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Confidence in discretionary trading

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  #21 (permalink)
 chipwitch 
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Skidboot View Post
Confidence is all about expecting and achieving a certain outcome.

I disagree. I shoot pool. I play cards. I bowl.... all these things I'm confident in. I don't expect to win. But I do possess certain skills that I am confident in. And that I will win with a higher probability than most. I really don't understand why everyone here is wanting to debate semantics. It's like y'all see words in black and white, like there's no middle or varying degrees of a thing. I don't think it's me that has a bias in how they look at trading.

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  #22 (permalink)
 Skidboot 
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I suppose you are on the right track. Play this probability game like a casino. Good Luck to you!


chipwitch View Post
I disagree. I shoot pool. I play cards. I bowl.... all these things I'm confident in. I don't expect to win. But I do possess certain skills that I am confident in. And that I will win with a higher probability than most. I really don't understand why everyone here is wanting to debate semantics. It's like y'all see words in black and white, like there's no middle or varying degrees of a thing. I don't think it's me that has a bias in how they look at trading.


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  #23 (permalink)
 Dasani 
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Skidboot View Post
You are looking for the wrong thing. Confidence is all about expecting and achieving a certain outcome. Embrace uncertainty which is the winning attitude. In trading, you can't and will never know what will happen next. So you can never expect to be confident.

Read "Trading in the Zone" by Mark Douglas. It helps a little.

"So you can never expect to be confident"?

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  #24 (permalink)
 ursus 
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For what it's worth.






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  #25 (permalink)
 bobwest 
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chipwitch View Post
I shoot pool. I play cards. I bowl.... all these things I'm confident in. I don't expect to win. But I do possess certain skills that I am confident in. And that I will win with a higher probability than most.

I am very reluctant to weigh in on this question, because I think trading is a very individualistic thing that is not the same for any two people.... which does make it hard to say much about it that will be of help to anyone.

I believe the OP is aware that trading is very probabilistic and that you win some, you lose some, and you aim for an average. I think it is realistic to wonder "what did I do wrong" when you buy the high/sell the low, and I think it is useful to ask and try to find out. Also, often enough you just did what you were supposed to, and it didn't work. I certainly understand the frustration.

But here's the little that I think I know:

(1) no methodology will live up to expectations, no matter how good it is or how much sense it makes or how well it seems to work in the (misleading) light of hindsight. But you need something, and some will give you a little bit of an edge (a word I am not at all fond of, because of the way it is so carelessly used in writing about trading, as if it's the golden Answer. An "edge" may just mean that your results are a little bit better than 50-50.) I think that most of the commonly-used methods have practitioners who have made them work, although they also have many (most) who have not.

Which brings up the other thing I think I know:

(2) two people who think they are following the same method and can makes a good case that they are, will do very different things is practice. It's not primarily an intellectual thing or even a skill thing in the usual sense, it's just that everyone sees what is happening differently, and you have to make a decision very, very fast under pressure and uncertainty. I think that the more realistic traders assess things better on the whole, and are much less influenced by their emotional attachment to wanting to win, and all the other "psychological" pitfalls we talk about. But it's more than that. At some point, you say, essentially, this will work, this won't, you click the mouse, and you are right more often than you are wrong. You are always going to be wrong pretty often. You won't know until later.

I do not know exactly how to pin this down any further. To give an example, I am confident that in any typical week, I will end up in the black and not in the red. Sometimes I take a holiday because I'm not, but this will usually be the case.

But ...


chipwitch View Post
So, this question is about the feeling of confidence. Do you consider yourself in possession of it in the same way a surgeon might feel about their career? Does a series of losses above some anticipated threshold shake your confidence?

Please describe your confidence and compare it to the confidence you had in a previous career, sport (golf?), hobby etc.

If I were a surgeon I would be put in jail for murdering my patients. But in my former profession of programming, I was 100% confident that I would eventually solve any programming problem, and I did (eventually.) In trading, no, I will often not. But the average will work out, so long as I stay out of my own way in terms of my personal quirks, and keep the losses low, and take a break when it isn't working well. It's not the same, but I'm OK with it.

What is the difference? This is why trading is hard to talk about, and why trading instruction and theory and discussion and all that won't take you too far. And I don't know how to put it into words. At some point I saw things more as they are and less as I wanted them (or didn't want them), but saying that probably isn't much help at all.

It's what I've got.

Bob.

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  #26 (permalink)
 chipwitch 
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bobwest View Post
(1) no methodology will live up to expectations, no matter how good it is or how much sense it makes or how well it seems to work in the (misleading) light of hindsight. But you need something, and some will give you a little bit of an edge (a word I am not at all fond of, because of the way it is so carelessly used in writing about trading, as if it's the golden Answer. An "edge" may just mean that your results are a little bit better than 50-50.) I think that most of the commonly-used methods have practitioners who have made them work, although they also have many (most) who have not.

Thank you for saying this. I feel the same way. I do think edges are valid, but the connotation is as you say. I prefer to think of it as "the probability is favorable for profit over the long term," which sounds uncertain and ambiguous (which it is). "Edge" on the other hand, implies a certain level of certainty, I think, to a newcomer, at least.


Quoting 
Which brings up the other thing I think I know:

(2) two people who think they are following the same method and can makes a good case that they are, will do very different things is practice. It's not primarily an intellectual thing or even a skill thing in the usual sense, it's just that everyone sees what is happening differently, and you have to make a decision very, very fast under pressure and uncertainty. I think that the more realistic traders assess things better on the whole, and are much less influenced by their emotional attachment to wanting to win, and all the other "psychological" pitfalls we talk about. But it's more than that. At some point, you say, essentially, this will work, this won't, you click the mouse, and you are right more often than you are wrong. You are always going to be wrong pretty often. You won't know until later.

I do not know exactly how to pin this down any further. To give an example, I am confident that in any typical week, I will end up in the black and not in the red. Sometimes I take a holiday because I'm not, but this will usually be the case.

But ...



If I were a surgeon I would be put in jail for murdering my patients. But in my former profession of programming, I was 100% confident that I would eventually solve any programming problem, and I did (eventually.) In trading, no, I will often not. But the average will work out, so long as I stay out of my own way in terms of my personal quirks, and keep the losses low, and take a break when it isn't working well. It's not the same, but I'm OK with it.

This sounds right to me. What prompted me to start this thread was the realization that my lack of confidence feeling would likely never go away entirely. I can make peace with that. I would probably think someone a liar if they were to claim their confidence trading was identical to any other profession. Even as a teenager I had an interest in painting pictures. Once or twice, I tried it. I wasn't very good, but I never lost my love for it. As an adult, an artist friend taught me to "see" and encouraged me to try again. I was very reluctant to because I was one of those people who would watch Bob Ross on public television paint these beautiful landscapes from start to finish, without effort in a 30 minute program! His ability and confidence was intimidating and had a negative effect on my own confidence. I found it VERY helpful when my friend pointed out that Bob Ross wasn't always so confident and that his paintings were "formulaic," that each was essentially the same and that he had painted thousands of that same painting. Having that perspective allowed me to enjoy painting for myself.

Watching videos of traders online is very misleading, quite possibly simply because they're scamming... But, I know some are legit (like FT71). He makes it look so easy. It helps to be reminded that even the most experienced traders weren't confident in the beginning and while some measure of confidence is possible, even the most experienced traders are not 100% confident, like we may think they are when we are new to trading.


Quoting 

What is the difference? This is why trading is hard to talk about, and why trading instruction and theory and discussion and all that won't take you too far. And I don't know how to put it into words. At some point I saw things more as they are and less as I wanted them (or didn't want them), but saying that probably isn't much help at all.

Bob.

I don't know if you're just a humble man, or what, but you have a knack for understating your value to us beginners.

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  #27 (permalink)
 AllSeeker 
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Going strictly by the thread title and not the discussion above, don't want to interrupt that.

Confidence is derivative of many things that come together in body of trader, which includes probabilistic backing, experience, faith in own ability and proper understanding of your own psychology and risk profile.

This is hardly black and white matter, nothing in trading is quite so black and white.

However, lack of confidence or even fear, isn't necessarily bad, confidence is hairline away from being overconfidence. A overconfident trader may not have fail safe in place but confidant but at the same time fearful one may have it. I feel people talk about risk management and stop losses all too much, so I'll take a little different direction. From my own example, I'm quite fearful, a very anxious person too, so knowing myself well, I avoid trading futures and carrying positions overnight.

I trade options on buy side, why? Even if markets went to hell in very next second of me taking my trade, it still only costs me premium of option. Which is quite negligible for me.

One of the reasons it is negligible for me is also because I'm confidant in my abilities to run business and make money elsewhere and not make trading my only source of earning, but then again, it's also because of my fear of putting too much pressure on myself if I made myself into solely dependent on trading.


I feel, key is achieving balance between these emotions. They are not necessarily with you or against you. Also, one advantage you get from this over long years is, you develop ability to know when to give more weight to what, even subconsciously. This is why some traders will know when to avoid taking a trade even if their system is telling them to.

Maybe successful is not just one that is most confidant, but one who is good at juggling these emotions, but then again without right practical skill set an emotional mastery just might make one thinker rather than doer. We want to be both, in a balanced way, how? Well, that's to each his/her own.

Trading is highly personal affair.

Just my uneducated 2c.

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  #28 (permalink)
 glennts 
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I am confident that the more participants there are in a conversation about confidence, the less likely it is they will all be talking about the same thing.

For example:

I am confident that if I adhere to my trading methodology I will be consistently profitable.
I am confident that I will not always adhere to my trading methodology.
I am confident that if I correctly stack the probability arguments then my next decision will likely have a positive outcome.
I am confident that confirmation bias plays a role in my analysis and can have me see what is not there.
I am confident that the more consecutive profitable trades I have the higher the probability that the next trade will be a loser.
I am confident that if my expectations are realistic the greater the likely hood that they will be achieved.
I am confident that if my expectations are unrealistic the greater the likely hood I will struggle and come to wonder if my confidence is misplaced.
I am confident that if I lose confidence, I will get it back.

So, while having lost confidence, if I can be confident I will get it back then confidence can be understood in many different ways. Different people, different understandings.

Borrowing from Anagami: "maybe you are in the right place but looking at things the wrong way."

If I am very confident that others do not understand what I am saying, perhaps I should be less confident that I understand what they are saying.

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  #29 (permalink)
 chipwitch 
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AllSeeker View Post
Going strictly by the thread title and not the discussion above, don't want to interrupt that.

Confidence is derivative of many things that come together in body of trader, which includes probabilistic backing, experience, faith in own ability and proper understanding of your own psychology and risk profile.

This is hardly black and white matter, nothing in trading is quite so black and white.

However, lack of confidence or even fear, isn't necessarily bad, confidence is hairline away from being overconfidence. A overconfident trader may not have fail safe in place but confidant but at the same time fearful one may have it. I feel people talk about risk management and stop losses all too much, so I'll take a little different direction. From my own example, I'm quite fearful, a very anxious person too, so knowing myself well, I avoid trading futures and carrying positions overnight.

I trade options on buy side, why? Even if markets went to hell in very next second of me taking my trade, it still only costs me premium of option. Which is quite negligible for me.

One of the reasons it is negligible for me is also because I'm confidant in my abilities to run business and make money elsewhere and not make trading my only source of earning, but then again, it's also because of my fear of putting too much pressure on myself if I made myself into solely dependent on trading.


I feel, key is achieving balance between these emotions. They are not necessarily with you or against you. Also, one advantage you get from this over long years is, you develop ability to know when to give more weight to what, even subconsciously. This is why some traders will know when to avoid taking a trade even if their system is telling them to.

Maybe successful is not just one that is most confidant, but one who is good at juggling these emotions, but then again without right practical skill set an emotional mastery just might make one thinker rather than doer. We want to be both, in a balanced way, how? Well, that's to each his/her own.

Trading is highly personal affair.

Just my uneducated 2c.

I think your post was very on-point and precisely the kind of response I was hoping for. In the OP I was intentionally leaving the respondents to determine at their own discretion (no pun intended), how to define "confident" for themselves. None of us can truly understand the confidence another person may have in their trading. Likewise, we can't truly know the confidence another person has in their non-trading profession. This is why I was asking them to compare the confidence they have experienced in both. While I make no correlation between success and confidence, I did target successful traders because one should assume someone who has not experienced trading success would presumably lack confidence, or be self-deluded. That isn't to say one can't be a beginner and have confidence that they will one day be successful. That's a different discussion.

Fear/anxiety is an interesting subtopic to this thread. I think we need to be careful not to conflate it with a lack of confidence. It seems reasonable to assume that fear/anxiety are abundant when we lack confidence. But, fear/anxiety are also important tools for anyone in any profession even with 100% confidence. One might even say that some (not all) fear and anxiety might ONLY be experienced by confident people who have acquired the experience necessary to overcome the beginner ignorance that made them blind to it.

Thank you for your comments!

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 petebaksh 
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This post is late to the thread, a bit long (apologies), and a response to the original question. I think that confidence in trading is fleeting, and not necessarily a good thing. Then again, my confidence in business has come in fields like sales and then later on a market making desk in equities a few decades ago, so for me confidence is very related to having thrived in conditions of uncertainty over many years.

Trading my own account, literally every one of my big hits has come when I had ?confidence? that the market was going to do something. Someone mentioned the statistical nature of trading earlier, and my real confidence comes from that. This will seem irrelevant for a bit, but bear with me.

It's deeper than statistics, but involves it heavily. You can find old videos of Mark Douglas delivering a seminar online that really moved the needle for me in my development of confidence in myself in the markets. Essentially, his idea can be summed up as you are not involved in any one single trade, but creating a distribution of them. Out of 100 trades, maybe 50 - 70 are going to lose or scratch, but so long as you are structuring the risk versus reward properly, you will come out ahead. Now in reality, this doesn't always pan out, but you can and should adjust along the way.

That's the game, it's one of uncertainty and adaptation. You can, and probably never should be really confident in any one trade, but you can and should have a growth mindset. Similarly, being confident and profitable in a process does not mean you've found what works. It means you've found what works right now. That is constantly changing.

By viewing each trade as a truly random event within some distribution, you are freed from worrying about whether you're buying the high or selling the low. Hell, my strategy often does these things on purpose because it's at those points where enough momentum is likely to come into the market to give me the kind of "free looks" that I like. But everyone is different, and maintaining the view that each trade is a random event is much harder than it sounds. That is why I walk away from the desk at the first instant I start to "feel" anything. When I am trading well (as distinct from winning in trades), I've noticed that I "feel" nothing, and could be best described as dispassionately observing and responding to the market. Invariably, if I am feeling anything, excitement, anger, frustration, and so on, I am going to make bad decisions involving either poor entries or exits.

So to come to the point, to develop confidence I came to terms with uncertainty, and developed methods of checking in with myself before and during trades to make sure I was objective. If it seems I'm not, I stay out, whether the opportunity looks good or bad, because there is no such thing as a good opportunity when the lenses are fogged.

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