Psychology, are you sure?
- Thread starter Alexis
- Start date
Travis, you are very correct that there has been confusion about whether we are talking about discretionary or automated trading. Indeed, I think that discretionary trading will always have a bit more psychology involved. HOWEVER, I think that most of this has to do with large order sizes. I can tell you that if your order size is a fraction of equity (i.e. no leverage) then there is almost no need for high blood pressure, because the stakes are simply not that high.
Of course, you need more capital than most to do this.
Yes, I agree.
If you invest 1% of your capital on each trade, it becomes like paper trading without the disadvantages of paper trading. For example, I probably never felt like doing paper trading because it made me feel like I was wasting opportunities and ultimately wasting my time (but I was wrong and should have done it). But if you invest 1% of your capital, you don't have this feeling that you're wasting opportunities and yet you're still psychologically balanced.
Things we should have differentiated between when speaking of psychology & trading are therefore not only automated trading vs discretionary trading, but also paper trading vs real trading and real trading with 1% of your capital on each trade vs real trading with 100% of your capital on each trade. We shouldn't start to discuss "psychology & trading" without first stating what type of trading we're talking about.
If you invest 1% of your capital on each trade, it becomes like paper trading without the disadvantages of paper trading. For example, I probably never felt like doing paper trading because it made me feel like I was wasting opportunities and ultimately wasting my time (but I was wrong and should have done it). But if you invest 1% of your capital, you don't have this feeling that you're wasting opportunities and yet you're still psychologically balanced.
Things we should have differentiated between when speaking of psychology & trading are therefore not only automated trading vs discretionary trading, but also paper trading vs real trading and real trading with 1% of your capital on each trade vs real trading with 100% of your capital on each trade. We shouldn't start to discuss "psychology & trading" without first stating what type of trading we're talking about.
TS,
Had a couple of thoughts on this today, so hereâs a fwiw Sir
I break stuff (knowledge/ thoughts??) in my head into three separate groups
Stuff I âknowâ â rigid â (characteristics of steel set in concrete) â unchangeable
Stuff I âbelieveâ â semi-flexible â (characteristics of wood/ aluminum) â bends but not very easy â always prone to breaking (changing) just not easily
Stuff I âthinkâ â fluid/ dynamic (characteristics of air / water) â always (and very) susceptible to changing
Everything in my head fits into one of these three categories - and is how I view my world... and trade
One note about learning also
I believe all people learn through their 5 senses â Touch (doing), Taste, Smell, Sight (seeing), Hearingâ¦
I also believe each of us has a dominate way... or two - by which we learn â a dominate sense or two if you will...
Figure out your dominate sense(s) â the one/ two you respond to best â and use it/ them
Regards Sir
RN
Regarding Psycology:
Let's think about the psycological ramificatons of a stop loss for example. Some traders use them while some do not. Why don't they use them? Is it because they feel they can exit the market quick enough without a need to succumb to the need to place a stop.
I think psycologically speaking the reason we often do not use them is because we view them as a weakness. Yes weakness, in that if we place a stop loss we are essentially admiting that we could be wrong. So then, is it our pride which is a reflection of our psycology or ego that prevents us from accepting the reality of humbling accepting losses. I know from experience that if you are on the wrong side of a trade and three computer buy programs kick in it can be devestating to your resources.
In essence a stop loss is an insurance policy protecting and preserving our our one and only precious resource, our capital. So from a psycological perspective losses should be viewed as a good thing in that if place properly they will not lead to greater losses. So I make this point in consideration as to how psycology can definitely impact our trading which is the main point and that of RN and others are trying to convey.
RN knows that I have struggled with many psycological issues that directly impacted my trading. I believe that if we don't rule and learn to control your mind we are doomed to failure. This certainly presents a great argument for system trading as it takes all of the emotion out of trading.
RN as others here have much wisdom to offer, listen, read and read again, until you can essentially read between the lines as to what exactly they are offering you. We need to humble ourselves in order to create an opportunity for us to learn.
We Are Destined For Greatness,
metoo
Let's think about the psycological ramificatons of a stop loss for example. Some traders use them while some do not. Why don't they use them? Is it because they feel they can exit the market quick enough without a need to succumb to the need to place a stop.
I think psycologically speaking the reason we often do not use them is because we view them as a weakness. Yes weakness, in that if we place a stop loss we are essentially admiting that we could be wrong. So then, is it our pride which is a reflection of our psycology or ego that prevents us from accepting the reality of humbling accepting losses. I know from experience that if you are on the wrong side of a trade and three computer buy programs kick in it can be devestating to your resources.
In essence a stop loss is an insurance policy protecting and preserving our our one and only precious resource, our capital. So from a psycological perspective losses should be viewed as a good thing in that if place properly they will not lead to greater losses. So I make this point in consideration as to how psycology can definitely impact our trading which is the main point and that of RN and others are trying to convey.
RN knows that I have struggled with many psycological issues that directly impacted my trading. I believe that if we don't rule and learn to control your mind we are doomed to failure. This certainly presents a great argument for system trading as it takes all of the emotion out of trading.
RN as others here have much wisdom to offer, listen, read and read again, until you can essentially read between the lines as to what exactly they are offering you. We need to humble ourselves in order to create an opportunity for us to learn.
We Are Destined For Greatness,
metoo
I believe it was Douglas who wrote in one of his books; "If you can't trust yourself to be objective and to always act in your own best interest,.....go automated.....
just kidding, the quote reads:
"If you can't trust yourself to be objective and to always act in your own best interest, achieving consistent results will be next to impossible".
Having a brain one can depend on at ALL times is the most precious commodity a person can have, not only for trading, but for all of life's endeavors.
just kidding, the quote reads:
"If you can't trust yourself to be objective and to always act in your own best interest, achieving consistent results will be next to impossible".
Having a brain one can depend on at ALL times is the most precious commodity a person can have, not only for trading, but for all of life's endeavors.
I fail to see what all the fuss is about.
In order to create and apply a solid positive trading methodology you are going to need a logical open mind capable of absorbing risk management.
This is all ONE package.
It cannot be split into either/or; and quite frankly only a dummy would try to do this.
sosueme
In order to create and apply a solid positive trading methodology you are going to need a logical open mind capable of absorbing risk management.
This is all ONE package.
It cannot be split into either/or; and quite frankly only a dummy would try to do this.
sosueme