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

  #31 (permalink)
Market Wizard
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Big Mike View Post
I think the issue @aligator seems to have is with paying for "professional help" from what he calls a shrink.

To be clear, I have no "issues" with the so the called "professionals" or self-promoted internet trader's shrinks, many of whom are without even a two years junior college education in psychology. If anyone wants to pay them, at least ask for proper professional credentials.

If one has acquired the skills, education, mental, physical, and resource capabilities demanded for a specific job he will most likely be successful and there is no need for a "professional" when he makes a mistake. He knows how to fix things.

That does not mean one should not sharpen his saw (the 7th Habit) to keep up with self, time, and competition.

Of course everyone has an opinion, whether it is ignorant or uninformed. Only long experience will tell one at a time when its no longer relevant.

So, Cheers to all opinions.

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  #32 (permalink)
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aligator View Post

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.

I don't know if he needs "professional help" to deal with post surgery stress, but I would say with confidence that being an excellent surgeon and also not stressed out by that excellence is superior to being an excellent surgeon and stressed out by that excellence.

I have no idea if it's possible to be an excellent surgeon and not suffer from post-surgery stress, but if I was a surgeon I'd be interested in exploring that, even if I was doing that exploration alone and on my own.

@aligator, do you feel the same way at the end of the trading day that your brother feels after a surgery?

best,
RK

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  #33 (permalink)
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Psychology/Mindset/Mental Discipline


Anyone reading this board ever had any of the following issues?:

1. Not taking a trade in your plan because you did not think it would work?
2. Not taking a trade in your plan after a couple of losses in a row?
3. Taking a trade immediately after a loss that is not in your plan? And then after another loss, another trade not in your plan?
4. Chasing a price move because you are afraid it is going to run without you only to see it reverse after you jump in?
5. Averaging into a losing position because you just believe you are right and price will come back to where you bought?
6. Moving your stop further away from your original stop to "give it more room"?
7. Moving your stop to break even too early only to get stopped out and it then run without you?
8. Continuous counter trend trades because you feel price has moved too far and you expect a reversal?
9. Refusal to close out a losing trade and holding it until later in the day or the next day taking a bigger loss than your original stop?
10. Trying to get your losses back as soon as you can by taking trades outside of your plan.

If you haven't had any of these issues, you are either a master trader or have never traded before. Chances are if you have had several of these happen to you, you either have no trading plan and should not be trading or your mindset around trading needs some work.

Call it psychology, call it mindset, call it mental discipline , or whatever suits your fancy. My guess is that is what needs work if you are doing any of the items very frequently above and they are not specified in your trading plan.


Wolf

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  #34 (permalink)
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Trading psychology is a hoax, human psychology is not. We bring into trading our human psychology, and that will certainly affect the way we trade. We need to recognize our own individual psychological traits, in order to choose the best trading approach that will work with those psychological traits.

I don't believe we should try to change our behavior, and/or force ourselves to behave in a way that is contrary to our nature, that is a recipe for failure. For instance, I am a scalper by nature, and a counter trend trader by nature. I tried trend trading higher time frames, I failed miserably, because I just couldn't be in trades for so long, and couldn't watch the market for so long without fiddling with active trades, or close trades due to impatience and frustration. I realized, if I was going to make it as a trader, it would have to be as a scalper, or I might as well pack it in. Either spend years of therapy changing my psychology, or spend that time developing an approach that worked with my psychology.

Even after putting the time and effort to develop a scalping approach that worked for me, I still had related psychological issues. One of my biggest, and still problematic area is revenge trading. For some reason, sometimes I get really pissed at 2 or more losing trades in a row, even though I know the win percentage of my method, and I know what expected string of losing trades is within those parameters. In order to curtail this, I needed to customize my charts and entry methods to circumvent that behavior.

I actually had to remove the discretionary entry buttons in chart trader, because even though I had my own customized entry/exit/management buttons that only allowed me to manage trades according to my trading method, when I got frustrated, I could always go to chart trader and start clicking buttons as a response. The pic below shows what my charts look like. If you notice, there are no default discretionary 'Buy', 'Sell' buttons. If I'm gonna enter a trade, it is going to be exactly according to what my strategy says I should enter. If I'm gonna manage a trade, it will be exactly how my strategy says I should manage a trade. A good portion of the technical aspects of my trading are customizations to specifically circumvent my psychological shortcomings. Crazy? maybe, but it works for me. I would have been out of this business a long time ago, if I had to force myself to trade like TraderX,Y, and Z.

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Last edited by monpere; October 5th, 2012 at 09:33 AM.
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  #35 (permalink)
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monpere View Post
In order to curtail this, I needed to customize my charts and entry methods to circumvent that behavior.

Monpere, your approach is wild, fantastic, and inspiring! Thanks for sharing your mind-expanding custom solution.

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  #36 (permalink)
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IMO a trader needs a to define a real edge first, which is numerically quantifiable. If it is not, or cannot be, 100% automated, then psychology enters the picture.

Much of the psych I have seen involved overcoming some fear/barrier to trading - but if you do not have a quantifiable edge, then that fear is actually useful to (hopefully) keep you from going broke!

I liked reading Dr. Brett before he went private with a company, because he did both successfully.

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  #37 (permalink)
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Tarkus11 View Post
IMO a trader needs a to define a real edge first, which is numerically quantifiable. If it is not, or cannot be, 100% automated, then psychology enters the picture.

Much of the psych I have seen involved overcoming some fear/barrier to trading - but if you do not have a quantifiable edge, then that fear is actually useful to (hopefully) keep you from going broke!

I liked reading Dr. Brett before he went private with a company, because he did both successfully.

Psychology is always in the picture. It is impossible to have a hands off automated system. Further the third step in trading is execution, and this requires total human control. If a human cannot properly execute an automated system (this is as important as development), then it is no good. Again, psychology.

Robots cannot read news. They also cannot adapt and understand sentiment. Their only use is for dominating human made algorithms/code through cpu usage and low latency. This does not permit fully automated systems to be successful. I question anyone who says this, because they have not traded automated themselves.

New traders should focus on descretionary trading, and be able to quantify their success in a simulator over a period. As they reach profitability, they can then bring in execution into the picture, and then move on to trading their live account.

"A Jedi's strength flows from the force."
-Yoda
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  #38 (permalink)
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monpere View Post
Trading psychology is a hoax


monpere View Post
I failed miserably, because I just couldn't be in trades for so long, and couldn't watch the market for so long without fiddling with active trades, or close trades due to impatience and frustration.


monpere View Post
Trading psychology is a hoax


monpere View Post
I still had related psychological issues. One of my biggest, and still problematic area is revenge trading. For some reason, sometimes I get really pissed at 2 or more losing trades in a row


monpere View Post
Trading psychology is a hoax


monpere View Post
I actually had to remove the discretionary entry buttons in chart trader


monpere View Post
Trading psychology is a hoax


monpere View Post
A good portion of the technical aspects of my trading are customizations to specifically circumvent my psychological shortcomings


monpere View Post
Trading psychology is a hoax

Does not compute.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

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  #39 (permalink)
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Big Mike View Post
Does not compute.

Mike

Read the post again @Big Mike. The quote is "Trading psychology is a hoax, human psychology is not. ". Obviously, (or maybe not so obviously) I am being facetious, and I'm really saying that psychology is important in trading...especially since the rest of the post goes on to detail all my trading psychology issues, and how I deal with them !!!

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  #40 (permalink)
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monpere View Post
Read the post again @Big Mike. The quote is "Trading psychology is a hoax, human psychology is not. ". Obviously, (or maybe not so obviously) I am being facetious, and I'm really saying that psychology is important in trading...especially since the rest of the post goes on to detail all my trading psychology issues, and how I deal with them !!!

OK thanks, I didn't get that message. I was shaking my head as I read your post... but that is not unusual LOL (just kidding)

I've talked to plenty of traders who would have written something very similar to what you did, but not be joking when they say psychology isn't important. It's like they are completely disconnected from what is happening.

Enjoy your weekend.



Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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