Australian (ASX) Stock Market Forum

My Obstacle to Trading Success

an interesting article below written by Brett Steenbarger.

impulsivie emotional trades leading to breaking trading rules on a cyclical basis, may not fulfil the strict definition of "addiction", but i see some overlaps.

whilst my ego would prefer to trade on, i think it would be sensible for me to return to sim trading, until a consistent application of rules is habitual.

otherwise i may as well head to the casino


http://www.brettsteenbarger.com/articles.htm


What I love most about trading is that it exercises the brain and the will. It involves ongoing analysis and problem solving, and it requires the steady development of performance-based skills. I'm sure serious players of chess and poker enjoy similar benefits. Talk to any successful athlete and you'll find someone who has cultivated themselves, not just their bodies.

There are times, however, when trading becomes a vehicle for destroying mind and soul. You won't hear brokerage firms, trading publications, or seminar producers talking much about this problem, because their common aim is to keep the public trading and buying trading-related products. But, as someone who has worked with many independent traders and traders at firms, I've seen this problem far too often: trading becomes an addictive activity.

Oh yes, trading coaches and psychologists will talk about losing "discipline", but rarely will they use the "A" word. Discipline you work on, addictions you get rid of. If you get rid of a trading addiction, there goes the trading coach.

Many times, however, losses of discipline in the markets are related to addictive patterns of behavior.

An addiction occurs when an activity provides a strong source of stimulation that, over time, leads to psychological and sometimes physical dependence. We generally label a behavior as an addiction when people seek out the activity even in the face of demonstrable negative consequences. It is the inability to stop the activity when those consequences interfere with life that marks any addiction.

Let's look at the facts:

* According to research cited by the National Council on Problem Gambling, 2 million adults (1% of the population) meet the diagnostic criteria for pathological gambling. Another 4-8 million adults (2-4% of the population) can be considered problem gamblers who are experiencing direct problems as a consequence of gambling.

* Research in psychology and psychiatry reported in the Oxford Textbook of Psychopathology finds that between 14 and 16 million Americans meet diagnostic criteria for alcohol abuse or dependence. Between 4-6 million Americans are dependent upon illegal drugs.

* Rates of substance abuse among men ages 18-44 are double those of the general population.

* A family history of addictive problems is one of the best predictors of risk for addiction. Peer influence is another significant risk factor.

* According to a research review in the Oxford Textbook, rates of depression are significantly higher among people with addictions than in the general population, with indications that people are using the addictive activities to medicate themselves for the pain of depression.

* Addictions are also most common among individuals with attention deficits and hyperactivity problems and appear to be related to sensation-seeking among those needing stimulation.

Even if we assume that traders do not have more frequent addictive behaviors than the general population, the statistics tell us that, in all likelihood, nearly one trader in every ten has a diagnosable addictive problem.
So what can we do about the issue?

The first step in dealing with any addictive pattern is identifying it--and identifying it as a problem. Here are a few questions that you might ask yourself:

* Have there been times when I told myself to stop trading, but still found myself placing trades any way?

* Do I find myself overtrading by putting on positions with too large size or by trading during periods when nothing is happening?

* Have my trading losses created problems for me in my relationship(s), or have they caused financial problems for me?

* Have people close to me told me that I need to stop trading?

* Is the pain from losing more extreme than the satisfaction from winning?

* Do I find my moods fluctuating with my P/L?

* Do I trade simply out of boredom sometimes?

* Do I find myself preoccupied with trading outside of market hours at the cost of other work and relationships?

Notice that, for many of these questions, you could substitute the word "drinking" or "gambling" for "trading". The dynamics of addictions are the same across the board. If you answered yes to three or more of these questions, I would suggest that trading has become a problem for you.

How does one deal with addictive trading? The first step is to identify it, but the second--and harder--step is to acknowledge that you need help for it. It's pride that tells us we can handle it on our own through will power, but addictions wouldn't occur in the first place if will power were sufficient to prevent consequences.

Telling yourself you can manage your own addiction is itself a form of denial.

That is why a key step in Alcoholics Anonymous is acknowledging that you are powerless against alcohol.

That is why AA substitutes mutual support for drinking and advocates abstinence as a goal.

Through books, self-help groups, and counseling, you learn to identify the thought and behavior patterns that drive your addictive behaviors. You also learn to identify cravings in advance and channel these in productive directions.

Most of all, you regain a measure of control over your life and end the negative consequences of the addiction.

If you find yourself unable to control your trading and you find the emotional, financial, and social consequences mounting, that's not a passion for trading. It's an addiction.

Do the right things:

1) Close your account.

2) Get help.
 
thank you bunyip
this is practical and common sense advice.
i know to do this, its the "must" bit that i like to deviate from occassionally

This is a conversation I have with others occasionally (not about trading). In the words of Dr Phil, "How's that working for you?"

If your deviations are not working, why keep repeating them? You must be getting something out of it or you wouldn't keep repeating the behaviour. Is it the excitement? The not knowing how it will work out because it was "against the rules"? The lure of "What if I miss this trade?"

Talk through your mindset, your decision making flow - TH's idea of videotaping it is good - then review it later.
 
James while it is no good continuing on with trading if you are losing $$'s But what are you going to work on? you don't know what is broken. Going to sim without knowing what points to fix will be wasting time. Are you going to sim to learn how to be as disciplined as this dude?
royal%20guard.jpg

Or are you going to sim to work on how to recognise when your set ups are developing.

Big diff IMHO. because what are the probabilities of your set up occurring in your market. How often and how much can you realistically expect from that? No good fighting yourself each day to take trades that will net you 10 points avg per day when you really deep down feel you should be taking 40. Not to mention the need to be taking far more to pay the bills. It seems that just like in other buissness people set themselves up for conflict with their plans, reality and execution.

This is important question right now. We have just gone through the BEST year ever for intraday trading. I would be surprised if I every see that action again. Which leads to the question are you looking for last years action where you simply will not find it? I think you are trading the SPI and I'm getting the feeling that we need to start expecting far far less from that. Which is were my point about
mismatched expectancy and expectations

and Franks point about probabilities.
 
TH

As you know I use the Dilernia Model. I am happy with it. I have seen Frank consistently profit from it and I have had periods of consistency with it myself.

Reviewing my trades over the months I conclude that it is not the system I use that needs changing, nor my knowledge of it, nor my application of it (when I am trading with a steady mind or in “the zone” as they say).


What do I need to work on?
My own divisive habits. My tendency, approx 1 week in 4, to lose the plot and start trading more from emotion and less from tech analysis: hope, revenge, fear, greed etc.

How will I do this?
Develop an awareness of my unhelpful habits as they arise in real time.
Take steps to counter such habits: reduce screen time, reduce distractions whilst trading, commit to the trading rules I have developed which I see work well in those 3 weeks in 4.


Re SPI losing volatility:
we both know there are other markets and that new systems or trading styles can be developed; I’m happy to change when the need arises. Set-ups, trade signals, . . . . trading the SPI am 3hrs and the FTSE pm 3hrs, there are enough opportunities; to-date at least.
 
I wasn't saying anything about the method.... relax

what i was saying is why would a sane person deviate from what they know works? They need more? I don't know but worth looking at.

Would love to know how you actually plan on working in sim mode on your
tendency, approx 1 week in 4, to lose the plot and start trading more from emotion
 
what i was saying is why would a sane person deviate from what they know works? They need more? I don't know but worth looking at.


it is a good question TH, and its the question i need to answer
so that i can either stay on track or realise i need to find a new one.
 
James.....Write down the rules of your consistently profitable technical system.
Let's say there are four rules to your system. When you think you have a trade setup, run your checklist of rules over it.
If your proposed trade passes rule 1, put a tick beside it. If it passes rule 2, put another tick. If it fails rule 3, put a cross. If it passes rule 4, another tick.
Don't take the trade unless you have four ticks.

This process won't take more than a few seconds and will ensure that you take only the trades that meet all the criteria of your system.

I think this is right..with the provision that you are constantly scanning the situation so that if your setup materialises you are already at least partly prepared for it...if you havent been analysing price action constantly and then..oh #hit!!..heres my setup..are the confirming factors met,??!...a few seconds may well be too long to get a reasonable entry....if you then miss it or enter late and get stopped out....then the frustration/anger/revenge can set in...the persisent application of concentration I find very demanding..... I relate to your experience James...and I am just simming...still..I am very confident in my method too..the x factor is its execution.
 
case in point,
yesterday i was quite driven by "hope" and then "revenge", when hope failed

LOL. Welcome to my world James!

As you know, I don't use a system like you and Frank, so there are days, when I simply (I have concluded), don't have the skill to trade and compete against these algo bots (I trade the noise, and they are all about taking advantage of the noise, so they are basically trying to steel my niche)! They pull orders, and squeeze me out of positions. On these days, when I go down a bit, I give myself a certain stop (about 1/3 of my daily stop), whereby I sit back, and think on how I am getting bled of my ticks. It seems to help a LOT, not only it minimizes the down day, but a lot of the time I go back and beat the algo bots at their own game and end up getting back to green.

When I don't sit back like this, I end up angry and try do size so they have more trouble squeezing me, end result: I get nailed to a wall and pounded into submission! And as we know, one big down day, can take 3 up days (after brokerage), for a scalper to recover from!

Just one way I handle my negative emotions and realise quickly, without too much damage, when it's time to alter the game-plan a bit. Either by working out what the algo bots are doing in the order book and making money off this, or simply being more patient, waiting for a set-up on the chart, widening my stops and avoiding their BS noise and traps.

:2twocents
 
Lets talk about how to reduce the number of points normally lost using stops ::p:

Intra day



If you take the loss its real - DONE " you lose those points .

Try this :- have enough margin so you can throw more contracts in to defend your losing position as it goes against you.
Place an another when its 9 points against , then hit again at 11 points farther .
\
If it all turns to sh*t get out when it goes 22 or 23 your call , I do it with good results , better then suffering continual stop hits like at 4, 6, 8 ,10 , your pick .
:sheep:
 
I think I might of come to an understanding of the nature of what is undermining my trading.

To summarise my core problem as I see it:

Essentially I have a series of good trading weeks, only to then lose the plot and take a series of random, emotionally driven trades; spoiling not only the week in question but also the good weeks.
Why, why, why, is this happening?

Tired of this repetitious cycle and treading water, it’s come time to face my situation head on.

Reading an article by Brett N. Steenbarger (Trading Psychologist) has alerted me to the fact that I may be experiencing a temporary form of ADD; Attention Deficit Disorder: prone to wandering attention, reduced self-control, and impulsive behavior. Assessing my random trades in those disappointing weeks, clearly demonstrates periods of reduced self-control and impulsivity.

Brett states that to trade in “the zone”, that state of mind most conducive to success in any challenging endeavor, we need to be able to “stay focused”.

When we operate outside that "zone" and lose our focus, we are no longer activating that executive center of our brains--the frontal lobes--that control planning, judgment, and reasoning. Left with a weak executive center, we become like a person with ADD: prone to wandering attention, reduced self-control, and impulsive behavior.”

The type of focus intraday index trading has required of me has been quite intense. Previous experiments reducing my trading hours has shown me to experience no ADD like symptoms and be capable of sustaining a productive level of focus for about 3 to 3.5 hrs. After this time a lengthy break of at least a couple of hours is required.

When I trade more than 3.5 hours, it seems I may very well be entering an ADD state of mind. Last week a poor trading week for me, for example Friday, my computer went on at 6.30am and off after midnight with no substantial breaks throughout.

The aftermath of “ADD trading”, if I can call it that, is it looks like I’m an emotional and undisciplined trader. But Brett says this is wrong. “In reality these are the results of the problem; not the causes.

This is a crucial point. Much attention is given to emotion and discipline in trading literature. These variables “can” undermine our trading but often they are a symptom not a cause. Hence your trading doesn’t improve if you keep targeting the symptom without changing the cause.


In summary, to trade in “the zone”, or at my peak potential, I need to be concentrated, focused, absorbed. And each individual will have a threshold when the “executive center”, the part controlling planning, judgment, and reasoning becomes exhausted. When this threshold is reached, a weakened executive center, can give way to ADD like symptoms and behaviours.

If all of this is true, the solution to my dilemma might be quite simple.

A] understand the relationship between the brains executive center, exhaustion and ADD symptoms

B] know my own limits where focus and productivity begins declining

C] develop a trading time-table to compliment my temperament


To conclude, it might seem pretty obvious that we need to take a break every now and then. But it’s not always easy to see the bigger picture when on the inside.

Furthermore, we often don’t have the conceptual model, such as the one provided by Brett, with which to understand or unpack our situation and therefore make the necessary changes.

-------------------------------------------------------------------------------------

Any way I shall reduce my trading hours, stick to my new time-table and report back with the results for any one interested.

Thanks to all who have contributed, you have encouraged me to dig deeper.


James


** Finally, the last obstacle to trading success out the way. Glad that’s over with. :rolleyes:
 
Why, why, why, is this happening?

You are being undermined by your own ego. You have a winning streak, subconsciously think you're pretty damn good, better that your system to be sure, so the only choice is to trade more opportunities. Because its you and not the system that is good you look for other trades.

You need to accept that its the system making the money. Not your own abilities.
 
Any reason why not?
Just not your style?

It's how I have been 'trained' at this intraday business.

Also agree with Nick, sometimes when you go on a winning streak you start trying more things, thinking your good enough to create another edge, only to be brutally beat down by the market and go back to your conventional methods with your tail between your legs. :eek:
 
There is always `gamblers anonymous` if the bull dung gets too thick.;)
 
James,

Look at the weeks that you have done well or the trades set-ups that
have made profits,

And then the ones that have failed.

I bet most of those trades or weeks that have done well because
price was matched with support or resistance:- ie a higher or lower
open matched with a level that has consistently reversed the direction
of the intra-day trend with the underlining overall trend.

The worse trades were probably when markets open or a trading away
from support or resistance which is usually in the middle of a range,
away from support or resistance.


Even though you might be using a proven method that makes money, you
still need to optimise the method based on market conditions to increase the edge.

At this stage this might be your biggest problem, understanding the market conditions to opitmise your trading set-ups, which leads to over-trading
and making mistakes.

This comes from experience.

Today on the SPI is a prefect example:- it might provide the perfect
trade but it’s nowhere near a support/resistance level.

Therefore there is more chance of you being stopped out early even
though the price might go in the direction that you were originally trading.

Seriously look at introducing forex and currencies into your trading, as
there are an abundance of opportunities to make money. But be patient
and optimise the set-ups.

I bet if you introduce other markets into your trading you will begin to
be able to optimise the set-ups far better because one of them will met
the conditions, whilst the market you usually trade (SPI & FTSE) doesn't

Don’t feel you have to be busy to make money.
 
James, my :2twocents on the topic.

You need to reward yourself for disciplined behaviour. Currently your 'reward' is a profitable trade or a successful loss minimising exit - thats rewarding succesfull implementation of the system but its not specifically focusing on discipline/restraint.

An approach that may help: After each undisciplined/emotional trade - write down the specific mistake you made (e.g. the example yoiu gave above - trying to enter in advance, before your entry signal completed). Build up a list of the specific 'emotional' mistakes you make. This is your 'DON'T DO' list.

Whenever you make an emotional/undisciplined trade and regret it, go back to your 'DON'T DO' list and mark the specific type of trade you've done with a cross next to it. If it isn't on the 'DON'T DO' list already (i.e. its a new type of mistake) add it to the list.

Whenever you are tempted to make an emotional trade but don't proceed and do exercise appropriate discipline - go and find that pitfall on your list and put a tick next to it for succesfully avoiding it.

I believe that if you follow this you will very quickly start to develop a new behaviour pattern surrounding these emotional/undisciplined trade pitfalls.
 
Cuttlefish,

It sounds logical. I have built extensive lists of what works and what doesn’t.

But undiscipline, emotional trading, I suspect is actually a “symptom” not a “cause” in my case. I’ve tried to explain my view on this in post #32 above.

It’s more likely that my temperament is not suited to staring at a screen 10hrs a day, and that’s what I’ve been doing. So I am reducing my screen time significantly; previously when I have done this my results have been consistently profitable, and more importantly I am happier within myself.

Trading is still my passion, but as Frank said above, “Don’t feel you have to be busy to make money.” Less in my case, is probably going to end up being more.

** Trading is far more involved than I imagined when I began. I never realised I need more than a strategy that works and the ability to implement it in real time. I also need to synchronise temperament with instrument, time-frames and style. Aligning all of these takes time.


Frank,

Yes, there is the issue of too much screen time as mentioned, but also the issue of real time skill/ experience. Your system does provide blatantly obvious set-ups and varying degrees of, along the continuum. Sorting these in real time takes experience.

As you say, a range of markets/instruments will give me access to more high probability set-ups, than the SPI alone does; potentially warding off the tendency to try and squeeze more out of the SPI than it has to offer.

Another instrument or market is something to implement when I decide to increase my screen hours, in the future.



Thanks again to All who have contributed.
 
Hi James Austin

Having read your posts, it seems obvious to me that your major obstacle to trading success is one of mindset. Forget the excuses and the intellectallising and "Make up your mind"

Cheers
Happytrader
 
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