How do you guys keep your 'Ego' in check?

[hamli]

Hi,

Bit of a background, started studying options and futures mid 2014, started with a small account of 8K. Actually trading, as opposed to pure 'theory' or 'paper trading', got me really engaged and accelerated my learning. I was trading 1 lots, and by years end, I was down 2K (3K of it was pure brokerage cost) - only options at this stage.

Based on my results, I knew I could make it work, if I either searched for a cheaper broker to fit my trade style or upscaled my account to 'minimise the impact of the fixed charges' (in hindsight, I wish I had done both), but I opted for latter. I increased my account size to 20K and by end of 2015, I increased my account size to 26K (and paid 6K in brokerage, made about 600-700 trades FY).

Which takes me to this year where I've developed a relatively high trading confidence and still eagerly learning as much as I can to improve my success rate, and reduce risk. I finally got rid of the other broker/platform and moved to a significantly cheaper and better platform (about 1/5 of the cost of old one) (but by no means perfect). Up scaled my account to 6 figures and also added futures to my arsenal.

Year to date I've made just over 3000 trades, and sitting at over 40% return since January (50% from futures/50% from options). I've been disciplined until last month, where ego got in the way, and I decided to take 'big bets', which I've never done before. I paid for it, 7% gone within a couple of days because of pure ego. Lesson learned. I'm back to where I was before the mistake was made, but it made the last few weeks feel really unproductive and I'm angry at myself for making it. How do you guys keep your ego in check and not get too large? At the moment, I think remembering my recent mistake will keep me in check going forward.

 

[cynic]

As you appear to have already noticed, the market is indeed a great educator in that it is often quick to deliver effective, albeit expensive, lessons.

Particularly painful experiences are less likely to be forgotten.

The wonderful thing about this, provided the damage taken doesn't prove terminal, is it's likely to contribute to better long term trading performance via the future avoidance of such errors.

 

[Triathlete]

Out of curiosity...what was the % size of the the "big bets" in relation to your account size at the time?

 

[hamli]

Out of curiosity...what was the % size of the the "big bets" in relation to your account size at the time?

Max loss capped at 7% required 14.% capital for short period. These were significantly lower probability trades with no repair strategy. For these trades I should have used 0.75% of capital.

Core positions I use about 6-8% capital, normal positions I use 1.5%, but these are significantly higher probability trades. Looking to get to 1% on latter - will give me more flexibility to scale in or repair.

 

[notting]

Well, after I bag a big one. I go to a crowded place with lots of pretty girls and start smiling at them and dancing.

 

[kid hustlr]

I'm confused by your numbers in the chart compared to you post.

 

[Wysiwyg]

I'm confused by your numbers in the chart compared to you post.

You mean this ...

Year to date I've made just over 3000 trades, and sitting at over 40% return since January

While the chart indicates different.

 

[Garpal Gumnut]

Going back to basics always helps, hamli.

Many of the responses to your query are trade/technique orientated but your original question was about " Keeping your ego in check"

We are fortunate here at the Ross Island Hotel having a Psychiatrist in residence, in one of the back rooms without a view of the V8's when they come to Townsville. I discussed this with him over some many schooners of Great Northern.

He explained to me that Freud developed the theory of Ego, Id and Superego.

Ego is you.
Id is greed, sex, down and dirty, profit, risk taking etc.
Superego is conscience, maiden aunt wagging finger, ASIC, Church etc.

The ego is you, and has two great taskmasters , the id and the superego. The former telling you to increase your account and take bigger trades, the latter saying hold back, be careful.

So your question re keeping ego in check needs to be reframed.

How do you keep your id ( greed, increasing your bet, young ladies fantastically beautiful etc etc etc. ) in check

Without being constipated by your superego, so that you are paralysed from trading by those who say I told you so, wife/husband/partner etc.

So it is a matter of balance.

And unfortunately my friend, this is the big question of life which has been argued and discussed since the ancient Greeks.

SO I would suggest you have a break and watch all episodes of Fawlty Towers to get your brain back in sync as you sound very constipated.

gg

 

[hamli]

I'm confused by your numbers in the chart compared to you post.

A lot of us trade within a system, but sometimes because of external factors, greed etc we break these proven systems and trade bigger than we should or stay in positions longer than we should.

Was just curious how people dealt with it. Personally, I cleared all my positions that day, and re-established everything in smaller sizes - just something I felt I had to do. Then reduced the hours I traded to bare minimum for next few days, before getting right back into things.

I think most traders feel the same way... giving away even a fraction of our earnings after weeks/months of grinding in a very short time frame is frustrating.

 

[Smurf1976]

My trading and long term investing are both based on numbers and I've long had a good grasp of the concept of probability so I've always found it pretty easy to not get too excited.

That I'm naturally a fairly calm person who doesn't really do the whole ego thing probably helps a bit here.

 

[Triathlete]

I find the Winning % and probability chart useful in making sure I keep to my correct position sizing and risk management.

How would things look with your trading account if you had a run of losses based on the probabilities as per the chart attached.

View attachment win%.xlsx

 

[luutzu]

I thought the Market have a way of keeping all our ego in check.

 

[hamli]

I find the Winning % and probability chart useful in making sure I keep to my correct position sizing and risk management.

How would things look with your trading account if you had a run of losses based on the probabilities as per the chart attached.

View attachment 66786

Cool. I like this table. I'll devise something similar for myself and crunch some numbers and keep it in plain sight .

 

[skc]

Nothing wrong with being a bit aggressive when trading is going when. Afterall perfect luck / market condition don't come all the time.... but there's a difference between aggressive and reckless.

Was just curious how people dealt with it. Personally, I cleared all my positions that day, and re-established everything in smaller sizes - just something I felt I had to do. Then reduced the hours I traded to bare minimum for next few days, before getting right back into things.

Next time you want to play a oversized low percentage play, just refer to this thread and see what happened to this poster called "hamli". That should deter you from doing the same again.

I think most traders feel the same way... giving away even a fraction of our earnings after weeks/months of grinding in a very short time frame is frustrating.

One key lesson I've learned is never extrapolate your equity curve. It will only lead to disappointment that you described.

A lot of us trade within a system, but sometimes because of external factors, greed etc we break these proven systems and trade bigger than we should or stay in positions longer than we should.

Who's this "a lot of us" you speak of?

 

[minwa]

I know I CANT keep my ego in check - hence I allow for it.

I trade smaller so when I get pissed and don't follow rules & revenge/overtrade (it happens), the damage is minimal. Ideally my draw down should not be much more than 5% according to trading statistics & probability, but it does get to 10-20% once or twice a year when everything goes to sh*t. I am comfortable with that draw down.

I used to trade with 10-20% EXPECTED (from trading stats/probability on paper) draw down, and it ends up higher when ego gets in the way. Now I just adjust for it by lowering size so normal draw downs are smaller and ego-blowup draw downs are my tolerable maximum draw down.

 

[MacDizzle]

I ended up in an anonymous program which has also been recommended by Alexander Elder, however this was after I blew up my account. But it really makes yo take a good hard look at yourself, who you're being and know there's a speed limit to stick to to remain mentally balanced for the long term. As well as humble acceptance of that real potential to act like a 'loser' I also practice mindfull meditation in the morning for about 20 mins just to get back to the present and live in reality.

 

[Tarxien]

I find the Winning % and probability chart useful in making sure I keep to my correct position sizing and risk management.

How would things look with your trading account if you had a run of losses based on the probabilities as per the chart attached.

View attachment 66786

can you please explain how to interpret the chart.
:1zhelp:

 

[Gringotts Bank]

Ego is a bundle of memories which form a very persistent circuit in the mind. The circuit is always active, except in deep sleep. It is partly reduced in a 'zone' or meditative state. The circuit's activity relates to the body, which it thinks it owns and operates (of course the body has no owner, it just seems that way). It's main emotion is fear - fear of pain, mainly, which can be physical and/or emotional. People say it developed as a survival mechanism but that's not correct, imo.

Fear can manifest in all manner of ways. Since most emotions are often pre- or subconscious, it can be difficult to negotiate and understand its massive influence. It's like: "I feel x, but I don't really know what it's about". That's your starting point.

Best approach is to develop emotional awareness. Many methods for that. I work on my own every day.

 

[Triathlete]

can you please explain how to interpret the chart.
:1zhelp:

If you have a sample size of trades let us say 1000 trades and we work out that our win % over those trades was 60% then it is mathematically possible that at some stage in your trading you are going to have a losing streak of around 12 losing trades in a row.

This is one reason why position sizing and risk management is so important in trading.

How long will your trading account last if you had this amount of losses based on your win% if you do not position size correctly.

Of course you also need to know what your profit / loss % is in regards to your own trading.

 

[craft]

If you have a sample size of trades let us say 1000 trades and we work out that our win % over those trades was 60% then it is mathematically possible that at some stage in your trading you are going to have a losing streak of around 12 losing trades in a row.

This is one reason why position sizing and risk management is so important in trading.

How long will your trading account last if you had this amount of losses based on your win% if you do not position size correctly.

Of course you also need to know what your profit / loss % is in regards to your own trading.

Its mathematically 'possible' although the probability is infinitely small to have a losing streak of 1000.

What your original spread sheet showed was the 50% probability of losing streak length (rounded) for a population of 50,000. The 50% probability for a population size of 1000 with a 60% win is 8 (7.539). But its all pretty meaningless information for trading because the numbers are based on random outcomes. Last time I looked market movements weren't random but serially correlated, you might better know that correlation as bull and bear markets.

And what really matters is not what the probable losing streak may be but the likelyhood of a series of losing streaks interspersed by only a few wins here and there and where those streaks occur in the timeline of trades. The amount you win and lose (not the average amount but the absolute numbers) also has a huge impact on your geometric return. Throw in a whole nother set of complexities if you are trading multiple position at the one time.

Most peoples Ego's are way too big when it comes to position sizing especially for total heat.