NexusFi: Find Your Edge


Home Menu

 





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


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one TropicalTrader with 106 posts (511 thanks)
    2. looks_two joe s with 14 posts (15 thanks)
    3. looks_3 Big Mike with 8 posts (52 thanks)
    4. looks_4 Sandpaddict with 8 posts (16 thanks)
      Best Posters
    1. looks_one Grantx with 8.3 thanks per post
    2. looks_two Big Mike with 6.5 thanks per post
    3. looks_3 josh with 5.7 thanks per post
    4. looks_4 TropicalTrader with 4.8 thanks per post
    1. trending_up 61,535 views
    2. thumb_up 971 thanks given
    3. group 599 followers
    1. forum 241 posts
    2. attach_file 12 attachments




View Poll Results: Do You Even Scalp Bro?
Nope 63 27.39%
Nope
63 27.39%
Yea, under 10 round-turns a day 95 41.30%
Yea, under 10 round-turns a day
95 41.30%
Yea, avg 10-20 round-turns a day 46 20.00%
Yea, avg 10-20 round-turns a day
46 20.00%
Yea, over 20 round-turns a day 26 11.30%
Yea, over 20 round-turns a day
26 11.30%
Voters: 230. You may not vote on this poll

 
Search this Thread

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

  #91 (permalink)
 
josh's Avatar
 josh 
Georgia, US
Legendary Market Wizard
 
Experience: None
Platform: SC
Broker: Denali+Rithmic
Trading: ES, NQ, YM
Posts: 6,216 since Jan 2011
Thanks Given: 6,752
Thanks Received: 18,136


oceansailor View Post
What works - hard as it may be - is to actually fix the root problem; i.e., handle the emotional mess that causes under/over-trading, fear of risk, wild-ass gambling/YOLO bets, etc. If you don't handle that, no stop-gap measure will help - and you WILL wreck your account.


This may be true -- however, professional prop traders all have a risk manager. To size up, they have to get authorization from the risk manager. The risk manager also sets daily loss limits. That is, the firm does not simply rely on traders fixing their problems -- they enforce it with software control that says "you're done for the day" ... and this is for traders who fall into the 'professional' category. So, a broker-enforced loss limit is absolutely a good idea, even if you have gotten things together mentally.

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
ZombieSqueeze
Platforms and Indicators
Are there any eval firms that allow you to sink to your …
Traders Hideout
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Futures True Range Report
The Elite Circle
New Micros: Ultra 10-Year & Ultra T-Bond -- Live Now
Treasury Notes and Bonds
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
59 thanks
Funded Trader platforms
36 thanks
NexusFi site changelog and issues/problem reporting
25 thanks
GFIs1 1 DAX trade per day journal
19 thanks
The Program
18 thanks
  #92 (permalink)
 oceansailor 
Tampa FL
 
Experience: Advanced
Platform: TradeStation
Posts: 31 since Apr 2019
Thanks Given: 88
Thanks Received: 87


josh View Post
This may be true -- however, professional prop traders all have a risk manager. To size up, they have to get authorization from the risk manager. The risk manager also sets daily loss limits. That is, the firm does not simply rely on traders fixing their problems -- they enforce it with software control that says "you're done for the day" ... and this is for traders who fall into the 'professional' category. So, a broker-enforced loss limit is absolutely a good idea, even if you have gotten things together mentally.

@josh, I think we're talking about processes that sound similar but have fundamentally different purposes. In the first case, the subject is traders who literally cannot control themselves - which would almost certainly not be the case with professional prop traders. The risk manager is not trying to crowbar a trader's emotional flaws; he's enforcing limits to protect the hedge fund from unwarranted risk as the company (and not the trader) sees it, and serve as the backstop to prevent criminal behavior as well as anything else that falls outside the rules. It's a complete separation of opposing imperatives, with the trader on one side and the risk manager on the other - which is not possible in the case of a trader who risk-manages himself.

In fact, we actually know what happens when you combine those roles in the professional world. Société Générale and Jérôme Kerviel, anyone?

Again, I'm not saying that my warning applies to everyone. But - as we know - the easiest person in the world to fool is yourself. And that's a risk that's always worth considering.

Reply With Quote
  #93 (permalink)
 TropicalTrader 
Vancouver Canada
 
Experience: Intermediate
Platform: Sierra Chart
Broker: EdgeClear Rithmic
Trading: MES
Posts: 125 since Feb 2016
Thanks Given: 241
Thanks Received: 552



josh View Post
This may be true -- however, professional prop traders all have a risk manager. To size up, they have to get authorization from the risk manager. The risk manager also sets daily loss limits. That is, the firm does not simply rely on traders fixing their problems -- they enforce it with software control that says "you're done for the day" ... and this is for traders who fall into the 'professional' category. So, a broker-enforced loss limit is absolutely a good idea, even if you have gotten things together mentally.

Thanks! That's what I was going to say. There are also some well capitalized individuals who choose to clear through a prop firm so that they get the benefit of the risk management team..

Sometimes trading events and our unconscious reactions to them can redirect the energy (glucose and oxygen) from our rational brain into the limbic system (monkey mind) or reptilian brain. This can lead to disaster. I'm sure many traders have blown up after being profitable for many months or even years.

Follow me on Twitter Started this thread Reply With Quote
Thanked by:
  #94 (permalink)
 TropicalTrader 
Vancouver Canada
 
Experience: Intermediate
Platform: Sierra Chart
Broker: EdgeClear Rithmic
Trading: MES
Posts: 125 since Feb 2016
Thanks Given: 241
Thanks Received: 552


oceansailor View Post
@josh, In the first case, the subject is traders who literally cannot control themselves - which would almost certainly not be the case with professional prop traders.

I have first-hand knowledge that this point is not correct. I'm friends with a risk manager in a prop firm and he's told me many stories about having to call traders and tell them to get out of their positions or he would have to do it for them. Loss aversion is a powerful thing, especially when the monkey brain takes over.. The goal is to make sure you stay in the game and don't let one bad day end your career or set you back immensely. There are many stories of these blowups happening to pro traders.

Follow me on Twitter Started this thread Reply With Quote
  #95 (permalink)
 oceansailor 
Tampa FL
 
Experience: Advanced
Platform: TradeStation
Posts: 31 since Apr 2019
Thanks Given: 88
Thanks Received: 87


TropicalTrader View Post
I have first-hand knowledge that this point is not correct.

I'm afraid you don't (your conception of the term "first-hand" is patently wrong.) What you do have is a case of a risk manager doing his job - as you say, "tell them to get out of their positions or he would have to do it for them". That's not necessarily - or I would presume even often - the trader being emotional; again, the trader's conception or tolerance of risk is not the same as that of the fund as represented by the risk manager.

Example: a trader who has a perfectly rational conception and tolerance of risk at, say, the $10M level - but has not yet reached that level of allowed risk by the fund. The trader may, from habit, put on a position that is too large per policy - but this has nothing to do with an emotional flaw; simply a mistake for which the risk manager is the backstop.


Quoting 
I'm friends with a risk manager in a prop firm and he's told me many stories about having to call traders and tell them to get out of their positions or he would have to do it for them. Loss aversion is a powerful thing, especially when the monkey brain takes over.. The goal is to make sure you stay in the game and don't let one bad day end your career or set you back immensely. There are many stories of these blowups happening to pro traders.

All of that granted - and all of those stories are the ones that are going to stick in your and everyone else's mind. What you're NOT hearing - classic case of filter bias - are the stories of thousands and thousands of traders who are going about their day calmly, quietly, doing their jobs within risk parameters and never hearing from the risk manager.

P.S. I will also note that this is a side issue that has little to do with my original point: trying to impose mechanical risk management on yourself as a "cure" for lack of self-control is likely to be futile for many people. We can dance all over the place and pick at imperfect semantics, etc., but that point remains.

Reply With Quote
Thanked by:
  #96 (permalink)
 joe s 
sacramento ca us
 
Experience: Intermediate
Platform: Ninja Trader,Trade Station
Trading: es
Posts: 163 since Aug 2015
Thanks Given: 133
Thanks Received: 105

Its hard to control emotions

Reply With Quote
  #97 (permalink)
 
Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
Posts: 684 since Mar 2020
Thanks Given: 975
Thanks Received: 637


Big Mike View Post
Many years ago when I first accepted the vast importance of psychology, I started to develop a combination trading tool that used emwave type inputs and combined it in a traditional trading indicator on a time series chart.

I actually had plans to market such a device with a trader here in the community which was a personal friend of mine.

I never followed through unfortunately.

Sent using the NexusFi mobile app

Holy crap! The ULTIMATE sentiment machine! Lol

Sent using the NexusFi mobile app

Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #98 (permalink)
 
Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
Posts: 684 since Mar 2020
Thanks Given: 975
Thanks Received: 637


Baudo View Post
is Merritt Black really a consistently profitable trader
I saw this interview where het told about his rough patch last summer

Or is he to be considered more as a label from SMB Capital to plug themselves in the market
Experienced, he is. but I see his name regularly around aspiring traders as their inspiration, the successful marketing of him as a brand kind of makes me question his abilities.

Difficult to distinguish the real ones from the scammers, there is a kind of conflict of interest being at these firms that also sell education like SMB, AXIA etc.

I also wonder this?

Sent using the NexusFi mobile app

Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #99 (permalink)
 
Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
Posts: 684 since Mar 2020
Thanks Given: 975
Thanks Received: 637


TropicalTrader View Post
I listened to Trading in the Zone for around the 10th time over the weekend. It's such an e p i c book.. So densely packed with knowledge. If I could only have one psychology book, that would be the one..

A few passages I highlighted in my notebook:

"Consistency is a state of mind"

"The best traders aren't afraid, preventing them from getting reckless"

"What separates the best traders from everyone else is not what they do or how they do it - but rather how they think about what they do and how they are thinking when they do it".

"Fear is the source of 95% of trading errors"


"Your state of mind is a byproduct of your beliefs and attitudes. Winning is a state of mind just like happiness, having fun and satisfaction are states of mind."

"One habit many losing traders have is blaming the market. They shift the responsibility onto the market". (victim mentality)

"Taking responsibility is the cornerstone of a winning attitude"

"When you are winning, you are more susceptible to making a mistake. Euphoria makes you believe that nothing can go wrong".


The 4 Trading Fears:

Fear of losing money
Fear of missing out
Fear of being wrong
Fear of leaving money on the table


Remember that this is a process and usually requires a lot of time, consistent effort, mental toughness and constant repetition to re-train your minds (rational, limbic, reptilian) to be effective for trading. Since I started putting in full time hours 6 months ago and doubled-down on my psychology+workload, I've made huge improvements.. I've also beaten one of my nemesis', having "emotional blowup days".

Something else that's very useful I received from Dr. Steenbarger - make a list of what sets you off ("makes you" angry, frustrated, filled with regret, etc).. For me it was being "wrong" and too much stress (from putting on too big size, making mistakes, impulsive trading, taking a few losses in a row and losing confidence in my ability).

Cheers!~

Hi TropicalTrader. Great thread!

There is a seminal book called Flow: The Psychology of Optimal Experience by Mihaly Csikszentmihalyi.

This book belongs besides Thinking: Fast and Slow by Daniel Kahneman.

Flow is about those times when you are just in tune with whatever you are doing. Your tasks are challenging but not impossible. Your skills are being stretched but not beyond reach. Concentratation is high but not overly causing frustration or lacking causing boredom. You can almost watch yourself as your movement just flows from from a place of deep understanding. Time seems to not exist or to freeze or slow. You feel this is where you belong in this moment... forever...

This book takes a scientific route to explain the root of HAPPINESS.

And happiness, contentment and confidence are all traits as far as I can tell are prerequisites for long term successful trading.

We have all been IN THE FLOW when trading. This book explains that experience.

Good trading to all!



Sent using the NexusFi mobile app

Visit my NexusFi Trade Journal Reply With Quote
  #100 (permalink)
 TropicalTrader 
Vancouver Canada
 
Experience: Intermediate
Platform: Sierra Chart
Broker: EdgeClear Rithmic
Trading: MES
Posts: 125 since Feb 2016
Thanks Given: 241
Thanks Received: 552



oceansailor View Post
I'm afraid you don't (your conception of the term "first-hand" is patently wrong.) What you do have is a case of a risk manager doing his job - as you say, "tell them to get out of their positions or he would have to do it for them". That's not necessarily - or I would presume even often - the trader being emotional; again, the trader's conception or tolerance of risk is not the same as that of the fund as represented by the risk manager.

Example: a trader who has a perfectly rational conception and tolerance of risk at, say, the $10M level - but has not yet reached that level of allowed risk by the fund. The trader may, from habit, put on a position that is too large per policy - but this has nothing to do with an emotional flaw; simply a mistake for which the risk manager is the backstop.

P.S. I will also note that this is a side issue that has little to do with my original point: trying to impose mechanical risk management on yourself as a "cure" for lack of self-control is likely to be futile for many people. We can dance all over the place and pick at imperfect semantics, etc., but that point remains.


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.

Follow me on Twitter Started this thread Reply With Quote
Thanked by:




Last Updated on April 13, 2021


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts