I am not as big of a fan of "Trading Psychology" as most seem to be. If you go to work for a respected hedge fund they dont make you sign forms not to disclose their mental techniques, however they will sue the hell out of you should you talk about their timing models and entry/exit criterias. That said, there is some validity to it, here is a rather wordy post.
The popular idea among traders is that if I can just find the "right" system or pattern I will be profitable. Traders think the market is a battle that pits them against "the market" but in fact nothing could be further from the truth. Like so many things in life, in the market what it really comes down to is you. You are your own opposition.
If you look at the trading landscape there are thousands of ways to make money, maybe more. There are scores fo chart patterns you can use. Simple things like bullflags and bear flags form the basis of much of my trading approach. I have found they have the best Risk/Reward ratio of any pattern when traded correctly. I promise you though, people are going broke using bullflags and bear flags. I also love the "Oops" pattern. Over time I have found it to be my most accurate (highest % of winning trades) pattern, and it also gives out a very nice payout. You know what? People are going broke trading the "oops" setup as well.
Given the above, there are two conclussions you could arrive at. A) Nothing works and I might as well stop trading now, return this book for a refund and get about my life. Those who are successful at this are just lucky, statistics would dictate that some people will make money even if it is only via luck. or B) There is much more to trading than a simple mechanical method or setup. That what seperates the winners from the losers has much less to do with with setups than the losers think it does, and much more to do with "something else".
What is that "something else"? My take on it is that the something else is a mental edge, and that mental edge comes from the difference in the manner a winning trader looks at the market, as opposed to a losing trader. I will use a pretty personell, non trading example here but it has everything in the world to do with trading.
I don't know how many of you get migraine headahces, but those who do know they are not any fun at all. What if you had one all the time, I mean 24/7 and it would not go away. Noting would make it better except for brief periods of time were strong narcotic medicines would give very temporary relief.
Several years ago I go pretty sick with a viral infection. For about 3 1/2 weeks I held a steady temp. between 101 and 105, and also during this time I had a very accute migraine, something like a 22 on the 1 to 10 pain scale. Eventually the fever and virus cleared up but the migraine did not. The theory being that because of the intense pain and high fever my pain receptors turned "on" and did not turn "off". So the end result of this is that every minute of every day I have a migraine. If I stop to think about the pain level, its at a pretty steady 6 unless I get a flair up.
I have been to most of the prominant (and some not so prominant) headache/pain doctors and clinics in the country. For the most part, after many tests they all come to the same conclussion which is, "Gee, it really sucks to be you" They can do some tests to figure that Im in pain, but they can not find anything medically to treat it.
For some time the only relief I got was from Morphine or Demerol IM or IV injections at the doctor. I was doing this fairly often because it was the only time I was not miserable. For some time the pain got to the point were I did not get out of bed at all unless it was to go to the doctor. I was in bed, in a dark room almost all day for about 9 months and was suicidal because of the pain.
If you were to talk to me about anything, it would only be my pain. That had become the central focus of my life. How bad it is, how bad I feel, and God damn it how bad you should feel for me. During this time I am continuing traditional medical treatment, trying to find the magic combo of medicines or whatever. Nothing was coming of it.
Finally I ended up at the Pain Managment Clinic run by the Mayo Clinic. It is a very intense 1 month program for people who are basiclly at the end of their rope. By the time you get there, it has been established that you are in a heck of a lot of pain, and that nothing medical science has to offer is going to work for you. By that time all the Biofeedback, Narcotics, Surgeries, Physical Theorpy, Dietary changes, Acupunture etc had been tried and failed. (Bullflags, Bearflags, Penenets, Triangles, Oops, Black Box Systems)
I of course went into the program hoping that they had the magic bullet. Some pill I could take, or surgery or anything they could come up with at all to make the pain go away. When I got there, I expected to find the very best Neurologists and Anestesiologists in the world. I was in for a big shock when I found that there was one staff physician ( a psyciatrist) and a resident, along with numerous clinical psychologists and nurses. But, there was not a single "Real" pain doctor.
When I got there I sat down with the Medical Director of the program, and the psychologist who had been assigned to me. We talked for a few hours about my headaches. What makes them better, what makes them worse. Do I notice any signals before they really flare up.Anything that can lead to a flare up? For me its certain smells, or not exercising enough, or exercising too much. Getting too much or not enough sleep (mostly too much), not eating enough and once I have them any sound or light is just horrible. So we went through that and I got into the program and met the group of people there.
A pleasant group of people, so they asked me: "How are you doing?". As per my routine I started to talk about how bad my headaches are and Jeez I hope they have the magic bullet here, but they did not let me get any further.
No they said, "HOW ARE YOU?"
So, I stumbled and thought for a bit, but I didn't have much so I went back to the tried and true, my headache. Again I was stopped, this time by a the nurse who ran the group meetings. She said "Brandon, are you simply a walking headache? How are YOU?
