Psychological BS?

[hcour]

TD,

Actually this is something I've been thinking about posting for a while now and was not a response to anything posted in particular. However, apparently we may be thinking along much the same lines. I've found the post you refer to but haven't read it so I don't have to respond to 2 posts at once. Here you write, which I see as the essence of your point:

To accept uncertainty is to accept a certain lack of control.

If we consider this from the standard trading psychology pov, the common mistake is that the trader tries to impose a belief about what the mkt should be doing instead of what it is actually doing. ("What's this? My brilliant analysis is wrong?") If one accepts this truth, that the mkt is control and that we're just along for the ride, then uncertainty should have already been, to use a common mkt term, "discounted" in the trading plan. To only risk so much initially, to set a stop-loss, to have a profit target, to stick to this criteria w/in the trade no matter what happens, acknowledges that the mkt will do what it wants and we can only follow along, trying to protect capital and maximize profits and live to trade another day.

When I drive to the store for groceries I can't control what the guy in the car behind me is doing, but I can drive intelligently, defensively, and minimize my risk of an accident by my own actions, to a degree.

Harold

 

[Thunderdog]

Quote from amex2:

Last night's episode of the Soprano's, with story line focusing on Tony's affliction for gambling was a perfect profile of the impact of fear and greed..and Tony made some poignant observations i.e. risk taking.

The fact of the matter is, the absolute best traders are completely devoid of emotion. They stick to a systematic approach (necessarily always refining those approaches, as market behavior, volatility and liquidity issues will impact any system), but always based on consistently hitting singles and doubles, with very tight exit strategies.

I posted a mention of something called the ACD method (read more at www.thelogicaltrader.net)... The book describing the method is particularly interesting because the author (Mark Fisher of MBF Clearing fame and ranked "Best of The Rest ' by Trader Monthly magazine) spends considerable time focusing on the psychological issues of trading--and what differentiates real professionals from those that are driven by greed.

Forgive me, but you seem to be a walking sandwich board for Mark Fisher and his book. Just about all of your posts thus far have a single theme. I read the book when it first came out. It wasn't bad, but it wasn't quite as good as you suggest. Just my opinion, of course.

 

[Joab]

Quote from Thunderdog:

If/then is reacting.

If / Then = you've used your brain and done your homework BEFORE you've reacted.

 

[Dustin]

Even the best laid plan that you know has an edge will bring fear into play. The hardest part is to ignore fear, but allow greed...that's how you let winners run.

Greed=Good
Fear=Bad

 

[Thunderdog]

Quote from Joab:

If / Then = you've used your brain and done your homework BEFORE you've reacted.

Fair enough. I'm just saying that trading is all about reacting. You don't tell a wild elephant what to do. You react to what it does.

 

[Thunderdog]

Quote from Dustin:

Even the best laid plan that you know has an edge will bring fear into play. The hardest part is to ignore fear, but allow greed...that's how you let winners run.

Greed=Good
Fear=Bad

http://www.elitetrader.com/vb/showthread.php?s=&threadid=93315

 

[kiwi_trader]

Quote from hcour:

To accept uncertainty is to accept a certain lack of control.

If we consider this from the standard trading psychology pov, the common mistake is that the trader tries to impose a belief about what the mkt should be doing instead of what it is actually doing. ("What's this? My brilliant analysis is wrong?") If one accepts this truth, that the mkt is control and that we're just along for the ride, then uncertainty should have already been, to use a common mkt term, "discounted" in the trading plan. To only risk so much initially, to set a stop-loss, to have a profit target, to stick to this criteria w/in the trade no matter what happens, acknowledges that the mkt will do what it wants and we can only follow along, trying to protect capital and maximize profits and live to trade another day.

When I drive to the store for groceries I can't control what the guy in the car behind me is doing, but I can drive intelligently, defensively, and minimize my risk of an accident by my own actions, to a degree.

Harold

Harold,

The difference between your example and the real market action demonstrate reasons that psychology steps in. Take two variations on the car example:

1) The fearful, damaged, trader:
Have you ever seen an asian woman driver driving amongst australian males (macho, love their v8s and subarus). Fearful driving creates a distorted maladapted version of "drive intelligently, defensively, and minimize my risk of an accident by my own actions, to a degree." Extremes of this behaviour really need psychological help to drive well.

2) The other drivers on the road don't periodically swerve towards you, brake randomly, and otherwise endanger you (at least you won't so perceive it unless you are in a paranoid fearful state). The market is much more vigorous in its efforts to shake the trader.

These are not precise analogies but hopefully illustrate something worth thinking about.

 

[Allaces]

Quote from kiwi_trader:



1) The fearful, damaged, trader:
Have you ever seen an asian woman driver driving amongst australian males

Or a female sheep among New Zealand males?... that is one nervous sheep

 

[epiktetos]

I saved a quote by Jack Hershey where I think he summed it up pretty nicely.

Daily trading is not a very difficult thing and it doesn't require much brain power either.

Trading is like being a carpenter or a plumber ,mostly. It comes down to doing it correctly and following the blue prints for new stuff and fixing only what is wrong when making repairs.

The blue prints come from the markets. What is busted and needs repair comes from the trader.

As witnessed by most postings of people, they can't read blueprints nor can they fix what needs repairing.

there is no such thing as stress in the world of carpentry, plumbing or trading effectively or efficiently.

You simply use the best tools made and effectively and efficiently get the job done.

the emotional feeling associated with this is like riding a bike down a path that you have biked about a 1000 times rain or shine cold or hot.

Get with the program.

 

[Thunderdog]

Quote from epiktetos:

I saved a quote by Jack Hershey where I think he summed it up pretty nicely.

Comparing an environment of considerable uncertainty with an environment of reasonable certainty does not strike me as a well-informed observation or comparison. Perhaps Jack is above such petty human frailties, but I think there may be another explanation for his apparent disregard of one of trading's largest hurdles. Besides, I didn't think it was in Jack's genetic makeup to actually "summarize."