The Trader Conflict

I have sports gambled large, both legal and not legal. But I have not placed a sports bet since 1984. I have been in many casinos and NEVER played a slot or a table game. When I was in college I played money bridge, but other than that I have never gambled.


I will not drive or ride a motorcycle, too much risk for me.

I never learned to swim, therefore if I get on the water it is in a very large boat.

I do not like to fly, since 9-11 all the security stuff has given me an excuse not to get on a plane and I haven't.

I drove on an expired driver's license for over ten years and was never stopped or never had to cash a check where I was not known.

My first trade as an active trader was for 2k shares over 15 years ago. I have always traded in thousand share lots, but since decimalization came along, I most often enter at 1k. This is my eleventh year of trading for a living.

Probably, my greatest risk was leaving a fairly comfortable career at the age of 46, knowing that it was very UNLIKELY that I could re-enter that profession at the income level as well as level of job security that I had worked my way up to.

I avoid high crime areas, even medium crime areas.

Once I started trading fifteen years ago, I have had absolutely no investments in anything other than treasuries.

I think it may have been the movie Heat where one of the professional robbers had most of his money in treasuries. In other words he took great risk to get his hands on his money, but he did not have much tolerance for risk after he got the money and he also wanted the liquidity of treasuries as well. I feel the same way, I take enough risk with trading for a living, I do not want to think about other investment decisions that I made get in the way of trading.

I have had friends and family get hit twice, once with the tech bubble and now with the latest crash. They thought I was taking risk with my money and it was they who took the risk when they thought they had invested the "right" way.

Since this is the psychology forum, I think to be a profitable trader it helps to psychologically constructed in a certain way. I am very aware of my left brainedness and my rightbrainedness, and in trading it sometimes is better to be analytical and sometimes it is better to be intuitive.

I sometimes say that it is best to enter a trade patiently and analytically and be a little late and it is better to exit intuitively even impulsively and be a little early.
 
My reply:

" A risk taker is willing to risk harm, loss or injury in the hope of gain or excitement. They don't follow the rules. They follow what attracts them at the moment. They may even do physical stunts such as sky diving or base jumping. They don't have any discipline because they know if they go all in with the risk and they make it out alive the reward will be amazing. A risk taker may take the risk of simply not conforming to society in order to conform to their own beliefs hence becoming a day trader. The bottom line is that somewhere either in the conscious or subconscious a trader starting out has some tolerance and even attraction towards risk."

Generally agree. However, I am pretty obsessive about limiting unnecessary risks. For me a risk is worth taking if there's a reward that justifies it. That doesn't mean I will take *pointless* or foolhardy risks.

"Now let me ask you something. If you had a choice which set of adjectives do you value more? Do you value discipline, rules, structure and organization more? Or do you value fun, excitement, intensity and euphoria more? The truth is that a person who values discipline, rules, structure and organization is very unlikely of taking on the "risky" profession of day trading. On the other hand the person who values fun, excitement, intensity and euphoria is much more likely of taking on the profession of day trading."

Agree. Other than following market hours, I live a pretty unstructured life. I prefer change and new experiences, and find routine, rules, structure and organization pretty boring and tiresome.

"There is just one little problem. In order to become a successful trader you have to value discipline, rules, structure and organization."

Hmm, not sure on this. I see those 4 things as useful to the extent that they serve my goals. In trading it's necessary to be disciplined in some sense, and have rules in certain areas, so that's what I do to the extent that it's necessary. In most of my life it isn't, so I don't. I would say I am more risk averse in the markets than 99% of the public, for example (the 1% is those who never buy a stock and just sit with cash in government bonds).

"Trading is a rare profession where a high majority of aspiring traders must actually change their value structure in order to yield success. To be a trader you must change the person you are."

I haven't found the need to change my value structure. Trading is almost the only career I can think of where I don't have to suppress or change any part of my personality to do it.
 
Quote from Ticketwatcher:


Once I started trading fifteen years ago, I have had absolutely no investments in anything other than treasuries.
More...

You may not be aware of this little factoid: a 90% treasuries, 10% stocks portfolio is actually *less risky* than an all treasuries portfolio. Stocks & bonds are somewhat negatively correlated (especially in stock bear markets) so it's beneficial to own a little in stocks for risk reduction purposes alone. The kicker is that most of the time they are higher return as well, so you get a true free lunch. Above about 10%, the portfolio starts to become more risky so then it's a true trade-off.
 
Quote from Ticketwatcher:

I sometimes say that it is best to enter a trade patiently and analytically and be a little late and it is better to exit intuitively even impulsively and be a little early.
More...
I don't have time other than to look in on anything that might be interesting at ET. I avoid or try to avoid the mountains of garbage and inexperience garbled in so many threads.

But occasionally you come across someone who knows something and it shows. I refer to your comment on your entries and exits. You do what you know and you know what you do.

I am not proposing that my methodology and trading aims are the same as yours. But I enter when my system's signal to buy or to sell comes on. You are right about patience. For day trading the turn can often be quite slow and a 'sell' for example requires patience as price works it way from the end of an upmove into the start of the ensuing downmove. As you note you can exit on the reverse signal as soon as you get the signal. You capture your profit and can again exercise patience taking this reverse signal for your new postion, in this example to buy, going long on the following upmove.

Of course there are fast turns and thats a different matter requiring recognition and action.
:)
 
I'm fascinated by the thought that some traders might change themselves unconsciously. I would like to hear from others about this. My process of changing myself was absolutely conscious and intentional.

I'd also argue that the skills that led me down that "straight and narrow" path for most of my life were instrumental in helping me change.

To succeed in school or a profession in which the path is long and difficult, but more or less defined for you, you must be able to figure out what it is that you don't know or are making mistakes at, and fix it. Most people don't excel in school, running a business, playing an instrument, or anything else because they don't recognize what they need to learn. They ignore the subjects/topics/tasks that are giving them trouble, and concentrate on the things they like, which are usually the things they are already naturally pretty good at. I've been able to succeed by ignoring my strengths and directing most of my effort towards working on my weaknesses, sometimes even until they become strengths. The hardest part is to see and admit those weaknesses. Once you have done that, correcting them is not so hard.

Perhaps others will post here who are also hybrids--part straight arrow, part risk taker :)
 
Most people trade for the excitement whether they admit it or not. Good traders always say their trading has become boring. Like a job, which is what it is.
 
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