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

  #61 (permalink)
Market Wizard
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wldman View Post
don't have any skill and I have a bad mindset how would I fix that?

To get skill, the 10,000 hour rule is probably a good start. It says to become proficient in anything, you need to put in around 10,000 hours of study and practice.

Once you did that, you'd likely have some skill, and that would dramatically improve your mindset. But changing your mind probably takes 10K hours of real money trading time.

It is a big time investment, for an uncertain outcome...

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  #62 (permalink)
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wldman View Post
don't have any skill and I have a bad mindset how would I fix that?

A good start is to learn the traders equation. This is the basis of making a profit in trading.

Al Brooks mentions the traders equation in his books, which says that the potential reward of a trade must be greater than the potential loss.

(probability of success * reward) > (probability of failure * risk)



You should also read about money management for matters such as how much to risk on one trade and how much you need in capital. For example, if you risk no more than 2% of capital on a trade on the ES you need $2,500 per point of stop loss for your method.


Next you need to have a way to assess good opportunities based on how the market works, which is based on supply and demand. I am a short term technical trader, so I ignore fundamentals and I use a mix of Volume Spread Analysis (VSA) and price action trading. VSA is good for using volume to see where markets are likely to turn and when to enter a trade. Reading price action is also useful and that can be used profitably on its own.

However, you need to consider what suits you, which takes us back to psychology. This first thing to do is to work out if you like fast action or if you like lots of time to think about things. A person who like to ponder would probably prefer swing trading and a fast thinking person might prefer day trading (assuming they have the time to devote). It is ideal to have a trading method that fits your personality, the amount of your risk capital and the time you have available to trade.

These are just some points to consider. There are others that I have not mentioned, but this is a thread about psychology and that's where it should focus.

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  #63 (permalink)
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aligator View Post


Millions of businesses in the USA and many millions around the globe do not pay a shrink to tell them how to run their business. So, why is it that 90 percent of all traders need a psychiatrist to analyze their trading behavior? Simple; they need someone to supposedly explain to them why they are failing running a business that they have no clue how to run it.

Ask again, why someone who has all the answers about how to run a successful trading "business" would spend time with a bunch of "failures" know it all not good for trading, for $300 an hour where he can potentially make many times more just having a trading "business."


Trading shrinks are useless cause failure is part of everyone’s life. By nature it’s much easier to loose than win. If you can overcome your old way of thinking, master emotional stress, and execute your plan with discipline, you will master the failure, gain confidence, and save $$$ on shrinks.

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  #64 (permalink)
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zonkilam View Post
Trading shrinks are useless cause failure is part of everyone’s life. By nature it’s much easier to loose than win. If you can overcome your old way of thinking, master emotional stress, and execute your plan with discipline, you will master the failure, gain confidence, and save $$$ on shrinks.


Personally, I have not sought such services as I think that I can learn enough from books and webinars, but I would certainly not say that trading psychologists are useless.

They are an option that will suit some people, based on the traders needs and preferences. People can be very good at denial of problems and sometimes another person can see what you can't see or refuse to see. A specialist in these matters can help you to learn faster than you can on your own, but, of course, its your choice.

There are predictable patterns in how we make mistakes and it is worth knowing these things as a trader, however you chose to learn about them.


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  #65 (permalink)
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pawnbroker View Post
A good start is to learn the traders equation. This is the basis of making a profit in trading.

Al Brooks mentions the traders equation in his books, which says that the potential reward of a trade must be greater than the potential loss.

(probability of success * reward) > (probability of failure * risk)



He also went into detail in his last futures.io (formerly BMT) webinar on probabilities:
Webinar: Al Brooks on Probabilities, Timing, Scaling

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  #66 (permalink)
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zonkilam View Post
Trading shrinks are useless cause failure is part of everyone’s life. By nature it’s much easier to loose than win. If you can overcome your old way of thinking, master emotional stress, and execute your plan with discipline, you will master the failure, gain confidence, and save $$$ on shrinks.

Thanks. It all boils down the the big".....IF....." , explained a few times before in this thread. So, if a [Trader] does not address this "big if" first, he should get out of trading and stop wasting more money consulting a shrink.


Last edited by aligator; January 31st, 2013 at 06:40 PM.
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  #67 (permalink)
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Is trading psychology a hoax?

This field exists because there is a need from traders who have goals. The psychology 'option' I suppose is just one of the things we can try to get us closer to our personal goals.

But....

In my view it is impossible to disprove (or prove) as I can not think of a way it can be empirically tested. There will be as many variables to control for as there will be individuals in the sample - because it's psychology, by definition it's subjective. No two people in a group can be seen as the same. No?

The question set in a generalised way is somewhat difficult to answer. It will be a hoax (to you) if you have tried it and not felt that it has benefited your trading in some way (and it may benefit your trading indirectly in some way, but you'll never know). You'll drop it and become a sceptic.

And vice versa.

Personally I dig it and have become somewhat addicted to the subject. My wife tells me I am a nicer guy too.

know thyself
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  #68 (permalink)
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The key to profitable trading is to create an "edge." When I was trading on the floor, I was able to buy-the-bid and sell-the-offer; in essence, buying below fair value and selling above fair value. This was a concrete edge, not unlike the house edge a casino enjoys over non-professional gamblers. Professional gamblers, especially those who play Blackjack, and are adept at card counting, may enjoy about a 1% edge. Creating an edge in screen trading is far more difficult, in my opinion, due to variance, ever-changing cycles, and fear induced losses. It's extremely difficult to quantify what kind of a realistic edge is attainable in trading, but it's probably something akin to the card counter's. This leaves little room for error, and demands of the trader something approaching perfection. Sometimes "deliberate practice," no matter how many hours are invested, is not enough. Mentor-ship, counseling, and/guidance may be necessary, to successfully attain mastery, and if it helps, would be money well spent.


Last edited by tigertrader; January 31st, 2013 at 08:38 PM.
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  #69 (permalink)
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tigertrader View Post
The key to profitable trading is to create an "edge." When I was trading on the floor, I was able to buy-the-bid and sell-the-offer; in essence, buying below fair value and selling above fair value. This was a concrete edge, not unlike the house edge a casino enjoys over non-professional gamblers. Professional gamblers, especially those who play Blackjack, and are adept at card counting, may enjoy about a 1% edge. Creating an edge in screen trading is far more difficult, in my opinion, due to variance, ever-changing cycles, and fear induced losses. It's extremely difficult to quantify what kind of a realistic edge is attainable in trading, but it's probably something akin to the card counter's. This leaves little room for error, and demands of the trader something approaching perfection. Sometimes "deliberate practice," no matter how many hours are invested, is not enough. Mentor-ship, counseling, and/guidance may be necessary, to successfully attain mastery, and if it helps, would be money well spent.

Does creating an edge demand great skills? What about the roulette player who has found a biased roulette wheel. He just needs to bet the same numbers without much thought. His edge stays unaffected. Why is it so different in trading? What exactly is an edge for a trader? Why is it so elusive?

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  #70 (permalink)
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Paraphrasing Mark

An edge is nothing more than the probability of one thing happening over another



For a trader

Applying one’s plan unwaveringly – is an inherent edge
Applying one’s methodology unwaveringly – is an inherent edge


Why so elusive;

Because people are not inherently unwavering

==================================

imo;

people like short term pleasure / and prefer to defer short term pain - much to the determent of their long term success

unfortunately


RN

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