Fear and Greed

[ahimsa 10]

So much theory ... so little substance!

 

Try stepping back a little and try to visualise what is going on.

 

The word "fear" is misused here, and in fact it suits some to call it fear. It makes the markets sound more formidable than they really are. That in turn gives the fear doctors a mandate to step in:

 

"Fear not! Thy redeemer cometh!" ... and so begins the therapy to overcome the enemy ... fear! Hundreds ... thousands of dollars later, the dog comes back to bite!

 

Unfortunately a bit more objectivity is required before swallowing what the book-sellers want us to believe - the myth that the markets are going to hurt us. The truth is the markets never hurt anyone - we place ourselves in positions where we are vulnerable outside our tolerance for risk.

 

This does NOT give rise to the emotion called fear at all ... do not believe the gurus.

 

The actual emotion is called "anxiety" ... heard of it before? Dealing with anxiety in trading does not require a deep analysis of the limbic system, the reptilian brain or the amygdala ... such things are a red herring ... a distraction.

 

While anxiety and fear may exhibit overlapping characteristics - some may say that fear gives rise to anxiety - they are very different emotions, as the experts should know, and should really be more up-front about in a discussion like this.

 

When looked at in the context of anxiety, the problems become a softer tone of red, and more assailable at least.

 

But the bottom line here is knowledge of your edge, and trust that your strategy in applying that edge, has a positive expectation over time. It's hard to be confident and anxious at the same time, but a complete absence of anxiety is probably unhealthy too. The point at which that anxiety becomes pathological will be different for every trader.

 

When that occurs, the trader needs to go back to the drawing board, examine the strategy and the edge, and re-test and understand its legitimacy - its place in his business. Then take responsibility for APPLYING that edge. It's a formula that works, and if it is not working, then go back. Which leg of the three-legged stool is rubbery ... broken?

 

A friend of mine from a few years back on another forum, said that a little paranoia is healthy in trading.

 

Anxiety is related to risk ... exposure. Traders who are risking only 2% should hardly be anxious, unless they are consistently failing to apply their proven edge.

 

Other than that, then the trader may be risking very large chunks of the account, and is anxious - very anxious about it indeed!

 

Cutting down on risk/exposure to a level that the emotions can easily accommodate, would be a logical first step. Learning to establish and trust the edge and the strategy would go hand-in-hand with this process.

 

Stop being in a hurry! Then half the problems will disappear, leaving the mind free to deal with the remaining issues.

 

Ingot you made goal:) ,changing fear with the word anxiety absolutely true,personally for me in this time is right the word nervous,i feel me nervous when i trade and i'm aware of this when i saw that i closed or cutting my position before time.and in this way i lose money .I'ts a new sensation never happen before now, and i must find absolutely the way for weaken this state of soul.

[Ingot54 13]

Ingot you made goal:) ,changing fear with the word anxiety absolutely true,personally for me in this time is right the word nervous,i feel me nervous when i trade and i'm aware of this when i saw that i closed or cutting my position before time.and in this way i lose money .I'ts a new sensation never happen before now, and i must find absolutely the way for weaken this state of soul.

 

Hi Ahimsa

 

Thanks for the compliment.

 

Some things come to mind that may help:

 

1) Make certain that the strategy you are trading is trust-worthy. You need to

trust that your strategy is robust - capable of handling the conditions and is

a consistent performer. Poor strategies make anxious traders.

 

2) Make certain that the amount of money you risk is no more than 2% of your

account. Risking too much of your account will escalate your anxiety more

than any other reason.

 

3) Check the higher time frame to determine the trend. If you trade the 15Min

TF then you need be confident that the 1H TF is agreeing with your assessment

of the trend. It will also work if you check the 4H TF if you trade the 15Min, only

your trades may run for longer, with more volatility. To combat this, perhaps you

might consider trading the 1H TF using the 4H TF to determine the trend.

 

4) Try to work out (at the time your make the entry) where you will need to be

getting out of the trade. This can be:

 

a) At a pre-determined support/resistance level or a strong Daily/Weekly

Pivot Point

b) At a semi-unknown level, determined by a trailing stop-loss order

c) At your stop-loss level if you can not watch the trade

d) At a level BEFORE your stop-loss is hit, that will tell you the trade is

not working

 

5) You should know at all times the maximum money the trade will lose if it goes wrong

and you need to be comfortable with such a loss if it occurs.

 

If all these boxes are checked, then you should be able to trade with very low levels of anxiety.

For me, the biggest single improvement was to stay within the 2% risk level. Some good

traders use 1% because they do not feel the need to make BIG money; their goal is to simply

be consistent. What is a large amount of money to some traders is small to others.

 

Get the method right and the money takes care of itself ... it will follow.

 

The above is what I have found to be true in trading. I do not always remain within these rules

but every time I break the rule, I either become very anxious about the health of the trade and my

money, or the trade simply doesn't work.

 

I guess that one of the signals to a trader that he/she is getting into a poor trade, is that there

is a temptation to break or bend the rules. When that happens, the trader would be wise to run

away from the trade, and wait for a better setup.

 

By the way - what do you trade? Do you trade Forex or Futures, Equities, Indices or Energy

Metals or Commodities?

 

Are you having much success?

 

Cheers

 

Ingot

[ahimsa 10]

Hi Ahimsa

 

Thanks for the compliment.

 

Some things come to mind that may help:

 

1) Make certain that the strategy you are trading is trust-worthy. You need to

trust that your strategy is robust - capable of handling the conditions and is

a consistent performer. Poor strategies make anxious traders.

 

2) Make certain that the amount of money you risk is no more than 2% of your

account. Risking too much of your account will escalate your anxiety more

than any other reason.

 

3) Check the higher time frame to determine the trend. If you trade the 15Min

TF then you need be confident that the 1H TF is agreeing with your assessment

of the trend. It will also work if you check the 4H TF if you trade the 15Min, only

your trades may run for longer, with more volatility. To combat this, perhaps you

might consider trading the 1H TF using the 4H TF to determine the trend.

 

4) Try to work out (at the time your make the entry) where you will need to be

getting out of the trade. This can be:

 

a) At a pre-determined support/resistance level or a strong Daily/Weekly

Pivot Point

b) At a semi-unknown level, determined by a trailing stop-loss order

c) At your stop-loss level if you can not watch the trade

d) At a level BEFORE your stop-loss is hit, that will tell you the trade is

not working

 

5) You should know at all times the maximum money the trade will lose if it goes wrong

and you need to be comfortable with such a loss if it occurs.

 

If all these boxes are checked, then you should be able to trade with very low levels of anxiety.

For me, the biggest single improvement was to stay within the 2% risk level. Some good

traders use 1% because they do not feel the need to make BIG money; their goal is to simply

be consistent. What is a large amount of money to some traders is small to others.

 

Get the method right and the money takes care of itself ... it will follow.

 

The above is what I have found to be true in trading. I do not always remain within these rules

but every time I break the rule, I either become very anxious about the health of the trade and my

money, or the trade simply doesn't work.

 

I guess that one of the signals to a trader that he/she is getting into a poor trade, is that there

is a temptation to break or bend the rules. When that happens, the trader would be wise to run

away from the trade, and wait for a better setup.

 

By the way - what do you trade? Do you trade Forex or Futures, Equities, Indices or Energy

Metals or Commodities?

 

Are you having much success?

 

Cheers

 

Ingot

 

 

Hi Ingot,thanks you too for your answers,that are always a good and exhaustive,point of subject.,personally for me that i contemplated at the beginning,not more for the way to trade as to for the technical terminology.i like observes the charts,study it and successively i apply tecnical and fundamental analisys,i used trade sometime to 15 but almost ever in 5 TF,i look ever the 1h and 4h for the trend assessment,i considered many important check in back for the consolidation the trend.i'm used also the MM,and the EMA,i used stop-loss also if many time i'm attempe to don't put it.but also if i don't use it,i put a mental stop-loss(but ,i don't like very much,because many time i had a hypnotic effect to watch the loss go away,becouse i dont cut before.The anxious or better for me the nervous,i have when the trend isn't in a consolidated point.in this phase, for me would be better close p.c and go to the beach.usually i made forex,i like to trade especially,USD.CHF and cable,i look ever 4 o 5 currency,i like trade also Nasdaq and crude oil.for the metals i don't have a big passion,too much speculative especially gold.i never traded silver.i throw an eye to commodities ,,but i don' trade it again.i used at max till 10% of account.in trade.in real i'm just at the beginning but i used the demo more like a study that like a gambling play.i don't like use the demo for play.i like used for learn,i hope ,i'll become ever more profitable.i have more to learn again.