Why Traders Continue to Fail - When They Are Trying Hard Not to Lose

[Rande Howell 10]

The Confessions of a Hard Working Trader

 

NOTIFICATION TO ALL READERS: THERE ARE SEVERAL LINKS PLACED IN MY TEXT THAT APPEAR AS SPAM TO ME. THEY WERE NOT INTENDED TO BE INCLUDED IN THE ARTICLE AND I'M HOPING THAT TL IS NOT RESPONSIBLE FOR THEM OR IT WILL BE THE LAST ARTICLE I PLACE ON TL.

 

I’m about to pull out what little hair I have left. I keep running into the same brick wall over and again. I’ve been trading 5 years and I win consistently when "play money" is on the table. But the moment I move from paper money to real money and really risk my capital, things just go haywire. And I don’t know why.

 

I’m well trained. I know how to trade my plan, but I don’t do it. I know that I should be patient, but still, five years later, I jump into trades I know I shouldn’t get in. I know risk management so I try to keep my losses small, because that is how you manage risk in trading, but instead I add to my losses – and hope things will turn around – but they don’t. And I even catch myself as I make stupid decisions (in the moment) – but I do it anyway. I’m like one of those characters in your book. It’s like you wrote about me.

 

I've "been there and done that" with trader psychology. I’ve spent good money on programs that promised that I’d become a disciplined trader – but I haven’t. I’ve been promised that I would learn techniques that would keep my emotions from railroading my perfectly good rational mind into becoming a runaway freight train. But here I am 5 years later still sabotaging my trading. It’s almost like I don’t really want to win, deep down.

 

I can go from one to three weeks without losing and then get mad and give it all back plus a lot more. This is the sabotaging pattern that I keep repeating. How do you figure that out and can you overcome it?

 

I love trading, but I need to come to overcome these destructive patterns. I don’t have an unlimited source of capital. So if I can’t get past this hump, I need to face the music and move on.

John Doe

Waking Up in Free Fall

Have you ever felt this way? I get numerous emails all the time, just like this one. So if you have ever felt at the end of your rope in trading, don’t feel alone. (Not that this is a consolation to your situation.) This guy is trying hard. (And, I imagine, so are you.) He is smart and working hard. He knows HOW to trade. No doubt he has experienced a pretty reasonable degree of success in his career or business before he came to trading. But, like many drawn to trading, he was not satisfied with running a business or dealing with the corporate world anymore and wanted more personal and financial freedom. Then he discovered trading as a means to his dreams of independent living.

 

After being shown the blue-sky side of trading and being sucked into its enchantment, he is convinced he could learn how to trade successfully and make those dreams come true. No one tells him about the psychological side of trading - or that he is going to come face to face with sides of himself of which he was blissfully unaware. (And if he had been warned, he would not have listened anyway.) Now he has chosen trading as a career, while thinking that trading is simply a way to make money so he can enjoy life.

 

He invests money in methodology training and learns how to trade in simulation. As proof of his increasing skills, he is able to take his sim account to impressive paper profits. And now he is ready for live trading. He is confident in his methodology and knows that he is capable of making money in the markets. His past skills that brought him success are ready to be employed in his new career. He is ready and begins trading. For the vast majority of traders this moment (moving from simulated trading to live trading) is like falling off a cliff. It is a long way down and the landing is brutal. Suddenly undiscovered emotions become involved in his decision-making that whipsaw his "mind that knows HOW to trade" into a mind that cannot seem to make a rational decision in the newly pressurized environment of risking his own capital.

 

Often, traders who have experienced confidence and discipline in past careers find themselves suddenly over-trading and impulse-trading. Once confident people, who were accustomed to making things happen by being “large and in-charge”, they are now paralyzed with fear – both at entry points and at exit points. And the more they try to “man up” to the problem and push through it, the bigger the problem gets.

 

How can a guy with proven confident and disciplined personality traits (that brought success in a past profession), use those very same traits in trading - with such poor results?

 

Career Development and the Notion of Work: Urgency to Act vs. Patient Observation

 

A set of attitudes has to be developed for a successful career in trading that is different from a career in a profession or business. No one comes to a career in trading with the traits necessary for instant success in trading, although they are certainly led to believe this by their trading trainers. These attitudes and assumptions have to be developed right alongside the knowledge of how to trade. But this is not taught. The left brain of the trader, where logic is king, is taught. But the right brain, where emotion is king, is ignored.

 

The flawed assumption that many people bring to trading is that the traits that brought them success in their careers and business will also generalize into developing a successful performance in trading. And they assume that the very confidence and discipline that drove them to prior successes will work in trading also. But they will not. In fact, far from it. These past traits, so essential to their prior success, will become the primary obstacle to the very success that they seek.

 

The kind of confident discipline necessary for trading success is very different from the confident discipline found in business. In business success there is an urgent discipline that is ready to take action and conquer goals by sheer will power. When this attitude is brought into trading and applied to the mind that actually trades, disaster is not far behind – or at least slow descent into pain. There is a bias toward urgency to act, to get into trades, because this is the work of trading. (You’ve got to be in trades to make money, right?) The moment that urgency enters the trading mind, the trader is no longer in the state of mind necessary for successful trading.

 

Read that last sentence again. This is very counter-intuitive to the experience of a trader's past successes, so he will continue with even more urgency because he now must make trading "happen" as a career (and make up for prior losses). The formula of a focused work ethic bringing career success worked in the past, so the trader simply tries harder to make success happen in trading. And the pattern continues until the trader stops to re-evaluate what mental and emotional traits are really needed for success in trading.

 

When traders are successful, they practice a patient discipline where they calmly lie in wait (ambush really) until the market comes to them – and then they strike. How different this is from our vignette at the beginning of this article! His trading is based on urgency while successful trading is based on patience. The notion of work is different between the two. Rather than work with urgency to action to achieve a goal, work takes on new meaning to the evolving trader. The new paradigm becomes patient observation, allowing the conditions to come to you. The trader is no longer chasing the trade (an urgency mentality), but is waiting for the trade to come to him so he can strike. This is the successful mind built for trading.

 

Less becomes more. Now, the career development of the trader has taken a quantum leap. Freed from a historical notion of action that brought success in another time and place, the trader now has the newer organization of mind that allows him to manage his emotions, his mind, and his methodology for a successful career in trading.

 

Neither one is better or worse than the other – only different. It simply means that success in business and success in trading require different forms of discipline for success. Without the development of patient discipline, a trader will continue to crash and burn. And it all has to do with the way the trader perceives work.

 

Work as the Coordination of Effective Action

 

I invite you to examine the assumptions of work habits you bring to trading. Really start noticing whether you drift mindlessly into an “urgency to trade” mentality – because that mindset produced success in another time before trading. Does working mean doing and pushing forward to you? Or is there room for a deconstruction of the beliefs you have about work? If you can accept that work is really about the coordination of effective action, then you can examine the effectiveness of your beliefs by examining your trading account. The effectiveness of your beliefs about work being projected onto the markets is demonstrated in black and white right there, in your trading account. It is the final judge about the effectiveness of the mind you bring to the performance of your trading.

 

Then, as you become more mindful of whether your notions of work are effective for trading, start to recognize patient observation as the key to effective work in trading. And realize that success in one domain does not generalize mindlessly into another domain, such as trading.

If this is your career, you are going to need to develop the mind that trades right alongside the knowledge base of knowing how to trade. It takes both. Developing the mind you bring to the performance of trading is not an option to a successful career in trading – it is a necessity. And it is going to have to be re-invented for you to be effective in trading.

[4EverMaAT 10]

The whole point of implementing systems, is to focus the mind only on those inputs which the system is designed to give a certain output, and ignore the rest.

 

With a complete trading system, the confidence to trade it consistently will come because you observe over numerous repetitions that the system is profitable. Most traders do not have a complete trading system. Instead, some aspect of it is left up to the trader (discretion) after the trade[cycle] has begun. This can result in panic and either over-leveraging or errors in following the system.

 

edit: i agree about the avoiding losses thing. Just like if you have a fear of heights, no amount of safety records and numerous other logical arguments justifying how safe it is to fly will get you to board an aircraft. So if you have a fear of losing money, no amount of logic describing a complete trading system will enable you to trade that system consistently. Your fear will find a way to change the rules to justify your fear and self-sabotage. It's kind of amazing how the ego (and more specifically the parasite) works to direct the mind.

Edited April 7, 2013 by 4EverMaAT

[Rande Howell 10]

The whole point of implementing systems, is to focus the mind only on those inputs which the system is designed to give a certain output, and ignore the rest.

 

With a complete trading system, the confidence to trade it consistently will come because you observe over numerous repetitions that the system is profitable. Most traders do not have a complete trading system. Instead, some aspect of it is left up to the trader (discretion) after the trade[cycle] has begun. This can result in panic and either over-leveraging or errors in following the system.

 

edit: i agree about the avoiding losses thing. Just like if you have a fear of heights, no amount of safety records and numerous other logical arguments justifying how safe it is to fly will get you to board an aircraft. So if you have a fear of losing money, no amount of logic describing a complete trading system will enable you to trade that system consistently. Your fear will find a way to change the rules to justify your fear and self-sabotage. It's kind of amazing how the ego (and more specifically the parasite) works to direct the mind.

 

The whole point of trader psychology or trader self development is develop a mind that, when exposed to the ambiguity of the markets, can effectively use the system they are trading with. The problem is that most are not emotionally equipped to do so.

 

Rande Howell

[steve46 12]

Clearly I see things from a different perspective than most folks

 

From my point of view, when a person continually fails, it is a signal that there are character issues that must be faced....these character issues are developmental in nature....that is to say...the person is generally "stuck" in the adolescent or infantile stages of development. In either case they tend to display specific behaviors that don't lend themselves to success in the adult world....

 

These behaviors include inability to take responsibility for their actions, inability to tolerate delay of gratification, and a need to be "taken care of", which presents as continual complaints that no matter what others do to try to help, for some reason IT IS NEVER ENOUGH.....

 

Most of my "process" isn't about trading per se....learning how to trade is actually pretty straightforward (I can show someone how to do it in about 3 months time)....what I see as the primary obstacle is the developmental delay and the attendant character issues that show themselves when the student encounters ANY problem, ANY delay of gratification, or has to take the initiative to do something on their own...finally the issue of risk is also paramount...people with adolescent or childlike personalities cannot tolerate risk, and that shows itself in the inability to hold a position long enough to make a profit (as just one example)....

 

I think it is no surprise that so many try to learn this profession, and fail...

 

Best of luck to all

 

Steve

[DbPhoenix 42]

Traders lose due to, as Steve46 suggests, arrested development. They also lose due to laziness. Either or both of these may be ameliorated through therapy. Or a swift kick in the pants.

 

But they also lose due to stupidity, and therapy can't fix this. As an old Southern saying puts it, beauty may be skin deep, but stupid goes right to the bone.

[Rande Howell 10]

Adaptation is very different than character. Many people I've worked with have created strong career and business success before they got into trading. Clearly they have demostrated discipline, courage, and clear thinking in those domains. The problem lies (as I see it) in the generalization of those skills into trading and their application for trading.

 

Overcoming years of training to create a sense of urgency and to act is a shock to the mind that has been organized around success in other domains. That kind of mind simply does not work well in trading. Particularly responses to fear. It takes re-training.

 

Most bring their "stuff" into trading (arrested development) and this needs to be healed and transformed into new, higher functioning adapatations. I just don't see much character flaws. I so see alot of ignorance though -- believing that trading can be learned without examining the beliefs the trader holds about their capacity to manage uncertainty. I also hold that we "see" what we project upon the world. We never see the "world as it really is"

 

Trading and self development for trading should be taught alongside each other. Much less suffering would occur if trainer acknowledged that the mind needs to be developed to produce the competency of trading as a career. But it is real easy to blame the student than to see a flaw in the way trading is taught.

 

Rande Howell

[jwdodge01 10]

I spent almost 10 years trasitioning from a successful business career to consistency as a trader. That makes me look slow, but it was the most difficult thing I have every accomplished in my life. I spent the early years looking for the "Holy Grail" in seminars and internet opportunities. That what newbs do, right?

 

Finally after attending a Mark Douglas workship, my transition took 3 years of daily focus, studying Mark's books and making trade after trade, reviewing my actions until I fully comprehended the concept of probabilities, randomness and ubderstanding what Rande calls "mindfullness". I still track my actions and system probablities on a daily basis. I never question doing it, it is part of my business plan.

 

The most frustrating thing I see these days, is the multitude of so called training webinars touting shortcuts to success and people making 10lot (or more) trades with demo accounts. They give new and struggling traders the impression they can BUY the understanding and experience they need to be consistent.

 

If we really want to help new and aspiring traders, we need to help them understand there is no shortcut to consistency. They need a good understanding of their "mindfullness", an edge, and the where-with-all to get the experience they need to understand the only thing they can control is their own action.

 

Like I said at the start of this post, it took me about 10 years, after having a very successful career in the corp world. I may be slow, but that's what it took me to make the journey.

[Rande Howell 10]

I spent almost 10 years trasitioning from a successful business career to consistency as a trader. That makes me look slow, but it was the most difficult thing I have every accomplished in my life. I spent the early years looking for the "Holy Grail" in seminars and internet opportunities. That what newbs do, right?

 

Finally after attending a Mark Douglas workship, my transition took 3 years of daily focus, studying Mark's books and making trade after trade, reviewing my actions until I fully comprehended the concept of probabilities, randomness and ubderstanding what Rande calls "mindfullness". I still track my actions and system probablities on a daily basis. I never question doing it, it is part of my business plan.

 

The most frustrating thing I see these days, is the multitude of so called training webinars touting shortcuts to success and people making 10lot (or more) trades with demo accounts. They give new and struggling traders the impression they can BUY the understanding and experience they need to be consistent.

 

If we really want to help new and aspiring traders, we need to help them understand there is no shortcut to consistency. They need a good understanding of their "mindfullness", an edge, and the where-with-all to get the experience they need to understand the only thing they can control is their own action.

 

Like I said at the start of this post, it took me about 10 years, after having a very successful career in the corp world. I may be slow, but that's what it took me to make the journey.

 

Thank you for your candor. The length of time you invested in getting the elements of success functioning in your trading is about right. It takes about that long for people to work through the blue sky and get to the business of training a mind to work in probabilties rather than certainties. There are very serious industry breakdowns in the way aspiring traders are taught that create enormous damage to people and to the future of this industry. You are right, crazy stuff is taught to people who, in their ignorance, blow up significant capital.

 

You are right, there is no shortcut. Yet, if the transition to a 2nd career is taught from another perspective, there would be less bloodshed and more survivers. A new possibility is rising where career self development is taught right along side the trader training. The trader is brought along as a whole rather the piece meal way it is taught now. This is an approach that is being explored by a number of trader trainers and me.

 

The major point is that the trader has to learn that their notion of work and success training have to be adapted from the model that brought them success BEFORE trading is re-learned so that new notions of work and success can be applied to the mind that trades. In the coming months, several training programs using this model will be coming out.

 

Thank you jwdodge01 for your real life example. Trading does require a very different kind of business plan than folks are used to coming from other disciplines.

 

Rande Howell

[SIUYA 11]

Rande - it will be interesting to see what you come up with....

 

While everyone touches on it - you need a plan, you need self responsibility, you need discipline, you need to understand probabilities (All of which i agree with as DBP , you and Steve say and think most people dont do these anyways ).....there are two related things that i think everyone misses that go with these important building blocks....in order to do them proper justice.

 

These simple things are.....

1...your previous success was probably not as a result of the traits you think you have of self discipline, responsibility and planning etc;....trading will reveal this and reveal your true strengths and weaknesses - and you will probably not recognize yourself. Get used to it as it is unlikely to be pretty. Then you can either live in denial or not. This belief that you as an individual controlled everything and made things happen because of who you think you are....probably not. (For all those success stories and BS of just work hard, be focused, never take no for an answer....well there are plenty of failures who followed the same ideas and had the same traits.)

 

2....(IMHO this is the most important for trading)-- control. The acceptance that you really have very little control over what happens. You think you can control the entry and exits (and this is debatable), but that is about it. The market does what it wants with or without you.

 

Rande, you mention one them with the idea that the mind you bring to trading is not the ideal traders mind....but I am thinking its not then about mental development, self development etc; but more a simple acceptance that - we have little control over things.

Maybe traders need to revert rather than grow.....or this has more to do with Zdos thoughts on flow....creativity and letting go of control.

.........

..........

Now many might disagree with this and of course its all up for discussion and maybe i am not explaining myself well, or maybe this germ of an idea that has been brewing in my mind will be washed away by the sands of time....but i will give a few examples of what i am trying to explain in a question type format and to see if people relate or dont relate.....

 

Q: why is it that we are desperate to get into a trade and once in we are desperate to get out?

Q: why is it we think that once in the markets the markets will respond to our wills, plans, hopes and what if scenarios?

Q: why is it people move stops around and second guess their original trades (based on plans and tests and reviews) when the market does not care about their individual trade, strategy, circumstances, hopes, stops or take profits.

Q: why is it people think the market will bounce off a level but then worry that it wont once they have a trade on?

 

The list can go on.....

 

A lot of this it this seems hard wired into our brains - our idea of control. We think we control our environment. e think we can control many things....but in the market we dont.....

no matter how good the plan, the sales pitch, the training, the review, the manufacturing process, the customer base, the mentoring process.....what ever process we have to build success in trading or elsewhere.....

once you have a trade in the market you have to completely surrender to the market.

 

Yes, you can monitor it, review it, move stops based on the plan and testing, exit, re-enter.....but these dont give you control over the market. They only control your individual trade risk in the market.

IMHO this goes deeper than just accepting uncertainties in an uncertain world or market.

 

Maybe just maybe, those traders who do the planning, take responsibility and review etc, if they are not doing it with a mindset that is based on this acceptance, then they are doing it from a mindset that all this planning will let them be in control --- and this is when the self sabotage occurs.

They think that after all their hard work they are in control when in fact they have not really accepted they are not.

[DbPhoenix 42]

Exceptional post, Siuya. You hit the nail on the head (tip of the hat to Maslow).

 

The class of '09 is considerably different from the class of '03 and even more so from the class of '98. The last was all about momentum, but this group is all about engineers and mathematicians and statisticians and algorithms and, even more than ever, indicators. They appear to believe that the market is not only something to be wrestled to the ground but something that can be wrestled to the ground. And pinned there. Until it submits.

 

Livermore encapsulated it a hundred years ago:

Rarely do any of us grow up learning how to operate in an arena that allows for complete

freedom of creative expression, with no external structure to restrict it in any way. In the trading environment, you will have to make up your own rules and then have the discipline to abide by them.

 

The problem is, price movement is fluid, always in motion, quite unlike the highly structured events that most of us are accustomed to. In the market environment, the decisions that confront you are as endless as the price movements you intend to take advantage of. You don't just have to decide to participate, you also have to decide when to enter, how long to stay in, and under what conditions to get out.

 

There is no beginning, middle, or end - only what you create in your own mind.

[jwdodge01 10]

Thank you for your candor. The length of time you invested in getting the elements of success functioning in your trading is about right. It takes about that long for people to work through the blue sky and get to the business of training a mind to work in probabilties rather than certainties. There are very serious industry breakdowns in the way aspiring traders are taught that create enormous damage to people and to the future of this industry. You are right, crazy stuff is taught to people who, in their ignorance, blow up significant capital.

 

You are right, there is no shortcut. Yet, if the transition to a 2nd career is taught from another perspective, there would be less bloodshed and more survivers. A new possibility is rising where career self development is taught right along side the trader training. The trader is brought along as a whole rather the piece meal way it is taught now. This is an approach that is being explored by a number of trader trainers and me.

 

The major point is that the trader has to learn that their notion of work and success training have to be adapted from the model that brought them success BEFORE trading is re-learned so that new notions of work and success can be applied to the mind that trades. In the coming months, several training programs using this model will be coming out.

 

Thank you jwdodge01 for your real life example. Trading does require a very different kind of business plan than folks are used to coming from other disciplines.

 

Rande Howell

I agree that a person must develop a new model of self, work and success when making the transition to trading and that their training should holistic. It will be interesting to see how your cooperative program with trading trainers works.

 

I watch different training techniques from a curiousity position, because I went through many webinars, training programs and methodolgies in my searching years. In that time, I found very little in real training from the "experts".

 

It would be great if, as part of your coop training, you can get students to understand what resources they need AFTER training. They need to understand that they have to do enough live account trading and self assessment to fully understand themselves AND implement the training they received. I am not a trainer and have nothing to sell, but very few of the people that ask me for help, have the commitment, patience and/or funding it takes to succeed after "training".

 

I realize that I may sound negative about the training community, but I have yet to see anyone who is selling training (system and psychology) actually help their students understand the time and effort it takes to become successful. Maybe you can work to change that truth.

 

I propose that there are not many people who can or will persevere after they have blown out their 1st account or go a year or more without consistent income. Maybe that is where the infamous 5% number orginates.

[4EverMaAT 10]

.......

 

Rande, you mention one them with the idea that the mind you bring to trading is not the ideal traders mind....but I am thinking its not then about mental development, self development etc; but more a simple acceptance that - we have little control over things.

Maybe traders need to revert rather than grow.....or this has more to do with Zdos thoughts on flow....creativity and letting go of control.

.........

..........

Now many might disagree with this and of course its all up for discussion and maybe i am not explaining myself well, or maybe this germ of an idea that has been brewing in my mind will be washed away by the sands of time....but i will give a few examples of what i am trying to explain in a question type format and to see if people relate or dont relate.....

 

Q: why is it that we are desperate to get into a trade and once in we are desperate to get out?

Q: why is it we think that once in the markets the markets will respond to our wills, plans, hopes and what if scenarios?

Q: why is it people move stops around and second guess their original trades (based on plans and tests and reviews) when the market does not care about their individual trade, strategy, circumstances, hopes, stops or take profits.

Q: why is it people think the market will bounce off a level but then worry that it wont once they have a trade on?

 

The list can go on.....

 

A lot of this it this seems hard wired into our brains - our idea of control. We think we control our environment. e think we can control many things....but in the market we dont.....

no matter how good the plan, the sales pitch, the training, the review, the manufacturing process, the customer base, the mentoring process.....what ever process we have to build success in trading or elsewhere.....

once you have a trade in the market you have to completely surrender to the market.

 

Yes, you can monitor it, review it, move stops based on the plan and testing, exit, re-enter.....but these dont give you control over the market. They only control your individual trade risk in the market.

IMHO this goes deeper than just accepting uncertainties in an uncertain world or market.

 

Maybe just maybe, those traders who do the planning, take responsibility and review etc, if they are not doing it with a mindset that is based on this acceptance, then they are doing it from a mindset that all this planning will let them be in control --- and this is when the self sabotage occurs.

They think that after all their hard work they are in control when in fact they have not really accepted they are not.

 

Exceptional post, Siuya. You hit the nail on the head (tip of the hat to Maslow).

 

The class of '09 is considerably different from the class of '03 and even more so from the class of '98. The last was all about momentum, but this group is all about engineers and mathematicians and statisticians and algorithms and, even more than ever, indicators. They appear to believe that the market is not only something to be wrestled to the ground but something that can be wrestled to the ground. And pinned there. Until it submits.

.......

 

I also agree. We never think about controlling everything when we drive a car, fly a plane, or ride a boat. We only focus on the 1/2 that we do have control over (avoiding collision, understanding lift, staying afloat, etc). BUT....

 

If you have a fear of heights, no amount of safety records or even personal assurances from the pilot can force you into that aircraft.

If you have a fear of water, no amount of proof of adequate flotation from the captain himself+ safety rafts will get you to go on that boat and sail.

 

If you have a fear of losing money, no amount of proof that a complete [transparent] trading system has the potential to prevent losses and simultaneously increase equity will allow you to fund your trading account, take the risk, and follow through 100% on the system. .

 

The irony of it is that the clients Randy was referring to in the OP were business minded people for the most part who enjoyed success in other business ventures. So one would at least assume that they have some basic understanding about taking risks and that losses may be necessary in order to achieve the larger goal. I think it is a combination of the subtle "get rich quick / mlm" mindset that many new traders or system followers come in with, combined with the masked fear of losing.

 

I think that the article "Trading as a Religion" sums it up nicely:

 

"I have never witnessed another area of human activities which would be inhabited by such an enormous number of superstitious laymen steeped in prejudice. Since they desperately lack knowledge about what they are doing, they tend to stick to whatever seems attractive to them, regardless of how adequate it is. Thus they repeat similar actions once and again, regardless of the result. I know a medium size fund which lost about 50% of its assets this year, and still they confess the same religion: we don’t believe in systematic trading, only human eye can spot the chance, etc., etc. However this religious approach can be very beneficial for a smart trader who understands the behaviour of certain groups of market participants and is able to exploit them."

 

It's good to see that we are acknowledging this problem and (hopefully) taking concrete steps to overcome it. I've always recommended practicing "The Four Agreements" to at least begin the process of seeing things (including the market) for as they really are, and not necessarily force our opinion on it. Too bad fear seems to grip people in very powerful ways, but the unlearning process always starts with "what do you really want"?

[DbPhoenix 42]

I also agree. We never think about controlling everything when we drive a car, fly a plane, or ride a boat. We only focus on the 1/2 that we do have control over (avoiding collision, understanding lift, staying afloat, etc). BUT....

 

If you have a fear of heights, no amount of safety records or even personal assurances from the pilot can force you into that aircraft.

 

If you have a fear of water, no amount of proof of adequate flotation from the captain himself+ safety rafts will get you to go on that boat and sail.

 

If you have a fear of losing money, no amount of proof that a complete [transparent] trading system has the potential to prevent losses and simultaneously increase equity will allow you to fund your trading account, take the risk, and follow through 100% on the system.

 

I'm not sure you understand what I'm saying, so you appear to be agreeing with the wrong thing.

 

I don't know that I really want to get into this here, but, for the moment, I'll say this much. While you acknowledge fear, you also circumvent it, just as nearly everyone else does, including psychologists, and begin talking about risk (not unlike those who pooh-pooh simtrading because there's no "risk"). But it's not about risk; it's about fear. And the fear stems from a thorough lack of knowledge of what motivates price movement. Since the failing trader has no understanding of this (and, often, the individual who's trying to help him), he is forever seeking someone to follow, some method to use, some indicator to plot, even to the extent of using some mechanical and/or automated system. But, again, all this does is circumvent the central problem, a brace on a broken leg, morphine against the cancer. This is not unlike the manager who must deal with employees but has absolutely no idea how to do so, believing that taking a workshop or reading The One-Minute Manager will solve his problems. But they don't, because skills are not the problem, any more than "patience" and "discipline" are the central problems for the failing trader.

 

Magee addressed this back in the forties. There may have been others before him, but so little of that survives, it's not always easy to trace these threads. It's tempting to suggest that systems and indicators have only made the problem worse because they hold the promise of enabling the trader to avoid addressing his fears for the foreseeable future. But of course they don't. Fear is far more central, and has been lurking in the shadows for millenia.

 

Your quote about religion is apt, but it somewhat misses the mark. Fearful traders do approach trading in much the same way as the religious approach religion, the latter being motivated by a fear of death. There are rituals to perform, actions to be repeated, truths to be denied. In both cases, we "run" from that which we ought to embrace.

[Rande Howell 10]

This is interesting. First, this article addresses a particular subset of people who come into trading. People who have already experienced success in a past career. That's different from other subsets of people who enter trading with very different "stuff".

 

Also, thought I was answering so that I would have multiple responses to your comments, but they are in your responces. Sorry about that.

 

Rande

 

Rande - it will be interesting to see what you come up with....

 

While everyone touches on it - you need a plan, you need self responsibility, you need discipline, you need to understand probabilities (All of which i agree with as DBP , you and Steve say and think most people dont do these anyways ).....there are two related things that i think everyone misses that go with these important building blocks....in order to do them proper justice.

 

I never said most people don't have a plan for successful trading. The vast majority of people I work with do have plans. They work with trader trainers and have a plan. But they have a plan that they can't seem to execute when they get in the thick of ambiguity of trading. Left brain is generally well prepared. Unfortunately, most traders have been lead to believe that the right brain can be ignored by just leaving your emotions at the door. Which, by the way, is not possible for the vast majority of human beings.

 

These simple things are.....

1...your previous success was probably not as a result of the traits you think you have of self discipline, responsibility and planning etc;....trading will reveal this and reveal your true strengths and weaknesses - and you will probably not recognize yourself. Get used to it as it is unlikely to be pretty. Then you can either live in denial or not. This belief that you as an individual controlled everything and made things happen because of who you think you are....probably not. (For all those success stories and BS of just work hard, be focused, never take no for an answer....well there are plenty of failures who followed the same ideas and had the same traits.)

 

My take on this is different, but similar, to yours. I have found the very success generated in the previous career has been about controlling outcome. All that goal setting and winning at all costs. This is a great way for a wounded Orphan (emotional brain) to feel a sense of mattering and control over what had been out of control in another time of his life. They then assume the same kind of control of outcome mindset that produced success will produce the same in trading. Not so. Can't control outcome. Can't control anything except the way you interact with the uncertainty.

 

2....(IMHO this is the most important for trading)-- control. The acceptance that you really have very little control over what happens. You think you can control the entry and exits (and this is debatable), but that is about it. The market does what it wants with or without you.

 

Bingo. See above.

 

Rande, you mention one them with the idea that the mind you bring to trading is not the ideal traders mind....but I am thinking its not then about mental development, self development etc; but more a simple acceptance that - we have little control over things.

Maybe traders need to revert rather than grow.....or this has more to do with Zdos thoughts on flow....creativity and letting go of control.

 

I would actually argue that recognizing how little control we have over external reality is a great leap forward in finding a peace beyond all understanding and growth as a human being. The futility of trying to control outcome out of your fears and self limiting beliefs becomes really apparent in trading. Coming to separate performance from being is at the core of a new radical acceptance of self. Most of the men I work with are still trying to prove their value and worth in their trading to someone already dead. As long they are tied to this cross, they will suffer. Freeing themselves from this attachment leads to a very new life.

.........

..........

Now many might disagree with this and of course its all up for discussion and maybe i am not explaining myself well, or maybe this germ of an idea that has been brewing in my mind will be washed away by the sands of time....but i will give a few examples of what i am trying to explain in a question type format and to see if people relate or dont relate.....

 

Q: why is it that we are desperate to get into a trade and once in we are desperate to get out?

Q: why is it we think that once in the markets the markets will respond to our wills, plans, hopes and what if scenarios?

Q: why is it people move stops around and second guess their original trades (based on plans and tests and reviews) when the market does not care about their individual trade, strategy, circumstances, hopes, stops or take profits.

Q: why is it people think the market will bounce off a level but then worry that it wont once they have a trade on?

 

Because the trader didn't bring the emotional brain into the equation of trading where our deepest beliefs about the self are held.

 

The list can go on.....

 

A lot of this it this seems hard wired into our brains - our idea of control. We think we control our environment. e think we can control many things....but in the market we dont.....

no matter how good the plan, the sales pitch, the training, the review, the manufacturing process, the customer base, the mentoring process.....what ever process we have to build success in trading or elsewhere.....

once you have a trade in the market you have to completely surrender to the market.

 

Yes, you can monitor it, review it, move stops based on the plan and testing, exit, re-enter.....but these dont give you control over the market. They only control your individual trade risk in the market.

IMHO this goes deeper than just accepting uncertainties in an uncertain world or market.

 

Maybe just maybe, those traders who do the planning, take responsibility and review etc, if they are not doing it with a mindset that is based on this acceptance, then they are doing it from a mindset that all this planning will let them be in control --- and this is when the self sabotage occurs.

They think that after all their hard work they are in control when in fact they have not really accepted they are not.

[SIUYA 11]

Hi Rande,

gotcha, thanks.

 

Re Plan....

I agree in order for this issue to be nutted out we have to assume the traders talked about, do have a plan, do have some form of discipline and self control, they have tested it etc....In other words, they have the building blocks and have done the hard work.

 

Re Previous success...

Agree - many people have found success in other fields and this success is usually not as a result of the reasons they assign to it. Often people attribute success to hard work, focus, discipline etc; when it fact it might be a lucky break (one is all it needs in some businesses as luck gets smoothed out in trading), a good network of people, others in an organisation, good sales technique (you cant wine and dine a market)

Also - the same approach to these reasons for success might not translate well into trading if they are applied incorrectly. eg; is persistence a fine line between stubbornness or perseverance....you get the general drift.

 

and yes - previously for them its all about controlling outcome - perfectly said.

 

In the case of trading the distinction probably needs to be emphasized that

-they have no control over the outcome of the market,

-the only thing they have any control over is their individual trade plan, and

-the control over how they manage a position.

 

(I guess I shy away from the proving of value to someone else and the associated issues. For me its simpler - the market dont care....period --- ) I also guess that while many do suffer the cross, I wonder if this complicates it further than the simpler version....

 

If someone does not have this cross to bear BUT they still cant accept the lack of control over the outcome then they will have the same issues.

 

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

 

So does this then not raise two different separate (they may or may not be related) possibilities for why a trader who has done the hard work might be failing?....

 

1...fear - emotional overrides circumnavigating the plan and hard work

2..proving value of worth.

or can these be lumped together in the respect that they have not accepted that they cant control things - either because they feel the need to overcome the fears first, or to prove worth, as opposed to accepting s..t happens.

(I am with DbP in this regard, you must also have a reason/rationale/philosophy for how the market moves, but the danger in this is you might be proved wrong exacerbating the issues - i guess testing will show this, but as my take is more control related then this point may not be so relevant.)

 

and is maybe the solution for some of these folks simply to stop trading particularly if other aspects of their lives are in good shape.

Edited April 10, 2013 by SIUYA

[DbPhoenix 42]

So does this then not raise two different separate (they may or may not be related) possibilities for why a trader who has done the hard work might be failing?....

 

1...fear - emotional overrides circumnavigating the plan and hard work

2..proving value of worth.

or can these be lumped together in the respect that they have not accepted that they cant control things - either because they feel the need to overcome the fears first, or to prove worth, as opposed to accepting s..t happens.

(I am with DbP in this regard, you must also have a reason/rationale/philosophy for how the market moves, but the danger in this is you might be proved wrong exacerbating the issues - i guess testing will show this, but as my take is more control related then this point may not be so relevant.)

 

I appreciate your being "with me", but I'm not sure you appreciate just what it is you're with. You may change your mind.

 

If by "proving value of worth" you're referring to self-worth, you have a point. Many people enter trading because they want to demonstrate what winners they are, while many people enter trading because they want to demonstrate that they are not losers. All sorts of dynamics to play with there. But the central fear issue remains, and one cannot overcome it or control it unless and until he acknowledges the fact that it exists. Addressing this can open up a Pandora's Box, a state in which counselors, psychologists, and psychiatrists can do some observable good.

 

As for testing, not so much. More observation. Just as failing traders tend to be obsessed with Where Do I Enter and Where Do I Exit rather than What Are Traders Doing And Why. Few traders have any interest in delving into all this, of course, which is why so few succeed. As someone once said (I can look it up if anybody cares), if you want enlightenment, you can sit in a cave with a Tibetan monk for a year, or you can daytrade the ES.

[SIUYA 11]

I appreciate your being "with me", but I'm not sure you appreciate just what it is you're with. You may change your mind.

 

i change my mind all the time... and i dont really get what this means.....

am i not appreciating it as in not giving it enough worth/value or simply not getting it?

maybe i am with you on some but not other things.

 

If by "proving value of worth" you're referring to self-worth, you have a point. Many people enter trading because they want to demonstrate what winners they are, while many people enter trading because they want to demonstrate that they are not losers. All sorts of dynamics to play with there. But the central fear issue remains, and one cannot overcome it or control it unless and until he acknowledges the fact that it exists. Addressing this can open up a Pandora's Box, a state in which counselors, psychologists, and psychiatrists can do some observable good.

 

As for testing, not so much. More observation. Just as failing traders tend to be obsessed with Where Do I Enter and Where Do I Exit rather than What Are Traders Doing And Why. Few traders have any interest in delving into all this, of course, which is why so few succeed. As someone once said (I can look it up if anybody cares), if you want enlightenment, you can sit in a cave with a Tibetan monk for a year, or you can daytrade the ES.

 

Its partially a chicken and egg thing - which affects us more - our fears and self worth values (brought up more by Rande - i dont think too much about this) etc, or our desire for control (my puppy)(based maybe on a fear).

if we are all fear based then why do people seek enlightenment? - because they fear their thoughts or they want to control them?

 

I just see it all differently - and dont think everything is fear based, but control based, (chicken or egg, and this thought process works for me)

 

Turning this to trading....until people can accept that they cannot control the market - despite all the other fears, despite all their issues of self worth, despite their meddling - which the market does not know or care about.

Sitting in a cave might give you enlightenment but it still wont convince you that you have no control over the markets, trading the ES might give you enlightment but only if you accept the market will do its own thing regardless of your meddling, regardless of all the planning, the training, the thought, the fears you have.

 

Its a bit like the weather - we can analyse it, forecast it, review it, but we cant do much about it - 99.9% of us accept this - yet 95% of us dont seem to fail at coping with it.

 

Imagine a world like that. we would all be taking our tops of when it is raining in the expectation that by doing so we would bring out the sun - good for some

[DbPhoenix 42]

if we are all fear based then why do people seek enlightenment? - because they fear their thoughts or they want to control them?

 

They generally seek "enlightenment" because they get tired of losing money. Or they've gone broke. But the enlightenment generally takes the form of looking for another indicator, another system, another algorithm, another someone to follow.

 

Turning this to trading....until people can accept that they cannot control the market - despite all the other fears, despite all their issues of self worth, despite their meddling - which the market does not know or care about.

 

Sitting in a cave might give you enlightenment but it still wont convince you that you have no control over the markets, trading the ES might give you enlightment but only if you accept the market will do its own thing regardless of your meddling, regardless of all the planning, the training, the thought, the fears you have.

 

I agree that the only control that the trader has is over himself, but, even if he recognizes that, then what? He still has to come up with some system/method/approach to the market, and if he has yet to address his fear, which will now be more likely to become dominant now that he is "naked", then he will continue to fail.

 

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

[johnw 10]

This is a very interesting thread and I suppose that like all threads of this subjective nature it tends to draw Posters deeper and deeper into the subject and in doing so the subject responds with the appearance of being a bottom less pit.

 

But what if The Failure of Traders (who bring apparent success from previous business ventures) is not complicated at all.

 

What if left brain versus right brain is not an issue.

What if childhood issues are not an issue

What if Alpha behaviour is not an issue

What if control is not an issue

What if self worth is not an issue

What if, what if, what if ......

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

"That men do not learn very much from the lessons of history is the most important of all the lessons of history."

Aldous Huxley

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

What if the only thing we need is acceptance .... if we accept that price does what it does and in doing so, it leaves footprints that an open mind can observe and therefore use as the basis of a plan ... then what more do we need ... we have no need of fear because there is no real danger.

We enter a trade when the market offers us a portal and if price does not take off we scratch the trade, maybe for a tic or two in profit and we wait for the next portal ... maybe it is for the same price wave or maybe it is for a different wave.

 

All we need to do, is observe and learn from price as DB has clearly pointed out.

When we accept this, everything else will begin to take shape...

Do not complicate matters by thinking ... just observe and everything will fall into place since you will be employing all your being, not just a very small (overloaded) corner of your brain.

 

Try to remember that focus is not your best friend ... just accept ... you cannot focus on acceptance

[DbPhoenix 42]

What if the only thing we need is acceptance .... if we accept that price does what it does and in doing so, it leaves footprints that an open mind can observe and therefore use as the basis of a plan ... then what more do we need ... we have no need of fear because there is no real danger.

 

We enter a trade when the market offers us a portal and if price does not take off we scratch the trade, maybe for a tic or two in profit and we wait for the next portal ... maybe it is for the same price wave or maybe it is for a different wave.

 

Unfortunately, John, this structure too often implodes with the first loss unless one has comes to terms with the fear of loss (which needn't be a fear of loss per se). Once this happens, the trader can too often be subjected to a virtual cascade of negative emotions and the negative self-talk that goes with it.

 

Those who have dealt with all this and come out the other side often think that conquering it is much easier than it really is. But it's anything but easy. Or simple, given the synaptic tangle we've developed by the time we begin trading.

[steve46 12]

First of all,

 

We aren't all "fear based"....our basic orientation to the world is either curiosity or what I would term "anxious observation"....this has to do with how our parents (mostly our mothers) provide parenting....To put it in simple terms. If a mother lets a child explore, move away from her periodically, and then come back....it assures the infant that their world is stable, non threatening and is going to be there when needed (as they return to the mothers arms)....if however the mother is fearful, anxious, and controlling (as some mothers tend to be with their infants) then the infant picks up on that, and stays close to the mother, or becomes fearful when the mother is out of the line of sight....

 

Another good example is shown in the way that infants receive food or physical care (warmth, love, nurturing, however you understand that)....if an infant child is deprived or has to sustain delay (notably extended delays) in receiving food, and other essentials of life, that infant grows up knowing anxiety associated with the delay of gratification and transfers that anxiety to other areas of life....they will generally have problems doing anything that requires them to work without near immediate positive feedback.....think about what trading requires in terms of background work and research....

 

Again for better or worse this all happens in the first few years of our lives and the legacy we carry with us from that time forward is based primarily on that experience...that is why when I anticipate teaching a class most of what I do is screening out the infantile personalities, WHY because the odds are that even if I do a great job of transmitting the information, they will still find it difficult, perhaps impossible to A) obtain a complete understanding of the method and B) have the fortitude to execute and then control their emotions long enough to receive gratification (a significant winning trade)....

 

I wish I could do more than just weed out the "adult children but that's what works....

 

Best Regards

Steve

[johnw 10]

Unfortunately, John, this structure too often implodes with the first loss unless one has comes to terms with the fear of loss (which needn't be a fear of loss per se). Once this happens, the trader can too often be subjected to a virtual cascade of negative emotions and the negative self-talk that goes with it.

 

Those who have dealt with all this and come out the other side often think that conquering it is much easier than it really is. But it's anything but easy. Or simple, given the synaptic tangle we've developed by the time we begin trading.

 

I am of the opinion that we don't try to conquer fear ..we simply let it go .. and that I believe comes from acceptance.

 

Anyone who continually buckles under the first bad trade or two should take that as a sign that they do not have a clue what they are doing.

This is a good sign as it is just the early part of the creative process ... if however this state of a fearful mind drags on and on, then obviously the Person has not accepted their situation and as such has no chance what so ever of accepting price and becoming a Trader.

[DbPhoenix 42]

First of all,

 

We aren't all "fear based"....our basic orientation to the world is either curiosity or what I would term "anxious observation"....this has to do with how our parents (mostly our mothers) provide parenting....To put it in simple terms. If a mother lets a child explore, move away from her periodically, and then come back....it assures the infant that their world is stable, non threatening and is going to be there when needed (as they return to the mothers arms)....if however the mother is fearful, anxious, and controlling (as some mothers tend to be with their infants) then the infant picks up on that, and stays close to the mother, or becomes fearful when the mother is out of the line of sight....

 

Another good example is shown in the way that infants receive food or physical care (warmth, love, nurturing, however you understand that)....if an infant child is deprived or has to sustain delay (notably extended delays) in receiving food, and other essentials of life, that infant grows up knowing anxiety associated with the delay of gratification and transfers that anxiety to other areas of life....they will generally have problems doing anything that requires them to work without near immediate positive feedback.....think about what trading requires in terms of background work and research....

 

Again for better or worse this all happens in the first few years of our lives and the legacy we carry with us from that time forward is based primarily on that experience...that is why when I anticipate teaching a class most of what I do is screening out the infantile personalities, WHY because the odds are that even if I do a great job of transmitting the information, they will still find it difficult, perhaps impossible to A) obtain a complete understanding of the method and B) have the fortitude to execute and then control their emotions long enough to receive gratification (a significant winning trade)....

 

I wish I could do more than just weed out the "adult children but that's what works....

 

Best Regards

Steve

 

A timely post, given where the content has been going. And you're right. We are not all "fear-based". My views on fear and trading have only to do with that. Those who for one reason or another do not carry this baggage into their trading (most likely for the reasons you've listed) will be most able to "accept" -- to use John's terms -- the market and the trading situation as it is. Those who fail, however, at least in my experience (since '98, online at least), can't handle the failure, and whatever they do often only makes the situation worse, like trying to rescue a falling tray of glasses from one's fumbling.

 

Steve also provides a good example of the kind of "method" that a trader with fear issues is more likely to be able to handle: relatively simple, straight-forward, easy-to-understand, free of mumbo-jumbo. It isn't what I do, but it has a surprisingly similar thrust.

[DbPhoenix 42]

I am of the opinion that we don't try to conquer fear ..we simply let it go .. and that I believe comes from acceptance.

 

I don't recall having said "conquer". That's not possible. And any effort to do so just sets up an internal conflict that may become intolerable (which takes us into the "discipline" thing again, but please let's not go there). But "letting it go" is a process, sometimes brief, sometimes extended, not just a foregone conclusion once the decision to let it go has been made.

 

I have a Zen thread in the Wycoff Forum for good reason . Though whether or not anyone has ever benefited from it is another matter.

[johnw 10]

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

I have a Zen thread in the Wycoff Forum for good reason . Though whether or not anyone has ever benefited from it is another matter.

 

I have just scanned your 33 lessons in 'Zen and the art of poker'

I deliberately only read the core of each lesson and all I saw was 'acceptance'

Now you may have another name that you prefer, but to me Zen is 'acceptance'

in that you accept what is (the reality) and use it to your advantage.

 

To me also, Trading is the same, exactly the same.