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Is Trading Psychology a Hoax?
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Is Trading Psychology a Hoax?

  #21 (permalink)
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An interesting article i read this week about this topic :


Quoting 
What if it was all wrong? The common advice you hear about trading, that is. What if it was, plain and simple, wrong? Have you ever really considered that?

You’ve been told that you need to focus on simplicity. And that you have to find a few trusted setups to execute with discipline each time they show up. And that all you need is good psychology and you’ll be profitable. But who tells you all of this?...

Source: If I Could Teach You One Thing About Trading Success, This Is It | OpenTrader Pro Trading Blog

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  #22 (permalink)
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I think most everybody who is defending Psychology are so fixed on their views that totally miss the point. What really was said is this: " If you know how to run your business you don't need psychology." They all seem to be missing that big "If."

Just because you skinned a rabbit, you are not ready to perform heart surgery. Same for trading, just because you have SIM traded for for 2 years it does not mean you are an accomplished trader businessperson. You need at least a four years degree and 4 years in field before you can even enter the professional world in anything.

Successful traders that know the trading business don't need psychology. The get-rich-overnight enthusiasts that have blown two accounts following 30 days of SIM trading are the majority that the trading shrinks seek to heal.

Nothing though wrong with reading something like Covey's "The 7 Habits of Highly Successful People", you learn ideas (all from old wisdom) that will help one in all aspects of life, including a trading business. These are some of the stuff that the trader's shrink put on a slide show in a 2-days seminar for $999.

Here is a little joyful 2-hrs read book($2.99) that would tell all one needs to know in addition to what one learned in kindergarten, "The Richest Man in Babylon."

Cheers!

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  #23 (permalink)
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aligator View Post
I think most everybody who is defending Psychology are so fixed on their views that totally miss the point. What really was said is this: " If you know how to run your business you don't need psychology." They all seem to be missing that big "If."
...!

I know quite a few good businessmen who have suffered from a burnout episode but were able to get back on track by exploring their psychological weaknesses and doing the necessary changes despite the fact they knew how to run their business. Psychology plays an important role in business to be sure you just need to type this in Google: "What Role Does Psychology Play in Business".

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  #24 (permalink)
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Psychology will not fix a bad strategy but psychological issues can destroy a good strategy.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #25 (permalink)
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aligator View Post
Successful traders that know the trading business don't need psychology.

In the nicest possible way, I would like to say that is ridiculous and really ignorant.

Do you think Tiger Woods just forgot how to play golf after all his scandals? Or was it that he had so much going on in his head, that his game suffered?

You seem to be going out of your way to say it is all skill, and that skill has nothing to do with psychology (the mind). I am having a lot of trouble connecting with you on this because it is so far and distant from my own beliefs and experiences, and what I know and believe to be true.

I have talked to a ton of successful traders, I can't think of a single one who has ever told me that psychology has no place in trading.

Mike

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  #26 (permalink)
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Silvester17 View Post
you should not be a doctor. nobody cares about the aspect of psychology. I know this is a far fetched example.

No one disputes that the state of the mind is not "Black and White." But @Silvester17, your example is not far fetched at all.

Here is a real example. My brother is a well respected reconstructive ophthalmologist surgeon with patients form around the world in his clinic. He has been doing major delicate eye surgeries for over 35 years without a failure of his fault. He knows what he is doing, updated on latest technology, lectures at major universities, and attends medical conferences all over the world. You would think performing just another surgery for him is a piece of cake.

While he is doing the surgery he is totally in control and the only things on his mind are the procedure and the safety of the patient. But I must tell you when he is done he is mentally a wreck and stressed out.

Does he need a psychiatrist to help him deal with post surgery stress and high levels of adrenalin? It is part of his job, he knows it, and he does it well.

Now, if he fails in the surgery because he can not psychologically, intellectually, and physically handle the task, then he should not be a surgeon. Just like the fictional Doc Martin, the surgeon, that can not stand the sight of blood so he became a GP in Portwenn, to treat common cold and runny noses. Even the shrink could not help him so that he becomes the chief surgeon at the Royal College. This is fictional, but is so true in real life.

Got to know your business, you are either made for it or not.

Cheers!


Last edited by aligator; October 4th, 2012 at 02:36 PM.
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  #27 (permalink)
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I kinda get where you are coming from alligator but you take it a bit too far.

Yes, there is no question that you need to know what you are doing in this business to be successful. However, I disagree that successful businessmen (let alone traders) don't need to get their head screwed on straight.

When you are under pressure you are going to be challenged whether in business or trading. Obviously if you know nothing about how to be a successful businessman or trader you can't succeed. But often the additional edge that differentiates the great businessmen and traders is having their head together.

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  #28 (permalink)
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I think the issue @aligator seems to have is with paying for "professional help" from what he calls a shrink. This has nothing to do with my argument or anything I've said, as I am not for or against that at all.

My argument has simply been that psychology is important. I'm not telling you to go seek out help or pay for it.

That said, in general, I would say that spending time, energy and money on a trading coach that specifically focuses on psychology, and not on methodology, indicators or systems, is a much smarter decision than spending money, time and energy on chasing vendors selling holy grails.

Mike

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  #29 (permalink)
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Big Mike View Post
In the nicest possible way, I would like to say that is ridiculous and really ignorant.

Do you think Tiger Woods just forgot how to play golf after all his scandals? Or was it that he had so much going on in his head, that his game suffered?

You seem to be going out of your way to say it is all skill, and that skill has nothing to do with psychology (the mind). I am having a lot of trouble connecting with you on this because it is so far and distant from my own beliefs and experiences, and what I know and believe to be true.

I have talked to a ton of successful traders, I can't think of a single one who has ever told me that psychology has no place in trading.

Mike

Quite to the contrary, it is not all skills. You can not run any business without the mental and physical abilities demanded by that particular business. We are not talking here about Tiger or Rory that have been conditioned to play golf from the time they were in diapers, 2 of a kind in 7 billions. We are talking about average business people with mental and physical ability demanded by the skill set they they found suitable for making a living.

Psychology has everything to do with any business, to put the records straight. Part of knowing your business, other than skills, is to know that you are capable of running that business.

Also, in response to our other friend; burning out and stressed out are not necessarily psychological problems for overachievers, more often than not are related to an imbalance between work and other things important in a healthy life. A vacation would likely do more good than a shrink.

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  #30 (permalink)
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Alligator-automated trading should be done after becoming a profitable discretionary trader. If automation is superior, then why should someone who can't discretionary trade expect to work as a quant?

A small automated system will take thousands, possibly only hundreds, of man hours to get working. Like small iPhone apps (forget the big ones like Garmin) it takes teams to accomplish this, with most people working on orders from a boss to complete the tedious stuff. This is a waste of time for an individual novice.

If someone is properly given the correct instructions on what to do (this does not mean bucket shops), they can become a profitable discretionary trader in just months. Yes, automated trading gives cool backtest results, but these are fool's gold. Creating human backtest results by practicing the market live (retail time or though a sim like Ninjatrader) and perfecting a skill that gives you your minimum profitability and consistency is how one becomes rich as a trader.

"A Jedi's strength flows from the force."
-Yoda
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