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Trading psychology articles
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Trading psychology articles

  #41 (permalink)
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These studies cover casino gambling, but I suspect the findings are relevant to problem situations in trading as well. Very interesting!


Brain mechanisms of chasing losses

https://www.biologicalpsychiatryjournal.com/article/S0006-3223(07)00434-9/fulltext


Dopamine released in situations where reward is uncertain

Discrete Coding of Reward Probability and Uncertainty by Dopamine Neurons | Science


Immersive environments can cue an urge to gamble (Argument against six-screen monitor setups?)

https://www.sciencedirect.com/science/article/abs/pii/S0306460314003189


Sound can affect accurate estimation of winning plays in slot machines (Turn off platform execution sound alerts?)

https://link.springer.com/article/10.1007%2Fs10899-013-9391-8


Losses disguised as wins (Could this dynamic also apply to the trader who wins *some* trades but is still net unprofitable? ...Strong support for the need to track objective performance stats!)

https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1360-0443.2010.03050.x


"Near-miss" effect (Almost win situations) increases desire to play

https://doi.org/10.1016/j.neuron.2008.12.031


"Stop button" encourages an erroneous perception of skill (Perhaps relatable to the multitude of indicators, platforms and execution methods available to the retail trader)

https://link.springer.com/article/10.1007%2Fs10899-017-9699-x

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  #42 (permalink)
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From The Neuropsychology of Self-Discipline

What, then, is self-discipline really all about?

The simple answer may surpise you: self-discipline is your ability to systematically and progressively work towards a goal until you have reached it. It includes acquiring knowledge and skills. It's your ability to become positively obsessed, single-minded and efficient; to strive without giving up; to work consistently, day after day, week after week and year after year, until your purpose is fulfilled.

Self-discipline is the power to say: "this is what I really want in life, and this is how I'm going to get it, and if I have to give up some other things, I will, because it's worth it in the long run".

To be self-disciplined you must learn to develop the kind of obsession that glows like a beacon in a storm. You must learn to watch that light and steer your course towards it, no matter what gets in your way or how long it takes.

Like a sailor, you must learn to use the skill that will point you in the right direction. And you must keep on using all your knowledge, skill and energy to stay on course until you have reached your destination.

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  #43 (permalink)
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Just wondering about that one xplorer. Some really strong words especially the part about being 'positively obsessed '. It still begs the question how?? You read that kind of thing everywhere in different flavours but it feels like something is missing, i mean to be positively obsessed implies that you are passionate about the thing you are obsessing over right?

So the question becomes: do you find your passion and then get good at something or do you get good at something which then provides the passion? This might sound stupid but it is important because you can chase your tail endlessly wondering why you can't seem to achieve.

I believe that it works contrary to what people think. It's actually finding what you are good at first which provides the passion/drive/motivation to keep pushing towards your goal. Mike Rowe once did a show of a pig farmer who has made millions by collecting scrap leftovers from restuarants and using it to fatten up his pigs. That guy admitted that never in his wildest dreams would he be doing such a filthy stinky job but yet there he was. He told Mike Rowe that the job had become his passion once he had worked out a system that was dead easy, and which surprisingly no one else wanted to do.

I don't believe you ever learn to cultivate passion. I believe it comes naturally once you start to discover that you are getting better and your skills are growing and bigger things are possible with the thing you are doing. That's why trading is so hard initially because it beats you down for so long that the only thing you have to cling to is hope but that's not the same as passion. When you get passion is when you start tapping into unlimited reserves of energy.

Thoughts?

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  #44 (permalink)
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Excellent question @Grantx.

Firstly about that excerpt: yes, they are strong, inspiring words and that's why I posted them. I loved the wording of that as it encapsulates so many different beliefs that I happen to share. It paints a tale of real dedication, laser-like focus and patience.

Back to your question, it is not at all stupid, although the motto of the decade is that you need to find something you are passionate about and then everything will fall into place. I'm sure you've heard the adage Find something you love and you'll never have to work. This is also the premise of a book called The Element: once you uncover what you really love to do in life you'll be in your element and you will have the potential to be great at it.

While I don't disagree with that, I contend that a) it may not be easy for everyone to find what you really love and b) it does not always follow that you can earn a living from your true passion.

For instance, one thing I am really passionate about is travelling. I could probably strive to find a way to earn a living from travelling (and I'm sure that if I looked hard enough I would), however I have other commitments that prevent me from travelling as a profession.

In other words I support The Element's theory but I believe it's not the only option.

I've had the chance to look at several individuals who are great at something while they're doing it and you can clearly see by the look in their eyes that they know that they are great and they enjoy doing it. This is anecdotal evidence that when you're good at something you become passionate. The author of The Element offers a different perspective: in a speech he gave he tells the story of a woman who was a concert pianist - she was really good at it but she never asked herself whether she enjoyed her profession. When she realized she didn't, that moment prompted her to dig deeper - that's when she found she always wanted to be an editor, so that's what she became. Happy and penniless, but that's another story.


Ideally? Yes, finding your passion and somehow channeling that into your work is the perfect outcome, but not everyone will necessarily be able to do that.

One alternative is its flipside, i.e. choosing something (music, teaching, trading, whatever) and devising a plan to become great at it.


Personally, another thing I am really passionate about is achievement. That's the reason I posted the quote above about self-discipline. In life I have experienced first-hand that, when you put your mind to it, you can pretty much accomplish whatever you want. And, often, it's not as hard as we made it out to be.

For me it's not so much about picking the best goal as enjoying the process of getting better at it and eventually reaching it. That's why, for example, I am skeptical of people telling me "either you love what you do or you will fail", and I side with Linda Raschke when she writes "I don't love or hate trading, it's just something I do".


So, to answer your question, my take is that it can work both ways.

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  #45 (permalink)
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Good one @xplorer you gave me a perspective I never considered. I thought about the why of it and I find a real purity in what she did. Ill try and keep it short to prevent TLDR

People measure value in dollar terms. How much we have accumulated compared to our peers. Sounds like this women had reached an elite level by achieving her goal of playing as a concert pianist. I dont believe an individual would get their by mistake, that would take dedication and determined effort in the form of daily practice and focus on the goal.

The thing with a goal is that once it has been accomplished, the feeling of achievement is fleeting because you realise two things:
  1. Maintaining a position as a concert pianist must be difficult because there will be up and coming talented pianists wanting to overthrow you and take your position.
  2. Your focus now instantly changes from motivation to fear because your daily practice is no longer a passionate drive to achieve but is replaced by fear. You exist in a defensive position now. Young whippersnappers everywhere. Out to get you.

What happens when you summit? You look back and see a queue of people wanting the same view that you have, and when you look out, you see more mountains to climb. Bit of a tough place to be.

Perhaps this person lost a passion for it because her situation changed from being something she loved doing, to being a job of maintaining a position in a hierarchy. Doesn't sound like much fun to me either.

So what this womans story tells me is that she decided to not place her happiness in materialistic terms. Or perhaps it was parents expectations or whatever, I don't know the story but either way the lesson is quite simple. She chose to live her life as she wanted and if she is content doing so then there is not a person on planet earth that can judge her because she has decided to measure herself by her own standards. That standard being contentment probably.

The thing about it is that we tend to use examples such as these to justify our own pathetic lives. We know deep down we are failures and live grinding lives as slaves to materialism. We hate stories about people that have achieved by passionate means because it highlights our own lack of courage to pursue our dreams. So we bring up stories like this women which makes us feel better because she did what we are all scared to do and she still ended up penniless. We love these little anecdotal fantasies because we get to feel better about our deplorable miserable lives. The fact that she might be living in complete happiness and contentment goes straight over our heads.

I would say to be careful of that little trick of the mind. It will always find an excuse and it is sly and subtle. Like a rat.

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  #46 (permalink)
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Grantx View Post
The thing about it is that we tend to use examples such as these to justify our own pathetic lives. We know deep down we are failures and live grinding lives as slaves to materialism. We hate stories about people that have achieved by passionate means because it highlights our own lack of courage to pursue our dreams. So we bring up stories like this women which makes us feel better because she did what we are all scared to do and she still ended up penniless. We love these little anecdotal fantasies because we get to feel better about our deplorable miserable lives. The fact that she might be living in complete happiness and contentment goes straight over our heads.

I would say to be careful of that little trick of the mind. It will always find an excuse and it is sly and subtle. Like a rat.

With online forums you can't always tell what people are trying to convey. In this case it's difficult for me to interpret the quote above, although it reads like contempt. Am I reading that right?

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  #47 (permalink)
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xplorer View Post
With online forums you can't always tell what people are trying to convey. In this case it's difficult for me to interpret the quote above, although it reads like contempt. Am I reading that right?

Not at all lol I dont have an ounce of contempt in me. Just part of my personal story, dragons I had to slay, challenges which i can never clearly articulate. Hell exists when you are not living to your true potential. If you dont shoulder the burden of the challenges that lay in front of you but instead, make excuses for your position in life, well you only have yourself to blame. By 'you' I dont mean xplorer I mean generally speaking.

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  #48 (permalink)
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Grantx View Post
Not at all lol I dont have an ounce of contempt in me. Just part of my personal story, dragons I had to slay, challenges which i can never clearly articulate. Hell exists when you are not living to your true potential. If you dont shoulder the burden of the challenges that lay in front of you but instead, make excuses for your position in life, well you only have yourself to blame. By 'you' I dont mean xplorer I mean generally speaking.

No worries, as I said sometimes it's difficult to interpret written things when you don't have the other party in front of you.

Just as an aside, I don't know anyone who's never had challenges, and who of us at some point has not blamed others for our own responsibilities? I'm sure I have.

We all have a history of successes and failures, it's part of life.

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  #49 (permalink)
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Amygdala Hijack and the Fight or Flight Response

It's encouraging that the subject of somewhat "losing control", whether it applies to trading or other fields, is being discussed more and more.

It certainly is why many people think about going to see a therapist, i.e. they recognize that sometimes there is something about their behaviour that they cannot explain, and they try to seek answers.

MiniP has started a similar thread on this subject, and I think it's a very interesting topic.

In prior posts I mentioned how scientists believe the amygdala can play an important role in shutting down the logical part of our brain when feeling under threat. I now have found there is a term coined for this phenomenon: Amygdala Hijack.



I also found a compelling article on the subject. Amygdala Hijack and the Fight or Flight Response.


I wanted to emphasize specific points of a section in the article because I think they are quite revealing.


Quoting 
The amygdala is one of two almond-shaped masses of nuclei located deep in the temporal lobe, that among other functions, is involved in the fear circuit in your brain. This structure is responsible for the fight-or-flight response that causes you to respond to threats.

The amygdala is also responsible for deciding what memories are stored and where they are stored. The level of emotion that is attached to a memory determines where it is stored in the brain.

While many of the threats we face today are symbolic, evolutionarily, our brains evolved to deal with physical threats to survival that we had to quickly respond to. However, our body still responds with biological changes that prepare us to fight, even though there is no actual physical threat with which we must contend.

When faced with a threatening situation, our thalamus, which receives incoming stimuli, sends signals to both the amygdala and the cortex.

If the amygdala senses danger, it makes a split second decision and begins the fight-or-flight response before the cortex has time to overrule it.

This cascade of events triggers the release of adrenaline (epinephrine), which leads to increased heart rate, blood pressure, and breathing. You may experience a racing heart, shaking, sweating, and nausea as this happens.

In this way, the amygdala triggers a sudden and intense unconscious emotional response that shuts off the cortex, making it hard for you to think clearly about the situation. As your brain triggers the release of stress hormones such as cortisol, you find it increasingly hard to problem solve and concentrate. This whole process takes a toll, and you may not recover to your original level of functioning for several hours.

I think this is a good reason why people may have rules in trading such as 3-strike and out, meaning, whatever may be going on in my brain (and I may not be at all aware about it), if I have, say, 3 losing trades in a row, I will stop for the day (or variations thereof).

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  #50 (permalink)
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xplorer View Post
What, then, is self-discipline really all about?



The simple answer may surpise you: self-discipline is your ability to systematically and progressively work towards a goal until you have reached it. It includes acquiring knowledge and skills. It's your ability to become positively obsessed, single-minded and efficient; to strive without giving up; to work consistently, day after day, week after week and year after year, until your purpose is fulfilled.



Self-discipline is the power to say: "this is what I really want in life, and this is how I'm going to get it, and if I have to give up some other things, I will, because it's worth it in the long run".



To be self-disciplined you must learn to develop the kind of obsession that glows like a beacon in a storm. You must learn to watch that light and steer your course towards it, no matter what gets in your way or how long it takes.



Like a sailor, you must learn to use the skill that will point you in the right direction. And you must keep on using all your knowledge, skill and energy to stay on course until you have reached your destination.


I think the above bold text is another way of saying (so as not to alienate many) “head over heels in love with” (insert whatever you like, for example in my case: trading the market).

When you are crazy in love with something it is MUCH easier to endure all the hardships.... specially in trading like these to name a few: drawdowns, psychological barriers, psychological skill development, trading system implementation etc.

When you are just fascinated to learning about the bid/ask, about Order Flow, about Volume at Price, about MACD, about Floor Pivots, about the Opening Range, about ABDC Patterns, about RSI, about Floor Pit Traders, about Globex, about the Nikkei 225, about the Hang Seng, Crude Oil, about learning the nick names of FOREX pairs like Cable, Loonie etc. Basically just anything having to do with this business.

I think this Love, at least for me, ends up being the driving force keeping me going... can’t get enough. Discipline seems needed to clean my garage, though.

Ron


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It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
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