Wow, well said goldenarm. That should be published (I guess it just was). I know my downfall is exactly that: Not controlling my emotions and not having the discipline to follow my plan through thick and thin. What happens when I'm trading well and bringing in some money? I loose discipline because, well, the moneys coming in and I can afford to bend the rules a bit to make even more profits. I tell myself that this is an easy game and I get lax. And when the money is flying out the window? I gotta get it back. And get it back right now! So I will bet too large or try some bogus set-up that I think will net me bigger, faster profits. I recently ran my account up 80% over a three month period. But when the chinese market got hit in February, I took a big hit. I was still doing okay but I just couldn't stand the thought of all the profits I had lost. So I tried to make it all back in a hurry and broke all my rules. Well now all my profits from that three months are gone plus more. On a deeper level, for me, I believe a lot of it has to do with psychology. More specifically, my comfort level with being highly successful and making a lot of money. Trading has just too many land mines. They are everywhere. And they all have to do with the person, not the plan.
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Newbie looking for advice
- Thread starter NEAsher
- Start date
Wow, well said goldenarm. That should be published (I guess it just was). I know my downfall is exactly that: Not controlling my emotions and not having the discipline to follow my plan through thick and thin. What happens when I'm trading well and bringing in some money? I loose discipline because, well, the moneys coming in and I can afford to bend the rules a bit to make even more profits. I tell myself that this is an easy game and I get lax. And when the money is flying out the window? I gotta get it back. And get it back right now! So I will bet too large or try some bogus set-up that I think will net me bigger, faster profits. I recently ran my account up 80% over a three month period. But when the chinese market got hit in February, I took a big hit. I was still doing okay but I just couldn't stand the thought of all the profits I had lost. So I tried to make it all back in a hurry and broke all my rules. Well now all my profits from that three months are gone plus more. On a deeper level, for me, I believe a lot of it has to do with psychology. More specifically, my comfort level with being highly successful and making a lot of money. Trading has just too many land mines. They are everywhere. And they all have to do with the person, not the plan.
Quote from goldenarm:
You really want an edge?
Okay, the edge that will make you successful as a trader is the ability to control your emotions ...
In other words, good traders ... master their emotions when they execute their trading plan.
not! once you're afraid you can't control or master the fear.
Read "trading in the zone" by mark douglas for a better understanding of emotions and trading.
every newbie (or oldie, lol) should read that book.
--------------Quote from NEAsher:
Okay. But what's an edge and how do I get one? Do you have an edge?
As the previous poster advised, you should read a copy of Trading in the Zone by Mark Douglas. His definition is "An edge is nothing more than an indication of a higher probability of one thing happening over another."
I would assume most people would agree with this statement and by its very nature can mean many things. As Don mentioned, having access to more capital is an edge. Another edge i can think of is having the S&P emini futures charts as a leading indicator when daytrading stocks can also be considered an edge (in general when the futures go up many of the big caps tend to follow suit). Yet another example is having access to credits/rebates (when compared to the average retail investor/trader they do not have the same low cost structure of a prop. trader).
Quote from goldenarm:
You really want an edge?
Okay, the edge that will make you successful as a trader is the ability to control your emotions and act objectively when you execute your buys and sells. You have to stick to your trading plan even when your heart is racing, palms are sweaty and you're hyperventilating. You also have to be aggressive and be able to pull the trigger on trades and not second guess yourself.
In other words, good traders exercise controlled aggressiveness and can master their emotions when they execute their trading plan. Remember, trading plans are a dime a dozen and most of them will work if you have the discipline to follow them. Even a monkey throwing darts at a stock list can beat most MBA'd money managers as long as it can cut its losses and let its profits run.
Mental discipline. This is the edge that will make you successful. You don't need inside information or a PHD from Harvard. You don't need math skills above a sixth grade level. You just need to be disciplined and mentally strong. It's no secret that top trading firms like to recruit accomplished athletes or military types because of their discipline and competitive nature. These attributes are far more important to becoming a successful trader than academic aptitude.
Most newbies like yourself will say "no problem, I can master my emotions!", but once they're thrown into the battlefield and start trading larger positions, they end up discombobulated and blubbering like a newborn babe when the position moves against them. Or if the position is moving in their favor, they immediately hit the sell button because they're petrified that the gain will turn into a loss and they fail to adhere to their profit objective. Greed and fear is what prevents most traders from breaking out and becoming successful. Impatience and recklessness are other poisonous attributes. The best traders are like elite Army snipers. Incredibly patient and can wait for days until the situation is ideal. Calm under pressure. Decisive when they need to act. They can make snap judgements on the fly. They are supremely confident of their abilities.
Like a previous poster stated, find a prop firm that will let you practice with their own money and you'll be able to determine if trading is indeed for you.
Right on the money! Best comment I have read on the subject in a long time!