Psychology in Trading

[OPTIONAL777]

Originally posted by OHLC
After rereading these two posts (RTharp and WD Gann), I'm still left wondering...
Psychology can influence someone's trading, just like psychology can influence someone's performance in competitive sports, for example.

But how can someone identify that a problem with his/her trading relates to something wrong with his/her psyche ?
How to identify that something wrong is a psy issue, instead of a technical issue ?
Can there be some undiscovered psy issues, that appear only while trading, and not in general life ?
What do to research on this ?


OHLC

They could use machines to measure stress levels at decision points, when someone determines if they should buy, hold, or sell. Same theory as measuring alpha waves or a lie detector test.

Once the feelings that produce the stress are identified, they can then be addressed through therapy, biofeedback, etc.

Most of the work that has to be done has to do with self awareness and honesty about what a trader is feeling at times of indecision. A machine could only make objective what the trader knows but is unwilling to admit to himself.

 

[WDGann]

I think the more you know the more you can analyze. I really don't like sounding like a yoga guru but I think that's what it all comes down to.

Let's take moving average as an example.

You and I use a 9-day moving average. The way trade it is going to be different. It's not a matter of better or worse, it's just different. So why do we use it differently? How we process the information is different. I may look at it to grasp the trend, you may use it for entry timing. Some other guy can use it for exit. You may look at change of direction, I may look at the price crossover.

Let's take this example of differences further.

Why do you trade? I may trade for fame(I don't but a matter of example). You may trade for money. I go around telling people around me that I am a trader. People tell me how hard the job is and they envy me about how independent I am. I like that and enjoy that attention(sounds like Ed Seykota's example). There's no winning or losing involved in my motivation. You trade for profits.

Now if human effort was quantifiable. Who would make more money if you and I put the same effort towards it? You, of course.

 

[OHLC]

O777, I'm not sure machines could help :
A real-life example :
One of the guys I used to shoot with is an International champion in his style of target shooting.
For years, he used to make near perfect scores, but as he reached the last 3-4 shots, he would shoot really like an amateur, and ended up screwing his score.
For years, he had everything reviewed to understand why he would always drop in performance durng the last shots.
Including cardio stuff and all.
And one day, he started performing fully and got to the top.
He explained that he had a fear of success and for years thought he did not deserve to get to the top.
So, he was obviously held down by a psychological issue.

I'm wondering if this could happen in trading, a much more technical discipline...
And how to detect this in someone's trading...
Since some traders put special emphasis on psychology,
I'm fearing I may have some issues to solve, and be totally unaware about it...

OHLC

 

[vulture]

Originally posted by OPTIONAL777


They could use machines to measure stress levels at decision points, when someone determines if they should buy, hold, or sell. Same theory as measuring alpha waves or a lie detector test.

Once the feelings that produce the stress are identified, they can then be addressed through therapy, biofeedback, etc.

Most of the work that has to be done has to do with self awareness and honesty about what a trader is feeling at times of indecision. A machine could only make objective what the trader knows but is unwilling to admit to himself.

Which is interesting as well as to how it pertains to sports because many PGA pros will wear these pulse monitors while putting to figure out their bpm and to see how stress is contributing to their lack of performance...On the Golf Channel now, if you watch it, they will wire up a mini tour player for the entire round and show how the fluctuations in his pulse rate occur during the various pre-shot, post-shot, etc, etc...

I agree with the 80-90% mental theory, but as I have said before, this is assuming that the mechanics of the sport(trading) have been mastered...Without the proper mechanics(system or methodology) all the psych training is still not enough...

 

[chisel]

Originally posted by OHLC
He explained that he had a fear of success and for years thought he did not deserve to get to the top.
So, he was obviously held down by a psychological issue.

I'm wondering if this could happen in trading

You bet it can happen. It's one of my issues that I'm working on. In my situation, I'll have a good run of trades and then give a lot back because I feel like I don't deserve it, or that I didn't work "hard enough" to get it.

Screwed up thinking, I know, but at least I'm aware of it. Awareness is the first step to resolving the issue.

 

[rtharp]

Originally posted by OHLC
After rereading these two posts (RTharp and WD Gann), I'm still left wondering...
Psychology can influence someone's trading, just like psychology can influence someone's performance in competitive sports, for example.

But how can someone identify that a problem with his/her trading relates to something wrong with his/her psyche ?
How to identify that something wrong is a psy issue, instead of a technical issue ?
Can there be some undiscovered psy issues, that appear only while trading, and not in general life ?
What do to research on this ?


OHLC

What is so great about trading is the most simplistic thing can make money. I've got a friend who buys all the broker recommendations on the up days early in the morning and shorts all of the downgrades on the days when the market is red. He does really well with just this small entry.

The problem is human emotion , and our beliefs come into the market. If you belief's aren't the same as top traders than you won't have the same results.

The way to identify a problem that is causing something to happen is to look for patterns in your life. Ask yourself what you don't like about something that keeps happening. Notice that it seems to repeat over and over again in your life no matter what you do.

Knowing there is a problem is half the battle.
The next step is much harder though and usually takes some additional assistance as you will need to revisit something that caused you to feel some emotion/a belief. You usually have to feel the pain again to remove the pattern. When you discovered the pain allow it to be felt till there is none, than examine the belief /or decision you made under mental stress that belief all of a sudden has no use for you in your life and a more useful belief comes into play.

I'll go through a few exercises and such over the next few days on these. As maybe I can help somebody with this thread

Robert

 

[rtharp]

Originally posted by WDGann




Lots of people say some books are worthless or doesn't live up to standard(different from people and the time when the person is reading it). Like Dr. Van Tharp's Peak Performance, Lewis J. Borsellino's Day Trader, WDGann's books, or etc. etc.. Yes, some of them are useless though, take those Beginner's Guide to Trading Stocks books... they are definitely useless, at least for me, but not for people who have no idea about stocks.

Remember how Van Tharp explains about biases in Financial Freedom? I think it's the same. We are biased when we read too. So I try to keep an open mind and try to be more than willing to change what I percieve and what I believe in. It helped me a lot. I have a sense of training myself as a trader even if I'm reading for pleasure and I love myself for that.

So regardless of his crudentials with the lawsuit and all I see quality in Van Tharp's book. Same goes with Niederhoffer, Larry William, Russell Sands, and others.

Gann brings up an interesting point. I've rated some of the books here on Elite and later on was slammed by some other posters for my views. The ratings I gave were completely due to how I felt about everything I had gained from the books I rated. Some of the books were just review of what I had already learned so my feeling's weren't as high as others are.

Robert Tharp

 

[rtharp]

Originally posted by vulture



Which is interesting as well as to how it pertains to sports because many PGA pros will wear these pulse monitors while putting to figure out their bpm and to see how stress is contributing to their lack of performance...On the Golf Channel now, if you watch it, they will wire up a mini tour player for the entire round and show how the fluctuations in his pulse rate occur during the various pre-shot, post-shot, etc, etc...

I've never heard about a golfer being wired but am now going to have to check this out.

Robert

 

[WDGann]

There is a problem with bio-feedbacks. Even if you go through these training, you'll lose most of it when you are not on the machine. So basically, you are adjusting the test and training. When you have these machines on you'll have peak brain wave patterns but once you take them off, , the results don't match up... "most" of the time.

What are bio-feedbacks?

They're basically the frequency of your brain waves. They basically measure how concentrated and relaxed you are. At a regular state, your brain waves are very rapid(as I recall, sorry if I'm wrong on this part). Once you start concentrating on something, your brain wave frequency starts to lower. This lowering of the brain frequency also occurs when your body is in relaxation.

So what the training does is, they try to make you do a certain task while relaxing. So for example golf shots. When your frequency goes above the Alpha wave(ideal brain wave condition) the headset sends a beep or a simple electric shock to make your body adjust instinctively to be in the Alpha Wave.

Also, your body goes into Alpha Wave in a REM sleep. This is said to be when you start watching dreams. It further goes into Ceta-Gamma(forgot spelling) waves where you are in a Non-REM state(deep sleep).

Does it work? I don't know, I haven't tried it. May work for some but that doesn't change the positive attitude you need in trading.

Edited or added:

Even if you put yourself in a fully concentrated state of mind, if you are doing something that doesn't fit you or doing something wrong, the results may get worse. Also, emotions like fear and hope are different from concentration. I like to give analogies so here's one:

Say you a bad recipe for a soup. It just tastes bad. Even if the cook is Wolfgang Puck making it, the bad recipe is a bad recipe.

 

[marketsurfer]

greetings,

many of the psych issues regarding trading can be traced back to early childhood inadvertent teachings on money. wealth wounds they can be called. this is why many traders can do quite well with a simulated account but fall apart as soon as real money is involved. it takes mental training to move beyond these 'wealth wounds'. the work of van tharp and ari kiev are an excellent start in this mental training.

all the best, all the time

surf