Wrestling with Emotions and Capacity for Change

[TheNegotiator 13]

This thought came to me recently and I couldn't help but wonder. Whilst there are some traders who have just the 'right' temperament for trading(or for trading their style), many have to adapt and temper their personalities in order to succeed. Questions arising from this thought are plentiful, but here are a few:-

 

Is a trader who is 'naturally' suited to trading better off in the long run?

 

How deeply do new traders generally experience anguish and what is their general tolerance level?

 

Does a trader have to break in order to become fully competent?

 

Does anything really change anyway other than the trader having more useful experience?

 

As the markets are in perpetually evolving, do traders experience the same thing over and over?

 

It's an interesting philosophical debate that could be applied to our lives in general. I think you can see where I am going with this though. The ability to learn but then crucially observe change and continually adapt is the key to long term survival imho. What do you guys think?

Edited January 18, 2012 by TheNegotiator

[Obsidian 10]

I think most of the traders have a common cycle in trading. First you think that you can do this and start with a demo account, buy when prices are going up, sell when prices are going down. Everything seems perfect for the first couple of weeks-months. You decide to open a real account.

 

You run the trading platform with big excitement and rush to trade. Meanwhile you discover that there are plenty of indicators to tell you what to do. Your charts become full of indicators.

 

You open a position with real money and things start getting harder. You seem to be making more mistakes. Sometimes you close trades with little profits. Since you don’t have certain rules and strategy, your account starts to melt due to different market conditions.

 

At this point you start to search forums, web sites to tell you what to do. Finally you blow another account and blame others for their bad calls. Next you search for paid services. Of course, you get the same results. Finally either you decide to quit or learn this business...

[Tradewinds 12]

How deeply do new traders generally experience anguish and what is their general tolerance level?

 

That could be an interesting study. In order to answer the question, there would need to be a poll done, and have enough people respond in order to have the results be reliable. And there are lots of factors that could affect each person's experience. How much money did they have to begin with? What is their personality? How much time did they put in?

 

I'd be interested to know if there are already studies and data out there that deal with people's tolerance for risk, and their ability to adapt. I wouldn't be surprised if someone has done a study on people who engage in risky behavior, like rock climbing, etc.

[jtrader500 10]

There is no 1 good type of personality that gives you an edge in trading.

I went from being the absolute highest % losing trader that has ever walked this earth and was soooo consistent at losing that I developed a plan to turn every one of my weaknesses into my biggest asset. It took me the first 10 years to figure out that all of my # crunching and indicators were responsible for about 10% of results.

I dont know anybody who has studied themselves longer and harder than I have. And now have a daily win rate at over 80%.

My personality is the worst type for any trader:

1) Very impatient

2) moderate to severe ADHD

3) Will buy anything on an impulse (even a car)

4) Highly emotional (raised by my mom and 2 sisters)

 

If you think you have problems with fear, greed, indicision, etc. Dont worry about it, I can tell you how to fix any of them right here on this thread. And I hope there are some professional traders here to second my motion.

I may sound cocky, But if you want to be truly consistent, You have to fix yourself before one single indicator hits your screen. (it's been a 19 year journey)

Please ask any question about psychology, only if your serious about trading

"you want the truth, you can't handle the truth!" LOL, (forgot the name of that tom cruise movie)

[zdo 20]

jtrader500,

 

Would you please open your own separate thread?

I have some questions.

Thx.

 

Have a great weekend all.

 

zdo

[jtrader500 10]

jtrader500,

 

Would you please open your own separate thread?

I have some questions.

Thx.

 

Have a great weekend all.

 

zdo

 

Hi, I am very new to this forum stuff and do not know all the in's and outs of types of threads and how to start them. This was an impulse post and I thought I would shed some light on the most important thing in trading.

I may start a new thread but i'm sure there are alot of psychology threads.

Thanks

[MightyMouse 12]

There is no 1 good type of personality that gives you an edge in trading.

I went from being the absolute highest % losing trader that has ever walked this earth and was soooo consistent at losing that I developed a plan to turn every one of my weaknesses into my biggest asset. It took me the first 10 years to figure out that all of my # crunching and indicators were responsible for about 10% of results.

I dont know anybody who has studied themselves longer and harder than I have. And now have a daily win rate at over 80%.

My personality is the worst type for any trader:

1) Very impatient

2) moderate to severe ADHD

3) Will buy anything on an impulse (even a car)

4) Highly emotional (raised by my mom and 2 sisters)

 

If you think you have problems with fear, greed, indicision, etc. Dont worry about it, I can tell you how to fix any of them right here on this thread. And I hope there are some professional traders here to second my motion.

I may sound cocky, But if you want to be truly consistent, You have to fix yourself before one single indicator hits your screen. (it's been a 19 year journey)

Please ask any question about psychology, only if your serious about trading

"you want the truth, you can't handle the truth!" LOL, (forgot the name of that tom cruise movie)

 

"Fixing" ones self is not a prerequisite to succeeding at trading. "Fixing" one self might be a prerequisite for one to realize that trading is really not for him or her.

[jtrader500 10]

"Fixing" ones self is not a prerequisite to succeeding at trading. "Fixing" one self might be a prerequisite for one to realize that trading is really not for him or her.

 

Thats right, You dont have to fix yourself. There are 2 main fundamental ways to approach trading if you want to become consistently profitable.

Since trading goes completely against our rational way of thinking, We must either change our pre-programmed decision making skills or we can go down the long road of using statistics, numbers, odds and try to out skill the biggest and best computers out there.

 

Most traders use indicators to make trade decisions with their setups. You can do it this way but you have to be very disciplined with risk management and controlling emotions and do the other million things that are the status quo.

 

Traders that base their decisions "first" on taking advantage other traders in trouble and anticipating the other guys moves, then using indicators as confirmation, are the 10% crowd.

You can be successful either way. But if you base your trades off of your opponents mindset first, You can trade rag tag off the hip and be consistent.

The best of the best traders do both.

The trading statistics alone tell you that the normal way is not the easy way.

I believe that anyone can be an excellent trader if they are willing to truly study themselves.

Thanks

[FXGirl 10]

No, you don’t have to fix yourself in order to trade. But you probably do have to fix certain patterns if you want to trade successfully.

 

The chief characteristic of the market is its ambiguity. We don’t know for sure what the market is going to do next. We have theories, indicators, system, etc., that help predict market movement, but none of these tells us what the market is going to do each and every time. This ambiguity makes the market a perfect Rorschach. We can project whatever we like on to it… and we do.

 

We all have internal scripting (what we believe is true) about our ability to succeed, about money, about our lovability, about the need to be right, our need for acceptance and so on. These emotional structures are the result of our early experiences in life; they are alive and potent in our unconscious, and are triggered when we experience something that reminds us of these early situations.

 

Had a Dad that told you no matter what you did it wasn’t good enough? Did you get angry and try even harder to prove him wrong? Now take that into your trading as an adult. You work hard, do the analysis, and put on a trade. At first it’s looking good, then the market starts to move against you. What are you feeling now? Do you dig you heels in, affirm that you are right and it’s got to turn around so you add to the trade? But the market doesn’t turn around and now you have a loss that a lot bigger than it should be. Do you get angry and take a revenge trade even though you know you shouldn’t? You weren’t thinking about your relationship with your Dad when you were trading, but those emotional structures influenced what you did with your trade.

 

So, yes, you probably want to find a way to “fix” that. Fixing it doesn’t necessarily mean that you have to resolve your issues with your Dad, though that would certainly help. Fixing it means that you pay attention to what you are feeling, recognize that emotions are data, and use that knowledge to make you a better trader by creating a different response to the market in similar situations.

[jaysmith124 10]

Is a trader who is 'naturally' suited to trading better off in the long run?

The short run, yes. But who's to say to what extent they make use of their talent?

 

How deeply do new traders generally experience anguish and what is their general tolerance level?

If they don't set a tolerance level they may experience anguish.

I set my tolerance level at my win rate. I believe the win rate should be at least 75% with simulated trading before moving onto real trading. The mind holds strongest its beliefs that are validated as the truth at least three times to one time that it turns out wrong.

 

Does a trader have to break in order to become fully competent?

They need to break away from their old way of thinking. Make changes from what is not working, and reprogram the mind with a goal of feeling good. Feeling joy in all areas of life. Supporting a purpose driven positive attitude.

 

Does anything really change anyway other than the trader having more useful experience?

Beliefs are formed by experiencing and reinforced by experiences. When skills are developed we have new experiences and our beliefs change. Our thoughts and feelings change to support that belief.

 

As the markets are in perpetually evolving, do traders experience the same thing over and over?

In my case, yes. I will stop and adapt to the new environment, but this would be unusual. Say the markets start a bull run more days than not, and prices just keep running up. I would stop and be cautious until an intuitive feeling says it's time to change.

 

This is from personal experience, Interpretations, Beliefs, Distortions, reading, etc.

[jtrader500 10]

You have a lot of good points jay, I would like to give my opinion on a few

A good way to reprogram your mind and also be on the opposite side of your emotions is to, instead of looking at prices like everyone else which is, "hey look at all these buyers off the bottom, its going up and im getting in.

Look at it like the black boxes that use orderflow algo's which is, "we have tried 3 times to go lower and the sellers just are not there, im going long with a very tight stop.

Getting used to looking like this will program your mind to do the opposite of your feelings. then you can read the market with vol and emotions and trade against yourself.

 

As for sim trading, i think that is the worst thing anyone could do. It gives you hopes with your technical skills, but is the smallest part of trading.

It would be better to trade some small ETF's so you can start small with real money and slowly raise your risk level as you learn the real thing.

The XLF is only $14 do 50 or 100 shares. At least you wont lose that experience time. You can us the sim to experiment with strategies and refine the technicals. its good for that.

Thanks

[TheNegotiator 13]

The question that interests me a great deal is "Does a stable and controlled emotional state lead to success, or does success lead to a stable and controlled emotional state?"

 

Think about it this way. You might think you have a great strategy and yet whatever you do, you end up screwing it up. Emotions run wild and sabotage your trading constantly. It's only when you learn to control these emotions that success comes. OR you have no success and you struggle emotionally. Fear, greed, anger etc. all play on your mind. It is only when you really attain some degree of success that actually your emotions fade and your success can then gather momentum.

 

I have the feeling that it's going to be a mix of the two for many. Similar in a way to the adage that "Money, makes money".

[Kiwi 16]

I think its more like "control of your thinking and actions in the situations that can give rise to rising emotions" results in the improvements. This then permits the move to greater pressure. And another round of improvement.

 

The place to look for evidence isn't in trading. Its in poker where the challenges are nearly identical but come at an even faster pace. And the population is greater so the evidence piles up faster.

 

The funny thing is that there doesn't seem to be anyone pushing near-stupidities like building populations of Jungian archetypes in poker. I'm not even sure that they have any freudian talk therapists either. They actually seem to use modern, evidence supported approaches for their coaching.

[jaysmith124 10]

The question that interests me a great deal is "Does a stable and controlled emotional state lead to success, or does success lead to a stable and controlled emotional state?"

 

Think about it this way. You might think you have a great strategy and yet whatever you do, you end up screwing it up. Emotions run wild and sabotage your trading constantly. It's only when you learn to control these emotions that success comes. OR you have no success and you struggle emotionally. Fear, greed, anger etc. all play on your mind. It is only when you really attain some degree of success that actually your emotions fade and your success can then gather momentum.

 

I have the feeling that it's going to be a mix of the two for many. Similar in a way to the adage that "Money, makes money".

 

You are asking if an activating event causes the consequences. Or, another words if results are caused by an activating event never taking responsibility. Here one will blame everything but themselves for causing the emotional consequences suffered, or they attribute good fortune to others, or to luck.

 

Or, is it our beliefs and their thoughts, and emotions, that cause our results. Here we take responsibility and control of our own mind. (mental schema, thought process, belief system)

 

And then there is a balancing act going on where they seems to be grey areas with our interpretations. An area where we can choose the most accurate interpretation for a situation. We can be content, considered ourselves successful, yet never come close to our potential. This can be from comparing yourself to others with a competitive mindset without an internal mindset of abundance and possibility.

Edited January 26, 2012 by jaysmith124

[zdo 20]

IThe funny thing is that there doesn't seem to be anyone pushing near-stupidities like building populations of Jungian archetypes in poker. I'm not even sure that they have any freudian talk therapists either.

 

Actually, neither gamblers nor traders are “building populations of Jungian archetypes”… but the successful ones in both fields are either consciously or unconsciously ‘bringing forth’ a set of game specific, pre-existing capacities / archetypes / background emotions appropriate to the ever changing contingencies of the ‘games’.

 

Ironically, in all gaming, the “gamblers” ie those predominantly expressing the gambler archetype and experiencing the accompanying gambler’s emotional mix form the dropping off loser pool and those expressing and experiencing the polars of the ”gambler” archetype form the pool of ‘winners’ (at the final table, etc.)

 

… That said, I’m going to ‘gamble’ for the next 36 or so hours and short the indexes…:rofl:

[FXGirl 10]

Certainly there is a learning curve regarding emotions during trading. Just like a new mother learns that every time her baby cries, its not a cause for panic, or a rookie cop learns that when the dispatcher calls you it isn’t always a robbery in progress, traders develop some equilibrium in the face of the market’s ups and downs – they have seen it before. And, as the Negotiator says, the more success you have, the more able you are to believe you can succeed in the current circumstances.

 

Nevertheless, when “Emotions run wild and sabotage your trading constantly” a strategy of trying to control your emotion seldom works. The fastest and surest way to deal with out-of-control emotions is to look them straight in the face and articulate what you are feeling – say it out loud or write it down. Once they are out in the sunshine, so to speak, they lose much of their power to control your fingers on the mouse.

 

All the stupid things we do such as get out of the trade too soon, move our stops, etc., we do in order to reduce the feelings of discomfort (fear, greed, regret, anger) we experience when faced with the uncertainty of market movement and the threat of loss. The brain is hardwired to produce these emotions as a way of getting us to take action. You can’t get rid of these emotions – they just are. You can try to repress them or pretend they aren’t there, but they will resurface and bite you in the ass just when you least expect them. Or you can acknowledge them, and in doing so, reduce their power, and then apply your cognitive techniques such as controlling your thoughts, and so on.

 

Recognizing your emotions, articulating them, and employing techniques to move you into a more relaxed state (“ ‘bring forth’ a set of game specific, pre-existing capacities/archetypes/background emotions…”) where you can more clearly see what the market is doing, is what all long-term successful traders have learned to do. For most, arrival at this process has by trial and error and so it has never been thought of as an integrated strategy. Instead, it operates unconsciously, as a habit. So once traders get to this stage, they seldom remember how they developed their emotional management skills and they tend to think they just learned to get rid of or “control” their emotions.

[Rande Howell 10]

Recently a trader asked me if you had to have a "robber" mentality to be a successful trader because it seemed, to him at least, that good trader takes money from less competent traders. My observation to him was that, for sure, this is one particular way to look at trading. I asked to look at the natural world and tell me if the wolf "robs" the deer in the preditor/prey dance they live in. Both actually need each other to survive. This is simply the dance they exist in. It is our perspective that characterizes the situation. It is simply the cycle of life and death in the natural world. George Seros used this anology to describe trading. He observes for the bubbles and exits before their collapse. The naive and ignorant get sucked into a bubble of their own doing and the seasoned trader plays the game of trading. The question is what do you observe about your self in relationship to others. In the natural world preditors consume the vast majority of the young (the naive) before they reach maturity. They do not attack the healthy (that's high risk). The same goes with trading. Trading is just taken to an order that is beyond the biology of the natural world. I would seek a mentor to learn the ropes before I ventured out into the world unprepared. Of course, that's opens up a whole new can of worms.

 

Rande Howell

[Marubozu 10]

Perhaps you do need to have a robber mentality it may be more beneficial than the mentality of a saint... or a preacher of altruism.

 

I see all profits as a form of exploitation of a person or resource, I don't see how any profit is formed with out something some where being exploited. We can pretend all day long that business is fair, but on the contrary.

 

The key difference is a robber attacks some one who is unsuspecting, a trader is basically having a bet with another trader, its completely fair as both people have defined their risk or at least you would hope they have and then the game unfolds.

 

But I do think you have to be ok with the idea that in each trade there is a looser and a winner and sometimes the guy who is loosing may not be able to cone back from his loss.

 

He chooses to play the game. If I am right I take his money, if I am wrong he takes my money. Its as simple as that for me.

[Rande Howell 10]

 

He chooses to play the game. If I am right I take his money, if I am wrong he takes my money. Its as simple as that for me.

 

 

 

Whether it's trading football, basketball, population growth and decline, or love interests -- playing the game opens the possibility of winners and losers. I'm personally looking forward to a great game this weekend. That's the dance of life in what ever form it takes. If the loser learns from his mistakes, then the loss is the price to learn competence. If you don't learn (adapt) from your losses, then you end up in extinction. But no one robbed anyone, unless you happen to be an ex-GoldmanSachs guy running MF Global.

 

Rande Howell

[Obsidian 10]

Buyer willingly agrees to buy, seller willingly agrees to sell...who is robber?

[SIUYA 11]

Buyer willingly agrees to buy, seller willingly agrees to sell...who is robber?

 

the government, the brokers, the tax man, your partner if you win or loose!

I would hate to think that my local store owner thinks himself as a robber and us the customers as his victims.

 

You can justify your existance anyway you like I guess.

There was one guy who was a good trader, but ultimately a complete prick of a human being.

 

He actually used to say and acted on this belief - "I was brought up to believe that you are trying to screw me over and hence I will do it to you first - and you are the fool for not stopping me, or beating me.....life is a competition"

 

I hope he is happy.

[johnw 10]

.................................................

There was one guy who was a good trader, but ultimately a complete prick of a human being.

 

He actually used to say and acted on this belief - "I was brought up to believe that you are trying to screw me over and hence I will do it to you first - and you are the fool for not stopping me, or beating me.....life is a competition"

 

I hope he is happy.

 

 

Ahhhh yes indeed, this is the twelfth commandment.

 

"Do unto others before they do it to you"

 

Just in case you are wondering after the eleventh commandment.

 

"Thou shalt not get caught"

[Obsidian 10]

the government, the brokers, the tax man, your partner if you win or loose!......

 

hehehe well you are right about that

[jaysmith124 10]

I think it is important to note that morals can impede your progress. To what extent are decisions guided by morals? On the surface, and when under pressure when opportunities arise.

 

I have run into two situations where Real Estate Agents took advantage of an opportunity. One under-priced a house in her interest. The house next door sold $30k under market in 2004. The pool was not used and needed cleaning. Three thousand was deducted for pool re-plastering. After the sale the pool was cleaned and filled along with house cleanup and some tree trimming and planting. It sold for an 80,000 profit after being flipped. Another incident a coworker was taken advantage of mad at himself for trusting the real estate agent.

 

It is buyer beware wherever you do business. Each industry has unwritten standards. About a year after the flipping of the house next door, I inquired with another real estate agent about selling my house. I brought up the name of the real estate agent who under-priced the house next door, and before I said anything she told me that that agent was real good. Opportunists are amongst the best known in their field of practice, and get away with it. Morals are flexible. They adapt to the situation. Some people can be respected for certain actions, while another will be castigated for the same behavior. Maybe we have to earn our right to take advantage of certain situations.

 

If you are a person of character, integrity, and with strict moral standards... you may unconsciously, or consciously, think you are doing something wrong if trading successfully. You don’t want to be castigated. Especially, if shorting stock. Or, it could be used as an excuse not to become successful for some other unconscious reason. But in trading we don’t have to earn the right to take advantage of opportunity. This reminds me of discussions that have come up where traders ask what they tell others what they do when asked. This shows an underlying fear coming to consciousness.

 

How does a trader deal with the fear of being a bad person? Instead of believing that there must be a winner and a loser consider the possibility that there are transactions with a winner and a winner. Is this possible? Out of the group of traders who have the shares you need a portion will benefit from the exchange. They will be taking profit, or getting into a position and take a profit some future time. So, it is a choice to believe what is going on behind the scenes of a transaction. I can choose to believe what will work for me. That could be that I choose not to pick a belief about something that does not matter. (if this ever mattered, or limited, me in the past it doesn't any more)

 

How does a trader deal with a belief that he is, or will be, a victim? You don’t have to be a victim unless you think you are. Unless you are predicting the future. (which can cause worry)

 

This is an example amongst a multitude of phobias we are conditioned to, and can choose to deal with. Besides phobias, the feelings of Guilt, Shame, and Worry will cause anxiety, affect the capacity for change, and limit growth.

Edited February 19, 2012 by jaysmith124

[Rande Howell 10]

I think it is important to note that morals can impede your progress. To what extent are decisions guided by morals? On the surface, and when under pressure when opportunities arise.

 

I have run into two situations where Real Estate Agents took advantage of an opportunity. One under-priced a house in her interest. The house next door sold $30k under market in 2004. The pool was not used and needed cleaning. Three thousand was deducted for pool re-plastering. After the sale the pool was cleaned and filled along with house cleanup and some tree trimming and planting. It sold for an 80,000 profit after being flipped. Another incident a coworker was taken advantage of mad at himself for trusting the real estate agent.

 

It is buyer beware wherever you do business. Each industry has unwritten standards. About a year after the flipping of the house next door, I inquired with another real estate agent about selling my house. I brought up the name of the real estate agent who under-priced the house next door, and before I said anything she told me that that agent was real good. Opportunists are amongst the best known in their field of practice, and get away with it. Morals are flexible. They adapt to the situation. Some people can be respected for certain actions, while another will be castigated for the same behavior. Maybe we have to earn our right to take advantage of certain situations.

 

If you are a person of character, integrity, and with strict moral standards... you may unconsciously, or consciously, think you are doing something wrong if trading successfully. You don’t want to be castigated. Especially, if shorting stock. Or, it could be used as an excuse not to become successful for some other unconscious reason. But in trading we don’t have to earn the right to take advantage of opportunity. This reminds me of discussions that have come up where traders ask what they tell others what they do when asked. This shows an underlying fear coming to consciousness.

 

How does a trader deal with the fear of being a bad person? Instead of believing that there must be a winner and a loser consider the possibility that there are transactions with a winner and a winner. Is this possible? Out of the group of traders who have the shares you need a portion will benefit from the exchange. They will be taking profit, or getting into a position and take a profit some future time. So, it is a choice to believe what is going on behind the scenes of a transaction. I can choose to believe what will work for me. That could be that I choose not to pick a belief about something that does not matter. (if this ever mattered, or limited, me in the past it doesn't any more)

 

How does a trader deal with a belief that he is, or will be, a victim? You don’t have to be a victim unless you think you are. Unless you are predicting the future. (which can cause worry)

 

This is an example amongst a multitude of phobias we are conditioned to, and can choose to deal with. Besides phobias, the feelings of Guilt, Shame, and Worry will cause anxiety, affect the capacity for change, and limit growth.

 

Markets are neither moral or immoral. They are neither fair, nor unfair. They simply are. Each brings their narrative to the dance called trading the markets. And out of that narrative, the insiders and outsiders create a story to explain the phenomenon of the market. When a trader lets go of the story of how it should be, they become open to a new narrative that can explain in a different way. I'm at the Traders Expo in NYC right now and its amazing at the stories that people are captive to that create pain and suffering. Naivity is a dangerous thing to the game if you are planning to keep your money or make money. Wise to the ways of the world is essential no matter what your attitude.