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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...

  #101 (permalink)
 TropicalTrader 
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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!

Thanks for the book recommendation! That will be my next audiobook.. I've heard some other books I've read quote that author. Cultivating flow is where its at. I think its really important for discretionary traders that we make the effort to program our minds with the right info and understand 'the trading game' plus our strategy/s on a deep level. I think it would be hard to experience flow without that..

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  #102 (permalink)
 
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 Sandpaddict 
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TropicalTrader View Post
Thanks for the book recommendation! That will be my next audiobook.. I've heard some other books I've read quote that author. Cultivating flow is where its at. I think its really important for discretionary traders that we make the effort to program our minds with the right info and understand 'the trading game' plus our strategy/s on a deep level. I think it would be hard to experience flow without that..

Ya totally TropicalTrader. Part of "being in the flow" is when your skills are matched with the task. In a game where one opponent just dominates the game over and over because of knowledge or skill it becomes no fun for either side. But when the better player can play against an opponent with equal skill he will need to focus more. Concentrate and play with more finesse or whatever the game requires to beat the better player. And, gain FAR more satisfaction from playing well. Playing in the zone. In the FLOW. And the satisfaction that comes from the experience itself.

The markets vs ourselves leaves a lifetime of skills to master and move to the next level. To the next. To the next.

He also explains that flow is everywhere in life. He talks about I believe it was a Taiwanese man working in a factory putting together plasma TVs. He finds immense pleasure day in and day out trying to beat his best time. He has it down to a science and tries to improve it anyway he can. Funny part of this story is the man couldn't even afford one of these TVs!

I love the monkey brain/monkey man references. Its just so true.

Daniel kahneman who should know more than almost any man on the planet about our cognitive biases says even though he's been studying behavior and psychology his whole career/life he isn't immune and just as fallible as anyone else!

If that doesn't tell ya that it will take a certain SPECIAL type of person to have a risk centric yet risk adverse enough of a personality and be able to trade like a robot day in and day out for years without any emotion then I don't know but doesnt seems plausible to me.

We are only human after all.

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  #103 (permalink)
 oceansailor 
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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.

Not surprising; as you say, the monkey mind will sometimes take over. (Note that enforcing quotas will not prevent either of those behaviors - although it will limit the maximum loss.)


Quoting 
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 non-obvious part - and therefore the interesting one, at least to me as someone who has studied human behavior for many years - is that most people reject that solution forcefully, almost instinctively, the moment it's proposed. I suspect that it sounds like "BAD puppy! HEEL!" or something of the sort to them. And yet, given the depth of our reactions to financial losses, it's clear that the only truly effective solutions lie deep in our psyches as well.


Quoting 
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.

We are in complete agreement on all of the above; during those times, having an externally-imposed hard limit is absolutely a benefit. The individual retail trader does not really have that option, although it can be simulated with a daily limit; I simply wanted to point out the flaws in the simulation (I can think of several ways that a frustrated/temporarily irrational trader can get around that limit.)

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  #104 (permalink)
 
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 Sandpaddict 
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----------------
"We are in complete agreement on all of the above; during those times, having an externally-imposed hard limit is absolutely a benefit. The individual retail trader does not really have that option, although it can be simulated with a daily limit; I simply wanted to point out the flaws in the simulation (I can think of several ways that a frustrated/temporarily irrational trader can get around that limit.)"
-------‐----------

Such as?...

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  #105 (permalink)
 RedDotScott 
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I have a $1000.00 loss limit with my broker, I day trade the ES, and I have never let that limit get hit.

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  #106 (permalink)
 oceansailor 
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Sandpaddict View Post
----------------
"We are in complete agreement on all of the above; during those times, having an externally-imposed hard limit is absolutely a benefit. The individual retail trader does not really have that option, although it can be simulated with a daily limit; I simply wanted to point out the flaws in the simulation (I can think of several ways that a frustrated/temporarily irrational trader can get around that limit.)"
-------‐----------

Such as?...

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Anyone with sufficient imagination can visualize a frustrated trader who decides that he will not accept any restrictions - even ones that he himself had set up earlier. From there, it's just a matter of choice. Just off the top:

* Reset/cancel the limit
* Use another broker
* Open a RobinHood/WeBull account
* Trade crypto
* Playing around with margin and leverage (eventual losses >> fixed loss limit)
* Online poker/other gambling

If you want a parallel, imagine an alcoholic who really, truly, absolutely seriously commits to having no more than two drinks a day - and has no mental reservations when he makes that promise.

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  #107 (permalink)
 
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 Sandpaddict 
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oceansailor View Post
Anyone with sufficient imagination can visualize a frustrated trader who decides that he will not accept any restrictions - even ones that he himself had set up earlier. From there, it's just a matter of choice. Just off the top:

* Reset/cancel the limit
* Use another broker
* Open a RobinHood/WeBull account
* Trade crypto
* Playing around with margin and leverage (eventual losses >> fixed loss limit)
* Online poker/other gambling

If you want a parallel, imagine an alcoholic who really, truly, absolutely seriously commits to having no more than two drinks a day - and has no mental reservations when he makes that promise.

My apologies oceansailor.

I thought you ment people can easily figure out how to get THEMSELVES out of those situations. Such as just using will power to cut loses that are out if control or something along thise lines.

But I'm on the side of "will power won't work".

But we do have to find a way to do the right thing because we know it's the right thing to do. Willing ourselves to do something we don't want to do won't work longer term.

Studies have even showed that using will power depletes energy and there is ONLY so much will power you have before it starts to deteriorate rapidly. Causing a chain reaction. No matter who you are. Granted different people have different tolerances but the idea remains the same.

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  #108 (permalink)
 TropicalTrader 
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Sandpaddict View Post

But I'm on the side of "will power won't work".

But we do have to find a way to do the right thing because we know it's the right thing to do. Willing ourselves to do something we don't want to do won't work longer term.

Studies have even showed that using will power depletes energy and there is ONLY so much will power you have before it starts to deteriorate rapidly. Causing a chain reaction. No matter who you are. Granted different people have different tolerances but the idea remains the same.

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..

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  #109 (permalink)
 oceansailor 
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Sandpaddict View Post
My apologies oceansailor.

I thought you ment people can easily figure out how to get THEMSELVES out of those situations. Such as just using will power to cut loses that are out if control or something along thise lines.

But I'm on the side of "will power won't work".

But we do have to find a way to do the right thing because we know it's the right thing to do. Willing ourselves to do something we don't want to do won't work longer term.

I'm with you WRT willpower; in fact, my take on the whole concept is that it's nothing more than self-abuse, in most cases. We do need to visualize a better version of ourselves in order to have a goal - but beating up on ourselves because we're not instantly perfect, or because we're not getting there at some ideal rate of improvement is never beneficial.

Meaningful self-improvement takes focus, skill, and mindful practice (all of which, unlike "willpower", are learnable skills). You never get to "perfection" - that's not a realistic goal, anyway - but it improves your life for every gain you do manage to make, and that's something that can be enjoyed and used as fuel for further improvement.

One of the things I love about trading is that it brings me face to face with things to improve - things that I would have had a hard time reaching otherwise, or didn't even realize I needed to change. It also keeps my head from getting too big... I'm quite successful in a number of other areas of life, but this one is going to keep me humble for a good long while yet.

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  #110 (permalink)
 
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 Sandpaddict 
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oceansailor View Post
I'm with you WRT willpower; in fact, my take on the whole concept is that it's nothing more than self-abuse, in most cases. We do need to visualize a better version of ourselves in order to have a goal - but beating up on ourselves because we're not instantly perfect, or because we're not getting there at some ideal rate of improvement is never beneficial.

Meaningful self-improvement takes focus, skill, and mindful practice (all of which, unlike "willpower", are learnable skills). You never get to "perfection" - that's not a realistic goal, anyway - but it improves your life for every gain you do manage to make, and that's something that can be enjoyed and used as fuel for further improvement.

One of the things I love about trading is that it brings me face to face with things to improve - things that I would have had a hard time reaching otherwise, or didn't even realize I needed to change. It also keeps my head from getting too big... I'm quite successful in a number of other areas of life, but this one is going to keep me humble for a good long while yet.

Agreed!

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