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torero

A cycle of our psyche?

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I noticed from my equity curve recently that there tends to be a wave of ups and downs and I tried to determine if this has to do with the market or it's our own psyche that dictates these results? These waves happen on a very almost symmetrical order, in terms of time and $ value. Do you know what I'm saying?

 

I mean, I'm a discretionary trader so when I execute trades to the setups on entries, no problem there, but I think it's the exit that is more flexible depending the market condition. So I'm not sure whether there is something in me or my mind that cause the equity to move to a level, then move back down then up again.

 

I've read somewhere that we humans have a cycle to everything we do, at work, at play, etc. An example is not all of us devote all 8 hrs at work in productive mode. Stats show that no one can produce even half of those hours productively. So I'm thinking that traders that falter in their equity is due to lack of concentration, focus, productivity. It must be difficult to maintain high level of productivity for long before a drop and a losing streak would come. Any ideas doc?

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Yes. I know exactly what you are saying. There are ever-changing cycles in the markets and in trading. It happens in sports where you see someone with a "hot hand" suddenly ( seemingly suddenly anyway) go cold. I am not a big sports person, but I believe there are many examples, and the sports fans here could help with this. I have seen it in ice skaters and also in Tiger Woods. I seem to recall that Tiger Woods went "cold" in his golf game. Do any of you remember that. He took time off and reassessed what he was doing and I think he changed several things about how he played. It is no different with trading. I have watched people I coach do really well for about six months or so and then go flat as a pancake for a few months and then come back roaring. I think it is possible to trade every day, but I do not believe it is possible to be so intensely trading for eight hours a day without some kind of burnout. It might not be full-blown burnout ( depression, physical illness), but reflected in a more subtle manner as lack of concentration, a general feeling of malaise, lessened ability to focus, etc. This is a sign that your body and brain give you that they need to rest and recover. Most traders ignore these signs until it is too late.

 

This is not meant as an absolute, because everyone is different. However, it is my experience that traders are way too hard on themselves, overwork, underexercise and generally do not take care of their bodies.

 

If you are going to be in it for the long run ( as most of us would like to be), it pays to listen to what your body is telling you. Get rich slowly and steadily and take time to enjoy the journey..

 

Thanks!

 

Doctor Janice

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I read something to that effect in "Mastering Futures Trading" by Bo Yoder

 

Bo called it the payout/payback cycle. He would try to identify which he was in and trade size accordingly.

 

Interesting stuff...

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Thanks mrpaul and doc! I'll check the book. I think there's a cycle that my brain starts kicking some negative mindset that I think was causing the losses. This is where I get ahead and then my mind tells me this is easy then I start to get sloppy. This happens once in a while, but this state of staleness and profitless period gets annoying because I know I can do better.

 

The truth is I only trade about 2-3 hours max each day (if the opportunities are there). So it's the mindset I mentioned above that is holding me prisoner locked in this winning/losing cycle.

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Thank you for the comments Janice and Torero for starting this thread. I have encountered similar problems with my own trading and really struggled to determine if it was my concentration and focus or market conditions which I had trouble grasping.

 

I do agree that health is underrated in trading. Fatigue really wears down a traders mental focus and ability to trade. I am trying to improve on this but struggling to do so as I can not simply take a day off. Are there any relaxation techniques that can help relax the mind without necessarily soothing the body?

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Excellent passages, thanks, MrPaul. Have you used this method to improve your trading? I think I would have to go back to review my trades as well as the days when they don't work. I think this is a tough job, because in intraday action it's difficult to identify something that change day to day. My particular problem I seem to have identified is that if I lose 2 trades in a row, I'm trading the wrong day. If I do well the first trade, I should be more aggressive and continue the streak. But this is from an introspective point of view. But from identifying the market price action, if I knew, I'd be rich by now LOL.

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Excellent passages, thanks, MrPaul. Have you used this method to improve your trading? I think I would have to go back to review my trades as well as the days when they don't work. I think this is a tough job, because in intraday action it's difficult to identify something that change day to day. My particular problem I seem to have identified is that if I lose 2 trades in a row, I'm trading the wrong day. If I do well the first trade, I should be more aggressive and continue the streak. But this is from an introspective point of view. But from identifying the market price action, if I knew, I'd be rich by now LOL.

 

Torero,

 

Yes I can say that I have used the payout/payback observation to some extent in my trading. I found myself constantly cycling between entering trades on breakouts to entering trades by averaging in strategically. I have found that when I can identify what conditions allow me to have the least risk things are much easier.

 

Lately entering a trade on a break is easier with the volatility so high. But when it is lower a breakout entry leaves much to much risk (measured by R/R on average) so I would have to average or scale in.

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I think for me it's trying to identify the day or the morning where it's best to enter on the breakout or enter on the pullback after a breakout. Some days, the prices zig zag so much, keeps whipping me out. This is important to identify this type of days. Hard to do.

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I think for me it's trying to identify the day or the morning where it's best to enter on the breakout or enter on the pullback after a breakout. Some days, the prices zig zag so much, keeps whipping me out. This is important to identify this type of days. Hard to do.

 

Torero,

 

The only thing I have been able to identify with certainty is the general level of volume so far for that day. If it's low, breakouts are gonna get whipsawed. I still haven't been about to quantify this to any levels though.

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