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Trading Psychology and How The Mind Works (III)
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Trading Psychology and How The Mind Works (III)

  #11 (permalink)
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Great posts George.
Thanks for sharing your knowledge.

Luis

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  #12 (permalink)
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Big Mike,

I'll start another tread on The Diciplined Trader so as not to hijack this one!!

Regards, NMTrader
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So true, clear your charts and focus on what's between your ears!

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  #14 (permalink)
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Re:
"I do want to make money, I love money, I love trading! But I'm still losing money.
What we're experiencing here is a conflict between the conscious mind and the subconscious mind."

I found these a very provocative couple of sentences, along the the theme of 'fear of success'.

When I first started trading, I thought it was because I was trying to raise money in order to be able to do other things that I felt were important, i.e. it was a means to an end. I did not acknowledge to myself a certain fascination with markets in general, outsmarting everyone else, trying to achieve a goal without too much effort, and also the sheer pleasure of looking at charts and analysing systems.

Actually, I almost managed to achieve the initial goal within 6 weeks of seriously trading but exited a very, very lucky position (short the SP before the 87 crash) several hours too early. But after that, I kept going and increasingly the activity was no longer about the initial goal but some sort of fascination combined with determination to 'get back' what I 'should have got' the first time around.

So there is some sort of fascination principle at play on several levels which I have not been willing to admit for quite a while. Secondly, I have to say that I am not sure I 'love trading'. On many levels, I hate it. In fact, I think it is a somewhat immoral activity whose sole purpose is to benefit oneself without contributing anything positive.

I agree with you that money is just a tool, and that is what I have often told myself. I also don't buy into the work ethic per se. But what is money a tool for? Probably Maslow's hierarchy of needs answers this, but when I started long ago I had no serious financial problems but was just trying to bump things up a level or two so I could expand other capabilities. Now I just need the money to pay for the basics, i.e. a lower level on Maslow's hierarchy, aka the survival level. But still in terms of work ethic, or 'working for money', I think that money is a medium of exchange which ultimately is received/earned based on what one contributes to society in some way.

Some people make more than their contribution is worth, some far less, but what matters here is not the dollar amount, rather that in that process they are expressing themselves in society in some fashion and in so doing contributing and thus maintaining a livelihood.

Of course one can trade for a livelihood, as probably many on this board are doing or aspiring to do. But even so, even if one makes money steadily from trading, the real issue is what one does with it and what one expresses/contributes to society. If it is solely about accumulating dollars in a bank account, this is rather shallow, but more importantly, only a small part of the equation that is called 'a life'.

So I definitely have conflicts about trading since on some level I am not convinced that it is a bona fide productive activity no matter how I have justified it to myself as a 'means to an end' or that 'money doesn't really exist anyway' etc. etc.

Now as to 'fear of success' that is an interesting topic about which there is dimension I would just like to add a comment, namely:

I have often thought of this in terms of 'being afraid to shine forth'. There are many levels to this but I think ultimately most of us are far more than we manage to express/manifest. This is partly a function of 'programming' as you call it, but also group think, to which all of us contribute and by which all of us are influenced.

Cultures/societies go through periods where certain values are promoted and others discouraged/suppressed. It is very hard not to be influenced by all this. And quite possibly one of the ways in which one becomes 'afraid to shine' is simply that in the culture what one would REALLY like to do and contribute has no value, either in monetary or cultural terms.

Ultimately it seems to come down to being willing to BOTH be a functioning, productive member of society/community and ALSO take responsibility for and create one's own reality. Perhaps this latter is what separates true adults, as it were, from sheople.

My conflict with trading, during both good and bad times, is that one is dependent upon markets which one has little control over, or more importantly responsibility for. One is not responsible for their existence and behaviour in the same way that one can manage one's own small business, trade or farm. So in some sense it is a passive, derivative or even parasitical activity.

More importantly, I cannot honestly state that I believe that were I to truly 'shine' to the limits of my abilities and character, that trading would be a bona fide expression of this. Far from it.

So that's a definite 'subconscious conflict' if you will; and one which I suspect many people share in many fields other than trading.

That said, one can hold down a job at MacDonalds, which one might despise as an institution, and still turn that situation into one which develops discipline and other virtues, especially if one is raising a family from the money earned. So the way one earns a livelihood is not necessarily the prime determinant of how one develops character. Perhaps that is also true with trading if trading is regarded as 'the job' but then personal, family and community life when not trading is regarded as the real, or more fundamental, measure of 'success'.


Last edited by cclsys; November 4th, 2009 at 04:12 PM. Reason: correcting typos etc.
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  #15 (permalink)
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cclsys,

First of all , thank you for bringing life into this old thread. Second I'd like to go on provoking by making some comments, if you don't mind! The purpose is to be constructive.

..." I think it is a somewhat immoral activity whose sole purpose is to benefit oneself without contributing anything positive."
But aren't you contributing to society by giving away money when you're loosing them? Money change hands. And aren't you contributing when you gain money, by paying taxes?

..."I agree with you that money is just a tool, and that is what I have often told myself. I also don't buy into the work ethic per se. But what is money a tool for?"

In my opinion, money is a tool for control. Have a look at the very few native societies that are left on this planet. Do you see any money involved in their day to day life, in order to fulfill a need or to survive?
..."But still in terms of work ethic, or 'working for money', I think that money is a medium of exchange which ultimately is received/earned based on what one contributes to society in some way."
Did you know that the third biggest cause of death in USA is caused by doctors (medical errors)(first is cancer, second heart disease). In what way does that apply to be earning your contribution to society?

In my opinion in order to imply Maslow into all this, we're programed with a lot of fear, that gives birth to the need for safety/security (hence M scale of needs). That's why I choose to describe money as a tool, as a reflection of security being met by it. I hardly think that people wake up every day with the need of going to their day to day work with a conscious thought of ""mmm I'm going to contribute today to my community, society etc." They do it based on fear of loosing ones security. No money, no food on the table roof over the head etc. etc.

..."So I definitely have conflicts about trading since on some level I am not convinced that it is a bona fide productive activity no matter how I have justified it to myself as a 'means to an end' or that 'money doesn't really exist anyway' etc. etc.
. "
In my opinion, this is the part where you put the dot over the i. If you may, this is a great example of having a conflict between ones conscious and subconscious mind. What the conflict is all about is hidden in your own subconscious mind. And it goes a bit hand in hand with this.

"I have often thought of this in terms of 'being afraid to shine forth'. There are many levels to this but I think ultimately most of us are far more than we manage to express/manifest. This is partly a function of 'programming' as you call it, but also group think, to which all of us contribute and by which all of us are influenced."

..."Cultures/societies go through periods where certain values are promoted and others discouraged/suppressed. It is very hard not to be influenced by all this. And quite possibly one of the ways in which one becomes 'afraid to shine' is simply that in the culture what one would REALLY like to do and contribute has no value, either in monetary or cultural terms."

But isn't this just another reflection of a conflict between the conscious and the subconscious mind? Conscioulsy one wants very much to do what's required, but subconsciously there are always needs that need to be fulfilled. Such as approvals, the need for control and security, etc. etc. And no matter how much one does in order to get these things from outside of himself (society) they never satisfies completely the need. One does indeed create his/her own reality!

..."My conflict with trading, during both good and bad times, is that one is dependent upon markets which one has little control over,..."

But you don't need to control the markets, in fact that would be like trying to control milions of people with one mind. That's indeed possible but your name then has to be Obama or Sarkozy etc. and the criteria that has to be met is that millions of people give away their own power in order to be controlled. But that's not the case in the markets. The markets are supposed to be free (hence the chaos), people do whatever they want. The only thing you need to discover is the need to control your perception. Whenever you're perceiving something that has the function of fullfiling ones need, the mind does everthing possible to put on a filter, and to concentrate all the exterior action toward the fullfiling of that need. The only thing you have to take responsability over is to get rid of that need. When you do that, you're going to be able to perceive what's really happening in the now. By doing that you get rid of all the filters and you'll be able to act "properly".

You're even going to be able to get rid of this ..."So in some sense it is a passive, derivative or even parasitical activity. "
Becuse all that is, it's just a filter that your mind is adding to it. Do yourself a favor, in order to discover what this whole thing is about. Do your best, and by that I really mean that you really, really have to try hard.Try NOT TO BE IN THE NOW! (and see what happens)!

/George

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  #16 (permalink)
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George, good reply.

I won't go through point by point which is pointless (pun intended) on this thread. Each expression speaks for itself. But to rejoin with a few points[!] anyway:

Re: ""I have often thought of this in terms of 'being afraid to shine forth'. There are many levels to this but I think ultimately most of us are far more than we manage to express/manifest. This is partly a function of 'programming' as you call it, but also group think, to which all of us contribute and by which all of us are influenced."

I meant to have in there the root thought which got lost in the typing, namely: but ultimately it's not about programming or others so much as about our own willingness to overcome laziness and cowardice to find our own way of shining forth and take responsibility for it no matter what our background, habits and cultural or other obstacles."

In terms of Maslow (which I have never studied), my impression from long ago is that the first level is that of survival, and then you go up and up into more status and then spiritual priorities. And money can be related at most if not all of them. At the initial level it may well be about survival. But later on it might not, so the fear-greed responses to trading will be greatly influenced by that context.

If one is in desperate straits trading a $5,000 account from credit card money and hoping to pay the bills or be faced with ruin in 3 months, this is very different from being a multimillionaire day trading 3 cars in the emini once or twice a day to experiment, study risk-reward paradigms and so forth. So the same money is quite different depending upon situation/perspective.

There is more I could say to clarify my original post and in response to yours, but my inclination is just to sit with the topic and let it resonate a little. I find this issue quite interesting/important and keep flashing on several different - and often contradictory - contemplations about it.

So thanks for provoking it.

And stay provocative!

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I've discovered a few little tricks that help my trading:

1] Take Regular Breaks

When the market allows, I get up and walk around. Maybe do a few push ups. This helps clear my mind, and when I come back to the computer my mind can focus much better.

2] Don't Trade Hungry
After studying my trades I've noticed a drop-off in consistency as lunch time approaches. The logical conclusion is that I make better decisions early on when my mind is fully energized. A banana now and then works wonders.

3] Set Goals
It is easier for me to execute trades properly when I can guage my progress throughout the trading session. Personally, I shoot for 20 pips per session and trade 2 sessions. It doesn't matter how many contracts I'm trading, my goal remains the same. For example, if I enter a trade with 2 contracts and take 1 off at +5 and the other off at +9 then I'll just average the two. I've made 7 pips towards my goal of 20. Before, I felt setting goals limits potential success. But I've discovered it focuses my mind instead if I use a yardstick to measure my progress.

4] Become A Robot
It sure would be nice if I could program everything I know about trading and enter it into a Cray super computer. But I can't so I have to do the next best thing. And that is to take my trading rules and use them consistently. In the end, that is what discipline is all about, trading your rules consistently. For me, using rules #1-3 above help me become more disciplined.

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  #18 (permalink)
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Markets as 'people stuff'


cclsys View Post
Re:
"I do want to make money, I love money, I love trading! But I'm still losing money.
What we're experiencing here is a conflict between the conscious mind and the subconscious mind."

"" I found these a very provocative couple of sentences, along the the theme of 'fear of success'.

When I first started trading, I thought it was because I was trying to raise money in order to be able to do other things that I felt were important, i.e. it was a means to an end. I did not acknowledge to myself a certain fascination with markets in general, outsmarting everyone else, trying to achieve a goal without too much effort, and also the sheer pleasure of looking at charts and analysing systems.

Actually, I almost managed to achieve the initial goal within 6 weeks of seriously trading but exited a very, very lucky position (short the SP before the 87 crash) several hours too early. But after that, I kept going and increasingly the activity was no longer about the initial goal but some sort of fascination combined with determination to 'get back' what I 'should have got' the first time around.

So there is some sort of fascination principle at play on several levels which I have not been willing to admit for quite a while. ""

Provocative, timely, insightful, dramatic, and just totally correct ... for some ..

I went to farm auctions as a kid, and it was always a fascination listening to the auctioneers do their chants ...but not enough to try it myself. We sold chickens and produce in the weekly Farmer's Market during the 60s-80s and that was an experience in itself, making sure that we didnt bring anything home [rarely did unless it was a horrible weather day]. Later I went to auctions to bid and realized it was better to never over pay because there was always a supply somewhere, but the farm next door might never come up for sale in my lifetime again. Lessons in value came very early.

I was lucky, damn lucky, to have the privelege of growing up country: it gave me an outlook that (I think) few other people really appreciate. If you ever have an opportunity to see the videos that Mark Cook has, and how he developed from farm boy to day trader you will see the psychology in play.

I am not there yet, but I have reread Steenbarger more times than I remember, and also realize that all my losses are due to overconfidence and greed, about 50/50. Ed Seykota has a 'trading tribe' book and organization that I eventually will be exploring: emotions rule everything humans touch (maybe even the code in the programmed trading computers??? ) and technical analysis will always lag.

SO What to do? Well I am just trying to do the best I can to understand myself with tools and resources I buy or build, to recognize and work with my emotions because in the end I am the one that controls if I am making the $$ or not. I have used EFT and emWave machine to allow my focus to be on the market, and while indicators may lag the mind can watch for high probability patterns. I have had a month where I made money each day that I decided to trade, and a month that I was emotionally affected by a person in my life to the point I wrecked my trading account to the minimum I can trade with.

I look at trading as a process: the unwise will have less in the end, and those that understand what is possible, and what they are capable of, have the advantage.

I trade for more than just the money: I trade for what the money can do for myself and others. Being honest, I have high goals: and I know where it is all going.

Best of who you want to be, each and everyone of you!

TJ

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  #19 (permalink)
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Yes-Simplify!

Once again some great words of trading wisdom from trader Denise Schull.

Shivaya

From the desk of Denise Schull:

Did you know that if someone presents you with 12 cars to choose from that the odds of you buying any car at all plummet?
In contrast, if they reduce the number of choices to 4, chances are you will sign on the dotted line.
Maybe you did and maybe you didn't but what has it got to do with trading?
- CHOICE OVERLOAD!
And choice overload is what most traders have on their charts, in their plan and unfortunately in their head when decision time comes.


The brain simply gets overwhelmed - and when you have too many pieces of data on your charts... the same thing can easily happen.
Think about it - what is the total number of combinations of discreet elements that can be created from the info you are looking at?

Now... you can make the argument that the choice is always to buy or sell but is it really?

Isn't it to buy or sell or get out now or get out later or move your stop or not move your stop or... the NQ says this.. and the $TICK says that...
Again, how many combos?
Single best tip - pare it down and simplify. More info doesn't make your trade more likely to work it makes you less able to make a good decision!

In other words, it ironically does the exact opposite of what you expect ... it lowers your confidence!



The mental game is cited as #1 reason for success or failure.

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  #20 (permalink)
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cclsys View Post
So there is some sort of fascination principle at play on several levels which I have not been willing to admit for quite a while. Secondly, I have to say that I am not sure I 'love trading'. On many levels, I hate it. In fact, I think it is a somewhat immoral activity whose sole purpose is to benefit oneself without contributing anything positive.

This is only true if you keep all of the money. If on the other hand, you have a goal to generate a lot of money from trading and donate most of it to charity, you are probably doing one of the most useful things you can do with your time. Just about anyone who puts money into the market is a person who can afford to lose some of it... so when you take their money as a trader and then give it to those who need it a lot more (like starving children), then you are anything but a parasite. In fact, you are probably doing one of the most useful things you can do to make the world a better place. If on the other hand you just plan to keep it all for yourself to buy a big yacht, a few mansions, or a fleet of Ferrarris, then you probably will feel some internal conflict from the notion that you are useless to society. You're not a parasite if you do something useful with the money, only if you waste it all on yourself.




Quoting 
I agree with you that money is just a tool, and that is what I have often told myself. I also don't buy into the work ethic per se. But what is money a tool for?

It is a tool for whatever you choose to use it for. If you choose to spend it selfishly, then it is a tool for self-gratification. If you choose to spend it in helping other people, then it is a tool for positive change in the world. It's up to you to decide.




Quoting 
Cultures/societies go through periods where certain values are promoted and others discouraged/suppressed. It is very hard not to be influenced by all this. And quite possibly one of the ways in which one becomes 'afraid to shine' is simply that in the culture what one would REALLY like to do and contribute has no value, either in monetary or cultural terms.

Ultimately it seems to come down to being willing to BOTH be a functioning, productive member of society/community and ALSO take responsibility for and create one's own reality. Perhaps this latter is what separates true adults, as it were, from sheople.

I think it's fair to say that any truly successful trader is definitely not one of the sheople. Many people are drawn to trading because of the freedom and independence that it represents, yet when it comes right down to it, most of those people actually "chicken out" when it comes time to take responsibility for their own success/failure and living on their own terms. In many ways, they are afraid to let go of their monetary struggles, because if you do that, then what is left? For many people, it's a void that they don't want to face. So they self-sabotage themselves to stay with their money problems, because that is a comfortable reality that they are used to. Generating a lot of money very suddenly can vault a person into a big unknown place, and that is a scary proposition for most.


Last edited by FBJS; February 13th, 2010 at 07:50 PM.
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