Emotional ruts and what to do about them

Z

zorrotrader

I seem to be stuck in a trading rut - I seem to be a perpetual breakeven trader. I have good days and they are usually followed up with bad days. The good days are not good enough or often enough because far too often I hesitate on my trades (probably fear of failure). There also seems to be a part of me that has become very good at distracting myself from monitoring the market and causing me to miss opportunities. It's like a part of me knows i can't fail if i don't trade.

The bad days are usually a result of impulse trades. They are trades I make - usually breakout trades that fail - that i know i shouldn't make and aren't part of my trading routine but i make them on complete impulse and usually end up with a nasty reversal. It's the seemingly uncontrollable nature of these impulse trades that really seems to damage my psychology and emotions.

For some time I have felt like if I could string together a win streak that the success and confidence boost would do wonders for my trading. But the impulse trades keep derailing the confidence. The dilemma is how to fix what needs fixing.

I have followed many of the discussions on ET about the mental side of trading and trading emotions. I've read Van Tharp and Mark Douglas (several times). I've followed many of the discussion of NLP. In fact I try to use grob's 4 stepper. I have tried to log my thoughts and emotions while i'm trading. I have studied Seykota's process of experiencing feelings. I've read and tried a lot of things and i'm probably more frustrated now than ever. I realize that dealing with (fixing, feeling, experiencing, etc.) my trading emotions seems much more difficult than the mechanics of trading albeit more important. I keep thinking something is going to work but maybe it's not something i can fix on my own.

Here's a practical rubber on asphalt question - how do i break these patterns or loops of what seem to be automatic preprogrammed responses from somewhere inside. There has to be a point in the process of executing an impulse trade or missing a trade do to hesitation that an incorrect thought or belief is acted on automatically. It seems like many of the obvious emotions and feelings that some would say you need to monitor and/or experience occur after I have acted on an ill conceived belief. Is there a way to interrupt the pattern? And if I can break the pattern how do i know what should be there in it's place? It takes more than sheer will power.

Hope that is not too much rambling but writing it out and posting it seems to help organize my thoughts.
 
If your still doing impulse trades then you havent experienced enough pain yet. Its actually quite simple. You will either stop doing impulse trading or be stopped out of the market. I guess the psycho books help some but for hardheaded types (like myself), pain is all they understand.

 
Being a very rash and impulsive guy has gotten me into loads of trouble trading. A stock is exploding...HEY, I want in! Top tick...smoked! I tried some sort of NLP stuff, mostly just meditation, a kind of reprogramming of my instincts. I'm still pretty impulsive in life, but have developed some patience and discipline. Of course being broke for a while will do that too...

:D
 
One of the problems I had was that I would take a signal on a trade before the bar had completed (I consider this an impulse trade). I now wear a stop watch that is in sync with my charts/pc. If It looks like I might get a signal, I will step away from my computer until just about the time the bar has completed (The smallest time frame I trade is 5 minutes).

I came up with this technique after the fed speech 2 weeks ago where I lost 4.5 pts on ES in about 5 min on 2 separate trades. luckily the 3rd trade bailed me out, but I was determined not to let that crap happen again.

Good Luck
 
Quote from zorrotrader:


... It's like a part of me knows i can't fail if i don't trade.
... For some time I have felt like if I could string together a win streak that the success and confidence boost would do wonders for my trading. But the impulse trades keep derailing the confidence. The dilemma is how to fix what needs fixing.

... Is there a way to interrupt the pattern? And if I can break the pattern how do i know what should be there in it's place? It takes more than sheer will power.

Hope that is not too much rambling but writing it out and posting it seems to help organize my thoughts.
More...

there is also fear of success, a guy just told me his short didn't get executed during the 10 points drop, turn out he didn't push the button, may be you didn't identify the real problem yet.
 
with those damn psycological issues also at the moment. When I get through this I'll pass on what gets me back on track if I can get a finger on it.
 
Zorro

Think about 3 things:

- Confidence
- Risk Reward
- Win rate

There's a reflexive relationship between the 1st and latter 2
It may be cliched, but that's reality

i don't know how u trade, whether it's intraday futures or stocks on a longer time frame, but one thing is consistent across all time frames, and that is that if you're risk reward is anything short of 2:1 on your trades, you will always have fear hovering over you and paralyzing you; fear to pull trigger, fear to take a normal, healthy loss, fear to go into drawdown and not be able to dig yourself out, fear of losing in a nutshell; even the best trading strategies with high win rates of 60% and above occasionally allow 3-4 losing trades in a row

we've all heard about risk reward, over and over again but my sense is that it's easy to pay lip service to the concept and much harder to actually implement something that's solid.
Win rate is crucial and you should invest every minute of your time in finding a robust entry method, but at end of day, you HAVE to have a 'I don't care' attitude about a loss, 3-4 consecutive losses and a down day. Sure, it always hurts to take a loss, but you have to be able to pick yourself up after 3 losing trades and take the 4th like nothing happened... tough to do, but absolutely necessary

You probably have thought about this, but I'll just say it anyway: how many consecutive losing trades can you take before you break down emotionally and are inable to trade? As a corollary, do you have a daily stop loss on your account, a max daily drawdown? If you're trading 6-8 times a day, for ex, and have a small capital base, say 25k, and are risking 1% on each trade, that's suicide. To echo what Larry Hite says in Market Wizards, u have to undertrade on each signal, risk 0.25% or less of your capital, is my own rule. So when you get that inevitable streak of losers, you're unfazed, only lost 75bps on your account; and are looking forward to blasting that away in the next trade. You obviously have to be well capitalized for that. Trading is a business

I know many will probably jump in saying that 3:1s or better are hard to find or impossible, especially day trading. Until recently I thought so too, but not anymore... I have seen much better than that, intraday on NQs

If you're looking for a robust entry method with great risk reward, here's my tip for you:

Optimize risk reward; find an entry point with the following characteristics:

- It is specific, mathematically definable, and triggers frequently
- Once it triggers, you are either immediately right or wrong; price should NOT come back to your entry point

In other words, you are looking for an entry where you take minimum heat, never more than 2-3 ticks.
To optimize your risk reward, use entry on a lower time frame and an exit on a higher time frame

Master heat and you will crush your fear

Good Luck
Maverick
 
Quote from Maverick1:

Zorro

Think about 3 things:

- Confidence
- Risk Reward
- Win rate

There's a reflexive relationship between the 1st and latter 2
It may be cliched, but that's reality

i don't know how u trade, whether it's intraday futures or stocks on a longer time frame, but one thing is consistent across all time frames, and that is that if you're risk reward is anything short of 2:1 on your trades, you will always have fear hovering over you and paralyzing you; fear to pull trigger, fear to take a normal, healthy loss, fear to go into drawdown and not be able to dig yourself out, fear of losing in a nutshell; even the best trading strategies with high win rates of 60% and above occasionally allow 3-4 losing trades in a row

we've all heard about risk reward, over and over again but my sense is that it's easy to pay lip service to the concept and much harder to actually implement something that's solid.
Win rate is crucial and you should invest every minute of your time in finding a robust entry method, but at end of day, you HAVE to have a 'I don't care' attitude about a loss, 3-4 consecutive losses and a down day. Sure, it always hurts to take a loss, but you have to be able to pick yourself up after 3 losing trades and take the 4th like nothing happened... tough to do, but absolutely necessary

You probably have thought about this, but I'll just say it anyway: how many consecutive losing trades can you take before you break down emotionally and are inable to trade? As a corollary, do you have a daily stop loss on your account, a max daily drawdown? If you're trading 6-8 times a day, for ex, and have a small capital base, say 25k, and are risking 1% on each trade, that's suicide. To echo what Larry Hite says in Market Wizards, u have to undertrade on each signal, risk 0.25% or less of your capital, is my own rule. So when you get that inevitable streak of losers, you're unfazed, only lost 75bps on your account; and are looking forward to blasting that away in the next trade. You obviously have to be well capitalized for that. Trading is a business

I know many will probably jump in saying that 3:1s or better are hard to find or impossible, especially day trading. Until recently I thought so too, but not anymore... I have seen much better than that, intraday on NQs

If you're looking for a robust entry method with great risk reward, here's my tip for you:

Optimize risk reward; find an entry point with the following characteristics:

- It is specific, mathematically definable, and triggers frequently
- Once it triggers, you are either immediately right or wrong; price should NOT come back to your entry point

In other words, you are looking for an entry where you take minimum heat, never more than 2-3 ticks.
To optimize your risk reward, use entry on a lower time frame and an exit on a higher time frame

Master heat and you will crush your fear

Good Luck
Maverick
More...

good post. Thansk
 
quote from nkhoi:

there is also fear of success, a guy just told me his short didn't get executed during the 10 points drop, turn out he didn't push the button, may be you didn't identify the real problem yet.
More...

Thanks for the comments. I have read comments before about the fear of success. I don't deny that the problem could be fear of success. I have labeled it fear of failure partly based upon experiences in other areas of my life.

I'm certain you have a point that I haven't identified the real problem yet. I would seem that by properly identifying the problem I could come up with a solution. You have given me something to think about.
 
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