Psychology, are you sure?

A

Alexis

Hi everyone,

Just wanted to share a thought with you all. I recently read, from a fellow ET member, that :

"Psychology is 90%, Money management and Analysis are 10%"

That. Again.:mad:

I was sharing my anger about this topic with a colleague and he had a funny, yet interesting, answer:

"yeah, tell them we have been consistently making money for decades, that we do an awful lot of analysis and stats in here but that we never felt the need for a shrink in the room!"

Bottom line is, analysis and risk mangement are 99% of the job. If you trust your strategies, there is no room for thinking or doubts.

testing -> validation -> trading.
A problem? Drawdown?
re-testing-> re-validation -> back to trading

This is a never ending process.

But why on earth would anyone cease to trust a validated strategy (you gyus validate your trading ideas, rght?) in the middle of a position and start doing something else? Markets are real-world, they are not in our head.

Hope I don't offend anyone,

Alex
 
Alex, for the most part, the traders here do not have a method with a positive expectancy. As a result, they are frustrated and have their heads twisted because of their losing ways. This opens the door for people who coach and write books about psychology and trading to ease the pain of the losers and give them false hope they can turn it around.

Traders need a positive expectancy, not attitude, to make it in this business.

I agree with you.
 
I'm not aware of many psy majors leaving the profession to trade stocks inspite of having access to the "good" meds. You'd think a background in psychology would be a natural btw people carry on about it. n'est ce pas?
 
thanks for your interesting input.

Well, I honestly understand that people find it difficult to find an efficient method/strat/system. This is everwhelmingly difficult and competitive. Furthermore, these animals (markets), they keep evolving all the time!

Really a competitive job, especially if you trade in the noise (it's a stats and execution game) instead of going for the larger moves (taking profit of the bullish long term bias in stock and indexes markets)
 
FWIW

I respect Y’alls opinion

My opinion – Trading is 93 – 95% Psychological, 5 - 7% Mechanical

Regards

RN
 
Quote from nutmeg:

Trading is 93 – 95% Psychological, (blame the victim)


5 - 7% Mechanical (blame someone else)
More...


Good thought Sir

But always 100% my responsibility

Regards

RN
 
Redneck,

Thanks for your reaction, and we most certainly respect your opinion as well.

Could I ask you to tell where you stopped agreeing with me in my initial post? (put differently, where do you think my reasonning is flawed?)

thx,

Alex
 
In the beginning, it is 90% (or more) psychology for most people. But then I think that over time, experience replaces that. Your analysis is probably still only a smaller portion, and then the experience is what guides you. There is little room for psychological factors if you have solid analysis and years of experience. For anyone who was actively trading this past year, and particularly on the worst days when the market took huge falls, I think that experience is probably worth 5 years worth. Having weathered those storms, and having watched many of those same stocks climb back to their previous levels, I know that I can weather any storm. I am no longer afraid to pull the trigger when I buy 10K, 20K or more of one stock. When I first started, I had a fear of even buying 2K worth of one stock -- I didn't have enough experience to understand the what ifs, and I genuinely believed that something could happen to cause that asset to drop to 0 value overnight. I know now that with blue chip stocks, that really doesn't happen. Even bear stearns and lehman gave longs some opportunities to get out with some of their invested capital.
 
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