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Unless you're on full-auto, where you simply hit the on-button every morning and then go to the beach while your program does its thing, there will be emotions involved every time you trade. The ability control your emotions and make rational decisions is of course paramount, but before you can even try to control them, you must first understand them. And quite frankly, there may be times where it's actually good to be a little scared. Over-confidence and complacency can be far more dangerous than fear and doubt.
Interestingly, some of the work I've been doing recently is, in a sense, designed to detect emotion when it manifests itself in actual traded contracts. My general hypothesis is that the ability to identify emotion-fueled trades when they hit the tape can provide an edge. Like the guy who panic exits a position at the worst possible level only to see it reverse and go his way right after he gets out? Try to be the other guy.
Years ago, there were floor traders who built entire careers out of exploiting their ability to read the emotions of other traders in the pit. Today we trade in an anonymous and faceless world of bids and offers appearing as numbers on a screen, but there are still very real emotions behind many of those numbers.
I'm still very much in the observation, study, and analysis stage here so I'm far from being able to make any claims as to whether I believe it's actually possible to identify if and when emotions are driving certain price moves, but it's certainly been an interesting exercise so far. If nothing else, it has helped me to better understand my own emotions, which has already made it well worth my time.
There will be the "emotions are bad" views, which are, in fact, pretty much the conventional answers.
There will be the "you've got emotions, live with/understand them" views, which you also hear a lot of.
Probably everyone can relate to both at some time or another. For me, I definitely know that I sometimes make trades on the basis of emotions that are out of control, and these don't work well. I also know I am not a robot, and do not aspire to robot-hood.... and would not succeed at it anyway. So I'm going to have emotions.
I think it's like anything else. Do I have emotions when I drive my car? Of course. Do I let them take me into an out of control state, so I ram into the M&*^% F(&&!@er who just cut me off? No. Is being pissed at someone who did that completely wrong? Not really. But it's what I do that counts.
Balance, and doing the right thing at the time, may be the simple and general rule here.
Thank you for pointing this out. I sometimes need a reminder that I have crossed a line. It was not my intent to come off as personally insulting to mattz. I tend to get emotionally charged in deeper discussions, and have deleted the offending post.
Stop believing in the popular BS of what must be the successful trader. The popular belief is that the good trader is a perfect mix of the "computational power" of Einstein mixed with the zen attitude of the Dalai Lama!
Of course if you compare yourself to this BS model you will find that you are not at even 1% of it because you are not super smart (apply to me too) and you are not a Buddhist monk.
I meet and work with a lot of real pro traders and believe me they are like you and me. It is just a job and like any job you (we) have just to learn and practice to become good.
R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
And nowadays we can exploit an understanding of emotion just by following the VIX and the implied volatilities of individual issues. It's always exaggerated over the historical and there is a very predictable pattern in how people react to events.
For the past few months i kept asking myself if i have the stomach for trading? Am i even in a situation where i should be risking my hard earned money ? As i read through this thread (backwards) I was doubting myself even more.
I have only been paper trading for the past few months , but i feel i make good decisions and i am profitable. So I had made the decision to open a real money account this coming weekend. As I read I began to change my mind. Then I got to this post above; I feel that I fit the criteria above with the exception of the trade journal. I never realized how important a trade journal is until I began to read posts about it. Im not sure how to approach the trade journal yet, but i will begin looking into it now.
Even though I've been making money with my paper money account , I'm not expecting to start off making money immediately. But will I know when to call it quits? Will i be more hesitant to buy/sell short with my own money at risk? will i take profit too soon? so many questions run through my head.
My wife fully supports me and we make enough income to pay all our bills and not sacrifice any necessities. I would like to make trading a full time income with part time hours, but am I being realistic? I have plenty of time to dedicate to trading, so I guess that is an advantage.
Anyway guys, I'm ranting ... This was actually good therapy. I got some doubts off my chest that i couldn't ask anyone else. Thanks for listening...(reading)
As to what to do, well, no one else can know that because no one else is you.
But here are some things to think about (but only if they make sense to you) and some suggestions:
- Read as much as you can on this site regarding trading and the things that interest you in trading. It will help.
- There is an enormous amount of material and trading discussion and posting on this site, but most of it is behind the Elite wall. You would be very well advised to spring for the 100 bucks (one-time, lifetime fee) and become an Elite member. It would be a sort of a leap in the dark, but think about it carefully. It is worth it.
- If you are doing sim (paper) trading, you can learn a lot about the mechanics and techniques of trading, but nothing of the personal, psychological and emotional elements that come up when you have something (money ) at stake.
- Many people will say that pure sim trading teaches you very little, because of this. That may or may not be entirely true for you, but the simple fact is that you will not know what trading fully is until you come out of simulation.
- A trading journal is a very good way for you to up your game, by becoming publicly accountable. If you want to find out some more about it, you could check out some of the journals that are currently active, and see if something of that sort might be of help to you. Having a journal while you are still trading in sim may give you a half-way step between risk-free, no-loss paper and the real thing, because of the accountability factor. (You can BS yourself much more easily than you can when you've put down your trading decisions and then had to report what actually happened .)
- Currently, nexusfi.com has a journal contest going on. If you jump over to this thread, you will see the people who are in this contest, and there are links to their journals. Just give them a look and get an idea what it is about (some of the journals will be Elite-only, but some will not.) Current journal contest thread:
Continuing in the tradition of encouraging journals on FIO, I am announcing a new Journal contest for September 2016.
The rules are extremely simple:
a) The contest begins September 1 and ends September 30. All decisions made by futures.io …
- There are also lots of journals that are not in the contest. Some you might like, some not. You can take a look and get an idea of it all.
The deeper you dive into things here on FIO, the better off you will be, at least in my view. (I don't, of course, know what is right for you.... But dive.)
Good luck, however you decide to go ahead. The people here will try to help you, and do wish you well.
Thanks for your suggestions. I have been on the site since 8am EST reading and trying to pick up everything i can. i'll probably spend the next few days doing the same.I agree that until i start trading real money i won't get a true feel for trading. thats why I want to start trading real account and set a daily loss limit. ill probably start a thread on my experience and keep you up to date . Thanks
) at stake. 