Edge VS Mentality

[Mindset 10]

jonbig04

 

I think actually you are spot on - I spent 4 years coding up every indicator and strategy you could think of, "mastering" the techniques, etc.

 

Now I spend all my time looking at how to discipline myself to trade a system I know has a very good edge. It is surprisingly difficult but at the same time most rewarding - the discipline that is - the strategy is about 4 lines of code ;-)

[jonbig04 10]

to me that's the whole idea of a system. If you have a system then you won't have good or bad days....you either followed your rules, or you didn't. And if you know your system is profitable over whatever term, then who cares? You simply have to follow your rules, increase size, follow your rules, increase size and so on.

[Bearbull 10]

And if you know your system is profitable over whatever term, then who cares? .

 

Is this not the same as first having " a Proven consistently profitable strategy" and then developing the mindsite to implement that strategy.

[jonbig04 10]

Yes, exactly.

[ztrader 10]

If you're scared, you're scared. You will find it very hard to pull the trigger even on your highly profitable methodology. When your real money is on the line, you will react differently. This is more so when you start with smaller trading funds.

 

Best wishes and ENJOY!

 

ztrader

[evolved trader 10]

Hi everyone,

 

Great topic! I agree with everyone that creating a winning edge is the easy part. Having the proper beliefs and habits stored at an unconscious level is the challenge. I’ve been reading over the posts and have read some great insights. I was curious to hopefully have some expert advice shed on my challenges. I have read over the posts but wasn’t really able to find many solutions.

 

Basically in a nutshell I've been learning about the markets for the past 5 years. Primarily focusing on Futures. Been trading them for a few years, and more recently (in the past year) been day trading futures. I have had some minor success but have challenges with gaining consistency and have been wiped out numerous times.

 

I'm sure you all have heard this before, but my biggest challenge is trading my system. I'm highly analytical and develop all my own systems that generate phenomenal success and my own market insight has grown exponential over the past few years. However it seems to be a blessing and a curse. It seems I'm a great analyst and an inconsistent trader. Getting in late, exiting trades pre-maturely, overtrading, or not entering the market all seem to be based primarily out of fear for me. I've gotten to the point where my market insight is intuitive and I'm able to clearly see am understand the markets I trade and the trade signals in real-time. Not like many years ago when I didn’t understand the market behaviour until hindsight.

 

I've have to tell you, it’s the most frustrating thing, understanding exactly what the market in doing in real-time and yet not being able to convert the success by the end of the day to match my system. And yes I have sounds money management, risk control, and I do place stops.

 

Do you guys have any suggestions? Should I have my broker place the trades for me?

 

I've read a ton of psychology trading books on understanding myself better and I do mental work to change things. I understand quantum physics, neuro science and brain research. So I understand systems in the brain like the amygdala and the psycho cybernetic mechanism. And I do many mental techniques to change many limiting beliefs. However there still seems to be a block that stops me from properly executing my trading system, and I’m wondering if I’m working against my personality (genetics).

 

I really appreciate your time can’t thank you enough. I have a huge passion for the markets and am completely enjoying the process of gaining consistency. Any suggestion would be greatly appreciated!

 

Thanks,

Ryan

[jonbig04 10]

You mentioned you have a system. You then mentioned you have a problem overtrading, exiting early etc. Doesn't your system's rules stipulate when you have to enter and exit? If so do you find yourself blatantly breaking those rules?

 

 

By the way I am fully convinced now that trading is 80% mental. You really only need a slight edge, with the ability to leverage that edge as much as possible by exercising complete discipline.

[evolved trader 10]

Hey Jon,

Yes, Yes, and Yes! All entry points, exit points, targets, money management, and risk control is clearly defined before a trade is placed. However that’s where my challenge or....opportunity exists. I not at the level where I’ll proper executing my system and have self sabotage. Any solutions?

 

I completely agree with you that it comes done to discipline. However discipline resides with our conscious effort. And our conscious power only controls 2-4% of our perception and behaviour. So having the right discipline must reside from an unconscious level that controls the remainder 96-98% of our behaviour. I know once the proper habits are installed into my brain and muscle memory forms I’ll be clicking the mouse exactly when I need to following my system and strategies. As I’ve read before from several traders in this board that it seems it going to take major repetition of doing the right actions over and over again.

 

Thanks Jon for the response, much appreciated.

 

Ryan:)

[jonbig04 10]

Awesome, so from what I've gathered: You have the rules, they ARE profitable, but when money is on the line you can't bring yourself to abide by them?

 

oh BTW I'm just a piker, feel free to take whatever I say with a large grain of salt

[jonbig04 10]

DbPhoenix

Do you think it's realistic for a beginning trader to find a trading method that is 60% + right? And Profitable?

 

Maybe you have got to that great place with your experience but for a beginning trader I think that is unrealistic.

 

 

I can say without a doubt high accuracy is not necessary. I know many beginners with very low accuracy (as low as 10%) that are doing well. I'm at 30% and it's fine with me and my points P&L. You could say that its tough on a traders mind when he is only getting 3 trades out of ten correct, that could be true. But you could also say it would be tough on a traders mind knowing that if he is not right 80% of the time, he wont be profitable. It's pretty subjective and there is no right or wrong. For me personally I like knowing I don't have it hit very many trades per week to meet my goal. It takes the pressure off when i get a few losers in a row. But thats just me and my $0.02.

[steve46 12]

The title of the thread leaves me to believe that the poster lacks an in-depth understanding of his own psyche. Further it seems he may be facing the same challenges we've all had to overcome when trying to integrate ourselves into a very competitive situation (like trading for instance).

 

Assuming that he/she has overcome all the technical obstacles and has only to master the mental aspect of trading, then I suggest going to a skilled professional working in that specialty. The best I know of are folks like Mark Douglas, Dr. Brett Steenbarger, Dr. Ari Kiev. Of those three I have had some contact with Dr. Steenbarger and Dr. Kiev. My intuition (and it is only that) is that the original poster might get maximum benefit from Dr. Kiev (if he could afford him) and more realistically might want to start by reading books from any of the three. Another idea that might prove valuable is to look into NLP (NeuroLinguistic Programming). I have seen some benefit from that approach in my own office. Unfortunately I have no current reference at this time for a good consultant in that field. The gentleman who used to provide service to my office is deceased.

 

I hope some of this proves helpful.

 

Best Regards

Steve

[evolved trader 10]

Jon,

 

Haha, it’s all good! Its hit and miss right now. I'm looking to really maximize my consistency.

 

Steve,

 

I completely agree with you because the degree we trade the markets is a direct reflection of our own psychology. I’m looking in doing some NLP techniques. I have been doing some changes own my own through NRP (neural reconditioning process-meditation, visualization, affirmations, and subliminal material) for the past year but still seem to been having emotional blocks.

 

I’ll get into contact with Mark Douglas and Dr. Kiev as I have contacted Brett S. before. We suggested exactly what you said, either a form of therapy or and NLP technique. I’ve also heard self hypnosis can be beneficial.

 

Great suggestions, thank you.

 

Ryan:)

[jonbig04 10]

The title of the thread leaves me to believe that the poster lacks an in-depth understanding of his own psyche. Further it seems he may be facing the same challenges we've all had to overcome when trying to integrate ourselves into a very competitive situation (like trading for instance).

 

Assuming that he/she has overcome all the technical obstacles and has only to master the mental aspect of trading, then I suggest going to a skilled professional working in that specialty. The best I know of are folks like Mark Douglas, Dr. Brett Steenbarger, Dr. Ari Kiev. Of those three I have had some contact with Dr. Steenbarger and Dr. Kiev. My intuition (and it is only that) is that the original poster might get maximum benefit from Dr. Kiev (if he could afford him) and more realistically might want to start by reading books from any of the three. Another idea that might prove valuable is to look into NLP (NeuroLinguistic Programming). I have seen some benefit from that approach in my own office. Unfortunately I have no current reference at this time for a good consultant in that field. The gentleman who used to provide service to my office is deceased.

 

I hope some of this proves helpful.

 

Best Regards

Steve

 

 

 

To be honest, I don't think its necessary to break down the mind of a trader in every aspect the way you would for some other kind of psychological disorder. I think this because the emotions that trouble us while trading are not disorders, but rather the natural function of our minds. Fear and greed and very basic and necessary emotions...just not in trading. Beyond that, Im not sure what purpose it would serve to go more deeply into it. I model what is important to me by emulating the successful traders I know. Make your rules, make them profitable, and follow them. What could be more simple?

 

The title of this thread wasn't meant to imply that discipline is more important than edge, or vice versa, but to get to the bottom of things. I didnt know very many traders then, good or bad and I was trying to get to the bottom of why so many can't seem to succeed. It was mentioned that a lot of traders dont succeed because they don't develop a method...interestingly, is that not a disciplinary issue? But anyways the fact is, for any serious trader it doesn't take very long to realize that developing an edge is going to take some time and that there is no free lunch in this business...or any business. To say that realization is beyond 95% of traders (those that fail) I dont think would be fair. There had to be more to it, and I know now that there is.

 

As far as im concerned wealth in trading can be achieved through a slight advantage and complete discipline. IMO it is the increase in size that makes the money, not necessarily an increase in edge. In my own trading I have a very specific goal and I'll even throw it out there. My first goal is to make a living from trading. That to me is defined by netting 15-25 NQ points while trading 5 contracts per week. Thats $1,500-$2,500 per week and that to me is a living. I've met my points goal for the past 4 weeks and want to do it for another 4 before I consider trading live. Notice I am more concerned with consistency than I am with making more than 25 points. I hope to achieve that goal within a few months. Now a lot of people would consider 20 points a week to be...small time. Sure, thats fine. But I've been very careful in my progression so that discipline was always number 1. I read somewhere here that it wasnt possible to maintain the correct mindset without a profitable system, to me that makes no sense at all. Following your rules is something you need to do while things are going good and bad. Following crappy rules will only enforce more discipline in the future. If you can't follow them while you have a bad system, to me taht says you will have trouble following them if you're in cash and have had a few losing trades in a row...and thats obviously defeats the purpose of having rules in the first place.

 

I started trading a few months ago and it wasnt very long, and it was in this thread, when I realized that it was all pointless unless I was developing rules to follow. I developed my rules fairly quickly and they sucked, so I sucked. It didn't matter though. I followed my bogus rules anyways. My rules sucked, so I sucked. As my rules have improved I have improved. Eventually I overhauled them completely. I made a habit to follow my rules from day 1 and I think that was important. Why? Because I can honestly say my performance will by the same SIM, cash, a boat load of cash, good mood, or bad mood etc. It seems to me every trader makes points (edge) their only priority when in fact you only need a slight edge. Its the discipline to trade your edge with size that makes the money! Don't get me wrong I dont want to downplay the journey of becoming profitable, I'm on it now and I have a long road to travel, but if your not disciplined you have absolutely no reason to think that just because your edge is improved (through PA or whatever) that you will improve. I like knowing that when my rules improve, I will improve.

 

Once again, I don;t think an in depth view of my mind is necessary. Because Im human, I can't trade without following rules. I make the rules, I follow them. Period. Simple, but obviously not easy. Anyways its late and I'm rambling.

[jonbig04 10]

Jon,

 

Haha, it’s all good! Its hit and miss right now. I'm looking to really maximize my consistency.

 

Steve,

 

I completely agree with you because the degree we trade the markets is a direct reflection of our own psychology. I’m looking in doing some NLP techniques. I have been doing some changes own my own through NRP (neural reconditioning process-meditation, visualization, affirmations, and subliminal material) for the past year but still seem to been having emotional blocks.

 

I’ll get into contact with Mark Douglas and Dr. Kiev as I have contacted Brett S. before. We suggested exactly what you said, either a form of therapy or and NLP technique. I’ve also heard self hypnosis can be beneficial.

 

Great suggestions, thank you.

 

Ryan:)

 

 

 

Hmmm. All that sounds well and good, I'm not one to knock anything as we are all different. But isn't it as simple as this: Follow your rules!

[JBWTrader 10]

Hi Evolved Trader

An honest post you have given.

 

As they say the unconscous is really unconscious !

Its difficult to mirror oneself to find the source of this type of issue. Metrics of course help however they are only part of the feedback loop. It usually does take someone else to "see" and offer a reflection back that one can consciously work on...

 

Numerous possibilities exist as to the real root cause..as many as the market itself..The solution is discovering the feelings behind the actions...

 

Some possibilities could be;

- a lack of trust of oneself projected out onto your systems and the market unconsciously ie you end up not really trusting your system or the market in the end. We are always projecting out our unconscious personality onto the market and end up seeing it a almost another person who can be tricky, out to get us or it knows something we dont...

- An identification with the Self. This can cause one to abandon ones plan and go without it. It sounds like you have really discovered some very good insights and you actually where the market is turning quite precisely etc Its when you think you know more than the market or even ones systems one can get into trouble here..a hubris takes over and we feel we are superior to the market or to our plan and we leave the plan and go with random trading..

- Not taking responsibility for ones actions eg by abandoning the plan you could really be saying you are not really responsible for the results as you didnt follow it in the first place.. this is common scapegoat psychology

- It might be felt also that your plan has control over you and you hence you may rebel at this...its hard to trust a "dumb" system, especially when one knows one is more intelligent than any system...

- Many people have a fear of success as this means a loss of the old structures we had/have...this means we can sabortage our efforts/ourselves to get back to where we have always feel most comfortable. Making money can generate many uncomfortable feelings of seperation anxieties...quite common outcomes to this experience is the poor me feeling and hence developing a victim mentality.

- A not so commonly know type of behaviour is the fusion /distance complex...here we are so absorbed by something eg the markets yet at the same time we are trying to gain distance from it. The result is these two dynamics operate simmultaneoulsy usually both out of awareness or just one opposite we are conscious of...very subtle but it can prevent us from have a real connection with what we are doing or trying to achieve...as a result we feel we are sort of half in and half out of something...

- A narssisicistic trait is one of perfection...any deviation from a plan that the markets give can feel like a failure...these feelings again make us abandon our plan as we seacrh for a more "pefect" one that better fits our phantasy of what it means to be successful..

 

Of course these type of problems are applicable to anyone at any time in differing degrees. The trick as a start is to see just before, during and just afterwards you decide to leave your plan what feeling states are occuring and what circumstances took place to leave the plan....All too often we split from these states in those moments eg go up into our heads or go blank etc. ..however these feeling states are gold if we can grab onto them and name them. They tell us a bigger story, a story that has often been out of our awareness but has left other traces in our lives...

 

Quite often solving this only too human puzzle will be harder and more complex than any system that can be created to mirror a market.

 

Hope this helps

 

All the Best

 

John

[steve46 12]

Yes it is that simple...If you have a successful trading plan...just follow your rules.....point & click.....

 

Of course there are other "simple" approaches. As an example my father was a Navy pilot..his preferred "simple" approach was to stand a few inches from my face and yell "snap out of it son....on the count of three you WILL "xxxxxxx" (substitute any instruction you wish right here)!!!" This is can be a very effective approach as it quickly weeds out those who don't have the right stuff. Also it is a very simple pass/fail approach that when successful teaches the student to deal effectively with stress. There you go...simple and free.

 

[jonbig04 10]

Lol. I just am having trouble seeing the need for a lot of this when its just you either follow your rules, or you dont. Follow them and make money, break them and lose money.

[captjoe 10]

My greatest success came when I first began trading. I had simple rules and played hem out every trade. As I have become more lets say educated I have had less success that I attribute to rule breaking and loss of focus. I strive to louse the commitment to win every trade and chase to bad ones to keep my win percentage high. This is even though I know keeping to my rules will bring the success I am looking for. I am on my second go around reading Trading Psychology and fine a lot of help with in this forum.

[AHAF 10]

Fear is the main reason for the loss of money in trading,

and Most traders enter and Quickly await profit.

[evolved trader 10]

Jon

 

Great post, and no you’re not rambling. You never know when your thoughts might inspire someone to make a positive change to their trading results.

I do agree that it is very black and white, very simple. Have the rules and trade them accordingly. But like you said, if it was really that simple, 95% of the people who do this wouldn’t be losing.

 

I do believe the mindset is more important than an effective edge? No. I believe they go hand in hand to obtain high levels of success in trading. With that said, I do believe one must come before the other, and the proper mindset must come before an effective edge. (or hence you end up with my challenge). If we have the right mindset first then we have the ability to succeed with any successful strategy we develop.

 

JBWtrader

 

That’s so true. Excellent break down. I fall into numerous categories you mentioned.

 

The trick as a start is to see just before, during and just afterwards you decide to leave your plan what feeling states are occurring and what circumstances took place to leave the plan....All too often we split from these states in those moments eg go up into our heads or go blank etc. ..however these feeling states are gold if we can grab onto them and name them. They tell us a bigger story, a story that has often been out of our awareness but has left other traces in our lives...

 

I went to Mark Douglas’s site and he sells a product called the “daily traders journal”. Would you suggest quickly making a few notes of the emotions I feel, before, during, and after the trade? Then not reviewing those emotions until the weekend approaches? I’m hoping this will give me a better overarching view of the self sabotage I’m creating.

 

Steve

 

Good example, simple and free! You gave me a pretty good laugh!

 

Thanks all,

Ryan

[shyvoodoo 10]

Its 100% mental. The individual is the "EDGE". He/She can control one self day in and day out. If you blowup, its your own fault. Its not mom, dad, strategy, system, everything west of the mississippi. Get it together each morning and take what the market gives you If i can control myself then i can control my good/bad habits in my trading life.

 

strtedat22

 

My name is Ben and this is my first time posting and I'm glad to be here. I think this analogy is a little too harsh but in reality it has some validity to it. This game , I believe is VERY mental and also there is so many factors to take into account BESIDES edge and mentality like other traders mentality and habits. I myself had a very bad habit of just impulse trading. But once I learned that you take what the market gives you and get rid of the notion of "market scarcity", which also contributes to the greed in us, my trading has gotten a lot better.

 

I still have some issues to work on before I "get there", but the "light bulb" moments for me was when someone told me "Building wealth slowly is the best way" and "enjoy the fruits of your work" , meaning every trade does not have to be 150+ pippers to be successful and when possible, pay yourself. I think when traders first start out, their eyes are as big as their dreams.. I been there, we all been there, its about being realistic. Once we start being realistic, we can begin on the road to being successful... Thank you.

[Kiwi 16]

Welcome shyvoodoo,

 

I'm a "psych component" fan but you'd have to have a very very discretionary approach to achieve 100% "mental".

 

I think most develop plans to improve their expectancy and to reduce the impact of the psychological component. If you planned well enough at the start and were well trained I suspect you might feel that there was no mental component (because your trainer protected you from it).

[shyvoodoo 10]

Welcome shyvoodoo,

 

I'm a "psych component" fan but you'd have to have a very very discretionary approach to achieve 100% "mental".

 

I think most develop plans to improve their expectancy and to reduce the impact of the psychological component. If you planned well enough at the start and were well trained I suspect you might feel that there was no mental component (because your trainer protected you from it).

 

Good Point Kiwi, I know when I first started, nobody talked about "psych" aspect of trading. All I heard was what to do, how to do it, when to do it. But nothing about preparing me for that first big "drawdown", which can stop some traders dead in their tracks especially if they been getting "lucky" through the markets already.

 

Here's a story: I introduced a friend to trading. He did some homework, then opened a 5,000 live account. Now I warned him that you have to fully understand what you are doing to truly be successful in this game. The worst thing that can happen to newbies with that kind of money happen to him. His 1st 3 trades hit for $2,500, $1,750 and $2,200. After this he thought that this was easy money and even started to question the advice I tried to give him about trading. Not even a month later, he was DONE, OUT. turns out, those 3 trades was the only 3 trades he would ever have that was successful before blowing up his account with 18 straight losing trades.

 

He did not learn money management, he did not have a trading plan or strategy (his strategy was if everything is going up/down, it must be going that direction), he did not know why it was going that direction, and most of all, he had no discipline because he did not bother to learn any.the 18 straight losers killed his confidence beyond repair. Automated trading to some usually takes the psych element and reduces it to a minimum. but I think if a trader wants to become a master trader, they should learn to trade through education and brain power. learn what your looking at, what your looking for, ect. Integrate a EXTENSIVE psych training education because you got to learn how to handle a huge drawdown or you will start to do dumb things like impulsing to get the market back and poor money management to make up what you loss..

[JBWTrader 10]

Hi Evolved Trader

Yes mate I would do the exercise, take notes on it...whatever feelings come up breath into them, no judgement of yourself at all here....like a scientist observing an object.

The trick with this sort of work is to not identify with anything that comes up...

Good luck with it all ....

 

Best

John

[Guest MRC & Co]

A methodology is not an edge unless it is at least consistently profitable.

 

Trading profitably takes more than "feeling" the shift in balance between buying and selling or predicting market direction or collecting bumper stickers like "cut your losses short and let your profits run". It takes a lot of time and a lot of effort. And even then, unless one can learn from failure, he can spend years just running in place.

 

Ah, this sounds like the good old 'stick to your trading plan' arguement of many a mechanical trader. Though I doubt you are one of them yourself Db.

 

A lot of the time it takes 'feel' to know when to adapt to the market in a discretional sense. Meaning, a trading plan is pointless, because various days call for various methods. None of which can be exactly described in words. More of a 'feel' in the price ladder.