Hello p0box4,
Please explain to me what I do not "get" if you have the answer.
I ask you a simple question below.
You still have not provided an answer yet.
https://www.elitetrader.com/et/threads/how-not-to-lose-money.379787/page-3#post-5975519
How not to lose money
- Thread starter Ironplates
- Start date
Please explain to me what I do not "get" if you have the answer.
I ask you a simple question below.
You still have not provided an answer yet.
https://www.elitetrader.com/et/threads/how-not-to-lose-money.379787/page-3#post-5975519
I ALREADY GAVE THE ANSWER BEFORE YOU EVEN ASKED IT.
Thank you @p0box4
First and foremost, don't equate losses to your psychology. You didn't lose because you had a flaky psychology. You lost because you had no plan.
Second, don't always assume losses are bad. The sooner you accept loss as part of trading, better off you will be. That said, not all losses are created equal. There is a correct way to lose as opposed to losing helter skelter. The first is foreseeable, the latter is completely arbitrary.
Hello Ironplates,
SIM trade until you are 1000% certain you can make money and not lose money year to year.
Well...
First understand that from an emotional/psych POV, as soon as we place a trade - or pass on a qualified one - to some extent we've already lost. IMO.
If the trade was profitable, did it keep moving and we didn't catch all the profit? Or had it gone further into profit and we gave some back before exiting? If the trade lost, could we have lost less? If we passed on a trade that would have worked, FOMO. If we passed on a trade that then failed, are we training ourselves to "pick and choose" and not follow our plan?
Because we all have these experiences we develop predictive emotions. They are real and valid. There to keep us safe.
But... we are doing probabilities.
Emotional predictions of individual outcomes don't apply even if they are true.
We have to learn to do simple probabilities without all the drama.
...which said another way is - trading a plan.
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To start with change the seach to the psychology of attaining financial gains.
Or the psychology of dealing with losses while attaining financial gains.
I would say that avoiding losses in almost impossible, you have to have a way to deal with them.
Your credibility as a coach is questionable when you look to avoid losses.
Once and for all, psychology has no correlation with trading results. Zero. It´s another cash grab for the gurus and I wonder why there are still people believing in that BS.
When you are in a position and you are anxious, you have to control breathing or do any other ridiculous coping strategy, your system is shit or you don´t have a system, that´s it.
Think about that. Riding a motorcycle is probably one of the riskiest things you can do as a normal (meaning no top athlete or jet fighter pilot) human being yet people just hop on their bikes and ride to work. They don´t meditate, they don´t talk to their inner child and what not.
And the reason is: They know how to do it, they practised long enough and they know how the bike will react in 99% of circumstances.
Now relate that to trading, how do you ever have issues when you exactly know WHY you make money, HOW your system works and what you can expect from it? A loss is a loss, you know it will happen and you don´t give a fuck because you know 100% you´ll make it back anyways.
People are running into issues when they don´t have that confidence in their system. They lose twice in a row, the third one is a runner and they cut it short because "is it gonna come back and turn into a loss" Each loss is gonna sting since they don´t built their own system, they have no idea why it would actually work and if they ever make money with it. So they cling on to every single trade. And it´s totally understandable and normal.
Would you hop on a thing with two wheels that´s capable of going 200mph without knowing how it´s actually going to do that and if it´s properly maintained??? I wouldn´t.
Now all the "but Tiger Woods also has a performance coach" monkeys crawl out of the woodwork and claim that it is equally important for success and all I have to say here is: If you are successful for years and have issues with scaling, if you lack focus during the session or if you have incredibly successful runs just to lose it all over and over again you might benefit from a coach to get rid of the underlying root cause (e.g. self sabotage).
But if you are a losing/break even trader you have zero benefit from anything remotely psychological. Your only job is to sit down and do the dirty grunt work to convince yourself that what you are doing actually makes sense until you are net positive after 500 trades.
When you are in a position and you are anxious, you have to control breathing or do any other ridiculous coping strategy, your system is shit or you don´t have a system, that´s it.
Think about that. Riding a motorcycle is probably one of the riskiest things you can do as a normal (meaning no top athlete or jet fighter pilot) human being yet people just hop on their bikes and ride to work. They don´t meditate, they don´t talk to their inner child and what not.
And the reason is: They know how to do it, they practised long enough and they know how the bike will react in 99% of circumstances.
Now relate that to trading, how do you ever have issues when you exactly know WHY you make money, HOW your system works and what you can expect from it? A loss is a loss, you know it will happen and you don´t give a fuck because you know 100% you´ll make it back anyways.
People are running into issues when they don´t have that confidence in their system. They lose twice in a row, the third one is a runner and they cut it short because "is it gonna come back and turn into a loss" Each loss is gonna sting since they don´t built their own system, they have no idea why it would actually work and if they ever make money with it. So they cling on to every single trade. And it´s totally understandable and normal.
Would you hop on a thing with two wheels that´s capable of going 200mph without knowing how it´s actually going to do that and if it´s properly maintained??? I wouldn´t.
Now all the "but Tiger Woods also has a performance coach" monkeys crawl out of the woodwork and claim that it is equally important for success and all I have to say here is: If you are successful for years and have issues with scaling, if you lack focus during the session or if you have incredibly successful runs just to lose it all over and over again you might benefit from a coach to get rid of the underlying root cause (e.g. self sabotage).
But if you are a losing/break even trader you have zero benefit from anything remotely psychological. Your only job is to sit down and do the dirty grunt work to convince yourself that what you are doing actually makes sense until you are net positive after 500 trades.
I generally like to watch documentaries and particularly sports documentaries offer interesting parallells with trading as both are performance based activities. The last I recall is the Grand Slam documentary series on Netflix. I was surprised to see how important inner game was in the game of tennis.
You could have players who was on top of the world at the start of a match completely lose their confidence to the point where they could barely hit the ball. You could literally see it in their face. The face of defeat.
The highs and lows of trading can be extreme.
If you're a discretionary trader psychological issues definitely matter. If you're a mechanical/systematic trader it shouldn't.
I'm a semi-discretionary trader meaning I have a base methodology based on statistical data, but ultimately, I decide when and where to place trades. I have tried and keep trying to make it completely mechanical, but it's difficult.
My own issues:
- Impatience and FOMO. Not waiting for the very high probability entries where your loss can be small and the potential gain big. I honestly believe that being very selective can make the difference between a winning and losing trader.
- Trading without an edge. Yes, I believe I have an edge, but there are also times where it's not clear to me where the market is going. Obviously. Yet, I can still place trades during these times. The solution appears simple enough, yet not always easy to implement.
- Greed (typically letting a larger unrealized win go back to even trying to hit a homerun). When I trade well, I will typically take profits at momentum peaks and rather re-enter on pullbacks or around the same spot if it seems no PB is happening.
- Over-confidence (typically comes after a good period where I start thinking trading is easy). This leads to both excessive risk taking and sloppy entries.
- Lack of focus and burnout. Trading is a performance based activity and if you're discretionary you can't sustain top performance infinitely. If you have other stuff in your life going on it will obviously affect you. The solution seems simple enough. Don't trade if you don't feel you're on top of your game. Of course, the urge to trade can overcome that at times.
- Desire/hope. I don't know how to properly explain this phenomenon, but it can definitely happen that there are times where I completely lose objectivity and just succumb to my desires or wishes for what the market should do as it would suit me best (by giving me an easy winner or way out).
I'm sure everyone have their own issues to work through. For example, I know some people who just can't seem to take risk or hold a trade for a big win. Issues I've never had or at least haven't had in a long, long time.
I think the first Market Wizards book and probably the rest as well had a lot of interesting stuff on psychology. But like Mr Muppet says - psychology can't transform a losing approach into a successful one. Obviously. But I'm sure it can make a difference if you have a valid approach.
You could have players who was on top of the world at the start of a match completely lose their confidence to the point where they could barely hit the ball. You could literally see it in their face. The face of defeat.
The highs and lows of trading can be extreme.
If you're a discretionary trader psychological issues definitely matter. If you're a mechanical/systematic trader it shouldn't.
I'm a semi-discretionary trader meaning I have a base methodology based on statistical data, but ultimately, I decide when and where to place trades. I have tried and keep trying to make it completely mechanical, but it's difficult.
My own issues:
- Impatience and FOMO. Not waiting for the very high probability entries where your loss can be small and the potential gain big. I honestly believe that being very selective can make the difference between a winning and losing trader.
- Trading without an edge. Yes, I believe I have an edge, but there are also times where it's not clear to me where the market is going. Obviously. Yet, I can still place trades during these times. The solution appears simple enough, yet not always easy to implement.
- Greed (typically letting a larger unrealized win go back to even trying to hit a homerun). When I trade well, I will typically take profits at momentum peaks and rather re-enter on pullbacks or around the same spot if it seems no PB is happening.
- Over-confidence (typically comes after a good period where I start thinking trading is easy). This leads to both excessive risk taking and sloppy entries.
- Lack of focus and burnout. Trading is a performance based activity and if you're discretionary you can't sustain top performance infinitely. If you have other stuff in your life going on it will obviously affect you. The solution seems simple enough. Don't trade if you don't feel you're on top of your game. Of course, the urge to trade can overcome that at times.
- Desire/hope. I don't know how to properly explain this phenomenon, but it can definitely happen that there are times where I completely lose objectivity and just succumb to my desires or wishes for what the market should do as it would suit me best (by giving me an easy winner or way out).
I'm sure everyone have their own issues to work through. For example, I know some people who just can't seem to take risk or hold a trade for a big win. Issues I've never had or at least haven't had in a long, long time.
I think the first Market Wizards book and probably the rest as well had a lot of interesting stuff on psychology. But like Mr Muppet says - psychology can't transform a losing approach into a successful one. Obviously. But I'm sure it can make a difference if you have a valid approach.
Good Evening Laissez Faire,
I always admire your trading experience post.
Can I ask please ask you a question please?
1. From a making money perspective, What is the difference of approach between you (Day Trader) and Pablo Escobar or Joaquín "El Chapo" (Verified Billionaires) Guzmán as it pertains to making a Millionaire in short amount of time?
***Note*** I assume your goal in Day Trading is to make a million dollars in X amount of years.
Thank you,
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