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

This is great stuff - the only thing I would add is to become an objective observer of what feelings you have - ... because they are there - underlying the thinking and the doing. By bringing the feelings to the surface, it become much easier to interrupt their ability to drive the auto-trade which is really a function of acting out a feeling rather than noticing it. ..jmho.

-fs No I don't mind. There is a new one at the CME from 2007 versus 2006. It is more comprehensive regarding our approach to advanced trading psychology. http://www.cme.com/edu/events/od/general.html I don't see how to make that a link but I guess anyone who is interested can copy it. TP aka DKS

DB's answer covers almost innumerable helpful hints - imo. Things people tend to overlook include 1) what time do I really have to trade 2) when am I most mentally and physically available 3) how patient am I? how hyper am I? 4) how patient can I be? 5) how much risk can I take on any one trade without getting overloaded with anxiety? --- and then 1) How systematic am I. How comfortable am I with a formula? 2) What do I already know that I can capitalize on? THIS is the big one. The standard pattern is to run into a series of losers and change the market or timeframe that is traded. After a couple of rounds of this, it isn't likely to be the strategy/tactics. This is when it is time to look back at your experience and ask "what feels right to me?" NOT what I am told by someone else but what timeframe pace, rhythm etc. It takes some guts to listen to and essentially honor your own experience but that is really the clue. If you have less than 2-3 years of experience, then you have to go with a trading educator who teaches a methodology that seems right and is run by a person who you feel good about it. All of this is a judgment call and as such, we all have the tendency to doubt ourselves. The best answer I can give is review some of DB's (jason's?) questions above along with my comments and then realize that if you have more than 3 years of experience, chances are you know lots more than you think you do. One more thought - it is usually best to throw out some number of indicators and charts. Invariably everyone clutters up their strategy and tactics with more stuff than they need. I hope that helps - at least a little.

"What kills traders is they trade in such a way that doesn't agree with their personality. - " I couldn't agree more. Neuroscience shows that "it isn't enough to KNOW what to do, one has to FEEL it also" (Camerer, Lowenstein, Prelec, Journal of Economic Lit, March 2005). ... this is the psychological/brain design reason that everyone have to find a system that fits their personality. For example, I work with a former bond floor trader who was used to scalping and trading a LOT. When he moved to the screen everyone told him he had to get indicators and a system and .... he did terrible - even though he had regularly made seven figures in the pit. Guess what works for him? Scalping in the bonds...

[1. If you are mentally drained (i.e. you have a lot going on in your life)- it is best to take a breather from trading. -- This is true in the macro and the micro. Traders underestimate the role their general psyche plays in their overall results. For example, if you are tired from getting too little sleep, you will be more impulsive. If you are getting a sore throat, same thing. The psyche and the brain that runs it is VERY much dependent on the physical body, therefore, you have to have the physical energy to run the psyche to help you see your trades and stick to the plan Mea is mentioning. Heeding your internal signals and staying out of the market when your mechanism for execution isn't up to par, increases the odds of higher profitability at the end of the month. ... this is the true joint probability distribution of psychological capital and trading plans.

Midknight - all I am saying is that I think not being responded to is the exception. I do also know they have garnered 100's of oversea's accounts in the past year so again, I think that experience was the exception. .... Oli - I can't really speak to the PM piece of it because I personally never remotely push the limits of my margin. I would recommend CALLING the regular number and talking to Kurt - although I know they have hired many new brokers recently.

I am surprised anyone had a bad experience with customer service and MIRUS. They work very hard to be the very best at it. I have been their client since 2004 and I know it is their #1 priority. I also wouldn't switch from Ninja Zenfire for anything. fwiw...

As long as my own intra-day trading is primarily on hiatus (which is at least for the summer and maybe for the better part of 2008), I am happy to participate as much as you all would like. There is a great article in the WSJ Science blog today about how we make decisions 10 seconds before we are conscious of them. To that end, I think it pays to work at being conscious of all the things we think, feel and sense. ... http://online.wsj.com/article/SB121450609076407973.html?mod=rss_Science_Journal It is another testament to how the over-emphasis on rationality actually leads us astray. ... Being aware helps us avert our unconscious biases. DKS

Yep it's me. One of my coaching clients mentioned this site... and I figured with my screen name I wasn't really hiding it .... thanks for the welcome. ... as for the workshop, I am a bit reluctant to talk about it as I don't want to inadvertently be selling it. The truth is I am writing a book and sometimes need a diversion - so have a new site to chat on is a good one. As for which emotion is more dangerous - I don't think you can say. ... and I do think that if you learn to think of emotions as information - and not as destructive or dangerous but just a signal of something... then you can manage into separating them from the auto-trade (separate them from actions) and end up with a better bottom line.

I couldn't agree more with the idea of finding a timeframe and style that suits you. Everyone is different and they need to capitalize on their strengths once they figure out what they are. As to the control your emotions, well that part I disagree with. It isn't necessary to control your emotions - only your actions. In fact, it has been shown that emotions are really just information and motivation and the trick is to use them that way. The challenge to that is we generally haven't been taught to do that so emotions and actions become one. Becoming aware of emotion, understanding it and then choosing which action to take (which may include going off to deal with the emotion itself) works better because our bodies/minds aren't set up to ignore such a fundamental element of who we are. ... or at least this is what I have learned over the years.