I would very much like to provoke you guys! Provoke you into thinking in order to get closer to insight.
There's a well known process in psychology (unfortunately I've forgotten the name of the process), that makes you act selectively. It has to do with your expectations.
Picture this, you buy yourself a new car. Suddenly you start seeing cars of the same brand all over the place. It means that you've welcomed into your perception field that kind of selective information which enables you to see those cars everywhere. Before they weren't there at all. You didn't see them.
This simple process has to do with your selective perception based on your expectations.
Now, this process can be quite funny in real life. But it could be a cruel enemy in trading. IF, your expectations aren't met, unfortunately you go on looking for them. Meaning that whenever your trade didn't met your expectations, levels etc, instead of letting go and start over, you go on in order to get your expectations met.
This can lead to over trading, stress, etc.etc..!
I call it noise. Whenever you have factors in your perception field that are increasing your expectations you amplify your noise, and your selective thinking.
One way to avoid it, is to get rid of expectations! IS THAT POSSIBLE?
NO, big NO! But we can decrease them, by filtering out NOISE!
SO, here's my provocation to you! Get yourself s a brainstorming and let's help each other out to identify noise!
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For me, expectations are tied in to holding myself accountable. I mean that I don't really expect the market to do something but I do expect me to follow my trading plan.
The tricky part in the past has been for me to make such a plan in a way that it can be followed. I mean that sometimes plans are too complex. It needs to be simple so you can follow it. If it is complicated then you always find a loophole for why you didn't follow it.
The following 3 users say Thank You to caprica for this post:
caprica so true so true ive been trying to tell my buddie not to tie his hands but he wont listen so he will have to learn the hard way that the market dont care about your rules.i keep rules in the back of my head for a foundation to trade with but im somwhat flexible depending on the behaviour of the market...sharky
You let go of the ego. You are no smarter than you were 20 minutes ago if the trades goes your way, just as you are no dumber (?) if it does not go your way.
You are comfortable and understand that you are risking money on an event\outcome that you have no control over. Unless of course you can inject or pull liquidity in such large amounts that you move the market, which I doubt us little retailers can.
You have to be comfortable with the decisions, irrespective of the outcome. You never risk your state of mind or your well being for a trade, a job, or anything. You only take trades(and make decisions) that you can live with and that you would do again if the scenario presented itself. Yes, the updownMAcross 2way oscillator crossed over the sideways inner divergence line and that was suppose to be a buy signal, but if you don't like the order flow then the hell with those lines.
Psychology plays a big role in everything we do, however understand psychology is not the end all be all for trading either. You could be the most negative person in the world, but if you have +EV you have +EV and nobody can take that from you and Vice Versa.
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Take a break from the screen. Go out, do something else, distance yourself from trading. It helps you to get back to your plan or whatever healthy trading expectations you had!
Clear your mind, and then get back to trading. But keep something in mind, don't go away from the screens thinking, I'm not going to think of trading, I'm not going to think of trading. If you do that, you're just going to trick yourself and your mind is still going to be there even though you're not there physically. Let it go, and do something that detaches you.
And when you feel that you've cleared your mind, then get back to trading!
The following 2 users say Thank You to George for this post:
This is my first time to post in this forum so here goes.
My feelings are that expectations should not be static from trade to trade. The market isn't. So why should we EXPECT the dynamic market to fulfill our static expectations? As some else said in an earlier post, our expectations should be based on following our plan regardless whether the current trade is a winner or loser.
To me, this means that my expectation for any trade is based on what the market is doing at the time. For example, I expect to enter based on my plan and react to the movement of the market. Sometimes, the market takes off and I trail based on my plan. That situation gives me a decent reward. Other times, the market sits there and wallows around before it moves a little. I still trail my stop based on the movement of the market and in this case the reward isn't nearly as good. But in both cases I followed my plan and my expectations were realized.
Ain't muddy water great!!!
The following user says Thank You to MWinfrey for this post:
George, I am thinking the aspect of our mind/brain that you are referring to is the reticular activating system that filters information and assists in our awareness.
It seems to me that realistic expectations need to be aligned with the realistic possible outcomes. As trader, I have expectations of my ability to execute my strategy and of price action and its impact on my strategy.
Speaking to price action, I know that over thousands of trades I take: there will be many trades that get stopped to the tick then move in my original direction for what would have been a win, many trades where price gets to my target, but I do not get filled and will reverse against my trade, many that will hit my profit target and fill it to the tick, then reverse, many that will take out my profit target and and keep going for many, many more ticks... So I know the possibilities of price action and the specific possible outcomes of every tick move in my favor. As each of these scenarios or outcomes develop, I ACCEPT it as an expected part of my trading - it can happen, and it will happen, hundreds or thousands of times.
I define what a good trade and a bad trade are. A good trade is one in which I followed my rules - regardless of the results. A bad trade is one in which I did not follow my rules - regardless of the results. So I have the following possibilities:
Good trade - positive result (followed my rules and made money)
Good trade - negative result (followed my rules and lost money)
Bad trade - positive result (did not follow my rules and made money - likely the worst combination as it provides positive reinforcement for wrong behavior)
Bad trade - negative result (did not follow my rules and lost money)
So as a trader, I think in probabilities over time and I know over time what will happen. I have no unrealistic expectation of what may happen on each and every trade. I ACCEPT the possibility of any price action scenario that unfolds after I enter my trade. If I do this, my expectations of my strategy will be in alignment with reality and I can have peace with that.
As for the expectations of my ability to execute my strategy and knowing myself and the possibilities...it's a similar process that I have to be honest about in considering and evaluating.