The Psychology of Trading

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If you feel so you could talk a bit about money management. I do feel this is also something most traders dont give proper care. And sometimes "the plane crashes"...

Thats true. Our personnel life does indeed affect the way we trade. Sometimes we seem overconfindent and sometimes we feel overscared.

Thats I do truly believe that mechanical trading systems work best in the long run. This is a side of trading Im starting right now exploring: one reason is my typical lack of time, the other is the reason of this topic...

A couple of days ago I drawn in one of your threads an upward channel. This channels are to damn easy to trade. Yestarday before I letf home to my plant I took a look at SP futures. Price line was reaching lower line so I decided to gave an order for a small ammount (10 contracts if I can remember it right): However at lunch time I remember that I did not put a stop loss on that order, so I opened at office my trading platform and feeling not so confident as in the morning...decided to cancel that order, that was set to 1291...

Resuming, I missed the boat and lost easy 14 points...

In my experience,

fear of missing out > fear of losing

fear of missing out --> takes bad trades/chase --> lose

losing --> increases fear of losing

good trade opportunity comes in --> fear of losing kicks in --> miss a trade

miss a trade --> fear of missing out --> takes bad trades/chase --> lose

endless cycle

I hadn't joined your group because I'm still trying to learn 'options' and haven't even thought about 'futures'. This thread I can relate to.

I am surprised that all of us have the same feelings because I am new and you guys have so much experience. I do know that we have to leave emotions out of our trades and I constantly remind myself of that. Having said that I'm holding MU short and losing big time but today I put a stop on it 3 times. Then I deleted all 3 right after I entered each trade and I sit here watching it. I finally set the stop at the opening price and I will not remove it but if I had just put a stop on it when I purchased the original it would have saved me a lot of money. My brain kept telling me it could not continue the uptrend.

Quote:

Originally Posted by IchibomB 

Same here JLC. So what we want to do is try to remain in the middle of the two emotions. 

It's hard to do. I'm finding myself fairly balanced in my entries. Exits are what's getting me now. 

Yep. Exits have always been the greatest challenge for me. As long as I get my R:R I'm happy but a lot of times I see that I exit too soon and next trade I'll try to hold longer but ended up giving it all back. Need to strive for that balance like you said!

Quote:

Originally Posted by JLC 

Yep. Exits have always been the greatest challenge for me. As long as I get my R:R I'm happy but a lot of times I see that I exit too soon and next trade I'll try to hold longer but ended up giving it all back. Need to strive for that balance like you said!

JLC, you were one of the first on this site to help me and I want to say thanks again. Look at my 'Group' cause your help to me is noted.

Wooo, I love threads like this.

Still have trouble pulling trigger at times. Working on it. xD

Quote:

Originally Posted by IchibomB 

For the time being, I've nailed my trade down to two different types. 
I'm focusing on just 1. I keep hitting it over and over and over, every time I see it

It's worked well up to today. I had not lost 3 trades in a row in 4 months.

So I lost 3 trades but I got another trigger to go long oil. I took it without too much

hesitation. There was still some but I figured just take it. If I lose I lose and I'll be down only

$300 more. Not a big deal because my risk is very strict. I don't let losers run ever! At least not now.

I most certainly did quite a few times in the past. 

 

My winner ended up running over 100 ticks. I took 78 ticks out of it and almost broke even on the day.

Because I have my performance tracked and my risk set, I had the confidence to take that 4th trade.

 

cliffs: track your performance of every trade, every trade type, etc. Stats are everything!

A lot of good advice in this thread Ichi. Thanks for sharing. 

Quote:

Originally Posted by IchibomB 

Same here JLC. So what we want to do is try to remain in the middle of the two emotions. 

It's hard to do. I'm finding myself fairly balanced in my entries. Exits are what's getting me now. 

Exits continue to plague me haha.  I just haven't been able to show the patience needed in a lot of cases.  I'm typically out at the first hint of resistance out of fear of losing profit. I'm not using positions large enough to have scaling make sense.

I said this in your journal, but it's really important for people to focus on trading to make sound trades instead of focusing on the money factor.  If money's the predominant factor then more than likely you are over-leveraged, using money you shouldn't be floating in the market, or irrationally greedy.  The other possibility (as I also discussed in your journal) is your relationship to money over the years .......... i.e. did you grow up with a lot of it?  Have you made a lot of it in your lifetime?  Those affect your mental edge in how you approach your trades.  

Trading can be like any other behavior though ...... you do it enough over prolonged periods of time it stands great chance of becoming second nature.  So that's why it's important to conduct quality trades and risk management instead of focusing on potential money won/lost.  I've had to re-focus myself plenty of times in regards to this.

Quote:

Originally Posted by JLC 

Yep. Exits have always been the greatest challenge for me. As long as I get my R:R I'm happy but a lot of times I see that I exit too soon and next trade I'll try to hold longer but ended up giving it all back. Need to strive for that balance like you said!

That's another thing that gets so many people in trouble .....  and it's called TRADE POLLUTING.

A person cannot let any other trades influence their current one.  Doesn't matter how much the last one lost them or how much they left on the table with one.  Got to stick to your pre-defined profit and loss stops.  Otherwise you're just trading by the seat of your pants.  

I get so pissed at myself the times I polute my own trades.

lol@how important trading psychology is... Van tharps exercises help me maintain a solid emotional state. Does anyone use them regularly, from the super trader book? I generally use them as punishment for bad trading behavior (defining this is complicated, but I consider it anything that is not robotic or systematic) or improper belief foundations.

I highly recommend them if you haven't looked at them, regardless of skill level. They help get rid of the "self."

Quote:

Originally Posted by IchibomB 

I haven't used them but Van Tharp is a genius so I'm sure they are great exercises. 

Very helpful thread, thanks Ichi... as I just posted in the daily, I've had a string of sour trades, and I've become so paranoid I'm finding it hard to pull the trigger now even though I see a positive setup in my charting.  Missed a trade today that I passed on, 8.25 calls went to over 18.00 eod, and it's killing me that I didn't get in on that... almost feels as bad as actually losing the money!

I think being very strict in my risk management will help, which is something I've not done well in the past.  I need a few winners to restore my faith that I can actually pull a profit out of this market!