Trading psychology

[fallenangel22]

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]

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]

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]

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]

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]

So if you cant afford losses then dont trade?

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

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 ----

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]

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

 

[Nick Radge]

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]

The 2 quickest ways to go broke.

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

 

[Stormin_Norman]

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

psychopathic even.

 

[Cartman]

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]

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

psychopathic even.

i'm set then !! :taz:

 

[tech/a]

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]

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]

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]

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 ---

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]

"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]

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]

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]

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.