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Finally Turning the Corner, tha "its 80% Psychology" thing...


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Finally Turning the Corner, tha "its 80% Psychology" thing...

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  #111 (permalink)
Langley
 
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TropicalTrader View Post
If you are not 100% confident in your edge then after a few losses in a row its going to be very hard to will yourself forward. You will be fighting your subconscious mind and its the 800 pound gorilla in the room..

I want to share that in reading your journal you remind me of a former version of myself. I was hell bent on doing it "my way" using just my renko patterns because I had spent a ton of time identifying and tracking them. I was fighting the market very often, fading strength, etc. I was very stubborn and needed to experience getting my ass handed to me over and over before I decided to get really humble and start a new round of the education process. I put my existing knowledge on a shelf and started fresh, taking a few very in depth courses and filling up 4 large notebooks with notes. Plus eveyday I committed to listen to at least 1 hour of psychology materials.

I was a member of Convergent Trading for about 6 months last year and watched all of FT's videos. Today I don't trade like he does (except for utilizing some of his stat plays and ideas around impulse continuations) but getting inside his head was extremely valuable to me. I saw the immense amount of work he has put in to his trading. I saw how confident he is in his edge and I believe thats what we need if we want to be a 50 lot trader one day.

My trading has been a mega rollercoaster and now its smoothed out considerably. I've developed way more patience and don't get as emotional or rattled as I used to. This year I've been doing a ton of work on reprogramming my subconscious mind and expanding my edge/profitability with order flow.

I think that before I had this egoistic idea to figure out the market but I guess I'm no Al Brooks lol. By learning from some really talented traders I've accelerated and thrilled to be where I am in my trading today.. For me after a long time in hell, the gates of heaven have opened..

Thanks again TropicalTrader. I think this was a nice foray onto this forum but Im really starting to think this forum is not for me. At least not as a participant.

I think people want to help in general here and this is the most caring forum I've been on with the absolute BEST people but the more I look for answers outside myself the more I just get the same answers. You need to look inside.

I need to learn to work my edge. I know what expectancy is. I know what risk and reward and probably are. I know WHAT I need to do. I need to learn to DO it and do it consistently.

I don't know any great skill that comes from ease. Knowing is the easy part. I have to go through the losses. And I'm learning to live with alot of smaller losses vs trying to avoid them. That's just where I'm at.

Im trying to stay in the futures game in live mode full time. Thats it. Thats my goal.

Im not committing huge amounts of capital at any one time. I need to find out what is wrong and fix it. That's painful and I'm learning but it's neccessary.

Im transitioning from SIM to live trading for the first time since first trying to trade futures live a year ago. I got REALLY slaughtered back then. So I'm not like that anymore but I have along way to go.

But like I said I think it's just time for me to move on. In the words of the littlest hobo...

Every stop I make, I make a new friend,
Can't stay for long, just turn around I'm gone again...

https://m.youtube.com/watch?v=JFGtRKx4ypY

Will repost in my journal.

Thankx for everything!


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  #112 (permalink)
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  #113 (permalink)
Vancouver Canada
 
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This week I listened to Thinking in Bets by pro poker player Annie Duke. It was a great read and I highly recommend. She tells some entertaining stories and goes deep into Cognitive Biases. One of the terms I really like that I hadn't heard before is the word "Resulting" which is when we interpret things with a bias based on the result. Example, we veer off our plan and the trade works so we're happy and consider it a good trade vs veering off our plan and the trade doesn't work, now we're upset with ourselves. She goes pretty deep into a lot of psychology that's useful for traders.

Annie was a psychology major who's older brother became a pro poker player and then she got into it and was fortunate to be in a mastermind group with some of the world's best poker players who worked very hard on their craft...

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  #114 (permalink)
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--------------------------------
QUOTE from: Sandpaddict (I'm not making this a mention because he asked to be left alone)

Thanks again TropicalTrader. I think this was a nice foray onto this forum but Im really starting to think this forum is not for me. At least not as a participant.

I think people want to help in general here and this is the most caring forum I've been on with the absolute BEST people but the more I look for answers outside myself the more I just get the same answers. You need to look inside.

I need to learn to work my edge. I know what expectancy is. I know what risk and reward and probably are. I know WHAT I need to do. I need to learn to DO it and do it consistently.

I don't know any great skill that comes from ease. Knowing is the easy part. I have to go through the losses. And I'm learning to live with alot of smaller losses vs trying to avoid them. That's just where I'm at.

----------------------------------------

I think this is an excellent example of why most traders fail.

In modern society we are taught to try harder, work harder, "attack until we succeed" and this can produce results in many business endeavors - but its not likely to work in trading. Maybe after many, many, many years of getting the crap knocked outed of you, but most likely not.

To quote Mark Douglas "The best traders think differently." "They're not afraid".

When we are making effort and pushing hard to get to our goals, we see the obstacles as our enemies. The obstacles are blocking are path to the promised land. They are attacking our dreams of success. On those days when we've taken a few losses in a row its easy to go into pain and feel victimized by the market. "The market" is stopping us from succeeding. So the natural thing humans do is either try to fight the market (just keep buying that falling knife) or get scared out of the game.

If you don't start thinking differently, then you're not likely to step out of this destructive pattern. That's why I put "the it's 80% psychology thing" in the title of this thread.

We need to really understand our biases, like recency bias, "resulting" bias, black and white thinking (its either this or that, one extreme or the other), the illusion of certainty, etc.

Then, we need to train ourselves to think differently. So we never see the market as an enemy, to quote Andrew Menaker "it's an opportunity generating machine". WE are the obstacle. WE are the way. If you've ever had to train a dog, you'll know it takes a lot of effort, consistent focus over time. Same with us evolved monkeys - and knowing how to act when everything is going our way is one thing, knowing how to act when our emotions are going wild is another. As we retrain our brain and reprogram our subconscious mind to think differently about our experience with the market, there will be less emotions, we will have more ability to stay rational.

Always remember that its a marathon and if you're frustrated with all the disappointments after those brief moments of success, get real about this journey. I very much doubt that all your will power and force will do anything except dig you into a big hole - and we're here to live out our dreams! I know I AM..

Sometimes I post trade ideas on: https://twitter.com/tropicaltrada
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  #115 (permalink)
Kanab utah/usa
 
 
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Thanks for your comment on the 3 trading groups. Very intuitive and pretty much on the money.

Since you asked, I think I am in the group 2 camp, risk averse. I am very cautious, do only trades my broker recommends in her daily newsletters and my trades are mostly option spreads - maxed out for minimum risk and maintenance. I have only been doing this since April so I literally have a dearth of experience. So far I'm positive $198 dollars before fees and commissions and this doesn't trouble me at all - my account is less than five grand. Beats a savings account. I enjoy watching the option spreads - it takes them a while to come to profit/expiry, and in the meantime I can follow the profit and loss meandering about - its plenty of excitement for me. Mostly I am just trying to learn by watching, and see where it all takes me.

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  #116 (permalink)
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TropicalTrader View Post
So my friend who manages risk has told me that sometimes some of their profitable traders do stupid things like adding to losers and refusing to exit with losses as trades move against them. This is quite common in the trading world from what I've heard. There are stories about this in the book One Good Trade and other books on trading. I acknowledge these may not be the "seasoned" veterans who have been trading many years and are consistently profitable.



I hear your original point that fixing the issue is the solution. That's obvious. The idea of the 'forced daily limit' is not a replacement for improving their discipline. The fact that a trader could respect their rules and limits for weeks or months shows that they are using their focus and intention. (as opposed to someone gambling having wild p-n-l swings everyday) However, this is quite common for "risk seeking personality" people to struggle with managing their limits at some point in their career.



Some rare individuals can stay completely rational everyday, week after week, month after month while risking hundreds or thousands of dollars a day, but that is extremely uncommon for most people There is a very good reason why traders at prop firms usually have access to trading psychologists and some of the best work with them regularly. In these moments of irrationality if the monkey mind takes over then limits and rules can be thrown out the window.


Shark, the top SMB trader, said he lost 300K in a trade. He said it took him months to get back in the green. I wonder how thatís possible with their risk managers around. Swang, another too SMB trader, said his account size is $10 million. Iíd assume Shark also has around the same account size. If the recommended stop loss is no more than 1-2%, I wonder how Shark lost $300K or how he got to stay at SMB.



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  #117 (permalink)
Legendary Market Wizard
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Nolaughingmatter View Post
If the recommended stop loss is no more than 1-2%, I wonder how Shark lost $300K or how he got to stay at SMB.


Guys who make several million dollars a year are not subject to the same risk parameters as a new trader trying to break even. "How he got to stay at SMB"? Businesses work by retaining good people. You don't "let someone go" because they have a rough patch or make a mistake. Likely a loss like this was being actively managed (it was probably a multi-day trade) and the risks were understood. He was probably not using a hard stop anyway, and was probably trying to hedge off risk instead, but that's just a guess and I don't know anything about the circumstances.

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  #118 (permalink)
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Very interesting... SMB liked to say that their traders always have a stop or itís a fireable offense to go over the stop.


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  #119 (permalink)
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Nolaughingmatter View Post
Very interesting... SMB liked to say that their traders always have a stop or itís a fireable offense to go over the stop.


In stocks, gap risk is real and I'd not be surprised to find that a large loss like that was due to a big gap up/down. It's unlikely that a senior trader who mentors others would demonstrate a pattern of poor risk management, like adding beyond a predetermined risk amount. Either way, I have no doubt that the risk was discussed with everyone involved, and that it was not a "rogue trader loses his mind" situation.


I'll reiterate that a "stop" is not necessarily a "stop market" order. And especially not a single one. Particularly for larger positions, instead of just blowing out of it, often a hedge is put on and both are wound down. "Stop" in this context means "risk limit".

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