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

  #1 (permalink)
Market Wizard
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Is Trading Psychology a Hoax?

Is trading psychology a hoax? Perhaps yes. It is certainly used more often to explain one's failure than helping one to become successful. One needs an Exorcist to remove the demons of fear and greed.

Here is some food for thoughts:

Most trading shrinks would say: You have to consider trading as a business and treat it as a business. I wonder if these shrinks have a shrink of their own to help them with their own business; chances are the answer is no.

Trading is not different from any other business, just another way of making a living. Once you know, have learned, or inherited, or grew up with a business you should be able to run that business. Our barber or butcher may need a shriek, but it will not be for how to run his business, perhaps for not using the the blade on a bare neck.

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."

These guys in the trading psychology "business" just copy ancient words of wisdom and give you a dangerous sense of security enough to go back and continue doing what you have done before to the point of ruins. The demons are still in there.

Analyze This!


Last edited by aligator; October 3rd, 2012 at 08:50 PM.
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I think you mean "shrink" ... not "shriek," a loud scream of terror.

To some degree I agree with you. Charlatans abound in the trading world, and no doubt the movement towards psychology has been infiltrated with opportunistic wannabe-psychs.

On the other hand, I disagree that trading is like any other business. It is a different game altogether than being a barber or butcher. Many high-performing athletes work with sports psychologists, and trading is more akin to sports than cutting someone's hair or cutting a piece of meat. Life is full of risks, and every business incurs expenses, but trading is somewhat unique in that money is directly wagered every time the trader "works."

A wage or salary worker goes to work, and over time if he does a poor job will lose that job. But there is very little chance of walking in on Monday morning, and walking out Monday evening having actually lost money at work (unless he has a hole in his pants pocket). Even a business of course may lose money some days because their overhead is greater than their income. However, even here the business actually gets something for their expense. The trader only gets opportunity to make money with risk capital, and can never actually hold something or see something tangible for the money he risks.

The very nature of trading is directly tied to risk in a more intimate way than most any other job or business I can think of. So much with proper execution in trading is counter to normal human behavior, hence the 90%+ rate of those who lose money; thus, it is not unreasonable that someone might seek help in rewiring their dysfunctional (yet normal) thought processes in order to achieve greater success.

Consider that those who are successful are probably quite diverse in their methods and approaches to the very same market, and there is also much diversity that we see in methods used by the unsuccessful; so what separates them? Is it method, or the gray matter between their ears?

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I've found that most people that think psychology plays no part in trading are really just using a different word in place of 'psychology'. Call it what you want, it has a major role in your trading ability.

One word for it would simply be "experience". The experience to deal with the "issues" that come up in trading. I would call it psychology, but many are opposed to this word.

I really don't care what you call it, so long as you pay attention to it since it is really what will make or break you as a trader.

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aligator View Post
Is trading psychology a hoax? Perhaps yes. It is certainly used more often to explain one's failure than helping one to become successful. One needs an Exorcist to remove the demons of fear and greed.

Here is some food for thoughts:

Most trading shrieks would say: You have to consider trading as a business and treat it as a business. I wonder if these shrieks have a shriek of their own to help them with their own business; chances are the answer is no.

Trading is not different from any other business, just another way of making a living. Once you know, have learned, or inherited, or grew up with a business you should be able to run that business. Our barber or butcher may need a shriek, but it will not be for how to run his business, perhaps for not using the the blade on a bare neck.

Millions of businesses in the USA and many millions around the globe do not pay a shriek 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."

These guys in the trading psychology "business" just copy ancient words of wisdom and give you a dangerous sense of security enough to go back and continue doing what you have done before to the point of ruins. The demons are still in there.

Analyze This!

absolutely, very true.

I said it before and I'll say it again. for me, all that psychology talk is nothing more than excuses for failure. but there's a simple cure. if you can't handle it, then maybe trading is not for you. if you're tone deaf then you probably shouldn't become a singer.

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I believe that trading psychology has 100% helped me in my trading, mostly in the consistency department. The difference between a traditional business say meat packing ( my family has done meat packing for over 40 years) to trading is that when things go wrong in the business. They are external to the CEO/Owner, broken machines, unproductive employee, lack of sales, distribution problems etc. They are easily identifiable and simple to remedy in comparison to trading. As a trader in the business of trading, my equipment is my mind and I am also the owner. It takes an incredible amount of introspection to do the same steps required to identify and remedy problems. I have to look inside at myself and the things i am doing for problems, as well as fix it. There is no ego in replacing a broken refrigerator, there is ego in telling myself your costing yourself money because of lack of discipline. Consider the differences in generating income in a traditional business vs trading. In a traditional business we can have a salesman pitch 100 people, the risk reward on that is tiny. Because when a potential new client says no, we dont lose as much money as we would gain or substantial portion of whatever potential contract could have been drawn up. In trading if you took 100 trades say with 3:1 reward risk. if you lose you lose 33% of your potential gains, which makes you less effective over time and well can put you out of business. OK maybe i am ranting here. Just saying, traditional businesses are not comparable to trading as the ego, self image, and execution are completely different then sales, logistics and management. I truly believe in trading psych.

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josh View Post
I think you mean "shrink" ... not "shriek," a loud scream of terror.

There you have it. I just trusted the spell checker, not my intuition. Its just like seeing a breakout and pushing the sell sell sell button without looking at the big picture. How can the shrink fix that? I should have had better reasons to believe that the guillotine was not really functional before I put my neck under it (the engineer joke).

Thanks, will edit the note.

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  #8 (permalink)
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josh View Post
I think you mean "shrink" ... not "shriek," a loud scream of terror.

To some degree I agree with you. Charlatans abound in the trading world, and no doubt the movement towards psychology has been infiltrated with opportunistic wannabe-psychs.

On the other hand, I disagree that trading is like any other business. It is a different game altogether than being a barber or butcher. Many high-performing athletes work with sports psychologists, and trading is more akin to sports than cutting someone's hair or cutting a piece of meat. Life is full of risks, and every business incurs expenses, but trading is somewhat unique in that money is directly wagered every time the trader "works."

A wage or salary worker goes to work, and over time if he does a poor job will lose that job. But there is very little chance of walking in on Monday morning, and walking out Monday evening having actually lost money at work (unless he has a hole in his pants pocket). Even a business of course may lose money some days because their overhead is greater than their income. However, even here the business actually gets something for their expense. The trader only gets opportunity to make money with risk capital, and can never actually hold something or see something tangible for the money he risks.

The very nature of trading is directly tied to risk in a more intimate way than most any other job or business I can think of. So much with proper execution in trading is counter to normal human behavior, hence the 90%+ rate of those who lose money; thus, it is not unreasonable that someone might seek help in rewiring their dysfunctional (yet normal) thought processes in order to achieve greater success.

Consider that those who are successful are probably quite diverse in their methods and approaches to the very same market, and there is also much diversity that we see in methods used by the unsuccessful; so what separates them? Is it method, or the gray matter between their ears?

All I can say, there is no difference, a business is a business. They all involve risk capital and their up and downs whether they offer a product (the grocer) or a service (the labor). The guy that runs a Seven Eleven, probably mortgaged his house and everything he has to get that franchise. Their exposure to loosing every thing is real and no less than a 100 percent vested trader. The grocer throws away a lot rotten fruit every day, push things out at 2 for 1 below cost, and deals with overhead, etc. all part of doing business.

Like driving in Indy 500, trading is not for everyone (although Helio Castroneves won the Indy 500 and proved he can dance too and won the Mirror Ball).

A successful business is one that is in black when it comes to paying the bills. But, if the operator does not know what is it that he is supposed to do he needs to learn it well before he opens the store or he can "shriek" until blue and no "shrink" can help.

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Big Mike View Post

One word for it would simply be "experience".

I buy the "experience."

Cheers!

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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.

Is this really TRUE? 90%


WORDS OF WISDOM- 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.

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