The Illusion of Control: The First Step to Emotional Sobriety in Trading

[SIUYA 11]

Hi SIUYA,

 

We are all human, we have bad days, I have bad days. Sometimes I have bad weeks. That doesn't mean I have or am developing "issues." I've been doing this long enough to know that when I'm well rested and my mind is clear, my body fit, and have minimal distractions, extracting from the market is effortless. I call it being in the groove, and the results are "unbelievable" to people.

 

I agree with you.....and the extent - badly worded maybe so thanks for being my English teacher (and plus none of this is meant to be an attack even if it might come across as like it), that there are exceptions is that while you may not develop issues. Others might. Does that not mean people like Rande may offer something to someone, or that SIM trading might be of value, or that not everyone reacts the same.

 

In any case, trading is a performance activity and I accept my results and don't look to blame people, circumstances, or psychological issues for lousy performance. In the big picture, trading is just a neat game to extract resources from and not that serious. There is nothing inherent about me or trading that can't be addressed with exercise, good nutrition, healing time, and getting my head straight, which is really a matter of aligning myself with life's true priorities.

 

Thats great, I adopt much the same attitude, but I also recognise that sometimes I do repeat the same stupid mistakes and wonder why. Its not lack of a plan, or experience - maybe its just I got out of bed the wrong side, or I did not like my coffee for the day...maybe I have underlying issues. Often the best way to fix them for me may be different - for others they may wish to understand why/if they have underlying issues.

While you say you dont have issues and there are no underlying issues then maybe you could solved the rest of the worlds problems.

I only mention this as I used to think the same, but does your experience or mine mean there is no worth in others work, ideas, help?

 

 

I don't wear their clothes but I am not turned off by their image or marketing. I accept that the fashion industry is all about hype and not substance. Thus I don't get your analogy between choice of clothing and using volume analysis, unless you are saying trading is also about hype and not substance.

 

the analogy (silly as it is) is about the fact that people will 'attack' (for want of a better word) anothers ideas/policies/methods when they dont agree with it from their own perspective, just because it might not apply to you, and you dont like them. Hence just because the Abercrombie and finch makes my skin crawl and I think its hype, does not require me to comment endlessly on it on a fashion website.....much as I dont use volume analysis and thing its also pointless....I dont feel I ned to get onto a volume thread about it to try and dismiss it. Same as for analogies - if you wish to stick to trading, and think that people dont have issues related to their past (or whatever reason) just because you dont then I think you have a very limited view of the world.

 

Who is the underdog?

 

Rande, and anyone with relevant issues.

 

 

Point is....I might not agree with Randes ideas, practices or methods, but I would not think that you can say that "there are no issues" - I have value from thinking about some of the things raised - attack/question his methods, but to sweep the whole thing under the carpet seems lacking.

[karoshiman 10]

 

...

 

do you apply the same thinking to sports and sports psychologists.

What about management coaches who help people who otherwise are normally successful but cant quite break through to the next level.

 

...

 

 

 

 

I don't think that you can compare the situation of a sport psychologists or a management coach with what some unprofitable traders might expect from a trading coach. I know at least about management coaches as I had one when I was an aspiring manager.

 

Sport psychologists and management coaches work with people who are already quite successful in what they do. Usually, you have to reach a certain level of success before you get a coach like this. And then, they work only on nuances. But they don't make a world class athlete or manager per se. Among several world class athletes or managers they can make a difference though, as everyone is already very good in the basics and these nuances can matter.

 

Compared with trading, I would say that an unprofitable trader does not yet master the basics. Otherwise he or she would be profitable already. A coach cannot change that IMHO. I am not a psychologist of course... but a profitable trader ;-)

 

A coach can potentially help here also with nuances, e.g. reducing stress levels by teaching meditation techniques, etc. or increasing the concentration capabilities or similar things. I am sure that this would also have an impact on the bottom line. But this impact would be only marginal, i.e. increasing the performance from 16% to18% in period X, but not from - 16% to + 18%.

[SIUYA 11]

I don't think that you can compare the situation of a sport psychologists or a management coach with what some unprofitable traders might expect from a trading coach. I know at least about management coaches as I had one when I was an aspiring manager.

 

Sport psychologists and management coaches work with people who are already quite successful in what they do. Usually, you have to reach a certain level of success before you get a coach like this. And then, they work only on nuances. But they don't make a world class athlete or manager per se. Among several world class athletes or managers they can make a difference though, as everyone is already very good in the basics and these nuances can matter.

 

Compared with trading, I would say that an unprofitable trader does not yet master the basics. Otherwise he or she would be profitable already. A coach cannot change that IMHO. I am not a psychologist of course... but a profitable trader ;-)

 

A coach can potentially help here also with nuances, e.g. reducing stress levels by teaching meditation techniques, etc. or increasing the concentration capabilities or similar things. I am sure that this would also have an impact on the bottom line. But this impact would be only marginal, i.e. increasing the performance from 16% to18% in period X, but not from - 16% to + 18%.

 

Agree. (50% )

(In trading....assuming a coach is really an educator (not a mentor who I would say is one who does not charge either) and making a difference between the psychologist and an educator, as they should offer different services)

I have often stated and asked Rande about this, as I have never thought a trading psychologist is appropriate for a beginner. A educator maybe, but often they are expensive, over rated and there is enough free information available.

Hence only once you have reached a level, only then may a psychologist be of any value if you find there is something holding you back in some form that is more related to the mental aspects of this occupation. Now this level may or may not be based on profit....however if you really are doing all the homework, have a profitable plan but then cant stick to it or constantly self sabotage - then surely a mental coach might help?

 

So I guess in agreeing with gosu - there are no issues - other aspects of trading - the education, the market philosophy, the practice, the back testing etc; should all be working and well covered aspects of a traders armory before the next level....and yet if all these are working - what else is there?

 

I do disagree however that depending on the issues you can have a big impact on profitability, as we know there is a fine line between being successful or not in trading. I say this as I have seen enough people do the same trades and yet some manage to make money others loose.....and given the amount of freely available systems and ideas out there....why are some people able to implement them successfully while others are unprofitable.....is it simply not following the rules or something more? (especially for discretionary systems that are generally rules based)

[karoshiman 10]

 

Agree. (50% )

 

...

 

 

 

lol

 

 

 

...however if you really are doing all the homework, have a profitable plan but then cant stick to it or constantly self sabotage - then surely a mental coach might help?

 

...

 

... I have seen enough people do the same trades and yet some manage to make money others loose.....and given the amount of freely available systems and ideas out there....why are some people able to implement them successfully while others are unprofitable.....is it simply not following the rules or something more? (especially for discretionary systems that are generally rules based)

 

 

 

My point is, in trading you cannot distinguish between the "technical" aspects of trading (systems/methods, money management rules, etc.) and your own psychology. Either all this works as one (then you got it) or it doesn't (then you have to keep on working to find it).

 

I like the quote from Jack Schwager's first book in the preface to the Ed Seykota interview: "... to him, trading and psychology are one and the same thing."

[SIUYA 11]

great point Karoshiman

which is why its important to develop a system specifically for yourself even if it borrows from others and to tailor it based on your own views of the market and your strengths.

because didn't Ed say - "Win or lose, everybody gets what they want out of the market."

 

(I still maintain the mental aspects are important when something/somehow f..ks with the mind - and I am no expert on this but I thought thats a lot of what the trading tribe was all about)

 

yet....in trying to keep the thread on track.....maybe thats a lot of what messes with the mind. The illusion of control. We might think that we have control not only of the markets (impossible IMHO) and control over our plans (likely if we have done the work and this is probably all we have some control over), and control over ourselves (as science is showing despite what we all think in general we dont - here in lies potential and real issues.)

1 out of two aint bad, and if we can get two out of three then thats great....if you can control the market well thats heavenly.

[karoshiman 10]

 

...

 

which is why its important to develop a system specifically for yourself even if it borrows from others and to tailor it based on your own views of the market and your strengths.

because didn't Ed say - "Win or lose, everybody gets what they want out of the market."

 

(I still maintain the mental aspects are important when something/somehow f..ks with the mind - and I am no expert on this but I thought thats a lot of what the trading tribe was all about)

 

yet....in trying to keep the thread on track.....maybe thats a lot of what messes with the mind. The illusion of control. We might think that we have control not only of the markets (impossible IMHO) and control over our plans (likely if we have done the work and this is probably all we have some control over), and control over ourselves (as science is showing despite what we all think in general we dont - here in lies potential and real issues.)

1 out of two aint bad, and if we can get two out of three then thats great....if you can control the market well thats heavenly.

 

 

Exactly!

 

And the method should not only fit your strengths, but more importantly, your weaknesses! Because it's our weaknesses that limit us.

 

Yes, that's what Ed said in the interview

 

I'm saying, if the technical aspects of trading and your psyche is one, then there is no need to control your plan or ourselves. Because - and that takes up gosu's point - there are no issues...

 

But that is, why this business is so damn hard... "arranging" the technical aspects in a way that there are no issues... that everything is natural to you...

 

So, summarizing my point of view, mental trading coaches like Rande try to adjust the mind. I am coming from "the other side"... I say, the mind is a given and cannot be changed. The work can only be to find the right combination of technical aspects that ARE you, and hence, don't lead to issues! Of course, this process can also lead to the finding that there is no combination of technical aspects that IS you. Hence, trading is the wrong profession for you...

 

Anyway, I think this process of finding the right combination of technical aspects has to do with thinking independently and questioning every piece of information until you are 100% sure that this is the right way for you! A great coach could help in this process too, I guess.

[johnw 10]

Exactly!

 

...... I say, the mind is a given and cannot be changed. .................................

 

Fascinating point of view.

Firstly, can I say that if this is what you believe, then nothing in your world will/can ever change.

 

But how do you account for Tiger Wood's sudden drop in performance and his incredible struggle to regain his form.

[karoshiman 10]

Fascinating point of view.

Firstly, can I say that if this is what you believe, then nothing in your world will/can ever change.

 

But how do you account for Tiger Wood's sudden drop in performance and his incredible struggle to regain his form.

 

 

No, I am referring to basic personality traits. I don't think they will change.

 

Things in our world change within the limits which are set by our personalities. Though, I admit you can improve some weaknesses one might have in certain areas but you cannot change your whole personality.

 

For instance, someone who is introverted and thrives in more analytical tasks instead of tasks where high social competence is required cannot be changed into an extroverted salesman, and vice versa.

 

I think success comes from accepting who you are and finding what you are good at. We all cannot excel at everything.

 

I don't follow Tiger Wood's career, but if this drop in performance came after his marriage problems then that explains it. We are not talking here about external factors which influence everyone, also excellent traders (problems in the family, illnesses, etc.).

[gosu 10]

Who is the underdog?

 

 

Rande, and anyone with relevant issues.

 

 

I had no idea you were privy to his deficiency or disadvantage. He came across perfectly fine to me. You are a good man for speaking out for the less fortunate. My apologies.

 

BTW, what's wrong with him? Feel free to PM if his condition is embarrassing.

[SIUYA 11]

i just feel he gets picked on a lot.

its an age thing for me.....I start to feel sorry for people.

Its probably a deficiency I am developing.

[MightyMouse 12]

No, I am referring to basic personality traits. I don't think they will change.

 

Things in our world change within the limits which are set by our personalities. Though, I admit you can improve some weaknesses one might have in certain areas but you cannot change your whole personality.

 

For instance, someone who is introverted and thrives in more analytical tasks instead of tasks where high social competence is required cannot be changed into an extroverted salesman, and vice versa.

 

I think success comes from accepting who you are and finding what you are good at. We all cannot excel at everything.

 

I don't follow Tiger Wood's career, but if this drop in performance came after his marriage problems then that explains it. We are not talking here about external factors which influence everyone, also excellent traders (problems in the family, illnesses, etc.).

 

Tiger's marital problems began much earlier than when the media caught wind of it. A lot of people trade perfectly fine and have issues that would qualify as mentally disabling.

 

It is foolish to see a top performing athlete and think that since he is a top performer, his marriage, relationships, acceptance of his past, etc must all be very good. A lot of these guys are what I might consider tortured souls, alcoholics, drug addicts, etc and they perform fantastically. You can argue that they would perform better if the did not have the issues, but I am sure I could argue that the issue could also make them stronger performers.

 

I think that if the market has you thinking about yourself, then you are failing. Your self is the easiest thing to become distracted by while you are trading. You have nothing to do with the market. When you are trading you should only be thinking about the market.

 

Your self is neither tied to the market nor the outcome of a trade. When you are in a winning trade and all you see are reasons to get out, then you are thinking about your self and not the market. If you are in a losing trade and all you can think of are reasons to stay in, then, again, you are thinking about your self and not the market.

[karoshiman 10]

 

Tiger's marital problems began much earlier than when the media caught wind of it. A lot of people trade perfectly fine and have issues that would qualify as mentally disabling.

 

...

 

 

 

Good points!

 

Regarding Tiger, maybe it was less the marriage problems itself but the "media hunt" and the resulting damage to his so far excellent reputation that came with it which caused his performance problems? ... Who knows... it's difficult judging from the outside what the cause of such problem is.

[johnw 10]

No, I am referring to basic personality traits. I don't think they will change.

 

Things in our world change within the limits which are set by our personalities. Though, I admit you can improve some weaknesses one might have in certain areas but you cannot change your whole personality...........................................

 

 

You seem to be very comfortable with capping your potential by your thoughts.

 

I imagine this locks you into a self fulfilling prophesy.... the old perfect circle ...as I think then so I do ... as I do then so I think.

[Rande Howell 10]

No, I am referring to basic personality traits. I don't think they will change.

 

Things in our world change within the limits which are set by our personalities. Though, I admit you can improve some weaknesses one might have in certain areas but you cannot change your whole personality.

 

For instance, someone who is introverted and thrives in more analytical tasks instead of tasks where high social competence is required cannot be changed into an extroverted salesman, and vice versa.

 

I think success comes from accepting who you are and finding what you are good at. We all cannot excel at everything.

 

I don't follow Tiger Wood's career, but if this drop in performance came after his marriage problems then that explains it. We are not talking here about external factors which influence everyone, also excellent traders (problems in the family, illnesses, etc.).

 

The factor you are talking about is called genetic predisposition. It is far more flexible than absolute -- more of a generalized direction than a locked in position. Gene expression has proven to turn on and off depending on various factors including environment. A person born with a predisposition toward anxiety may not become a lion trainer, but can go and watch the lion trainer or even learn to train dogs. They can show up at the party, just not be the life of the party. But they can enjoy themselves.

 

Same with trading. I have worked with people with significant OCD that, when properly medicated, could learn emotional regulation skills and trade effectively. I have also seen the same person not sustain his capacity to manage his predispositon with horrible results.

 

It's commom when working with a trader with sub-clinical levels of anxiety (everyday worry applified by the rigors of trading) learn to work with this predisposition gone amok and develop a working mindset that managed the trading environment effectively.

 

The point is that predisposition is not set in concrete. It is the belief, usally learned from family of origin and culture, about their capacity to manage uncertainty successfully that has to be examined and transformed. People often confuse predisposition with self limiting beliefs. If the emotional brain comes to believe something about the self, the thinking brain will produce an explanation that supports that belief. This is pre-logic.

 

I'm with JohnW here. Tiger Woods is a good example. From an early age, he was taught and learned to fuse his sense of indentity with this performance. He certainly got drunk with power and confused sex with a representation and reward of how large and in charge he was. As in trading, this belief (that had once served him so well in the domain of golf) and the euphoria of being a hot man (Gail Mercer calls this male bravado in her trader training) crashed marriage and family. Like many traders who fall victim to the euphoria that can occur in hot trading and end up losing big capital based on self limiting beliefs exposed in their trading, Tiger Woods did nothing different and his performance is now tentative. Being blind to his arrogence brought him down. In Tiger Woods story, it took time for the consequeces to be brought forth. In trading, it usually is alot faster.

 

Self mastery is what I see most traders avoid. They will seek answers outside of the self so they do not have to change the current organization of the self. This is called self preservation. It's a useful bias, but it keeps you locked into a particular way of seeing the world. If that position comes crashing down, it's time to look at the self limiting beliefs behind the performance. Not sit in the comfort of saying that it is all nature.

 

Rande Howell

[karoshiman 10]

You seem to be very comfortable with capping your potential by your thoughts.

 

I imagine this locks you into a self fulfilling prophesy.... the old perfect circle ...as I think then so I do ... as I do then so I think.

 

 

I am comfortable with the way I think or do things, but I do not cap my potentials. Actually, it's quite the opposite...

 

I've been a somewhat successful athlete on a national level some years back (once runner-up at the national championships) and after that I continued to be successful in the corporate world. However, I did achieve this as I choose a sport and a career which fit to my personality, with all its strengths, but also its weaknesses!

 

I am not saying that you cannot get better in other fields if you work hard at it. You can absolutely and I did that too (e.g. I hated public speaking and was not good at it, but with getting more and more exposure I had to do it during the course of my career and over time I've got really better at it...).

 

I am just saying that you can achieve so much more if you focus on what is already inside you. That's what I did in my life so far and it worked very well for me. In order to stay with the golf analogy, most people can learn to play golf, but few can become professionals (or as I do not become one of these great motivational life speakers ).

 

Coming back to trading, I just cannot believe that so many people have so serious issues with uncertainty that it hinders them executing a trading plan properly. I mean, I had issues in trading too, but that was when I followed rules of others, when I did not understand every single aspect of my trading properly and, most importantly, when certain aspects of my trading did not fit to my personality. But I did not realize it back then.

 

I got lucky that my computer broke down and as I did not have a backup computer I could not trade for a few weeks (had problems with ordering a new computer too). During that time I had time to step back and think about my trading without being interrupted by the actual trading. It was during that time that I realized that parts of my trading are not really what I believe in and some of them actually seemed afterwards like absolute nonsense to me. That was when I started my journey to develop my own method. But that took a lot of time, hard work and trial and error to develop such customized method. But since using this method I did not have emotional issues impacting my trading negatively.

 

 

PS: By the way, great trading day today! Hope you all can profit from it!

[johnw 10]

I am comfortable with the way I think or do things, but I do not cap my potentials. Actually, it's quite the opposite... .......................................

!

 

 

Well done and good for you.

 

Might I ask what sport and career did you chose to fit your personality.

 

The reason I ask is because these activities seem to find people early in life without conscious thought and children just grow into them through the natural ability of youth and the encouragement of Elders.

 

Later in life they may question their choices to the point where they make huge life changes and that tipping point is normally the result of an overwhelming desire to change

and seek one's true potential.

 

But it appears that you are different ..quite different indeed.

You consciously chose a sport and a career that suited your personality, presumably at an age when Kids still think they are bullet proof and are capable of achieving anything.

 

What made you do this ... can you remember the defining moment in your life when these choices presented themselves and you narrowed your selection to those of sport and career.

 

Mostly, my experience with thoughtful children is that it makes them timid and they need encouragement to take chances, just as reactive children need encouragement to think through 'cause and effect'

In the end both these groups of kids grow up to be just fine.

 

But you seem to be special and I am curious to know your background.

[karoshiman 10]

 

...

 

Might I ask what sport and career did you chose to fit your personality.

 

...

 

 

 

Thank you, John!

 

I am not sure whether it was a conscious decision when I was a teenager. The decision I took consciously was that I did not want to get involved in team sports as I never liked teams (and still don't do... that's why I like trading, by the way ). So I choose individualistic sports after trying some team sports. The sport in which I've excelled was also an individualistic sport.

 

But whether it was my sports or my career I did what I liked, to what I was naturally attracted. I think I was and still am very good at listening to my inner voice. So, I guess it have been more subconscious choices I've made at that time.

 

However, with hindsight I can say that it were excellent choices (subconscious or not) that made a lot of sense and explain my success (to a larger extent with my career though, than with my sports). I am able to see now the bigger picture or the "central themes" in my life and how everything fits together. By listening to my inner voice at that time I had a "natural fit" to my personality. Does that make sense?

 

What is your background? You sound like you have also (like Rande) a professional psychological background.

[johnw 10]

Thank you, John!

 

I am not sure whether it was a conscious decision when I was a teenager. The decision I took consciously was that I did not want to get involved in team sports as I never liked teams (and still don't do... that's why I like trading, by the way ). So I choose individualistic sports after trying some team sports. The sport in which I've excelled was also an individualistic sport.

 

But whether it was my sports or my career I did what I liked, to what I was naturally attracted. I think I was and still am very good at listening to my inner voice. So, I guess it have been more subconscious choices I've made at that time.

 

However, with hindsight I can say that it were excellent choices (subconscious or not) that made a lot of sense and explain my success (to a larger extent with my career though, than with my sports). I am able to see now the bigger picture or the "central themes" in my life and how everything fits together. By listening to my inner voice at that time I had a "natural fit" to my personality. Does that make sense?

 

What is your background? You sound like you have also (like Rande) a professional psychological background.

 

 

No ... I am just an enthusiastic amateur .. a perpetual student of life