Analysis Paralysis and Fear of Losing

[james_gsx 16]

I read the article Analysis Paralysis and I will admit that one of my biggest problems has been to analyze everything to death. For a while I couldn't come up with a trading plan because at first I was making it too simple and I thought there was more to it. Well I found out that being simple was right to begin with. I know that I am a good technical analyst and I know that I am right a good portion of the time. I would admit that I do have some work at analyzing risk/reward in real time situations but I can still analyze a chart and decide where it will go next.

 

Over the last month I have begun to embrace uncertainty and admit that I don't need to know where the market will go next. If I stick with my trading plan and setups then I will survive. There are thousands of tools ranging from market profile, to candlestick analysis that will aid me to figure out what will happen next but at the end of the day it could be one trader that changes all of it and makes me wrong. The more I accept this reality the clearer I see the markets and the opportunities presented to me everyday.

 

This has been a huge step for me, but the period of time where I suffered from analysis paralysis I instilled a fear of trading into my head where now it's difficult for me to even pull the trigger. I see my account and immediately remember all those times I pulled the trigger and the trade immediately went against me and the pain of losing money. That pain is instilled in my brain and I need to help to get rid of it. I don't believe I'm undercapitalized because I have a few accounts and they range into the 6 digits (I don't want to give out a number on a forum). This problem doesn't just relate to the futures markets, but all markets.

 

I'm not worried about losing all of the money, I just have a fear of being wrong. I have realized my entire life I have put myself up against very high standards and when I don't meet those standards my subconscious mind automatically pin points me as a failure. So when I lose, I believe I'm a failure. I know this probably sounds ridiculous and I do wonder if the more I train myself to fully believe that anything could happen and accept full responsibility of the risk with every trade this may go away. But the fear of losing is programmed in my brain like a child who encounters a dog for the first time and is attacked. The child has no reason to believe a dog is full of love, the child just remembers an aggressive animal attacking him and is therefore afraid of dogs.

 

Do you have any suggestions to overcome this fear? I think I have accomplished a few steps by identifying the problem and understanding it exists. But I am stumped when it comes to de-programing that fear. It's easy to say, "Just follow your trading plan, act like a robot." But in reality, it never really works that way. I can't just follow my plan and hope that the fear will immediately kick in. I know the seconds leading up to pulling the trigger my brain will freeze and I will perceive the markets in a completely different way. I want to be able to trade the way I analyze - free of emotion and the ability to see the countless opportunities presented by the market.

 

One other thing I will be in Vegas in January for three weeks for a trading "camp" with the firm I will trade for. Since I will be in a room full of other traders I am wondering if my very competitive nature will kick in. Basically, will this fear of losing be pushed aside so my competitive nature will be able to focus and beat everyone else? I won't be competing with anyone per se, but I will want to stand out and have the best results. I do this naturally in any situation where I am doing the same thing as everyone else from selling at work to playing any form of sport. I'm interested in what your feedback might be on that. I am also hoping that the professionals that are there might be able to identify a few things I do that I am unaware of.

 

Thanks for your help, and anyone else who can help. I honestly believe once I overcome this speed bump that I will be on my way to a very profitable trading career. I am determined to succeed and overcome this, but I just don't know where to start.

[RAVIN 10]

Think majority of the successful traders have gone through similar stage, so don't beat yourself on it. You obviously have read Trading in the Zone by Mark Douglas, if not , highly recommended.

Also have a look at the attached, from a very successful ex-floor trader,

And you are right about information paralysis:doh:, so keep it simple:)

 

Hope this helps

TradingPschology.pdf

Keep It Simple-DOW.doc

[BlowFish 10]

 

I'm not worried about losing all of the money, I just have a fear of being wrong. I have realized my entire life I have put myself up against very high standards and when I don't meet those standards my subconscious mind automatically pin points me as a failure. So when I lose, I believe I'm a failure.

 

 

I have thought for some while for many traders (if they are reasonably capitalised) that it is actually the fear of being wrong and ultimately failure that is the real mind killer.

 

For me this manifests itself as just not entering (occasionally) but more often closing good positions for no good reason. The subconscious says 'I can make you right here, lets just bank a few ticks'.

 

I think a lot stems from the ego. Would you rather be right or be 'rich'? I think the ego would rather be right.

 

Its a tough one to crack thats for sure.

[james_gsx 16]

Thanks for the links Ravin, they actually helped a lot. I am currently reading Mark Douglas Trading in the Zone. It's a great book but I haven't seen anything where he gives you any ideas on how to achieve the consistent attitude that he talks about so often in the book. Maybe it's at the end and I haven't gotten there, but I sort of doubt it. I like the idea of setting a set loss/profit limit and trading until I hit those limits.

 

Blowfish I would agree a lot stems from the ego. I know for one if I went to my friends and told them how much money I lost I'd feel like an idiot. I have too much pride to let them think I'm failing at something. Most outsiders don't understand what traders go through before they become profitable. Whereas we could all talk about how much money we lost and it's a normal conversation. Tell a random person you met and you'll see the fear in their eyes immediately.

 

A few weeks ago I was writing in my journal and came across an interesting conclusion. I have an image that I've always felt I had to project. This image was tearing me apart and not actually letting me do anything at all. I made myself feel like a failure because I couldn't live up to my own image. I would imagine we could tie in the ego to projecting the image. I know I'm not the only one who displays a false image in order to protect ones ego. Wow, that all makes me come across as a complete arrogant ass. But I promise I'm not

 

I am leaving tomorrow for a wedding so I won't be able to trade this week. But I have something to think about and add to my trading plan. Thanks again for your responses Ravin and Blowfish.

[BlowFish 10]

Thanks for the links Ravin, they actually helped a lot. I am currently reading Mark Douglas Trading in the Zone. It's a great book but I haven't seen anything where he gives you any ideas on how to achieve the consistent attitude that he talks about so often in the book. Maybe it's at the end and I haven't gotten there, but I sort of doubt it. I like the idea of setting a set loss/profit limit and trading until I hit those limits.

.

 

You will get to a point where Douglas recommends an exercise (I think its in Zone and not his first book). One book I really like that deals with the ego and trading is http://www.amazon.com/Zen-Markets-Edward-Allen-Toppel/dp/0446518107/ref=sr_1_1?ie=UTF8&s=books&qid=1196960670&sr=1-1 its pretty slim but quite a powerful message.

[MC 10]

Think majority of the successful traders have gone through similar stage, so don't beat yourself on it. You obviously have read Trading in the Zone by Mark Douglas, if not , highly recommended.

Also have a look at the attached, from a very successful ex-floor trader,

And you are right about information paralysis:doh:, so keep it simple:)

 

Hope this helps

 

Thanks for the documents. They should help me as well.

[zdo 20]

james,

 

Actually Douglas does have a method. It’s very old fashioned; no subliminals, no affirmations (as they are typically thought of in ‘the secret new age of attraction’), no mental techniques or tricks…

His method is hard and simple - Do ‘it’ until you Be it.

Mark would say something like '(faithfreely and unerringly) do ‘it’ until you (unerringly and faithfully) are it'.

 

However, that brings out a polarity - because others are touting a more “Be it until you do it†approach

An example of this way can be found at http://www.stevepavlina.com/audio/

Audio #018 and the accompanying docs at http://www.stevepavlina.com/blog/2007/01/stevepavlinacom-podcast-018-faster-goal-achievement/

... this also relates some to the “I have an image†paragraph of your most recent post...Maybe liston to Audio #020 too… hth

 

What would spell both for you? (and not necessarily simultaneously)

 

All the best,

 

zdo

[james_gsx 16]

Zdo,

 

Sorry it has taken me so long to reply, I actually looked at this a while ago and I've been listening to the podcasts on Steve Pavlina's website and they have been very helpful. Not just for trading but for my life in general.

[dandxg 10]

Looks to be good info will take a look myself. I suffer from this to. Mine has to do with making a bunch years ago and then crashing and burning ugly. It was gambling in the markets not trading. Recently I was listening to a video Denise Shull did for the CME in which see challenges conventional psych. She is a neuro psych and specializes in traders. Instead of focusing on positive thoughts and denying negative ones when they appear in your mind acknowledge them. By doing so you will begin to release the negative energy associated with it that will hamper you ability to trade well. I have tried it and it appears to work. She has customer discuss how he increased his profits 40 fold from doing such. Confirmed 200 lot trader her client. She states that recent studies show feelings come before thoughts, it's not I think therefore I am am. You might want to check it out.

 

After a lot of thought I believe that focusing on the positive while acknowledging anxiety is the way for me. I like Douglas' but I like Steenbarger better. Enhancing Trader Performance..................is a great book, highly recommended.

 

And I am not affiliated with either of these folks. Good luck.

 

P.S. Brett has a great blog too. He talks on one part of the blog about how disguist is one way to motivate yourself to change. Makes sense. When ppl, such as alcholoics, are disguisted with themselves they get the motivation to change. I firmly believe that pain is greater motivator than pleasure. I need to figure out spell check on this forum.

Edited January 18, 2008 by dandxg

[torero 10]

L

I firmly believe that pain is greater motivator than pleasure. I need to figure out spell check on this forum.

 

I think there are two kinds of people, either motivated by pain to succeed like Marty Schwartz who never wanted to be securities analyst and another failure in his family (his own opinion) and by pleasure who just love trading and does it successfully and take pleasure out of it. I myself from both, I never wanted a 9-5 job anymore and of course, I never thought I would enjoy trading so much, especially when the market and I are in synch.

[james_gsx 16]

I think there are two kinds of people, either motivated by pain to succeed like Marty Schwartz who never wanted to be securities analyst and another failure in his family (his own opinion) and by pleasure who just love trading and does it successfully and take pleasure out of it. I myself from both, I never wanted a 9-5 job anymore and of course, I never thought I would enjoy trading so much, especially when the market and I are in synch.

 

I agree, I have a few main motivators for basically anything I do that's off the beaten path.

 

1 - People say I can't.

2 - The intellectual challenge and feeling of success (being in synch with the market is one of those feelings).

 

I can say I've taken a lot of the advice that has been given to me by many people on this board and I am turning into a better trader. I actually trade now, and from time to time I miss good trades but that is something I am working very hard with to overcome.

[torero 10]

There comes a time when you just rise above the shoulda coulda woulda and just enjoy the moment until the next setup along because you know sooner or later a next great setup is just around the corner waiting for you to take it. The now moment is all I look forward to.

[MOOVA 10]

I totally agree with you. There is always another trade waiting. The markets are HUGE !!

Lose the fear. Fear of missing a trade, fear of losing etc etc.

 

Cheers

MOOVA

[wsam29 10]

Here is the CBOT webinar by Denise Shull

Denise Shull

[neoikon 10]

I stumbled upon James' original post about "analysis paralysis" in my attempt to diagnose my own poor trading results.

 

I'm a relatively new trader (paper trading futures (ES) for close to a year!). I'm finding myself taking small gains and big losses. So, I start thinking that I need larger stops and bigger targets. So far, that equated to even larger losses and very little gains. So, then I return to the "quicker profit" mentality... and the cycle repeats.

 

James' situation sounds similar to mine, as I feel I am decently capitalized, however, it's tough to take a loss, since I know how big a blow mentally that would do to my already fragile trading mindset. It would show me that I was wrong, that I'm out of sync with the market, and I would lose faith in any future trades.

 

Now that it's been a few months since James' original post, I'm curious if there are any particular revelations that have helped or fixed your problems? Have any recommendations for my problems? Perhaps you're experiencing something similar as well?

 

Thank you!

Daniel

[DbPhoenix 42]

I stumbled upon James' original post about "analysis paralysis" in my attempt to diagnose my own poor trading results.

 

I'm a relatively new trader (paper trading futures (ES) for close to a year!). I'm finding myself taking small gains and big losses. So, I start thinking that I need larger stops and bigger targets. So far, that equated to even larger losses and very little gains. So, then I return to the "quicker profit" mentality... and the cycle repeats.

 

James' situation sounds similar to mine, as I feel I am decently capitalized, however, it's tough to take a loss, since I know how big a blow mentally that would do to my already fragile trading mindset. It would show me that I was wrong, that I'm out of sync with the market, and I would lose faith in any future trades.

 

Now that it's been a few months since James' original post, I'm curious if there are any particular revelations that have helped or fixed your problems? Have any recommendations for my problems? Perhaps you're experiencing something similar as well?

 

Thank you!

Daniel

 

What would your win/lose and profit/loss numbers have been if you had followed your trading plan?

[MrHappy 10]

What would your win/lose and profit/loss numbers have been if you had followed your trading plan?

100% of course!

 

This generation, anything can be automated, even the most complex trading plan. If it is your discretion that you employ, well, then it is the same effect as basically using no trading plan at all because it cannot be defined. End of story, move along....

 

I believe discretion is the only variable which can employed to defeat the market. Anything in the way of rules, you will only embarrass yourself by trying to limit the Market to simple some operators!

Edited February 27, 2009 by MrHappy
add

[neoikon 10]

What would your win/lose and profit/loss numbers have been if you had followed your trading plan?

 

In general, I'm losing more than I'm gaining. Thus, I'm stuck in paper-trading mode and not gaining confidence to change that. As I originally mentioned, I've been at this for many months. I have dabbled using real money on and off during that time, but in general I lose more than I gain... thus I keep going back to paper-trading. I don't want to blow my account and leave myself with no choice but to quit.

 

Perhaps I don't have a good enough plan. Perhaps I don't know the definition of "a plan". I always hear, "stick to your plan". But what's the plan? How do you create a plan? What does that really mean? A system? Pre-defined levels for the next day? A money management plan once within a trade? I feel people through around this term, but everyone has their own definition.

 

I believe that I create "a plan" then when I see it not working, I build a new plan. This is what I was referring to with going from the "quick profit" mentality to "larger targets" etc.

[sevensa 10]

100% of course!

 

This generation, anything can be automated, even the most complex trading plan. If it is your discretion that you employ, well, then it is the same effect as basically using no trading plan at all because it cannot be defined. End of story, move along....

 

I believe discretion is the only variable which can employed to defeat the market. Anything in the way of rules, you will only embarrass yourself by trying to limit the Market to simple some operators!

 

I am not really sure what you are trying to say here. In the first paragraph you say that if you use discretion, then you don't really have a plan. In the 2nd paragraph you say that the only way to beat the market is to use discretion, but based on your first paragraph this means then that you don't have a plan. So are you saying that the only way to beat the market is to trade without a plan, or what are you trying to say?

 

I am also not sure I agree that every trading plan can be fully automated.

[sevensa 10]

In general, I'm losing more than I'm gaining. Thus, I'm stuck in paper-trading mode and not gaining confidence to change that. As I originally mentioned, I've been at this for many months. I have dabbled using real money on and off during that time, but in general I lose more than I gain... thus I keep going back to paper-trading. I don't want to blow my account and leave myself with no choice but to quit.

 

Perhaps I don't have a good enough plan. Perhaps I don't know the definition of "a plan". I always hear, "stick to your plan". But what's the plan? How do you create a plan? What does that really mean? A system? Pre-defined levels for the next day? A money management plan once within a trade? I feel people through around this term, but everyone has their own definition.

 

I believe that I create "a plan" then when I see it not working, I build a new plan. This is what I was referring to with going from the "quick profit" mentality to "larger targets" etc.

 

A plan at minimum should clearly define your trading strategy, i.e. what you are going to trade, how much you will risk, why and where you will enter a trade, where your stop loss would be and how you will take profits. If you follow this plan with one contract and you are not profitable, then doing another year of sim trading is not going to turn this into a profitable strategy. You will need to come up with a new strategy and a new plan then.

[DbPhoenix 42]

In general, I'm losing more than I'm gaining. Thus, I'm stuck in paper-trading mode and not gaining confidence to change that. As I originally mentioned, I've been at this for many months. I have dabbled using real money on and off during that time, but in general I lose more than I gain... thus I keep going back to paper-trading. I don't want to blow my account and leave myself with no choice but to quit.

 

Perhaps I don't have a good enough plan. Perhaps I don't know the definition of "a plan". I always hear, "stick to your plan". But what's the plan? How do you create a plan? What does that really mean? A system? Pre-defined levels for the next day? A money management plan once within a trade? I feel people through around this term, but everyone has their own definition.

 

I believe that I create "a plan" then when I see it not working, I build a new plan. This is what I was referring to with going from the "quick profit" mentality to "larger targets" etc.

 

If you have no trading plan, then you should not be surprised that you're losing. Your problem is not fear but rather that you don't know what you're looking for, much less what to do if and when you see it.

 

There are many sources for developing trading plans, but you must begin by deciding just what it is that you want from the market. Do you want to scalp? swing trade? position trade? trade off indicators? price action? news? Do you want to make one trade a day or a hundred? Are you disciplined? Are you patient? Do you enjoy risk or avoid it? And so on and so on and so on.

 

If you have no idea where to start, try here. If that doesn't work for you, search the site using "trading plan". You can, of course, find some system somewhere and trade that, but you are not likely to have much confidence in it since it won't be yours, and since you're subject to fear anyway, your chances of success with someone else's system will likely be slim.

Edited March 7, 2009 by DbPhoenix

[neoikon 10]

I found this interesting video (1 hour) talking about trading plans and mentality. I found it helpful (regardless of trading instrument):

 

http://www.fxstreet.com/education/trading-strategies/how-to-create-a-trading-plan/2008-04-04.html

 

 

Enjoy!

Daniel

[traderpsyches 10]

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