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Agree with all, except one thing. The argument is not based on being close minded. The title of this thread and the jest of the discussion is: Is "Trading Psychology" is a Hoax, not Human Psychology. I am not about to challenge Sigmund Freud.
No one denies there is a human psychology component in every job, and trading is no different. If you talk to real psychology experts with credentials they will tell you that majority of the the real issues affecting job performance are not related to job itself. So, why is it that a trader under pressure deserves a unique brand of psychology and is different from a sales professional under pressure to meet his monthly quotas.
Tiger (a bad example here, because he is one of the best) is just recovering after two years of therapy for issues that had nothing to do with course management or his swing mechanics, but were affecting his performance. That is "Human" psychology not "Golfers" psychology. This is true for any job, but to make a unique distinction of "Traders Psychology" is a hoax.
Like any other job, a trader needs to gain and master the knowledge, skills, mechanics, poses experience, perform the job and deal with the human psychological aspect of trading like any other job.
Do some 4 billion workers in the world need to see a psychiatrist to perform their jobs? Not a chance, unless they have gone crazy insisting on doing a job they can't be fit for.
What is unreal here is that some claim 50 percent of trading is psychology. While that maybe the case for gambling, it is far from truth in intelligent trading. Trading is just another job, no more no less.
A quote from Wychoff:
"Anyone who buys or sells a stock, a bond or a commodity for profit is speculating if he employs intelligent foresight. If he does not, he is gambling."
Richard D. Wyckoff, American pioneer in technical stock analysis"
Have any of you men suffered from performance anxiety in the bedroom and seen the rather deflating results?
Happens to all of us at some point, usually through wanting to impress a new partner.
Same sort of thing in my opinion. Sometimes you can do something over & over & over again but then you start making it a conscious thing and boom - the wind goes right out of your sails.
Well said. A trader should be clear-headed. If he is not he is either trading too big or inexperienced.
I have experienced my limits and I pay attention not to push myself over the edge EVER.
When I had discomfort while trading I always f#cked it up. So first I stopped trading when I had this bad feeling later I learned that I shouldn't stress myself and make trading decisions I will be satisfied with. For this you need to know your limits.
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Talking about psychology I think it is good guess what are the bears and what the bulls are anticipating.
I have heard this referred to as "Theory of mind" - and some believes its an edge in the markets. I am having a look at this at present - volume profile and trying to understand what others may be thinking at specific levels.
An interesting interview at topstep trader - one of the newly funded traders said that trading psychology (or awareness of self and limits and personality) was the key to become profitable (he pulled some big numbers). He also said that trading psychology is the difference between the 95% and the 5%. Everyone wants an indicator and method but few look at their routines, processes etc when it comes to decision making. Those that do he believes excel. In his journal he writes down the mistakes he makes or things that go wrong - and then looks for patterns - usually one common error can come out in a few ways in trading. So he works on that and its helped him.
I know what I would call 'the psychological factors' were what personally held me back from consistency.
One example: take an average trader; you know the one, the one which is losing money, or is not consistently making profits, and let's say this trader has a problem with over-trading. Maybe this is you now?
Let's assume he has already identified that he over-trades often, which of course results in less than desirable results. Less than desirable because 1) he loses money in the long term because of this 'issue', and more importantly 2) because he realizes he is not able to follow a plan which dictates that he only take X trades per day/week, etc. A plan which states he should only focus on one, maybe two A+ type setups. He is not able to control himself. He cannot help but over-trade, and as soon as he does, he realizes the mistake he has made, but will continue to repeat this mistake for some time. Many times until the pain has reached some individual threshold, or the money is gone.
Now, ask this trader to only focus on taking no more than one trade per day for a few weeks. Ask him to not focus on making money, not even to focus on not losing money, simply focus on only taking at most, one trade per day.
How many of the average trader can even do this?
In my experience, very very few.
So, then, the question is why?
Not an easy question to answer, as each of us have a history, experience, and mental 'makeup' unlike any other person.
So, then why do so many people regardless of their history/experience/makeup suffer from similar symptoms?
I believe because we have more in common than we think when it comes to reactions to things such as fear, greed, pain, etc.
And, if this is true, then in my humble opinion, the good news is this means many of these issues or obstacles can be over-come in similar ways. Spend enough time working with people, studying people, working through your own demons, etc., and often this experience can be translated into practical exercises which can help others to overcome these same obstacles. This is where forums like BigMikeTrading can become an invaluable tool.
Spend enough time, and you will find that many of the traders who are consistently profitable talk about the importance of the mental game, their "pre-game" preparation, their ability to be self-aware, to know when they are "in the zone", and when they are not, and other similar topics. Coincidence?
If this is not psychology (trading or otherwise), then what is it?
Gary
As consistently profitable traders.. "We get paid to wait, and we wait to get paid."
I recently had the pleasure of enjoying a tiny bit of dialog with Dr. Brett regarding some psychology and trading type stuff, and included it in my latest journal entry. Our esteemed nexusfi.com (formerly BMT) friend @josh thought it would fit in well with this thread, so I was more than happy to share it here:
Luck is what happens when preparation meets opportunity. ~ Seneca
"Trade your plan" for example, well does anyone expect that not following your plan would somehow lead to better results?
"Control emotions", again -- does anyone think having out of control emotions would be a plus in trading?
If you go back thru futures.io (formerly BMT) journals and read posts you'll find some where the trader has had a really bad day. More times than not, when a trader has a really bad day, it isn't because they were in control of their emotions and followed their plan.
So those axioms are only useful in as much as they are simply requirements, prerequisites, for being a good trader.
BTW you can't will yourself into following your plan or trading without emotion. Those things require practice and an environment where you can measure your actions.
I think in concept, we are probably on a similar page in regard to these topics.
However, anyone trying to control or eliminate their emotions is destined to fail. Actively aware of them? Sure. But there is a potentially wide band of variance covering the space between out of control and emotionally stable. And if some one has out of control emotions, trading will just be another way to express that.
As for trading plans, I no longer buy into 'any plan is better than no plan'. I used to, but it no longer makes sense to me. A crappy plan will lead to crappy results which will PROBABLY amplify any emotional or mental issues the trader is dealing with. Does he deviate from his plan because he's an emotional wreck or is he an emotional wreck because his plan was crap to begin with?
I think most struggling traders create plans for their ideal, future self instead of their realistic, current self. It's like deciding to start working out tomorrow by following a plan that has you benching 300-lb on day one. You're not ready for 300-lb today, so if that is your 'any plan', you're gonna fail. Start with a plan that has you starting with just the weight of the bar. That's where your current self is. That doesn't mean a 300-lb press plan isn't in your future - it's just not your in your today.
Also, I'm not immune to any of this crap either. I still often try to enlist the skills and talents of my future self
Edit: @Big Mike, After re-reading your post, I'm not sure I took away what you intended. I started to edit my response, but opted to leave it as is so that you can correct any misunderstandings I may have come away with. Thanks, in advance.
Luck is what happens when preparation meets opportunity. ~ Seneca
