traderpsyches

Agree -it is a great disservice of many educators too teach defined goals in the way that they do. They leave out what the mkt is giving, the need for judgment and the fact that numerical goals r really a psychological mechanism to be used judiciously and consciously. DKS

The underlying clue in this message is the perception of markets as what they really are - just a game against what another human being is going to want to pay in the future. I would agree that the better this is understood, the more successful a trader can be.

Trading is a very physical business - as well as a psychological one... just like everyone needs to find their instruments and timeframes that best suit their thought process, everyone needs to "workout" and rest accordingly. This is one of the core problems with the concept have creating a plan and following it AND EVERY TRADE to the letter... you can't get every trade because your brain doesn't have the energy... and if you try, you take ones that aren't so great and further degrade your mental energy ... or what as you know we call Psych Cap. It is one of those things that falls under the rubric "Well the reality is...." DKS aka TP

The issue isn't monetary objectives (which is what they are) ... it is the timeframe. Monthly, quarterly and yearly are one thing - weekly and daily are a completely different psychological and market event. And in the end, your psyche is going to determine the figure in your account. Manage it and the rest takes care of itself. Mark Douglas is a genius in many ways but the elements in his books where he encouraged humans to become like robots are misleading as to what really happens in man vs. market. DKS

What mostly everyone fails to realize is that unless you are a black box, you have waxing and waning mental and emotional energy. These swings in energy will have an impact on your perception, judgment and ability to execute. If you manage to them - i.e. Psychological Capital ... the rest will take care of itself. On the flip side, the ultimate trading is taking what the market is giving at any particular time. If not giving, then get away, if giving, then get. The best way to optimize your ability to be there and capable when the market is giving is to manage to your psych cap. Daily profit goals are fine but they are really just a tactic to manage one's mental state - their psych cap. The longer term goal should be to move away from them but use them in the meantime.... btw... great week in Chicago at CME and with Trader's Audio - CME video available in a few weeks.

In Chicago at CME right now with not a lot of time but short version - take lots of breaks. Get away from the stimulation of the trade, do jumping jacks, take a walk... yes once in awhile you will miss a great set up but the fear and frustration of that reality is the emotional architecture behind the worst trades. If you manage first and foremost to your psychological capital - energy, mood etc... the rest will take care of itself presuming you have a decent trading strategy and tactics pre-planned. Sorry for short reply -

A couple of points to ponder #1) Daily money goals make no sense whatsoever from the market's perspective - ultimately the most profitable trading is taking most of what the market is giving when it is giving and to stay away when it is not #2) Having said that, having daily goals can be a very useful tool in building what you all are talking about which is what we call Psychological Capital. Without psych cap, your plan doesn't matter. When psych cap is lacking, you will make mistakes, take too much risk and deviate from the plan. The trick within all of this really is to manage to your psychological state first and foremost. IF you do that, everything else will take care of itself. For example, it is proven that when we are tired we take more risks. So... if you are tired, you will justify taking riskier trades. Managing to psych cap means asking if you are tired first - as a risk management tool. Another issue here is the brain has a "circuit" for ambiguity - in other words, it appears (see Hsu et al 2005) that the brain detects when it is dealing with imprecise or incomplete information. The markets are always incomplete and imprecise. Therefore, our trading plans are at best like the plan a football quarterback has going into the game - when the defensive end comes at him to sack him, he has to abandon the plan and make a decision in the midst of ambiguous info (can he get here, will that guy block him etc) Now... this brings us back to psych cap. The brain reverts to unconscious pattern recognition in ambiguous situations and communicates with the conscious mind via feelings ... so again if you manage to psych cap (most of which is experienced through your feelings), you will be working in concert with how the brain perceives markets. So - my advice is #1) have a daily goal if it helps you manage your mental state but realize that you want to move beyond that to reach the pinnacle of trading. #2) Realize that your real probabilities are your system combined with your ability to execute it and your ability to execute is almost 100% psych cap. (exceptions include technology, margin calls). If you manage to how you feel (yep I can hear you guys screaming now) ... you will both be in concert with the real way your brain interprets markets and you will be using the best risk management tool you have... both of which will improve your performance. ... btw - browns fan ... I am originally from Akron.... had season ticks for years.

HI all - Thanks so much Soultrader for posting! This is the introduction to our new self-driven workshop, Access Your Psychological Capital, the Enduring Edge. It is meant to give you a flavor of how the course works and what it consists of. We are confident that if any level trader fully works the workshop, their bottom-line results will inevitably improve. The key is "if" .... The official release is April 1 and there is a pre-launch program which provides a recording of a two-hour live mini-workshop we did in October. For more information, contact us directly or visit our website. DKS aka traderpsyches

The whole key to fear is to embrace it, research it, verbalize it and actively feel it - if you do that, it will not stand in the way of following the actions that you plan to take. DKS aka traderpsyches

If you ask me (which you did not), the success of a trader is directly related to their ability to find a strategy and associated tactics that suits their personality. It would be hard to argue with the success of the trader who is in the CME video with me (check CME/Shull/Exaggerated Emotions or Trader Psyches/independent traders page) and he definitely trades the shortest time frame possible for a human being. Furthermore, many hedge funds are using sub-one minute algo's to capture smaller and smaller swings.... Nevertheless, for others, a swing or hourly strategy works better... there is no size fits all IMO. DKS

A key to note in Lo's work is the word - reactivity. This links the experience of a feeling with action. Lo has also written the emotion and logic are two sides of the same coin. You HAVE to be emotional to make a decision... so the conundrum lies not in trying to become less emotional but in learning what to do with the feelings you experience. The problem with being emotional only comes when those emotions are acted-out in trading decisions. An emotion alone never made or lost a dime... As another study by Seo and Barrett shows, using emotion analytics and personal emotional research leads to an understanding of the emotion one is experiencing and a better series of trading decisions.

Those are actually great suggestions... if one can do them. But, would they really change your trading behavior? - as the ingrained and unconscious emotional patterns that lead to impulsivity will still be there even if one did each of these things. Check this out for an update to Decisions Under Uncertainty from a Neuroeconomics point of view - the latest from the world of Tversky et.al. and the Society for Neuroeconomics. http://traderpsyches.com/blog/?p=214 - The Brain on Risk by Elise Payzan of the Lab for Decision Making Under Uncertainty at the Swiss Finance Institute.

If one takes the attitude that they are researching themselves and their sequence of Feelings-Thinking-Action then indeed the process of introspection can reveal boatloads of information about oneself that one was previously unaware of. Indeed it is easier to come about this information through conversation with a coach who knows what to listen for but many of my clients or even would-be clients have come to realize lots of things about their unconscious patterns through writing alone. It is a great tool for those who are inclined to do it. For some it is too hard and another tool is needed. But behind each tool needs to be the quest to understand the same sequence - feelings, thinking, actions - because that is how the brain works and that is where the pay-dirt lies in terms of trading.

While it is understandable that the mental dimensions of thinking versus feeling seem complicated, in reality they are lots simpler than many people make them. Here are some facts to hopefully help simplify - 1) Your brain is going to use feelings to make a decision. PERIOD. So... the question is how to put yourself in a state where those feelings are working for you in the pursuit of profitable trades? 2) The more indicators you have the more your brain is going to use shortcuts - or heuristics - and rely more on feel than anything that resembles a mathematically updating probability machine. Hence, simplification is best. 3) If you manage to the energy of your feelings - by avoiding trading when you are tired or there is emotional static of noticeable types - your w/l ratio and productivity will go up. In other words, you don't need to take every trade in your system - only a computer can or should try to do that 4) The core feelings anyone is going to have are a. wanting more .... = fear of missing out b. wanting less ... = fear of losing or being wrong. Both of these feeling dimension are going to tap into a part of you that feels insecure about who you are, your position in life, what your partner or parents want... or..... Everyone has this feeling and the constant judgement nature of the market taps into it. 5) Most likely the various internal voices are the voices of your parents - or at least your childhood interpretation of those voices - but they will circle back to the feeling of insecurity in who you are or are you "doing it right." 6) The trick is to realize that the feelings are trying to be your friend so to speak and turn them into you ally. It is key to realize that they are not inferior to your thoughts and key to realize that feelings and actions are two separate things. 7) The ultimate goal is to be able to verbalize ALL feelings as this will enable you to understand their disguised message and disengage their power to control your actions. This takes practice. ... okay I said it was simple and wrote seven long points but the keys are a. the feelings will almost always be - fear of losing, being wrong or missed out (and frustration over having missed out) b. the underlying fuel for those feelings will be a feeling of "not being good enough" .... and EVERYONE experiences this. So... try to see how this basic experience occurs in your trading and find mechanisms that work for you to disconnect those disguised feelings from your decision/action to enter or exit. hope that helps - DKS

Actually, the only thing anyone can control is their actions... I am currently writing a paper for the CME group that will reference a number of studies.. including a new one out of Stanford and Northwestern that show we absolutely will have (and others that show we must have - LO at MIT) these emotions to make decisions. I can show you how trying to control the emotion is actually the most dangerous piece of trading advice ever given. Be as emotional as you are - whatever that is - just be careful what makes your finger hit the mouse key - actions are the key. DKS