg (30 January 2009)

slight tangent, is anyone aware of any research or trading texts that correlates personality type, especially optimism/pessimism with trading success.

Regrettably, I am aware that my personality is biased somewhat to the pessimistic.

That should have made me more bearish than I actually traded.

Is tied up with the notion of finding trading styles one is comfortable with, understanding and overcoming inherent bias, and trading with less emotion and more profit

seems to me like the majority of traders/financial pros, tend toward optimism


----------



## MRC & Co (30 January 2009)

There is a book, "the Trading Athlete" by Shane Murphy and Doug Hirschhorn, which deals with the mental aspect of trading.  

Shane coached 5 US Olympic teams in mental preperation and relates the emotions experienced by an athlete to those of a trader.

It gets a bit cheesy at times, but is probably worth a read for those struggling with this side of trading.  

Good luck.


----------



## CanOz (30 January 2009)

fallenangel22 said:


> Ok I have had a few losses lately.. That's fine  haven't put a great dint in my capital yet.... but!  I have been paper trading for a little while to get my confidence back and yes I would have been doing quite well if I had executed those trades .... but now when I go to place trades i find I do not have the guts to push the button!  What the!  Does this phenomenon have a name. It is killing me, I am meticulous in checking my sums chart analysis fundamental reasons stop loss win loss ratios etc etc etc everything adds up and if I pushed the button would be doing well but I just can't do it.  anyone else been through this?




I'm currently going through a string of losses on the 3quack sys. Have cut back on the risk now, still pulling the trigger though, but its becoming a challenge to trade this system. I could almost imagine the string of wins i would have had if i was trading on the Sim.

I'll give it more time, i will persevere with it.

Believe in your system Angel, you should be aware of the highest number of losses you could sustain given your risk level etc.

If anything, at least you are very aware of your pain tolerance now.

CanOz


----------



## Cartman (30 January 2009)

*Re: Trading psychology idiot*



CanOz said:


> I'm currently going through a string of losses on the 3quack sys. Have cut back on the risk now,
> 
> If anything, *at least you are very aware of your pain tolerance now.
> *
> CanOz




that is a good point Can ------ dealing with a serious loss/losses teaches u a crapload more about how to trade than any book ever will -------- cause u either fix the problem or 'drown' 

every good trader knows

a) what its like to lose ---- AND --- 

b) how to manage/deal with a loss ----- 

there will be a lot of good traders come out of the current market mess !!


----------



## pilbara (30 January 2009)

fallenangel22 said:


> ... I have been paper trading for a little while to get my confidence back ...



yep when you suffer a losing streak in real trades, switch to paper trades, but keep a full record of all the trades both paper and real.  

From this trading diary you will get an idea of the longest losing streak of your trading plan, and also it can guide you when it is ok to switch back from paper to real trades.   

If you know the expectancy of your system you can figure out the probability of a losing streak of a certain length.

If your system has a good edge then these losing streaks really stand out and you just carry on paper trading until the normal expectancy resumes.  

If things continue to go wrong when paper trading just take a break for a while because it often means you aren't in the zone and your trading isn't following the plan.


----------



## strudy (30 January 2009)

I think it is a stage that every one must go through at some stage in their trading career.How to get through it depends a lot on the individual concerned.

Speaking for myself, I found that Greed caused a lot more problems than Fear.I was never satisfied with a 15% profit.I wanted to double and triple my investment, Which looking back was a unrealistic expectation not to mention a costly one.

The only way I can control Greed is to have a preset profit % and stick to it.Usually I set it around 10 to 15% profit and stick to it.

With all my trades  I always use a stop loss, not only to minimises losses but it effectively locks in those hard won profits as well.

Without having a trading plan set up and sticking to it is the only way I can trade successfully.Otherwise if I don't it is chaos and my stress levels increase.

As I said before it is up to the individual trader to work out a trading system which suits them and then stick to it.

Happy Fearless Trading


----------



## Gringotts Bank (24 August 2013)

from wikipedia

I'm just assessing how this relates to trading.  Add your own comments.  

*
Decision fatigue*


In decision making and psychology, decision fatigue refers to the deteriorating quality of decisions made by an individual, after a long session of decision making.[1][2] It is now understood as one of the causes of irrational trade-offs in decision making.[2] For instance, judges in court have been shown to make poorer decisions later in the day.[1][3] Decision fatigue may also lead to consumers making poor choices with their purchases.

There is a paradox in that "people who lack choices seem to want them and often will fight for them"; yet at the same time, "people find that making many choices can be [psychologically] aversive." [4]
Contents

    1 Effects
        1.1 Reduced ability to make trade-offs
        1.2 Decision avoidance
        1.3 Impulse purchasing
        1.4 Impaired self-regulation
    2 See also
    3 References

Effects
Reduced ability to make trade-offs
When consumers visit car dealerships, they may feel overwhelmed by all of the different financing, upgrades, and warranty options.

Trade-offs, where either of two choices have positive and negative elements, are an advanced and energy-consuming form of decision making. A person who is mentally depleted becomes reluctant to make trade-offs, or makes very poor choices.[1] Jonathan Levav at Stanford University designed experiments showing how decision fatigue can leave a person vulnerable to sales and marketing strategies designed to time the sale.[1] "Decision fatigue helps explain why ordinarily sensible people...can't resist the dealer's offer to rustproof their new car." [5]

Dean Spears of Princeton University has argued that decision fatigue caused by the constant need to make financial trade-offs is a major factor in trapping people in poverty. Given that financial situations force the poor to make so many trade-offs, they are left with less mental energy for other activities.[1]
Decision avoidance

Decision fatigue can result not only in fast and careless decisions but even in decision avoidance, where no decision is made at all. [6] [7] Research by Iyengar and Lepper (2000) "found that people who had more choices were often less willing to decide to buy anything at all, and their subsequent satisfaction was lower when they had been confronted with 24 or 30 options than when they faced six options"; which "suggest that choice, to the extent that it requires greater decision-making among options, can become burdensome and ultimately counterproductive."[4] In the formal approach to decision quality management, specific techniques have been devised to help managers cope with decision fatigue.[8]Other forms of decision avoidance used to bypass tradeoffs and the emotional costs of decision making can include selecting either the default, or status quo options, where these are available. [9]
Impulse purchasing

Decision fatigue can influence irrational impulse purchases at supermarkets. During a trip to the supermarket, trade-off decisions regarding prices and promotions can produce decision fatigue, hence by the time the shopper reaches the cash register, less willpower remains to resist impulse purchases of candy and sugared items. Sweet snacks are usually featured at the cash register because many shoppers have decision fatigue by the time they get there. Florida State University social psychologist Roy Baumeister has also found that it is directly tied to low glucose levels, and that replenishing them restores the ability to make effective decisions. This has been offered as an explanation for why poor shoppers are more likely to eat during their trips.[1]

Researcher Carol Dweck found "that while decision fatigue does occur, it primarily affects those who believe that willpower runs out quickly." She states that "people get fatigued or depleted after a taxing task only when they believe that willpower is a limited resource, but not when they believe it's not so limited". She notes that "in some cases, the people who believe that willpower is not so limited actually perform better after a taxing task."[10]

Impaired self-regulation

The "process of choosing may itself drain some of the self’s precious resources, thereby leaving the executive function less capable of carrying out its other activities. Decision fatigue can therefore impair self-regulation".[4] "ome degree of failure at self regulation" is at the root of "[m]ost major personal and social problems", such as debt, "underachievement at work and school" and lack of exercise.[11]

Experiments have shown the interrelationship between decision fatigue and ego depletion, whereby a person's ability for self-control against impulses decreases in the face of decision fatigue.[12]

George Loewenstein has suggested that the disastrous failure of men in high office to control impulses in their private lives may at times be attributed to decision fatigue stemming from the burden of day-to-day decision making.[12] Similarly, Tierney notes that "C.F.O.'s [are] prone to disastrous dalliances late in the evening", after a long day of decision-making.[13]

Research shows the decisions judges make are extremely influenced by how long in the day it has been since their last break.[14]


----------



## CanOz (24 August 2013)

Ahhh, thats why after a while some people say "aww i don't care, you decide"

Very interesting GB


----------



## Gringotts Bank (24 August 2013)

CanOz said:


> Ahhh, thats why after a while some people say "aww i don't care, you decide"
> 
> Very interesting GB




I think it's interesting too.  I had some of this happening myself earlier in the week after a very poor night's sleep.  In the past I would have pushed through that and made decisions anyway, but this time I decided to delay that process and just watch.  In that sense I was happy that I could identify the feeling and stop trading.  I missed opportunities but didn't lose anything.

Systems do have their advantages - avoidance of decision fatigue being the main one.  But I still feel discretionary is the way to go, particularly if one can recognize the best [personal] times to be trading.


----------



## peter2 (24 August 2013)

Decision fatigue situations in trading:

1. Scanning for trading candidates and having too many codes come up. The time taken to review the charts with a checklist could lead to fatigue and an irrational decision at the end of the process. Especially when the scan is done near the close and there is a time constraint.

It's important to narrow the starting universe and make the scan more specific to lower the number of results before the decision process starts. 

2. Intra-day trading without a list of objective setups. After minutes of indecision (guessing) the final decision can often be impulsive and irrational. 

3. Looking at too many markets often leads to an irrational decision to trade one after missing a clear setup in another market. Specialists get paid more than general practitioners. 

I understand now why I eat chocolate in the evening while going through my scan results.


----------



## Gringotts Bank (24 August 2013)

peter2 said:


> I understand now why I eat chocolate in the evening while going through my scan results.




Good idea.  I have found caffeine very helpful but I don't use it much nowadays because it increases my BP.  After a meal is a good time.  And a good night's sleep seems to be the best for me.


----------



## Trembling Hand (24 August 2013)

Gringotts Bank said:


> And a good night's sleep seems to be the best for me.




I find my trading is best when I have had close to an all night bender ending up passed out in a bucket of cocaine with a mini-me and an entourage of depraved social misfits fleecing me of yesterdays profits. 

But thats just me.

Each to his own I guess.


----------



## skyQuake (24 August 2013)

Trembling Hand said:


> I find my trading is best when I have had close to an all night bender ending up passed out in a bucket of cocaine with a mini-me and an entourage of depraved social misfits fleecing me of yesterdays profits.
> 
> But thats just me.
> 
> Each to his own I guess.




Remember kids:


HSI

Not even once.


----------



## tech/a (24 August 2013)

Trembling Hand said:


> I find my trading is best when I have had close to an all night bender ending up passed out in a bucket of cocaine with a mini-me and an entourage of depraved social misfits fleecing me of yesterdays profits.
> 
> But thats just me.
> 
> Each to his own I guess.




Bloody hell what do you do on weekends!


----------



## notting (25 August 2013)

If your trading according to a mathematical framework with proven probability there is not much room for psychology if you do other things after respecting the signals.
When not doing that I find walking briskly on the treadmill forces you to breath regularly and has a moderating and healthy impact. Its also a great way to exercise without even feeling it because trading/gambling is so entertaining it distracts you from the boring effort of exercise.


----------



## Gringotts Bank (25 August 2013)

from wikipedia

I emboldened the parts I thought were applicable to discretionary traders.



*The somatic marker hypothesis (SMH)* proposes a mechanism by which emotional processes can guide (or bias) behavior, particularly decision-making.[1][2] This hypothesis has been formulated by Antonio Damasio.
Contents

    1 Hypothesis
    2 Research background
    3 Working mechanism
    4 Evolutionary evidence
    5 Experiments
    6 Iowa Gambling Task
    7 Application To Risky Sexual Behavior
    8 Drug Addiction
    9 Criticism
    10 References
    11 External links

Hypothesis
Somatic markers are probably stored in the ventromedial prefrontal cortex; pictured.

When individuals make decisions, they must assess the incentive value of the choices available to them, using cognitive and emotional processes. *When the individuals face complex and conflicting choices, they may be unable to decide using only cognitive processes, which may become overloaded.*

*In these cases (and others), somatic markers can help decide. Somatic markers are associations between reinforcing stimuli that induce an associated physiological affective state.* Within the brain, somatic markers are thought to be processed in the ventromedial prefrontal cortex (VMPFC; a subsection of the orbitomedial PFC).[3] These somatic marker associations can recur during decision-making and bias our cognitive processing. When we have to make complex and uncertain decisions, the somatic markers created by the relevant stimuli are summed to produce a net somatic state. This overall state directs (or biases) our decision of how to act.[4] This influence on our decision-making process may occur covertly (unconsciously), via the brainstem and ventral striatum, or overtly (consciously), engaging higher cortical cognitive processing. *Damasio proposes that somatic markers direct attention towards more advantageous options, simplifying the decision process.*

The amygdala and VMPFC are essential components of this hypothesized mechanism and therefore damage to either structure will disrupt their proposed action in mediating the development and action of somatic markers. A major source of supporting evidence for this theory is provided by experiments using the Iowa gambling task.[5]
Research background

In economic theory, there is a tendency to model human decision-making as being devoid of emotions, involving only logical reasoning based on cost-benefit calculations.[6] Such theories assume that individuals have the time, knowledge and information processing power to make optimal decisions. In contrast to this idealization, the somatic marker hypothesis proposes that emotions play a critical role in the ability to make fast, rational decisions in complex and uncertain situations.[7]

Patients with frontal lobe damage (e.g., Phineas Gage) provided the first evidence that the frontal lobes were associated with decision-making and social conduct. Frontal lobe damage, particularly to the VMPFC, results in impaired abilities to organize and plan behavior, learn from previous mistakes, and behave in a socially appropriate manner.[8] Patients with damage to the VMPFC develop severe impairments in both personal and social decision-making that can result in choosing unsuitable friends, partners, and activities. In fact, these patients appear to lack concern for other individuals, which resembles a mild form of sociopathy.[9] Surprisingly, patients with VMPFC damage have normal intellect in terms of working memory, attention, and language comprehension and expression.

*VMPFC patients also have difficulty expressing and experiencing appropriate emotions. This led Antonio Damasio to hypothesize that decision-making deficits following VMPFC damage result from the inability to use emotions to help guide future behavior based on past experiences.* This damage prevents rapid emotional signaling to bias behaviors toward appropriate responses to simplify the process. Consequently, VMPFC damage forces those afflicted to rely on slow and laborious cost-benefit analyses for every given choice situation,[10] which degrades accuracy and response-time.
Working mechanism

*Emotions, as defined by Damasio, are changes in both body and brain states in response to different stimuli.*[7] Physiological changes (e.g., muscle tone, heart rate, endocrine release, posture, facial expression, etc.) occur in the body and are relayed to the brain where they are transformed into an emotion that tells the individual something about the stimulus that they have encountered. *Over time, emotions and their corresponding bodily change(s) become associated with particular situations and their past outcomes.* 

When making decisions, these physiological signals (or ‘somatic markers’) and their evoked emotion are consciously or unconsciously associated with their past outcomes and bias decision-making towards certain behaviors while avoiding others.[7] For instance, when a somatic marker associated with a positive outcome is perceived, the person may feel happy and motivate the individual to pursue that behavior. When a somatic marker associated with the negative outcome is perceived, the person may feel sad and act as an internal alarm to warn the individual to avoid a course of action. *These situation-specific somatic states based on, and reinforced by, past experiences help to guide behavior in favor of more advantageous choices and therefore are adaptive.*

According to the SMH, two distinct pathways reactivate somatic marker responses. In the first pathway, emotion can be evoked by the changes in the body that are projected to the brain””called the “body loop”. For instance, encountering a feared object like a snake may initiate the fight-or-flight response and cause fear. In the second pathway, cognitive representations of the emotions can be activated in the brain without being directly elicited by a physiological response””called the “as-if body loop”. For instance, imagining an encounter with a snake would initiate a similar flight-or-fight response “as-if” you were in that particular situation (albeit perhaps a much weaker one). In other words, the brain can anticipate expected bodily changes, which allows the individual to respond faster to external stimuli without waiting for an event to actually occur.[8]
Evolutionary evidence

To support his claims about the evolution of the human race, Charles Darwin wrote The Expression of Emotions in Man and Animals in which he noted the similarities between emotional facial expressions between humans and other animals. In this book, Darwin argues that human emotion-evoked expressions, like furrowing of the eyebrows and tears, are similar to animal facial expressions and is evidence of our evolutionary origins. Today, the existence of emotion in animals is controversial, but current research suggests that intelligent, social animals (e.g., primates, dolphins, parrots)[11] do experience primary emotions like fear, joy, anger, and disgust.[12] In particular, our closest living relatives, the great apes, are prime candidates for having the most developed capabilities for emotions, empathy, and theories of mind.

Within an evolutionary framework, emotions in humans and animals can be defined as coordinated cognitive and physiological responses that enable an individual to respond effectively to environmental opportunities and communicate with others.[11] For example, anger is not simply a specific facial expression or neural activation, rather it is a set of coordinated responses that help an individual express dissatisfaction and perhaps restore relations. *Emotions are adaptive because they are efficient responses that help organisms reproduce, protect offspring, maintain cooperative alliances, and avoid physical dangers.*[13] Emotions and their influence on motivation and certain physiological responses, prepare individuals for actions that are in their best interest. In humans, for example, anger is associated with enhanced blood flow to the hands for fighting an enemy, whereas fear causes less blood flow to the periphery to help escape an attack without too much blood loss.[14]

Yet humans have a much larger array of finely tuned emotions compared to animals, even the great apes. It has been hypothesized that concurrent selection for greater social cohesion and organizational flexibility in early hominids may have been the impetus for increasing the human emotional repertoire.[15] The elaboration of human emotions may have aided social bonds if genetic relatedness was low within a social group. Consequently, the increase in the spectrum of human emotions could also be used to tag dimensions within their environment with emotional value that could be used in the future to guide difficult decisions that had not yet been encountered by animals”” such as the abstract and complex issues surrounding morals and social rules.

According to the Social brain hypothesis the demand for the ability to solve complex social problems initiated the evolutionary trend for increases in brain size observed among humans and other primates.[16][17] This increase is mostly due to an increase in prefrontal cortex volume. The evolution of the human prefrontal cortex allows humans to think and process information in more abstract ways. By tagging particular stimuli with an emotion associated with a bodily change, it helps to speed up the process of decision-making when it is encountered by eliminating unsuitable choices and ensuring only advantageous options are considered and fully processed. This is most important in the social domain since social environments are complex, unpredictable and more responsive to one’s own behavior than the physical environment. Since social interactions are complex, evaluating the appropriate behavioral response in these situations requires greater brain processing capacity involving multiple brain structures.[18] *Given that there is a large amount of information that needs to be processed in a short amount of time, it is advantageous to have a “fast-track decision-making” mechanism (i.e., somatic markers), that can respond rapidly in the most advantageous fashion. In essence, the SMH provides neurobiological evidence of what has often been referred to as “hunches” or “gut-feelings”.[10]*

The SMH is supported by human lesion studies suggesting that predictions of future outcomes or consequences that are near in time require processing in the more posterior portion of the ventromedial (VM) cortices and representations of outcomes or consequences not in the immediate future are processed in the anterior portion of the VM cortices.[10] Patients with damage to only the anterior VM cortices, are more likely to engage in behaviors that negatively impact personal relationships in the distant future. However, they will never engage in actions that would lead to immediate harm to themselves or others.[7] This brain organization pattern appears to be rooted in evolution. The functional evolution of the prefrontal cortex involves increases in the ability to represent events that may occur in the future.[10] The ability for humans to think about future consequences of their actions coincides with the development of the more anterior portions of the VM cortices.[19][20] This is also supported by human neuroimaging studies demonstrating that tasks involving moral or ethical decisions evoke increased activity in the most anterior sections of the VM cortex.[21] Finally, comparative studies in neuroanatomy demonstrate that advancements in the size and connectivity seen in human brains primarily relates to the evolutionarily younger anterior portions of the frontal lobes as opposed to the more ‘ancient’ posterior areas.[19][20] Consequently, Damasio suggests that the ability of humans to cope with such degrees of abstract thinking quickly and efficiently coincides with both the development of the anterior regions of the VM cortex and the use of somatic markers to guide human behavior.[10]
Experiments

In a quest to produce a simple neuropsychological tool that would adequately assess the obvious deficits in emotional processing, decision-making, and social skills of OMPFC lesioned individuals[2] Bechara et al. 1994[5] created the *Iowa gambling task*. Their aim was to produce "[a] *task which simulates in real time, personal real-life decision-making relative to the way it factors uncertainty of premises and outcomes, as well as reward and punishment" (p. 8). The task measures a form of learning that has been defined as emotion-based learning. Studies using the gambling task have found deficits in various neurological (e.g. amygdala and OMPFC) and psychiatric populations (e.g. schizophrenia, mania, drug abusers), providing support for the SMH.*
Iowa Gambling Task
For main article, see Iowa gambling task.

The human brain has evolved over time to best benefit oneself in any decision-making circumstance. It is important to understand that “natural selection shapes not only the physical characteristics of organisms, but also their behavioral and cognitive traits”.[22]

The Iowa Gambling Task is the most common experimental paradigm used to test decision-making processes under various contexts and is frequently used in experiments exploring the Somatic Marker Hypothesis. The Iowa Gambling Task is a computerized task in which participants are presented with four decks of cards from which they repeatedly choose. Each deck contains various amounts of rewards of either $50 or $100, and occasional losses that are greater in the decks with higher rewards. The penalty cards are periodically located in the deck so the participant will not know when they will arise and the participants are told to pick cards that will maximize their winnings. The most profitable strategy is to only choose cards from the small reward/penalty decks because although the reward is smaller, the penalty is proportionally much smaller than in the higher reward/penalty deck. Over the course of a session, this deck will yield a significantly higher net profit compared to the alternative deck. Most healthy control participants adopt the beneficial low reward/penalty deck strategy during the duration of the task. Participants with brain damage however, are unable to determine the better deck to choose from, and continue to choose from the high reward/penalty deck despite this action causing a clear lower net profit than the other deck.[23] This experiment has been used to analyze the impairments suffered by people with damage to the ventromedial prefrontal cortex, which has been known to affect neural signaling of prospective rewards or punishments.[24] *Since the Iowa Gambling Task measures participants’ quickness in “developing anticipatory emotional responses to guide advantageous choices,” it is helpful in testing the Somatic Marker Hypothesis since it studies how anticipatory signals affect decision-making.[25] The study of human behavior in respect to evolutionary psychology demonstrates “that much, if not all, of our behavior can be explained by appeal to internal psychological mechanisms”.*[26] *The Iowa Gambling Task and the Somatic Marker Hypothesis relate to this theory by revealing that emotions may have evolved during the course of human evolution to help people make better decisions. Therefore, the brain has been trained to make immediate decisions that will benefit the decision-maker.* Evolutionary theory and the Somatic Marker Hypothesis suggest that human emotions have evolved to send signals to the brain which will help someone make quick decisions that will benefit them. The Iowa Gambling Task upholds this evolutionary theory by demonstrating that lesions to the ventromedial prefrontal cortex act as a blockade to the emotional decision-making signals that have evolved in helping humans make quick and beneficial decisions. As suggested by Comsides and Tooby, “Mechanisms involved in hierarchically ranking goals or calibrating other kinds of motivational and reward systems should be emotion-dependent”.[27]

Although the Iowa Gambling Task is a well-known experimental measure used to explore how emotions may have evolved in humans to guide decision-making, there are “real-life” factors that can be added to the Iowa Gambling Task to test differences in participants’ results. *One such study found that people who were given more time to complete the Iowa Gambling Task had better results compared to people that had less time* [28] In a more recent study aimed to determine the effects of perceived time constraints, the experimental group was told that they would likely not be able to finish the task in the time allotted, whereas the control group was informed they had a sufficient amount of time to finish. As expected, the participants who were informed they had an insufficient amount of time to complete the task performed more poorly than the participants who were told they had ample time to finish it. The results of this test can be correlated to the real world in which professionals are told they have an adequate amount of time to complete a project are less likely to make mistakes.[29] Thus, recent studies suggest that the Iowa Gambling Task does not appropriately mimic “real-life” decision-making tasks because other factors, such as time, play into one’s success in the task instead of merely the health of the ventromedial prefontal cortex. However, human neuroimaging studies support the validity of the Iowa Gambling Task and show a clear link to “real-life” decision-making situations. Li and colleagues (2010) used functional magnetic resonance imaging (fMRI) to analyze the brain during the Iowa Gambling Task. This imaging reveals brain activity during the Iowa Gambling Task and indicates which parts of the brain are being used during decision-making processes. The results suggest that the brain regions that were activated during the Iowa Gambling Task were consistent with the ones hypothesized to trigger decision-making by somatic markers (i.e. brain regions involved in emotional processing). This adds validity to the Iowa Gambling task in conjunction with the Somatic Marker Hypothesis and suggests emotional processing is causing these regions to be activated as well as regions associated with decision-making.[30]
Application To Risky Sexual Behavior

Emotional decision-making can greatly affect aspects of people’s daily lives, such as their sex drive. Sensation is connected to the brain and likely stimulates precarious sexual behavior by making the riskier sexual behaviors more exhilarating and pleasurable.[31] The risky sexual behavior evaluated in a study by Wardle and colleagues was continued sexual activity in individuals who are already infected with HIV and are substance dependent. The Somatic Marker Hypothesis proposes that the Iowa Gambling Task may distinguish HIV+ and substance dependent people who have emotional influenced risks, from those who have risks caused by other, unrelated factors. The Somatic Marker Hypothesis was tested in a circumstance when extraneous factors become present, such as a lethal sexually transmitted disease and substance abuse. Wardle and colleagues performed a study utilizing the Iowa Gambling Task in which they drew together 190 HIV+ participants in the Chicago area who all had a history of drug dependency or abuse. Among the factors that were held constant in all participants were: education, race, and brain related items such as no history of neurological disorders or head injury. It was hypothesized that the Iowa Gambling Task would reveal that HIV+ substance dependent people, who are at increased risk for impairment and emotional suffering, are “motivated by negative emotion in their sexual risks”.[25] The results of the study supported the hypothesis that with the better performers on the Iowa Gambling Task there was a clear connection between distress and risk relatedness. The greater the distress, the greater risk these people would take in regards to sexual acts. However, the poor performers on the Iowa Gambling Task did not show a significant link between distress and sexual risk. These findings suggest that people with intact decision-making abilities can attenuate their risk-seeking behavior by decreasing their emotional distress. This conclusion is inconsistent with the Somatic Marker Hypothesis that posits that people with “dysfunctional decision-making circuitry as reflected by poor Iowa Gambling Task performance and emotional distress has little influence on their decision-making capacity”.[25] Instead of concluding that the Iowa Gambling Task is not fully accurate in demonstrating how we have psychologically evolved, it can be determined that sexual risk is a complex neurocognitive process, and emotional variables do not have as much weight in this aspect as in others actions by humans. Additionally, the entirety of human evolutionary psychology evolved without the implications of modern day drugs such as cocaine and other similar substances that have only been presently used and distributed for the past several hundred years.[32] Therefore, it is highly likely that the new initiation of drugs and also diseases (which have always been present through evolution) act as a similar blockade as a lesion to the ventromedial prefrontal cortex, which affects neural signaling. Though many “Theories about innate human predispositions are extremely difficult to verify” the Somatic Marker Hypothesis has clear evidence leading to its validity as tested in the Iowa Gambling Task.[33]
Drug Addiction

Despite being aware of the medical, social and legal problems associated with consuming illegal substances, substance dependent individuals (SDI) incessantly take part in activities that ultimately lead to addiction and dependency. This myopia for the future is characteristic of drug abusers and can be applied to somatic markers.[34] The Somatic Marker Hypothesis attributes SDI difficulty in making advantageous decisions to a defect in an emotional mechanism, which indicates the future consequences of an action and helps select the best response. This emotional mechanism is a special feeling that emerges in bioregulatory processes, and can be produced in the body or in brain areas.[35] When a negative somatic marker (like fear) is juxtaposed to a particular future outcome, it functions like a warning, signaling us to refrain from an action. Positive somatic markers act as an added incentive to behave in a particular way. Through this process, somatic markers help control human tendency to discount the future since long term costs associated with a negative somatic marker have the potential to deter an individual away from making a decision.[36]

According to the SMH, there should be a connection between abnormalities in expressing emotions and experiencing feelings, and severe impairments in decision-making. Much of the evidence for this comes from the Iowa Gambling Task (IGT), which provides testing of human decision processes in regard to immediate rewards and delayed punishments, risks, and uncertainty of outcomes.[36] The results from the IGT studies support the notion that impaired decision-making in substance dependent individuals is associated with varying reactions to rewarding and punishing events.[34] For example, it was apparent which packs of cards had the greatest risk for loss, but individuals continued to choose from the high-risk, high-reward packs. Thus the prospect of immediate high reward clearly outweighed the negative long term consequences for SDI. Damasio (1994) suggests that somatic markers provide a covert, non-conscious estimate of which cards are good and bad based on the rewards and punishments received. Prior to any conscious cognitive process of selection, initial sorting occurs and then the individual is guided in a theory about the gambling game more efficiently. Somatic markers, put more simply, appear to be a fast mechanism for reasoning that allows individuals to make satisfactory decisions without the necessary time to go through a lengthy analysis. They are advantageous, and thus adaptive.[36]

One of the more frequently used models, the International Affective Picture System (IAPS), consists of a large set of images categorized according to their normative values in three dimensions: valence, arousal, and control.[35] Using this model, Gerra et al. (2003) analyzed the neuroendocrine responses of both substance dependent individuals and healthy individuals in order to induce pleasant and unpleasant emotions. The results showed that in response to unpleasant images, SDI showed decreased activity in several neuroendocrine markers, including norepinephrine, cortisol, and adrenocorticotropic hormone levels. SDI showed a more level response pattern to both pleasant and unpleasant images, suggesting that they may have a diminished emotional response to natural reinforcers other than drugs.[37]

Consistent with this evidence, a neuroimaging study conducted on drug craving by Garavan et al. (2000) demonstrates that drug related stimuli have the ability to activate brain regions involved in emotional evaluation and reward processing. This study exposed two groups, one including experienced cocaine users (N=17) and the other including non-users (N=14), to three separate films: individuals smoking crack cocaine, outdoor nature scenes, and explicit sexual content. Meanwhile, all patients underwent functional magnetic resonance imaging, which monitored thirteen regions of the brain. Three regions of the brain, the anterior cingulated, right inferior parietal lobule, and the caudate/lateral dorsal nucleus, displayed significantly greater activation during the cocaine film than during the sex film in the cocaine users, suggesting that cocaine cues activate similar parts of the brain as natural stimuli in cocaine users. Additionally, cocaine users exhibited a lower response than the non-users to the sex film, suggesting that drug-users demonstrate a lower emotional response to natural reinforcers other than drugs.[38] Although the somatic states linked with natural reinforcers may not be strong enough to influence decisions in substance dependent individuals, these studies demonstrate how strong somatic states associated with drug abuse have the potential to dominate decisions regarding drug use. Modern day drugs like cocaine were not popular throughout human evolution, and so it seems obvious that natural responses are affected by habitual cocaine use.[35]

Criticism

Some researchers believe that the use of somatic markers (i.e., afferent feedback) would be a very inefficient method of influencing behavior. Damasio's notion of the as-if experience dependent feedback route,[1][4] whereby bodily responses are re-represented utilizing the somatosensory cortex (postcentral gyrus), also proposes an inefficient method of affecting explicit behavior.[39] Rolls (1999) stated that; "it would be very inefficient and noisy to place in the execution route a peripheral response, and transducers to attempt to measure that peripheral response, itself a notoriously difficult procedure" (p. 73).[39] Reinforcement association located in the orbitofrontal cortex and amygdala, where the incentive value of stimuli is decoded, is sufficient to elicit emotion-based learning and to affect behavior via, for example, the orbitofrontal-striatal pathway.[39][40] This process can occur via implicit or explicit processes.[39]

The Somatic Marker Hypothesis represents an intriguing model of how feedback from the body may contribute to both advantageous and disadvantageous decision-making in situations of complexity and uncertainty. Much of this support comes from data taken from the Iowa Gambling Task.[41] While the Iowa Gambling Task has proven to be an ecologically valid measure of decision-making impairment, there exist three assumptions that need to hold true. First, the claim that it assesses implicit learning as the reward/punishment design is inconsistent with data showing accurate knowledge of the task possibilities [42] and that mechanisms such as working-memory appear to have a strong influence. Second, the claim that this knowledge occurs through preventive marker signals is not supported by competing explanations of the psychophysiology generated profile.[43] Lastly, the claim that the impairment is due to a ‘myopia for the future’ is undermined by more plausible psychological mechanisms explaining deficits on the tasks such as reversal learning, risk-taking, and working-memory deficits. There may also be more variability in control performance than previously thought, thus complicating the interpretation of the findings. Furthermore, although the Somatic Marker Hypothesis has accurately identified many of the brain regions involved in decision-making, emotion, and body-state representation, it has failed to clearly demonstrate how these processes interact at a psychological and evolutionary level. There are many experiments that could be implemented to further test the Somatic Marker Hypothesis. One way would be to develop variants of the Iowa Gambling Task that control some of the methodological issues and interpretation ambiguities generated. It may be a good idea to include removing the reversal learning confound, which would make the task more difficult to consciously comprehend. Additionally, causal tests of the Somatic Marker Hypothesis could be practiced more insistently in a greater range of populations with altered peripheral feedback, like on patients with facial paralysis. In conclusion, the Somatic Marker Hypothesis needs to be tested in more experiments. Until a wider range of empirical approaches are employed in order to test the Somatic Marker Hypothesis, it appears that the framework is simply an intriguing idea that is in need of some better supporting evidence. Despite these issues, the Somatic Marker Hypothesis and the Iowa Gambling Task reestablish the notion that emotion has the potential to be a benefit as well as a problem during the decision-making process in humans.[44]


----------



## Trembling Hand (25 August 2013)

Gringotts Bank said:


> When individuals make decisions, they must assess the incentive value of the choices available to them, using cognitive and emotional processes. *When the individuals face complex and conflicting choices, they may be unable to decide using only cognitive processes, which may become overloaded.*
> 
> *In these cases (and others), somatic markers can help decide. Somatic markers are associations between reinforcing stimuli that induce an associated physiological affective state.*




The above is the process of someone who is "overloaded". Someone who cannot cope. That most probably is the description of most discretionary traders........ ones that are not profitable.

Below is where someone functions when they have the experiences and knowledge of outcomes,



> A skill is the *learned ability to carry out pre-determined results *often with the minimum outlay of time, energy, or both. In other words the abilities that one possesses.
> http://en.wikipedia.org/wiki/Skill




If you are "unable to decide using only cognitive processes" you haven't the skill to be doing what you are trying to do.


----------



## Gringotts Bank (25 August 2013)

Trembling Hand said:


> The above is the process of someone who is "overloaded". Someone who cannot cope. That most probably is the description of most discretionary traders........ ones that are not profitable.
> 
> Below is where someone functions when they have the experiences and knowledge of outcomes,
> 
> ...




Yeh, as a trader, you shouldn't get overloaded in the first place, which was the theme of the "decision fatigue" article.  Even if one has good cognitive skills or a high level awareness of somatic markers, overload can kill your ability to decide correctly.  That's why we scan for set ups (and eat chocolate or cocaine).  When in the right frame of mind, then apply cognitive processes (if you wish), or somatic markers (gut feel), or both in order to come to a decision.  I think both is the best bet.


----------



## Gringotts Bank (4 September 2013)

I like watching this video (and others like it) before starting trading.  Gets a few cobwebs out and loosens me up nicely.  No fear.

http://www.youtube.com/watch?v=jq31TnU278w


----------



## CanOz (4 September 2013)

Gringotts Bank said:


> I like watching this video (and others like it) before starting trading.  Gets a few cobwebs out and loosens me up nicely.  No fear.
> 
> http://www.youtube.com/watch?v=jq31TnU278w




lol...fark

Sort of puts everything into perspective when you're in a nice safe place with your feet on the ground!

I was talking recently with a crude oil trader from Florida and he was saying to come to term with his fears he put him self in a small losing trade and just sat there watching it, analyzing how it made him feel, over and over until he was accustomed to the fear.

Right up your alley GB!


----------



## Gringotts Bank (4 September 2013)

CanOz said:


> lol...fark
> 
> Sort of puts everything into perspective when you're in a nice safe place with your feet on the ground!
> 
> ...




Definitely.  I'd like to talk to him to see what he learned.  Can I have his email?

Here's another one: http://www.youtube.com/watch?v=S0lF56yEfkM


----------



## tech/a (4 September 2013)

I'm aghast at this thread.
Particularly GB's in put.

If GB has psychology as an interest then fine.
But if your actually that baffled by the decision
making process and its consequences---seriously get some help.

Thank God I have no issues making decisions.

Black/White
Right/Wrong
Good/Bad

"I used to be indecisive but now I'm not so sure"


----------



## CanOz (4 September 2013)

tech/a said:


> I'm aghast at this thread.
> Particularly GB's in put.
> 
> If GB has psychology as an interest then fine.
> ...




Well you haven't spoke to many traders then Tech. Everyone's different, we all have our fears. 

I'm a little surprised how easily you dismiss it...a little disappointed too as i thought you would have some gems from your past to contribute.

It seems now, from your posts in Pavs threads that you're quite comfortable with your losses but can we assume you were always like this?


----------



## tech/a (4 September 2013)

CanOz said:


> Well you haven't spoke to many traders then Tech. Everyone's different, we all have our fears.
> 
> I'm a little surprised how easily you dismiss it...a little disappointed too as i thought you would have some gems from your past to contribute.
> 
> It seems now, from your posts in Pavs threads that you're quite comfortable with your losses but can we assume you were always like this?




I've been in business 35 yrs.
I make decisions all day everyday.

My father once said to me.
Son you have no respect for money.

He was and is dead right!

Far from Cavalier I've become adept at being able to recognize when I'm wrong quickly
Not placing myself in a position where an outlier event is likely to bankrupt me 
and taking control to as greater degree as possible over my own affairs.

If I cant control the decision making process then I wont be involved.
Other than sitting on a plane!---So financially.
Of course we do need to trust and delegate to some professionals.

I've escaped Bankruptcy twice each time I was aware that
the Banks had the problem---did they really want to write off X$s?
The answer was NO! So while it appeared I had no control I actually had plenty!

Today where $$s are less of an issue its about managing risk and utilizing
resources without losing control.

Business has definitely honed the skill.
If there is one thing I hate more than anything its *NO DECISION*
If its right then get on with it.
If its wrong then deal with it--then get on with it!


----------



## Gringotts Bank (4 September 2013)

Even with a very structured process, there's a lot of decisions that need to be made.  

I filter 2000 odd stocks down to maybe 10-20 stocks each day.  Amibroker does that - no decision.

Then I look at XAO and while I have an on-off filter, I do apply discretion on top of that.

For each of the 10-20 stocks there's numerous decisions such as:

 - whether to enter at all (which includes a whole host of decisions in itself)
 - if entering, can I get it at my price, and if not, do I want to chase it a few points if it's a great looking trade?
 - do I want to wait for a retracement to my price, either today or in the following days?  Would it be met?
 - do I want to risk 1 or 2%?
 - do I want to trade such a high priced stock and be using up more capital?
 - do I want to trade a stock which has such narrow R:R parameters and again use up a lot of available capital?
 - are there fundamental stock-specific risks to consider?
 - and so on...  Better be quick, it's breaking out right now.  You know the feeling.  Entering intraday is often more profitable than EOD and you have that pressure to deal with.  Not everyone trades EOD when there's no time-pressure.  

Decision-making is a psychological process, so psychology is _extremely_ important in trading.  As shown in the articles presented (above posts), this process is not at all straight forward.  It is influenced very strongly by memory, fear and desire.

Placing a SL and TP level is easy and requires no decision (in my approach).  The rest of the process of a discretionary trader requires a lot of skill in decision-making. Sometimes a trader is in-trade and has to decide when to exit if neither the SL or TP targets look like eventuating in the required time frame.  A good way to ensure your decision making is objective is to have a process for accessing that part of the mind that is beyond fear and desire.


----------



## Des P (4 September 2013)

Business has definitely honed the skill.
If there is one thing I hate more than anything its NO DECISION
If its right then get on with it.
If its wrong then deal with it--then get on with it!

Love this i go through this every day

I have made a decision for the benefit of the company i work for, then somebody decides it can be done cheaper ( normally somebody higher than me) then the weeks go by and no decision made so we go for the original decision but with lost time and it ends up costing more (I am sure many people have to put up with this)
And as tech says and i will back this 110%, If its wrong then deal with it--then get on with it!
But this is getting away from the thread a bit

I started trading 3 years ago and done alright (24%) then the next year done ok  (13 %) the next year nothing but i did not sell so traded a paper loss average 67%, 
As my boss said why did i not get out sooner this is the psychological part Kicks in, i could not stand to take a loss, (my mistake)

But i have to admit i have not lost to much financially as i am still learning and did not go in big while trying to learn.
To me simple! follow the forum, develop ideas and try them, eventually it can be done right, for me technical analysis is the go, but i cannot find the time to study, so i will stick to Fundamentals at the moment with my experience in the mining and energy sector

Just my thoughts
Cheers
Des


----------



## Gringotts Bank (4 September 2013)

Des P said:


> Business has definitely honed the skill.
> If there is one thing I hate more than anything its NO DECISION
> If its right then get on with it.
> If its wrong then deal with it--then get on with it!
> ...




Yes, but a string of bad decisions can send your business bankrupt...twice.   It's not just about decisiveness, it's about quality decision-making.  The 'quality' aspect is addressed by the articles I have posted.  I guess one can always say it's the bank's problem - not cavalier?


----------



## tech/a (5 September 2013)

> Decision-making is a psychological process, so psychology is extremely important in trading.




For you and for people like you



> As shown in the articles presented (above posts), this process is not at all straight forward. It is influenced very strongly by memory, fear and desire.




For you and people like you.



> Yes, but a string of bad decisions can send your business bankrupt...twice. It's not just about decisiveness, it's about quality decision-making. The 'quality' aspect is addressed by the articles I have posted. I guess one can always say it's the bank's problem - not cavalier?




Generally businesses go BROKE due to one* BIG *factor.

(1) First time it was 18% interest rates and when I could not service the Interest (on over $2 mill of Industrial Property in 1987 that was a damned lot) with business profit they raised it to 24%---that was really helpful! Lost a lot----a marriage being one casualty.

(2) Second time a large client went belly up and owed me a small fortune--painful!

*Dismantle fear and you'll be totally free.*

And you'll spend far more time on things that really matter
and far less time on working out what you *SHOULD* be capable of and why your not!

Its like the simplicity in trading.

*If there is no supply then prices rise.
If there is no doubt or fear you are also free to rise.*

My opinion and experience is that your challenge (And people like you) is NOT psychological but* PRACTICAL*.


----------



## Caveroute (5 September 2013)

Copied form a different forum - but relevant I think ...................

Gonna work on my emotional side this Christmas; I have 8 samurai biographies plus Yip Man; what impresses me about samurai was the deliberate attempt to control emotion and cultivate a practical way of thinking; and this self-discipline was part of their journey to becoming unbeatable, as was the case with Tesshu, for example.

Posts here and in other trading forums tell us not to emulate another trader as we'll never fully copy their character, and hence never make their trading our own. And I think this is right in that the path to profitability is shorter if you're honest about who you are. But once you attain profitability, where do you go from there? How do you improve?

Samurai were told by tradition to copy and learn from anyone better than themselves. I think at any junction on the road we can look at successful traders and copy their character. I was a journalist in London for several years and copied the behavior of public-relations people in order to be better on the phone and easier to talk to. Controlling emotions, and cultivating those that will benefit me in trading, will be harder, but well worth the effort.

Question, when you realize that an emotion is affecting your trading and making it harder, or impossible, to make money (impatience, boredom, fear) do you suppress it? Or do you deal with it? You deal with it, or it will resurface later on.

And so how did a samurai deal with fear to become fearless in the face with death? The samurai considered himself dead already, and accepted the fact, and gave no thought to self-preservation (see Tesshu). The samurai became focussed and fearless as a result, and not reckless. Incidentally, imagine being able to face any madman with a sword or a gun and not think about staying alive; that must have been tough, and must have taken several years to achieve.

Trading. Perhaps we're going to be invincible if we believe we're already penniless? The aim is to eliminate fear and focus on technique, like a samurai. Two of the friends I’ve made on this forum declared something like: “I’m going to trade live with $5000 and consider that the cost of my education”. Accept the loss in advance and you’ll give no thought to self-preservation. They eliminated fear to focus on technique.

Also, the "trade small so you don't care" of BPA about each individual trade is also fear control. And the other day Al stated in the room he could trade *much* larger than he actually does. Trading small is a way of eliminating anxiety. You focus on not losing money, but eliminate the fear of going broke. Brooks Ryu.


----------



## CanOz (5 September 2013)

Thanks Cav


----------



## Trembling Hand (5 September 2013)

Some people just shouldn't trade.

Its a miserable "job", only gets better with skill. The rest is denial about your lack of skill.

Unfortunately some refuse to, at the same time, give their all and or fail. End result is a lifetime hobby that lacks pleasure or achievement. Sad.


----------



## CanOz (5 September 2013)

Well its nice to get a different "view" anyway...

I agree that it gets easier with skill, but TH you are extremely competitive by nature...perhaps a prerequisite for this "job"?

People are all different...


----------



## Gringotts Bank (5 September 2013)

tech/a said:


> For you and for people like you
> 
> 
> 
> ...




If 18% interest rates were the cause, then every business in a similar field would have gone bankrupt in that period... but they didn't.  If you over-borrowed, then you made a bad business decision.  Was it greed or FOMO that made you over-borrow?  That's emotional decision-making.

If a large client goes belly up, you relied too heavily on one source for cash flow.  Again a bad business decision.

Dismantle fear and you'll be totally free.  Sounds sort of familiar.  Did you just take what I said and re-package it?  Now that's a good decision.


----------



## Trembling Hand (5 September 2013)

CanOz said:


> People are all different...




Yeah thats why I reckon more and more that some (many??) just shouldn't trade. Aint nothing wrong with failure, just do it well and fully when the time comes.


NEXT trade..................... (in many case that should be no more trades, IMNSHO)


----------



## craft (5 September 2013)

Risk is that something won’t work out as you planned/prepared for.  Sizing can’t fix it unless you go so small that you won’t have any upside left either.  You’ll never be right enough to totally avoid negative (beyond expectations) outcomes.  

So if you are going to trade (or invest aggressively)  you better get used to the fact that sometimes you are going to find yourself outside your comfort zone – and those times are the ones that really matter. 

I’m not sure about this psychology stuff done from inside a comfort zone. The environment beyond comfort is very different, natural instinct is about all that remains, perhaps prior visualisation can help but I think actual physical repetition clocked up under similar circumstance is what really counts – I think that’s what they call experience.

Failure is an important part of accumulating experience. Experience is a more robust foundation for success then luck.

Queue  the Micheal Jordan video.


----------



## Gringotts Bank (5 September 2013)

craft said:


> So if you are going to trade (or invest aggressively)  you better get used to the fact that sometimes you are going to find yourself outside your comfort zone – and those times are the ones that really matter.
> 
> I’m not sure about this psychology stuff done from inside a comfort zone.




Yes, you can't make things too safe, because without risk there's no profit and nor is there the challenge of overcoming fear.  There's probably an optimal level of psychological/financial risk that needs to be pushed further outwards as one succeeds.  In case of repeated failure, this boundary should be pulled inwards towards more safety.


----------



## craft (5 September 2013)

Gringotts Bank said:


> In case of repeated failure, this boundary should be pulled inwards towards more safety.




That's fear of failure. That's a problem.  

I would say in the case of repeated failure - learn from it. Its telling you to adapt or get out. Only Hunkering down (unless just riding out a statistical possibility) achieves nothing.


----------



## tech/a (5 September 2013)

Gringotts Bank said:


> If 18% interest rates were the cause, then every business in a similar field would have gone bankrupt in that period... but they didn't.  If you over-borrowed, then you made a bad business decision.  Was it greed or FOMO that made you over-borrow?  That's emotional decision-making.





There were a number of "Reasons"
Properties were bought 4 years earlier when interest rates were 10% and all businesses in the complexes were not under stress. Cash flow was not an issue.
Many who held property in my situation did go bankrupt in fact Banks altered their way of lending and increased their initial capital requirement to 40% straight after.

Bad business and or poor decision making--open to argument.



> If a large client goes belly up, you relied too heavily on one source for cash flow.  Again a bad business decision.




Again like many others who place business with companies who for all outside appearances are financially sound we suffered an outlier.

Sure it altered the way I did business and gave me the experience which gives us indications that something just isn't right. Hones my skill in litigation and securing of asset to minimise loss.

Bad decision---open to argument.



> Dismantle fear and you'll be totally free.  Sounds sort of familiar.  Did you just take what I said and re-package it?  Now that's a good decision.




Sorry didn't see it.


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> In case of repeated failure, this boundary should be pulled inwards towards more safety.




No it shouldn't, it should be stopped. Its broken.


----------



## skc (5 September 2013)

It's easy to focus on the "fear" or other psychological issues as the reason for failure. But it will be wrong for one to assume they would automatically succeed if only they could overcome their fear.

May be we've all watched too many Disney kids movies where the young girl with a great voice but a fear of singing and performing in public, finally achieved success with inspirations from whoever... so we walk away with the message "conquer your fears and you can do anything", while forgotten the underlying premise that "the girl had a great voice".

If you are struggling to trade profitably and think that fear or other emotions are the main reasons... are you really really sure?


----------



## Gringotts Bank (5 September 2013)

skc said:


> It's easy to focus on the "fear" or other psychological issues as the reason for failure. But it will be wrong for one to assume they would automatically succeed if only they could overcome their fear.
> 
> May be we've all watched too many Disney kids movies where the young girl with a great voice but a fear of singing and performing in public, finally achieved success with inspirations from whoever... so we walk away with the message "conquer your fears and you can do anything", while forgotten the underlying premise that "the girl had a great voice".
> 
> If you are struggling to trade profitably and think that fear or other emotions are the main reasons... are you really really sure?




I use techniques, (lines, levels, sizing etc) to reduce fear.  They give me confidence.  If I'm feeling very confident, then I do away with most of that and just trade on pure feel.  For myself, I have proven that confidence is primary, and technique is secondary, not the other way around.  Technique is a tool to achieve confidence, but confidence can also be generated without this.

I know what your next post will be (because we've been here before!)... All I can say is we have different world views.


----------



## CanOz (5 September 2013)

Hmm, for me, between live and sim...skill and technique proven over a significant sample of trades on a sim account with a selection of plays gives me the confidence to do the same live...So it is proven technique first, then that gives me confidence to trade it live.


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> I use techniques, (lines, levels, sizing etc) to reduce fear.  They give me confidence.  If I'm feeling very confident, then I do away with most of that and just trade on pure feel.  For myself, I have proven that confidence is primary, and technique is secondary, not the other way around.  Technique is a tool to achieve confidence, but confidence can also be generated without this.
> 
> I know what your next post will be (because we've been here before!)... All I can say is we have different world views.




I bet ya cannot back that up with 100 profitable real trades.


----------



## skc (5 September 2013)

Gringotts Bank said:


> I use techniques, (lines, levels, sizing etc) to reduce fear.  They give me confidence.  If I'm feeling very confident, then I do away with most of that and just trade on pure feel.  For myself, I have proven that confidence is primary, and technique is secondary, not the other way around.  Technique is a tool to achieve confidence, but confidence can also be generated without this.
> 
> I know what your next post will be (because we've been here before!)... All I can say is we have different world views.




At least you are softening your tone... you used to say that confidence alone is sufficient. Now you are saying it is primary while technique is secondary.

To me you observe your inconsistent trading performance and related that to psychology issues. But if you ever get to trade a pofitable strategy or develop real trading skills, you might just change your world view to algin with mine!


----------



## tech/a (5 September 2013)

Trembling Hand said:


> I bet ya cannot back that up with 100 profitable real trades.




Ill go 10


----------



## CanOz (5 September 2013)

tech/a said:


> Ill go 10




Knock it off you two, you're a couple of trolls.:frown:


----------



## pavilion103 (5 September 2013)

I just don't get it!!!!

I don't want to be critical or have a go at anyone personally though.

How can confidence be primary?

I thinking having a (proven) methodology that you have confidence in, gives you the confidence to trade. 

I can fight against the world champion of martial arts and genuinely have the confidence that I will win, but without training, technique, skill, execution, I don't stand a chance! My confidence counts for zero and is a misguided confidence.


----------



## Gringotts Bank (5 September 2013)

pavilion103 said:


> I just don't get it!!!!
> 
> I don't want to be critical or have a go at anyone personally though.
> 
> ...




You won't like this review because it will clash with your current beliefs.  

http://joelbowes.com/jed-mckenna-theory-of-everything-review/

See?  I told you you wouldn't like it.

If you don't like the review then you definitely should give the book itself a wide berth.  

C-Rex.  He's not the only one who talks this way.  Plenty of clever cookie scientists too.


----------



## Trembling Hand (5 September 2013)

GB can you show us how you put this into practise?


----------



## skyQuake (5 September 2013)

- Confident about trading
- Little to no technique
- Makes buckets of money

...Alvin Purple?


----------



## Gringotts Bank (5 September 2013)

Trembling Hand said:


> GB can you show us how you put this into practise?




Does the C-Rex paradigm seem ok?  If not I can't proceed.


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> Does the C-Rex paradigm seem ok?  If not I can't proceed.




You can't trade?


----------



## Gringotts Bank (5 September 2013)

Trembling Hand said:


> You can't trade?




Are you ok with the paradigm?  Yes or no?  (PS. I know the answer I just want to hear you say it).


----------



## CanOz (5 September 2013)

lol....







> So the (bad?) news is that all of reality is bull****. The (good?) news is that its some entertaining bull****.


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> Are you ok with the paradigm?  Yes or no?  (PS. I know the answer I just want to hear you say it).




That is irrelevant to *practical application *of " Trading psychology" but,


NO

How are we to accept these gurus' enlightenment when their own premisses is that everything is not real, surely they are taking the piss - looking for idiots to swallow their nonsense and in the process cough up a good deal of $ their way all while promising to fill that lonely sorry feeling one has when you realise you are a loser. Do a Google search on this dude and you get the same old washed search result that all scamsters and spammers have. Same old lost souls praising him. Been going on since witch doctors claimed their own brilliance.


----------



## Gringotts Bank (5 September 2013)

Trembling Hand said:


> That is irrelevant to *practical application *of " Trading psychology" but,
> 
> 
> NO
> ...




Actually, he and others like him ask you specifically *not* to take their word for anything.  It says that in the article that you were supposed to have read!  You project a lot.  http://en.wikipedia.org/wiki/Psychological_projection

Regarding the Googling of Jed McKenna, it won't yield much.  He doesn't run courses, nor does he have a shiny website, keep a blog (ahem...cough)  or sell CDs or DVDs.  He keeps completely out of any sort of spotlight.  The blogs you will find on the net are not by him, but by dudes who appreciate his work.  You'll find amongst his admirers some very clever and astute people.  There's never even been a photo of him published anywhere on the net.  The book cost me about $7.


----------



## pavilion103 (5 September 2013)

This is deteriorating.....


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> The book cost me about $7.




And as you keep avoiding it I would guess trading with this gumpf has cost you a hell of a lot more.

Show us the out come of this enlightened knowledge GB....... Give us a hand full of trades.


----------



## Gringotts Bank (5 September 2013)

Trembling Hand said:


> And as you keep avoiding it I would guess trading with this gumpf has cost you a hell of a lot more.
> 
> Show us the out come of this enlightened knowledge GB....... Give us a hand full of trades.




I mention them every now and then on here.  You can search through my old posts.


----------



## Trembling Hand (5 September 2013)

Gringotts Bank said:


> I mention them every now and then on here.  You can search through my old posts.




LOL, Figures.

I hope you find what you are looking for one day.


----------



## Gringotts Bank (5 September 2013)

Trembling Hand said:


> LOL, Figures.
> 
> I hope you find what you are looking for one day.




Thank you.  We're all searching in our own way, are we not?


----------



## Joules MM1 (5 September 2013)

here ya go GB ......no lines....current trades......cupla looks....

show us some simple set-ups ...they dont all have to be stella.....

- - - Updated - - -

have a nice election weak-end .....


----------



## Joules MM1 (6 September 2013)

Joules MM1 said:


> here ya go GB ......no lines....current trades......cupla looks....
> 
> show us some simple set-ups ...they dont all have to be stella.....









.......later

to cap it off....closed


----------



## tech/a (6 September 2013)

Joules MM1 said:


> .......later
> 
> to cap it off....closed
> 
> View attachment 54260




God after that you must be in therapy.


----------



## Trembling Hand (6 September 2013)

Gringotts Bank said:


> Thank you.  We're all searching in our own way, are we not?




Yeah I guess we all desire something, in my case I have always thought the more the better .

Though I stopped searching for complexity where there is none a log time ago. Guess what happened.......?




Last 26 days trading


----------



## tech/a (6 September 2013)

Trembling Hand said:


> Yeah I guess we all desire something, in my case I have always thought the more the better .
> 
> Though I stopped searching for complexity where there is none a log time ago. Guess what happened.......?
> 
> ...




You fired your therapist?
Gave up boxing?


----------



## Trembling Hand (6 September 2013)

tech/a said:


> You fired your therapist?
> Gave up boxing?




Two hours a day of exercise clears the mind from trading and helps you smell the roses.


----------



## Joules MM1 (6 September 2013)

tech/a said:


> God after that you must be in therapy.




after that.....i revise....and if i wasnt pontificating posting that chart i would have exited correctly 

i know....lulz on me!


----------



## 5oclock (6 September 2013)

Though I stopped searching for complexity where there is none a log time ago. Guess what happened.....


Wow TH , looks like your on to something-----thanks for sharing!!!


----------



## Gringotts Bank (6 September 2013)

Joules MM1 said:


> .......later
> 
> to cap it off....closed
> 
> View attachment 54260




Everything has an art.  Nice one.


----------



## skc (6 September 2013)

Trembling Hand said:


> View attachment 54264
> 
> 
> *Last 26 days trading*






5oclock said:


> Wow TH , looks like your on to something-----thanks for sharing!!!




Don't get too excited. It's a cumulative P&L over the last 26 days. No dbout a good period of trading, but not necessarily suddenly enlightened.


----------



## Trembling Hand (6 September 2013)

skc said:


> Don't get too excited. It's a cumulative P&L over the last 26 days. No dbout a good period of trading, but not necessarily suddenly enlightened.




No its daily P & L from worst to best. Point being keep it simple, find something that works and repeat and repeat and repeat. End result being way more positive than neg days/week/months etc. Which I think is what most people are after rather than a warm fuzzy feeling?


----------



## notting (6 September 2013)

Trembling Hand said:


> Point being keep it simple, find something that works and repeat and repeat and repeat. End result being way more positive than neg days/week/months etc.




Yep!!
That's exactly what one can do.
You can make very good profits doing things that others overlook and doing them repeatedly.
They can seem benign and boring but they pay and pay.
You don't don't go running in the streets tearing your shirt off like some soccer girl.
You quietly go up the street and buy yourself a cappuccino. 

For example during the GFC when every thing was just in chaos ALL was just bouncing up and down between Nov 2008 to July 2009 You could make 5 to 6 % on buying and selling it in very short periods.  Once it broke out I lost interest.  But that was a great period.  I was luck to spot it early.  I didn't think it would keep doing it.  But it did, so I kept doing it till it stopped.  
Sometimes stocks that aren't trending are the best trades around.


----------



## skc (6 September 2013)

Trembling Hand said:


> No its *daily P & L from worst to best*.




Thanks for clarifying... I thought it didn't make sense to plot a cumulative PnL column chart.


----------



## 5oclock (6 September 2013)

TH , any chance you can expand a bit more without giving away any  top secret stuff???


----------



## Trembling Hand (6 September 2013)

5oclock said:


> TH , any chance you can expand a bit more without giving away any  top secret stuff???




On what? I trade the HSI futures doing about 4000 - 5000 contracts a month. So basically I stare at a computer for 5 hours a day hitting orders all day. No secret.


----------



## 5oclock (6 September 2013)

TH , you said you stopped looking for the complex and simplified, just wondering if there was any specific you could  give as an example, thats all. Thanks


----------



## boofis (6 September 2013)

5oclock said:


> TH , you said you stopped looking for the complex and simplified, just wondering if there was any specific you could  give as an example, thats all. Thanks




At a guess, it may be that he stopped searching for a holy grail and acknowledged hrs/yrs of hard work and learning your niche, whatever that might be, as the simple but important.


----------



## Trembling Hand (6 September 2013)

5oclock said:


> TH , you said you stopped looking for the complex and simplified, just wondering if there was any specific you could  give as an example, thats all. Thanks




Basically what Boofis said.

Forget everything you know, H&S patterns, trend lines, oscillators, break outs, psychology babble, mysticism, manipulation on and on!!

Just observe a market for long enough to recognise recurring patterns in your market and timeframe and in what type of market phase they occur. Then figure out a positive R:R way to trade them. Then just work on refining the simple setups day after day, week after week. Boring as bat **** but somewhat profitable........ Then again some don't really want that.......


----------



## 5oclock (6 September 2013)

TH , thanks for an insight to whats worked for you on the never ending learning curve !! We are confronted with so much info/news etc and to read a to the point no BS post from someone at the coal face is greatly appreciated. Thanks again.


----------



## 5oclock (6 September 2013)

TH , with the HSI futs you trade , would it be fair to say that you have a smaller rather than a large number of patterns, and also do they typically stop working or just stop occuring after a while. I am guessing that there will be a number of patterns specific only to the HSI futs and maybe some that come up on other markets to?? Obviously i know your answer will be from your experince only and others may see a pattern that you dont see/use etc.


----------



## Gringotts Bank (7 September 2013)

5oclock said:


> TH , with the HSI futs you trade , would it be fair to say that you have a smaller rather than a large number of patterns, and also do they typically stop working or just stop occuring after a while. I am guessing that there will be a number of patterns specific only to the HSI futs and maybe some that come up on other markets to?? Obviously i know your answer will be from your experince only and others may see a pattern that you dont see/use etc.




I don't think you'll get anything useful out of Mr Angry.  By the way this thread is about trading psychology, which the broader trading community recognizes as the most important aspect of trading.


----------



## Trembling Hand (7 September 2013)

Gringotts Bank said:


> I don't think you'll get anything useful out of Mr Angry.  By the way this thread is about trading psychology, which the broader trading community recognizes as the most important aspect of trading.




You got any empirical proof on the "most important" claim. Cuz the real traders I know wouldn't claim it as the most. I know you do but you cannot trade by your own admissions. So if you cannot show prove of a claim and cannot back it up with your own practical application then where does that leave your psycho babble other than just regurgitated trader education speel you have read in books aimed at skimming strugling traders

- - - Updated - - -



5oclock said:


> TH , with the HSI futs you trade , would it be fair to say that you have a smaller rather than a large number of patterns, and also do they typically stop working or just stop occuring after a while. I am guessing that there will be a number of patterns specific only to the HSI futs and maybe some that come up on other markets to?? Obviously i know your answer will be from your experince only and others may see a pattern that you dont see/use etc.




Might start another thread in relation to this as I was also meaning to get back to Tech on my claim that futs don't act like EOD stocks, bit busy at the mo tho. Sunny day and all.


----------



## Gringotts Bank (7 September 2013)

"It's just a job. Grass grows, birds fly, waves pound the sand. I beat people up." - Muhammad Ali

TH, do you beat people up too?  Or that's just to maintain the mean image you have going on?

"Market Wizards" is a book you should read.  It investigates the World's top hedge fund traders, and guess what?  Good psychology was the most reliable indicator of success.


----------



## tech/a (7 September 2013)

Gringotts Bank said:


> I don't think you'll get anything useful out of Mr Angry.  By the way this thread is about trading psychology, which the broader trading community recognizes as the most important aspect of trading.




Broader Trading Community

Read---

(1) Give me your money and I'll get you in the right mind set.
(2) I have no idea how to trade I need a " reason " why!
(3) I have no idea how to take advantage of opportunity --- it's obviously psychological.
(4) I need a reason for failure.


----------



## Gringotts Bank (7 September 2013)

tech/a said:


> Broader Trading Community
> 
> Read---
> 
> ...




I think you're like TH, tech.  You just like a bit of an argument.  Anyone whose trading research extends outside ASF knows psychology of trading is of utmost importance.  Your mentor* Nick Radge* would disagree quite strongly with you, but I'm sure you will have a very good come back for that.  You always do.  

For anyone else reading (whose universe extends outside of ASF), you might like to Google "Radge and trading psychology".  Just one of thousands of professionals who know what's what.

How boring you guys are.  Seriously.


----------



## skyQuake (7 September 2013)

Mate you just don't get it do you?

Its methodology and technique that leads to confidence. Not the other way around.
I completely agree that good psychology can amplify gains, and bad psychology can do the reverse; but these are just multipliers on the actual system itself.

If you have a crap system you'll lose money no matter how much positive thinking you do. Eg.Stoch indicators in a roaring bull/bear market.

If you have an awesome system you'll make money no matter how much of an emotional wreck you are. Eg. Inside trading.

Also, read market wizards again. All those guys had confidence, BECAUSE of their proven methodology, which they stuck to and rewarded them for it.


----------



## tech/a (7 September 2013)

Gringotts Bank said:


> I think you're like TH, tech.  You just like a bit of an argument.  Anyone whose trading research extends outside ASF knows psychology of trading is of utmost importance.  Your mentor* Nick Radge* would disagree quite strongly with you, but I'm sure you will have a very good come back for that.  You always do.
> 
> For anyone else reading (whose universe extends outside of ASF), you might like to Google "Radge and trading psychology".  Just one of thousands of professionals who know what's what.
> 
> How boring you guys are.  Seriously.




Yep

The answer is simple.
Those who are successful traders 
have the correct Psychology---just as those who are successful in business do.

You and others like you----don't and as such are constantly searching for that psychological missing link.

*You either have it or you don't.*
Frankly I don't think it can be taught or researched/argued into existence.


----------



## CanOz (7 September 2013)

Nick is very rules based and systematic....the psychology is centered around believing that things will turn out according to the statistically proven results, based on a robust method....

Once you have the stats, back-tested and walked forward (in summary here) you should have the confidence to trade it live.

The confidence comes from results, stats...number one yeah?



As an edit, the hardest part to take is when you apply the same thing over and over and there is a period where things don't go as "normal", then you ask yourself "is this just a "normal" abnormality or is it broken? Those that can keep trading through this have the confidence that sh*t happens and you've got to think next 1000 trades....


----------



## pavilion103 (7 September 2013)

CanOz said:


> Nick is very rules based and systematic....the psychology is centered around believing that things will turn out according to the statistically proven results, based on a robust method....
> 
> Once you have the stats, back-tested and walked forward (in summary here) you should have the confidence to trade it live.
> 
> ...




+1.

Seems obvious enough doesn't it?


----------



## Gringotts Bank (7 September 2013)

skyQuake said:


> Also, read market wizards again. All those guys had confidence, BECAUSE of their proven methodology, which they stuck to and rewarded them for it.




OMG, you think any simple minded twit doesn't understand that basic concept?  That's like grade 2 understanding.  I passed that stage 10 years ago.


----------



## Gringotts Bank (7 September 2013)

tech/a said:


> Yep
> 
> The answer is simple.
> Those who are successful traders
> have the correct Psychology---just as those who are *successful in business* do.




*Two bankruptcies??!!*  I'd be embarrassed to even comment on this forum if I was you.

Oh that's right, it was the interest rates!  Blame the banks.


----------



## Boggo (7 September 2013)

Gringotts Bank said:


> *Two bankruptcies??!!*  I'd be embarrassed to even comment on this forum if I was you.
> 
> Oh that's right, it was the interest rates!  Blame the banks.




One of my mate's father went down to the wire twice. On two occasions he came home and started packing up the house as the banks were about to move in.
He eventually went on to retire a multimillionaire before he was sixty and still commutes between his house in Adelaide and his yacht and house on Hamilton Island.

Some of the notables that have gone bust and restarted are Abraham Lincoln, Henry Ford, Walt Disney and HJ Heinz.

You seem to enjoy crapping on just about everything GB, you obviously have a reason ?
Reminds me a bit of a fruitbat, what they can't eat they **** on so nobody else will eat it


----------



## Gringotts Bank (7 September 2013)

Boggo said:


> One of my mate's father went down to the wire twice. On two occasions he came home and started packing up the house as the banks were about to move in.
> He eventually went on to retire a multimillionaire before he was sixty and still commutes between his house in Adelaide and his yacht and house on Hamilton Island.
> 
> Some of the notables that have gone bust and restarted are Abraham Lincoln, Henry Ford, Walt Disney and HJ Heinz.
> ...




Ho hum.  Another idiot.

Here's techa's teacher, Nick Radge:

"The most important part of investing and trading is psychology. Investing is a constant struggle where the battleground is not the market or advice given but comes from within you". 

But why stop at Radge?  All the top traders know it.  I'm surprised you haven't done any research outside of ASF.


----------



## skyQuake (7 September 2013)

Gringotts Bank said:


> OMG, you think any simple minded twit doesn't understand that basic concept?



It seems like you dont


Gringotts Bank said:


> "Market Wizards" is a book you should read.  It investigates the World's top hedge fund traders, and guess what?  Good psychology was the most reliable indicator of success.






Gringotts Bank said:


> That's like grade 2 understanding.  I passed that stage 10 years ago.




That puts you at 17-18?

Explains a lot.


----------



## Gringotts Bank (7 September 2013)

skyQuake said:


> It seems like you dont
> 
> 
> 
> ...




Ho hum.  Another 2nd grader.

If guys like techa and TH are your idols, you also need to look outside of ASF to see what the top guys are doing, and how.


----------



## skyQuake (7 September 2013)

Gringotts Bank said:


> Ho hum.  Another 2nd grader.
> 
> If guys like techa and TH are your idols, you also need to look outside of ASF to see what the top guys are doing, and how.




Thats funny cause I am one of the top guys and interact with similar minds daily. techa and THs style are very different to mine yet still successful which makes it so interesting.


----------



## Gringotts Bank (7 September 2013)

skyQuake said:


> Thats funny cause I am one of the top guys and interact with similar minds daily. techa and THs style are very different to mine yet still successful which makes it so interesting.




That means absolutely nothing.  If you made 500%pa for 10 years running, it would mean absolutely nothing.  This thread is not about performance, it's about how to achieve it.  In other words, I know more about successful traders than they know about themselves.  I know how they became successful... they don't.  They _think_ they know, but they don't have a clue.

I understand the mind and the nature of reality on a level that is so far beyond what most people are capable of comprehending, it actually makes it hard to communicate.  I have to dumb things down to a level that is digestible, and in doing so, meaning is lost.

And yet you will _still _make it about performance.  You all _badly_ want to know how much I'm making.  I'm up 19% for the FY... and that means absolutely nothing.


----------



## skyQuake (7 September 2013)

Gringotts Bank said:


> That means absolutely nothing.  If you made 500%pa for 10 years running, it would mean absolutely nothing.  This thread is not about performance, it's about how to achieve it.




It means I am in the industry and have a clue to whats going on. 
Everyone has repeatedly told you its about methodology. Find an edge, manage your risk, (optional: find another edge) pick colour of Ferrari. 
*That's all there is to it*
Psychology helps to keep to the plan. Having good psychology by itself won't get u there.



> In other words, I know more about successful traders than they know about themselves.  I know how they became successful... they don't.  They _think_ they know, but they don't have a clue.
> 
> I understand the mind and the nature of reality on a level that is so far beyond what most people are capable of comprehending, it actually makes it hard to communicate.  I have to dumb things down to a level that is digestible, and in doing so, meaning is lost.
> 
> And yet you will _still _make it about performance.  You all _badly_ want to know how much I'm making.  I'm up 19% for the FY... and that means absolutely nothing.




By all means, make yourself a successful trader then. 
I expect a shoutout to us from the BRW young richlist in a few years.


----------



## PinguPingu (18 September 2013)

My main problem comes down to almost always cutting profits short and letting losses run - damn you loss aversion! Break even stops have helped a bit, but I still seem to have problems of letting profits run because of fearing the loss of open profits I presently have.


----------



## Gringotts Bank (18 September 2013)

PinguPingu said:


> My main problem comes down to almost always cutting profits short and letting losses run - damn you loss aversion! Break even stops have helped a bit, but I still seem to have problems of letting profits run because of fearing the loss of open profits I presently have.




Adding a time frame will help with this.  A recent trade I did with AGO had an expectation of at least 1R return in 1-3 days (not that I'd sell at 1R, but it forms a land mark).  If that is not met, and depending on the trading activity, I simply pull the plug and forget about waiting for my stop to be hit.  If after 2 days I'm reasonably well above break-even but not at 1R, then I will probably continue to wait a while longer.  But my 2R _target _should be met in about 5 days.  If not I will probably sell.  Time makes a big difference.  Traders don't like to wait, and if they are forced to wait, they will sell and push the price down.

This is what I'd call an example of using trading technique to improve psychology.  Most people do this in some form or another.  Psychology can _also _be addressed _independently _of trading technique, and that's the basis of most of my posts on this thread..


----------



## Gringotts Bank (18 September 2013)

Here's _one _possible example of a non-trading technique which can be used to improve trading psychology.  Good quality instruction on witnessing meditation.  I don't do the labeling part because I find that cumbersome, but it still does what I want.  

http://www.swamij.com/witnessing.htm


----------



## CanOz (26 March 2014)

*Re: Trading psychology_State of Flow*

Interesting comments by Mike Bellefiore on State of Flow...


----------



## Wysiwyg (2 September 2016)

Habakkuk said:


> I don't belong in this thread.
> 
> But I can't resist posting this little extract from the book that Howard Bandy mentioned quite a bit lately, not one of his.
> 
> ...



Hello. Hopefully you will see this post. I want to pick your thoughts on what I have bold typed above. It is something that I have never been able to absolutely define. In my mind and actions, I do not get it wrong. I do not get it wrong (make a mistake is another common term) when I enter and exit the market. The reason is because I do not determine the direction of the move, the intensity of the move nor the timing of the move. The collective of market participants (mainly the big stacks) determine the move so how can I be wrong when I have zero control over a move? It is a concept which most people cannot grasp. 

It is only after the entry/exit that people judge themselves right or wrong. The direction, intensity and timing of a move has absolutely nothing to do with the trader being right or wrong. It is simply one of the outcomes of that trade and thinking that one is beating the market (being right) is a small 'delusion of grandeur'. 

I am very interested in anyones thoughts on this subject.


----------



## rnr (2 September 2016)

Wysiwyg said:


> Hello. Hopefully you will see this post. I want to pick your thoughts on what I have bold typed above. It is something that I have never been able to absolutely define. In my mind and actions, I do not get it wrong. I do not get it wrong (make a mistake is another common term) when I enter and exit the market. The reason is because I do not determine the direction of the move, the intensity of the move nor the timing of the move. The collective of market participants (mainly the big stacks) determine the move so how can I be wrong when I have zero control over a move? It is a concept which most people cannot grasp.
> 
> It is only after the entry/exit that people judge themselves right or wrong. The direction, intensity and timing of a move has absolutely nothing to do with the trader being right or wrong. It is simply one of the outcomes of that trade and thinking that one is beating the market (being right) is a small 'delusion of grandeur'.
> 
> I am very interested in anyones thoughts on this subject.




*I know what I'm doing wrong but I'm doing it anyway.*

From my perspective this statement refers to those elements of the trade I can control.

Some examples would be:-

Placing stops too close to the daily price action.

Taking profits too early.

Second guessing the market and, as a result, exiting the trade before my stop loss was taken out.


----------



## Habakkuk (2 September 2016)

Wysiwyg said:


> Hello. Hopefully you will see this post. I want to pick your thoughts on what I have bold typed above. It is something that I have never been able to absolutely define. In my mind and actions, I do not get it wrong. I do not get it wrong (make a mistake is another common term) when I enter and exit the market. The reason is because I do not determine the direction of the move, the intensity of the move nor the timing of the move. The collective of market participants (mainly the big stacks) determine the move so how can I be wrong when I have zero control over a move? It is a concept which most people cannot grasp.
> 
> It is only after the entry/exit that people judge themselves right or wrong. The direction, intensity and timing of a move has absolutely nothing to do with the trader being right or wrong. It is simply one of the outcomes of that trade and thinking that one is beating the market (being right) is a small 'delusion of grandeur'.
> 
> I am very interested in anyones thoughts on this subject.





Modest has described his psychological issues as he calls it, that apparently lead to a breakdown of common sense and self-sabotage.
That struck a chord with me and while I don't believe I'm sabotaging myself, I notice my loss of common sense.

That's what I meant when I said "I know what I'm doing wrong but I'm doing it anyway". I haven't followed Modest's thread as I'm not interested in futures, and whenever I look casually at the charts those guys put up - well, it doesn't make much sense to me.

So it's fair to say that I have only read a few posts by Modest and captain black and don't really know the bigger picture.
That book goes into great detail on the unconscious biases people have that result in irrational decisions. The fact is that I have studied this stuff for years and know "all" about it but I seem to "forget" it when it counts. Some classic examples will illustrate it.

We can't win every trade. We know we don't need to. But we (or at least I do) expend far too much emotional energy on each individual trade, when we should simply let (hopefully) positive expectancy and the law of averages take care of itself. My risk-aversion causes me to over-analyse each trading signal until I can find something wrong with it and therefore not take the trade. Also, halfway through a month I may stop trading altogether because I'm sitting on a nice profit and I don't want to risk having a losing month. How stupid is that?
And how about this: on the first day of the month I casually enter a trade or two completely carelessly, without even looking at a chart, what the ... ?

Captain black points out to Modest that his wins are 4-6 pips and his losers are more like 8 pips. Something like that. That links in with Prospect Theory (Kahneman and Tversky), the bit about different attitudes to risk for gains and losses. Words to the effect that losses are felt twice as much as the pleasure from gains. And yet we know that we should cut losses and let winners run.

Hey, it's a 500-page book. Don't expect me to summarise it.

Wysi, I understand exactly what you're saying about 'not being wrong'. The outcome being judged instead of the action/choice/decision before the event. A fundamental principle of game theory is that the right moves/decisions aren't determined by what eventually happens. A good strategy is one that would have the highest chance at success if repeated enough times to develop a reasonable sample size. You know that.
Van Tharp would ask, "Is it a useful belief?".

Do you know of Michael Covel and his "Trend Following" book? It's been a few years since I've read it but I remember the bit about trend followers NOT *predicting* but only *reacting* to the market moves. You could therefore say they also are never wrong. I'm not sure if he actually says that but it's implied. I think it's semantics.
"Is it a useful belief?"
Yes, it is for Michael - he has sold a lot of books and turtle trader courses.

Getting back to the the other book for a moment, and I hope Howard Bandy doesn't read my comment. I find it very interesting and worthwhile reading. I'm glad that he mentioned it, otherwise I would probably never have found it. I'm going to read it more than once.
However, the average ASF member will find it heavy going, it's almost 500 pages and not about trading.


----------



## Gringotts Bank (2 September 2016)

Self-sabotage is when a part of you doesn't actually want the winning trade.  Done it many times.
It's a hard thing to 'unpack' because self-sabotage usually relates to subconscious beliefs about worthiness.

Living a highly virtuous lifestyle can go some way towards helping this.  The expert commentary on virtue -_in my opinion_- is from buddhist literature (aka sila, http://www.accesstoinsight.org/ptf/dhamma/sila/)

With a high level of virtue, the mind tends to become clear.  Meditation becomes easier and self-sabotage less likely because karma is reduced.  If you think of karma as "guilt relating to past actions" you can see how the mind gets disturbed by this, and the drive for self-punishment arises in some people.  The pitfall is to use virtue to prop up self esteem eg. "I helped an old lady cross the road, therefore I am a good person!".  That's the mind co-opting the situation for self-aggrandizement.  If on the other hand you help the old lady with a pure intent, a connection is formed and the reward is immediate.  The first is self-focussed helping, the second is other focussed (selfless).


----------



## Wysiwyg (2 September 2016)

Habakkuk said:


> Modest has described his psychological issues as he calls it, that apparently lead to a breakdown of common sense and self-sabotage. That's what I meant when I said "I know what I'm doing wrong but I'm doing it anyway".



Well I did notice Modest does lament his decisions with could have and should have which is the connection I thought you drew. The truth is it is only after a trade decision is made that we pass judgement on ourselves which I believe leads to biases in the future and more to the point, not trading in the moment. 



> That book goes into great detail on the unconscious biases people have that result in irrational decisions.



Yes yes, that is it. Observers may see them when the individual may not.



> We can't win every trade. We know we don't need to. But we (or at least I do) expend far too much emotional energy on each individual trade, when we should simply let (hopefully) positive expectancy and the law of averages take care of itself.



Positive expectancy is another trading cliche I have never come to terms with -slash- understood. Positive expectancy based on (usually) statistics and faithful probability! The trader believes because of historical and most recent results that similar or same results will happen in their future trades. The test results are the holy bible. I think it true to say that human behaviour repeats with pricing but the intensity and duration is near random. 



> My risk-aversion causes me to over-analyse each trading signal until I can find something wrong with it and therefore not take the trade. Also, halfway through a month I may stop trading altogether because I'm sitting on a nice profit and I don't want to risk having a losing month. How stupid is that?



Tech/A posted something along the lines of - being successful staying out of the market at the right times. Timing is a biggy?



> Captain black points out to Modest that his wins are 4-6 pips and his losers are more like 8 pips. Something like that.



His scatter chart results show he had more losses than wins for that period but the aggregate winners were greater than the aggregate losses. Obviously if repeated will lead to success but the shear loss percentage takes a belief that is devout. I am surprised Blacky has not stumbled upon a more consistent sequence of trade signals or maybe trading the trend is the only profitable game to play. In flow. 



> Do you know of Michael Covel and his "Trend Following" book? It's been a few years since I've read it but I remember the bit about trend followers NOT *predicting* but only *reacting* to the market moves. You could therefore say they also are never wrong.



Yes that is what I mean. No could have or should have post trade disempowering lament. I have been trading stocks, indices, FX and testing strategies for what seems like a length of time to be reasonably conclusive in my assessments.


----------



## Wysiwyg (2 September 2016)

Gringotts Bank said:


> Self-sabotage is when a part of you doesn't actually want the winning trade.  Done it many times.
> It's a hard thing to 'unpack' because self-sabotage usually relates to subconscious beliefs about worthiness.



It may not need 'unpacking' but simply flipping that thought. Again it is only after the event that the judgement is formed. Next time you 'know' the winning trade, let me know.


----------



## cynic (2 September 2016)

Wysiwyg said:


> It may not need 'unpacking' but simply flipping that thought. Again it is only after the event that the judgement is formed. Next time you 'know' the winning trade, let me know.




Ahh! But did you not know?
Knowing it's a winner!
That is the key to making it so!


----------



## Wysiwyg (2 September 2016)

cynic said:


> Ahh! But did you not know?
> Knowing it's a winner!
> That is the key to making it so!



Wellll, yes if there is consensus.


----------



## cynic (2 September 2016)

Wysiwyg said:


> Wellll, yes if there is consensus.




A consensus of one?!


----------



## Wysiwyg (2 September 2016)

cynic said:


> A consensus of one?!



Okay, one billionaire then concensus.


----------



## cynic (2 September 2016)

Wysiwyg said:


> Okay, one billionaire then concensus.




I was alluding to a philosophical concept that suggests our reality is formed in accordance with our beliefs! Have you noticed how your beliefs have influenced your interpretation of my last two posts?


----------



## Quant (3 September 2016)

I have not read entire thread but have read a few posts here and there . And i have to tell you there is only one cure to trading induced emotional breakdowns . EDGE  , thats it , now you dont need a therapist to find that . You more than likely need a mathematician . Now an edge is a positive expectancy ( that terrible thing many think is not real ) I can tell you the quickest way to a positive mindset is POSITIVE EXPECTANCY . Now obviously accurately defining it is difficult for many and basically impossible for a discretionary trader  . It requires statistics of a repeatable sequence that produces a trade  , this is where everyone fails .  All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional   , its the answer i tell you   ...   The can is open   haha   


Many traders think its their psychology letting them down when in fact they are no freaking good at trading . Fix the root of the problem

Find a method that works and is defined by a rock solid set of rules ... RINSE & REPEAT ... its that easy


Last edit  ... If you can measure it you can more than likely improve it . start bloody measuring

I LIED  , if you have not got POSITIVE EXPECTANCY you could do all the work on psychology in the world and never fix your problems ..... that is a FACT   , you cant turn **** into marble


----------



## Triathlete (3 September 2016)

Quant said:


> I have not read entire thread but have read a few posts here and there . And i have to tell you there is only one cure to trading induced emotional breakdowns . *EDGE  , thats it *, now you dont need a therapist to find that . You more than likely need a mathematician . *Now an edge is a positive expectancy *( that terrible thing many think is not real ) I can tell you *the quickest way to a positive mindset is POSITIVE EXPECTANCY *. Now obviously accurately defining it is difficult for many and basically impossible for a discretionary trader  . It requires statistics of a repeatable sequence that produces a trade  , this is where everyone fails .  All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional   , its the answer i tell you   ...   The can is open   haha
> 
> 
> Many traders think its their psychology letting them down when in fact they are no freaking good at trading . Fix the root of the problem
> ...




+ 1   ..........although myself I am more of a discretionary position trader with a positive expectancy rather than a system trader.....


----------



## cynic (3 September 2016)

Quant said:


> I have not read entire thread but have read a few posts here and there . And i have to tell you there is only one cure to trading induced emotional breakdowns . EDGE  , thats it , now you dont need a therapist to find that . You more than likely need a mathematician . Now an edge is a positive expectancy ( that terrible thing many think is not real ) I can tell you the quickest way to a positive mindset is POSITIVE EXPECTANCY . Now obviously accurately defining it is difficult for many and basically impossible for a discretionary trader  . It requires statistics of a repeatable sequence that produces a trade  , this is where everyone fails .  All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional   , its the answer i tell you   ...   The can is open   haha
> 
> 
> Many traders think its their psychology letting them down when in fact they are no freaking good at trading . Fix the root of the problem
> ...



I remember a time when I entrusted a friend with a very simple, high probability, rule based betting formula. 

The first day that we both independently operated the system, on the same race meeting, was an enlightening experience.

When the formula worked that day, I was naturally pleased for myself and my friend, but, later that day a puzzling thing happened! 

My friend complained to me about losing money! 

When I asked what she had done, she admitted to having initially profitted, but, being discontent with the size of the win, had decided to violate a critical rule by placing an additional bet!

Clearly something other than the systematic edge was at play here!


----------



## minwa (3 September 2016)

cynic said:


> I remember a time when I entrusted a friend with a very simple, high probability, rule based betting formula.
> 
> The first day that we both independently operated the system, on the same race meeting, was an enlightening experience.
> 
> ...




Much like the turtle traders experiment. Same rules, same system, same edge. Some blew their accounts and booted from program while others collectively go on to make $175m over 5 years.


----------



## Wysiwyg (3 September 2016)

The only "edge" in trading is the trade management.


----------



## Habakkuk (3 September 2016)

Wysi, some further thoughts on your original comments about not 'getting it wrong'.

You're looking at it like Mark Douglas.
- You think in probabilities
- You have an edge
- You act on it (flawlessly)
- You completely accept the risk (carefree state, maybe?)
- You let the market unfold, etc.

In that case you are correct - you did everything right, according to plan. Any individual losing trade is the result of market action and was out of your control. There is nothing to correct.

Now consider the opposite scenario. I'm a full discretionary intra-day momentum trader (I wish!).
- I have an edge too
- My entry timing is decided by myself, it's my responsiblity
- What happens next is decided by market forces

If the position moves against me immediately after entry, I have been wrong; I have made a mistake; The loss is my fault.
I was supposed to trade momentum but I entered at the wrong time, just as it mean-reverted. There is no excuse. I'm guilty.

That's the way I see it, and I prefer that idea. It might explain why I can't trade profitable mechanical systems.


In my previous post there is some clumsy wording that caused confusion. 



> Captain black points out to Modest that his wins are 4-6 pips and his losers are more like 8 pips. Something like that.




I meant this comment by captain black to Modest:



> Taking a profit at 6 ticks but letting losses run out to -6 and -8 makes it really tough to get expectancy working in your favour.
> 
> You have a real edge when it comes to picking S&R levels, just need to keep working on reviewing where to let the winners run.




And finally, I don't believe in this concept of self-sabotage. Nobody does that. Why would you lose deliberately to punish yourself? I can't see the point.
But it sells books.


----------



## Habakkuk (3 September 2016)

Quant said:


> All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional   , its the answer i tell you   ...




Quant, I agree with your main point, but it's precisely because people are *not* machines that they get emotional and (maybe) need the goddamn psychology books. Although they haven't helped me much so far.

It may have been Van Tharp who said 15 years ago that successful trading is 10% methodology, 20% money management and 70% psychology.
Apart from the complete nonsense of assigning percentages to completely different, hard to quantify items (that's why I think it was Van Tharp), I think it's about right. The method or system is not that difficult to come up with *for a retail trader*. Money management is to make the highest possible return with acceptable risk. That's only slightly more challenging. But executing it consistently and accurately, that's where psychology comes in.

That's what's holding me back and it's 100% for me.


----------



## Roller_1 (3 September 2016)

Wysiwyg said:


> The only "edge" in trading is the trade management.




You can have an entry edge ie greater than 50% win rate or you need to manage your positions to create an edge ie. cutting losses, letting profits run. Two different things. 




> I have not read entire thread but have read a few posts here and there . And i have to tell you there is only one cure to trading induced emotional breakdowns . EDGE , thats it , now you dont need a therapist to find that . You more than likely need a mathematician . Now an edge is a positive expectancy ( that terrible thing many think is not real ) I can tell you the quickest way to a positive mindset is POSITIVE EXPECTANCY . Now obviously accurately defining it is difficult for many and basically impossible for a discretionary trader . It requires statistics of a repeatable sequence that produces a trade , this is where everyone fails . All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional , its the answer i tell you ... The can is open haha
> 
> 
> Many traders think its their psychology letting them down when in fact they are no freaking good at trading . Fix the root of the problem
> ...




Good post, don't agree with needing to be a mathematician but you need to understand what you're looking for/at.


----------



## tech/a (3 September 2016)

Quant said:


> I have not read entire thread but have read a few posts here and there . And i have to tell you there is only one cure to trading induced emotional breakdowns . EDGE  , thats it , now you dont need a therapist to find that . You more than likely need a mathematician . Now an edge is a positive expectancy ( that terrible thing many think is not real ) I can tell you the quickest way to a positive mindset is POSITIVE EXPECTANCY . Now obviously accurately defining it is difficult for many and basically impossible for a discretionary trader  . It requires statistics of a repeatable sequence that produces a trade  , this is where everyone fails .  All i got to say is throw those goddam pyschology books in the bin and goddam learn to become systematic trader , I am a machine and i dont get emotional   , its the answer i tell you   ...   The can is open   haha
> 
> 
> Many traders think its their psychology letting them down when in fact they are no freaking good at trading . Fix the root of the problem
> ...




The only post you need to read on this topic


----------



## Wysiwyg (3 September 2016)

Roller_1 said:


> You can have an entry edge ie greater than 50% win rate



An entry where price moves in ones favour within a fixed period? Three wins and one disaster is a 75% win rate but a losing strategy.


----------



## Quant (3 September 2016)

Wysiwyg said:


> The only "edge" in trading is the trade management.





Good luck with those random entries  , and just to be clear systems have risk management as part of the " system "


----------



## Roller_1 (3 September 2016)

Wysiwyg said:


> An entry where price moves in ones favour within a fixed period? Three wins and one disaster is a 75% win rate but a losing strategy.




Obviously..

If you have an certain entry and exit after x days and you achieve a 60% win rate with a W:L ratio of 1. Then the entry has created an edge. I've found adding stop or profit targets to a short term system with a entry edge is mostly counter productive


----------



## Wysiwyg (5 September 2016)

Gringotts Bank said:


> Because narcissism can be used as a proxy for low self-acceptance or low self-worth (the former being a reaction to the latter).



The case of the introverted narcissist!


What should you do if you want to reveal your closest secrets to everyone?

Tell your darkest secrets to a narcissist first, then the narcissist will pass on your secret whenever he/she thinks it most appropriate(i.e. sooner rather than later).

What's a narcissist's idea of compromise?

Persuading others to go along with the narcissist's preferences.


----------



## Gringotts Bank (5 September 2016)

Wysiwyg said:


> The case of the introverted narcissist!
> 
> 
> What should you do if you want to reveal your closest secrets to everyone?
> ...




I'm well aware of my narcissistic tendencies thank you!


----------



## Garpal Gumnut (30 December 2020)

I stopped trading and investing about 10 days before Christmas. 

A trading portfolio I'd started in August 2020 went from showing a 15% overall profit to 7.5% in just one week, in mid December. 

I began over trading for a few days, then doing nothing for a few days. I guess it was the equivalent of a brainfart, a prolonged brainfart, over 6 trading days.

So I sold the whole portfolio locking in a 7.5 % profit for just on 4 months work. 

I'm happy. I'll not trade until the New Year. 

Work that out all you Psychs.

gg


----------



## Trav. (30 December 2020)

@Garpal Gumnut that's a great reminder mate. We all need to take a step back to reassess what we are doing and how we are going about it.

I am still a beginner and always falling into little traps caused by my weaknesses, the list of weaknesses is long but slowly identifying and rectifying.

Cheers mate.


----------



## Garpal Gumnut (30 December 2020)

Trav. said:


> @Garpal Gumnut that's a great reminder mate. We all need to take a step back to reassess what we are doing and how we are going about it.
> 
> I am still a beginner and always falling into little traps caused by my weaknesses, the list of weaknesses is long but slowly identifying and rectifying.
> 
> Cheers mate.





Garpal Gumnut said:


> I stopped trading and investing about 10 days before Christmas.
> 
> A trading portfolio I'd started in August 2020 went from showing a 15% overall profit to 7.5% in just one week, in mid December.
> 
> ...




I've been going through all the trades today and also looking at my money management. 

In fact it was money management not "bad" buys nor "bad" sells nor overtrading wot did me in. 

Until I entered brainfart territory. Then I over-traded and the gains and losses plateaued and I went sideways and became frustrated until I liquidated the protfolio.  

It is what it was.

gg


----------



## Craton (30 December 2020)

Psychology, stock wise, as well as adding to the longer term big divvy payers generally on dips and/or SPP, one thing I've been doing in the last few years, with Commsec's $10 trades, is short term trading. Just the odd stock here and there but am absolutely ruthless in taking profits. I don't try to pick/predict a top and don't buy anymore than two to three parcels of any one stock.
The only mandates are that any profit >10% on a pull back gets the trigger to sell, if a stock falls it'll stay in the long term portfolio until such time it is 10% in the black or I take a loss to offset tax or it stays there for perceived longer term prospects.

Total purse available for short term is 10K and no more than 5K in the one stock. Might not sound like much to you heavy hitters but to me, it still feels like a million $ and that any stock pick is no better than a punt. Sure, I've had losers (THC) and I cop it on the chin as a learning lesson but the multi-bag winners (BTH) negate and compensate the loss.

As a mostly passive investor and a minnow, I find that these short term plays are useful in learning and dealing with the "emotions" of trading. It is easy to answer the question of why I want to buy any particular stock. Answer is simple, profit! That's where the ugly head called greed comes into view and hence my purse limitation. I'm not adverse to the risk/reward but losses imparts caution, lol.

I must add that my long term divvy payer portfolio is not just for my retirement, I intend to pass down this portfolio to my children either directly or through my trust.

With well over two decades of share holdings and seeing/feeling the markets fall and rise (rinse and repeat) and being bombarded with everything from flus, bubbles, 9/11, GFC, CV19 and the like, it has all helped my to HTFU, stay the course, fine tune and hone what it is I expect and want as a long term share holder and as a sporadic trader.


----------

