Mindset of a losing trader

virtusa said:
Theoretically correct, but in real life not. Many people have psychological problems at the moment they should act. The brain is controlling them and makes them take wrong decisions.
The human brain is not made to take rational emotionless decisions.
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As stated again and again. Psychology is not the root cause of losing as a trader. It's the lack of edge. If you really think you can create alpha by drawing a couple of lines on your chart as your only source of trade generation, you are wrong.

Now the financial education industry makes you believe that this is sufficient and you just have to practise enough and that is how your brain starts to work against you.

"It should be possible, they all say it is"
-> you're losing money
-> now you beat yourself up for being bad and not disciplined
-> you're scared shitless as soon as you enter a new position, take profits too early and stop out too late.

The solution to this is simple but not easy:

You have to space out of this entire "read internet to copy a plan" workflow.
Sit down and realize that you have no single clue about the markets. You know nothing, zilch, zero.

Then think about what niche you would be able to cover. Are you an arbitrage trader, relative value, momentum, fundamental investor...how would you like to spend your day?
Go from there.

After that, LEARN your market. Why does it exist and who benefits, who are the players, what can they do and whehn do they trade.

It absolutely baffles me that people are playing the oil complex with charts without a single clue about refineries, producers, storage, transport and trade.
They play breakouts when an entire armada of tankers are sitting in front of a major hub waiting to clear. People trade eMinis without even knowing how ETFs are priced, what basis is and when APs are balancing their portfolios when prices get out of line.Learn that stuff to get the big picture.


Third you have to learn how to build a strong position, meaning a position that you cannot get squeezed out by the market by a couple of ticks. If your general plan is good but your position is trash, you are not gonna be able to hold and profit. Learn how to spread and use options. Learn how to control risk with size instead of stops and how to establish a core position and trade around your average. If you can only use one contract or 100 shares, the market is too big for you.


4rth look for side plays that happen due to major events that nobody looks at. The best play in GME was not shorting the stock when everybody tried to do the same. This trade is crowded and choppy. If you shorted the hyperinflated OTM puts you had a free ride.

The best play in oil when Hin Leong went belly up was not playing the bounce after MAY20 settled negative but shorting JUN20 against AUG20, because JUN20 was still priced as if nothing happened. One day later everyone rolled into JUN contracts and the premium completely collapsed. Easy money and huge reward for your risk.


This game is fucking hard and when you come up with a trading plan that you fabulated together yourself after reading books and the internet without even looking at the actual market you are trading it is like opening a book store right next to AMZN headquarters without even being able to read.
 
MrMuppet said:
As stated again and again. Psychology is not the root cause of losing as a trader. It's the lack of edge. If you really think you can create alpha by drawing a couple of lines on your chart as your only source of trade generation, you are wrong.

Now the financial education industry makes you believe that this is sufficient and you just have to practise enough and that is how your brain starts to work against you.

"It should be possible, they all say it is"
-> you're losing money
-> now you beat yourself up for being bad and not disciplined
-> you're scared shitless as soon as you enter a new position, take profits too early and stop out too late.

The solution to this is simple but not easy:

You have to space out of this entire "read internet to copy a plan" workflow.
Sit down and realize that you have no single clue about the markets. You know nothing, zilch, zero.

Then think about what niche you would be able to cover. Are you an arbitrage trader, relative value, momentum, fundamental investor...how would you like to spend your day?
Go from there.

After that, LEARN your market. Why does it exist and who benefits, who are the players, what can they do and whehn do they trade.

It absolutely baffles me that people are playing the oil complex with charts without a single clue about refineries, producers, storage, transport and trade.
They play breakouts when an entire armada of tankers are sitting in front of a major hub waiting to clear. People trade eMinis without even knowing how ETFs are priced, what basis is and when APs are balancing their portfolios when prices get out of line.Learn that stuff to get the big picture.


Third you have to learn how to build a strong position, meaning a position that you cannot get squeezed out by the market by a couple of ticks. If your general plan is good but your position is trash, you are not gonna be able to hold and profit. Learn how to spread and use options. Learn how to control risk with size instead of stops and how to establish a core position and trade around your average. If you can only use one contract or 100 shares, the market is too big for you.


4rth look for side plays that happen due to major events that nobody looks at. The best play in GME was not shorting the stock when everybody tried to do the same. This trade is crowded and choppy. If you shorted the hyperinflated OTM puts you had a free ride.

The best play in oil when Hin Leong went belly up was not playing the bounce after MAY20 settled negative but shorting JUN20 against AUG20, because JUN20 was still priced as if nothing happened. One day later everyone rolled into JUN contracts and the premium completely collapsed. Easy money and huge reward for your risk.


This game is fucking hard and when you come up with a trading plan that you fabulated together yourself after reading books and the internet without even looking at the actual market you are trading it is like opening a book store right next to AMZN headquarters without even being able to read.
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And if you master all that but are afraid to push the button you are still nowhere.

You need to control your behavior (psychology) and of course you need an edge. If one of these two is not working, you will never make money.
Psychology is as important as edge.

I am a private daytrader since the early 90's when daytrading almost did not exist except for financial institutions. You were 3-5 years old when I was already daytrading. I have a little bit experience in trading.

PS: you clearly did not read the first 2 lines of my first post.
"You are losing because your trading plan sucks. Go back to start and improve or replace your trading plan by something you tested and with a clear positive expectancy."

There is a seperate section about Psychology on ET with over 3,000 threads. If psychology would be irrelevant these threads would not exist.
https://www.elitetrader.com/et/forums/psychology.35/

Check out @Andrea Wylan
 
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virtusa said:
And if you master all that but are afraid to push the button you are still nowhere.

You need to control your behavior (psychology) and of course you need an edge. If one of these two is not working, you will never make money.
Psychology is as important as edge.

I am a private daytrader since the early 90's when daytrading almost did not exist except for financial institutions. You were 3-5 years old when I was already daytrading. I have a little bit experience in trading.

PS: you clearly did not read the first 2 lines of my first post.
"You are losing because your trading plan sucks. Go back to start and improve or replace your trading plan by something you tested and with a clear positive expectancy."
More...
If you mastered all that and are still afraid you're probably in the wrong business. If you trade for 30 years and cannot stand your ground anymore, this is probably true, too
 
MrMuppet said:
If you mastered all that and are still afraid you're probably in the wrong business. If you trade for 30 years and cannot stand your ground anymore, this is probably true, too
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First of all: I never said I have that problem. I am fulltime daytrader for many years. No other job.
Second: you just confirmed the importance and impact of psychology.
 
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virtusa said:
First of all: I never said I have that problem. I am fulltime daytrader for many years. No other job.
Second: you just confirmed the importance and impact of psychology.
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do you suggest any material that help in psychology like fomc?
 
I'd say that psychology is generally an issue only if you already have a successful system, but have trouble executing it and/or you find yourself losing objectivity. The latter is something I've struggled with from time to time and where I consciously override my own system/statistics, i.e., I can know that the outcome I'm anticipating have a very low probability and it would do me good to go flat and even reverse, but yet I don't.

Being undercapitalized and/or needing to generate a specific return will compound these psychological issues.

And the more discretion there is in your system - the more likely you are to get into 'trouble'.

IMHO.
 
If you do not have the discipline to get out when you should, maybe, you should be using stop losses or stop limit orders on a good till cancelled basis. That will put your trading on auto pilot where you do not have to closely watch every tick. Fear and greed will always be there and natural emotions for any trader including, me.
 
Laissez Faire said:
I'd say that psychology is generally an issue only if you already have a successful system, but have trouble executing it and/or you find yourself losing objectivity. The latter is something I've struggled with from time to time and where I consciously override my own system/statistics, i.e., I can know that the outcome I'm anticipating have a very low probability and it would do me good to go flat and even reverse, but yet I don't.

Being undercapitalized and/or needing to generate a specific return will compound these psychological issues.

And the more discretion there is in your system - the more likely you are to get into 'trouble'.

IMHO.
More...
I trade a naked chart, and trade price pattern action. sometimes i can see action everywhere. I now actually want to add some filter to keep me from chasing a temporary exhaustion area. but yea the thing is a lot of time I know not to do something, But I act different.
 
It's very easy to see what you want to see. Trading so called 'price action' usually means interpretation and a subjective view of what's going on at any given moment.

With money on the line and a fast moving market - it's not easy. Filter or rules which adds objectivity can help you, but will you be able to follow them...?

The one thing you can do though, is to actually not trade unless things are very, very clear to you. Not always easy that either. :)
 
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