I agree. The long term stress caused the lack of emotion. To much exposure for too long. I was very much animated and into the process during my early years. We used to call mechanical trading "monkey trading", because if you used mechanical systems you didn't need a trader (a monkey could do it). I used to sit across the aisle from the program trading desk where one guy monitored the systems and changed allocations throughout the day based on market liquidity. You probably can't imagine how stressful it was to go over and see the P/L being racked up all day long (knowing if you didn't outperform...you're gone). It's probably why I've liked using modeling to create strawman traders and beating their performance as my way of saying "...no monkey's got my job".
Trading psychology: is it being overdone?
- Thread starter Thunderdog
- Start date
I agree. The long term stress caused the lack of emotion. To much exposure for too long. I was very much animated and into the process during my early years. We used to call mechanical trading "monkey trading", because if you used mechanical systems you didn't need a trader (a monkey could do it). I used to sit across the aisle from the program trading desk where one guy monitored the systems and changed allocations throughout the day based on market liquidity. You probably can't imagine how stressful it was to go over and see the P/L being racked up all day long (knowing if you didn't outperform...you're gone). It's probably why I've liked using modeling to create strawman traders and beating their performance as my way of saying "...no monkey's got my job".
Thunderdog, I agree with you that having the proper trading psychology is important. It is also true that everyone has, de facto, emotions that are present as they sense market data.
As you state, for all of us, our vulnerability changes as we operate. You sound as though most of the time things are as you desire but occasionally your emotions are at variance with what you want them to be.
Gringinho, sharply, relates your feelings to the strategy that may be at hand when you are more vulnerable. He connects strategy, to beliefs and philosophy as well.
Emotions relate to sensed data as it relates to our situation as Steve46 points out pragmatically by considering things from the sidelines to enter, managing positions, and leaving positions.
These three key vantage points all contribute to the totality of how emotions contribute psychologically to success. It is very powerful to have and integrated view. It is very necessary to strive to have more and more oneâs trading time occur in the context of emotions that contribute to success rather than having emotions that stymie or distort anything.
Where in the spectrum of offerings does information exist to allow traders to shape their approaches to have good objective emotional conditions exist for the spectrum of applications of their beliefs, strategies based upon conscious philosophies?
People can look to how psychology works. They can look to examples of people who do it well. They can explore the world of self-improvement. All these external resources are there.
Internally, everyone does examine how they progress, stage by stage, and particularly when sustained improvements are found. Not too many people examine where they started from nor how profoundly they are influenced by others in their lives.
Personal philosophy is the largest deepest resource a person has and it doesnât change much nor easily. Beliefs are acquired through deep experiences that have impacted a person as he grows into a larger and larger consciousness of his environment and habitat. About the only thing that proactively and creatively changes for traders is, as gringinho points out, is the strategy a person follows. It may actually be impacted upon during making money, especially when there is no success in the picture.
The financial industry addresses everything usually in many ways and wherever money can be made. At the other extreme, traders themselves, must and do address the psychology of trading.
How does one achieve the proper trading psychology?
Very neatly everyone gets one as part of the turf. To make it proper is the task that must be addressed.
Formally, wonât work usually. Informal approaches work best. The books, workshops, forums are formal and external. Internal and informal effort is the way to go. Thunder and Gringinho, show that self-assessment works nicely and covers the waterfront. It is possible to, informally, practice iterative refinement of taking oneâs trading psychology from where it is to the proper place.
The old standards apply. Documenting the process of change works very effectively. This is especially true if a person has a written plan for trading. That being in place, al,ost everyone will notice that there is not anything in the plan regarding the trading psychology. This is just the way it is in the industry at present.
By adding this to the plan as a starter, a profound discovery may be made. The psychology of trading for any plan deals in several ways with the beliefs of the trader. Trading plans often leave out beliefs as you may be just noticing.
Adding in the beliefs to the plan along with the original plan and the added psychological aspects of the plan completes a triad. You will find yourself in a very very strong place to begin to iteratively refine what you do to make money.
Looking at steve, thunder and gringinho compared to those I mentor (I rank them too) all have relatively few beliefs that they carry from their life experience that are counter to making money trading. The informal process has to start with consciously detecting beliefs that you have that interfere with making money. I am a depression baby, my parents are work ethic oriented, and I was taught to compete in sports, and in BSA to do the oath and law.
Everyone starts somewhere to deal with the best possible beliefs for making money. By simply journalling your trading, your emotions, your screw ups, and your successes and failures, you get to make continuing changes. By replacing common myths that you belief with proper objective beliefs, you get to observe changes in yourself. Fewer and fewer unwanted (unexpected) emeotions will come up for you. At some point good feelings will outweigh bad feelings. Good feelings are ones that work for making money. You build on those and associate them with beliefs that work.
Any emotions that are negative and associated with failure can, be journalled and the associated belief rechecked, restated, and provisionally be used to replace what doesnât work.
None of this has to do with your strategy or trading approach. It all has to do with what surrounds that. Some people backtest. What is backtested is intellectual stuff.
Psychology deals with the emotional half of the sensing/emotion pair you use to monitor. It deals with how you compare the data and analysis with your beliefs. The train of events is monitoring and infusing an sensing/emotion then doing analysis, then making decisions (these come to be by engaging beliefs emotionally) and acting. You then get consequences. You will take this as experience and pile it up with other experience in your memory.
To journal informally, allows you to look at things. You see what you have. Think about what you want instead. Make repairs based upon the consequences you earned. Write out what you want. You will see the changes that are needed. Changing beliefs is the most helpful.
Your informal efforts are a book. The book is a resource. What is nice about reading this book occasionally is that it is not âoverdoneâ. It will grow longer and longer and never be âoverdoneâ.
The proper trading psychology is your book. It has the beliefs you need that you repaired and then used successfully to make money.
All of this is old stuff. Nothing new. Boring and dull.
As you state, for all of us, our vulnerability changes as we operate. You sound as though most of the time things are as you desire but occasionally your emotions are at variance with what you want them to be.
Gringinho, sharply, relates your feelings to the strategy that may be at hand when you are more vulnerable. He connects strategy, to beliefs and philosophy as well.
Emotions relate to sensed data as it relates to our situation as Steve46 points out pragmatically by considering things from the sidelines to enter, managing positions, and leaving positions.
These three key vantage points all contribute to the totality of how emotions contribute psychologically to success. It is very powerful to have and integrated view. It is very necessary to strive to have more and more oneâs trading time occur in the context of emotions that contribute to success rather than having emotions that stymie or distort anything.
Where in the spectrum of offerings does information exist to allow traders to shape their approaches to have good objective emotional conditions exist for the spectrum of applications of their beliefs, strategies based upon conscious philosophies?
People can look to how psychology works. They can look to examples of people who do it well. They can explore the world of self-improvement. All these external resources are there.
Internally, everyone does examine how they progress, stage by stage, and particularly when sustained improvements are found. Not too many people examine where they started from nor how profoundly they are influenced by others in their lives.
Personal philosophy is the largest deepest resource a person has and it doesnât change much nor easily. Beliefs are acquired through deep experiences that have impacted a person as he grows into a larger and larger consciousness of his environment and habitat. About the only thing that proactively and creatively changes for traders is, as gringinho points out, is the strategy a person follows. It may actually be impacted upon during making money, especially when there is no success in the picture.
The financial industry addresses everything usually in many ways and wherever money can be made. At the other extreme, traders themselves, must and do address the psychology of trading.
How does one achieve the proper trading psychology?
Very neatly everyone gets one as part of the turf. To make it proper is the task that must be addressed.
Formally, wonât work usually. Informal approaches work best. The books, workshops, forums are formal and external. Internal and informal effort is the way to go. Thunder and Gringinho, show that self-assessment works nicely and covers the waterfront. It is possible to, informally, practice iterative refinement of taking oneâs trading psychology from where it is to the proper place.
The old standards apply. Documenting the process of change works very effectively. This is especially true if a person has a written plan for trading. That being in place, al,ost everyone will notice that there is not anything in the plan regarding the trading psychology. This is just the way it is in the industry at present.
By adding this to the plan as a starter, a profound discovery may be made. The psychology of trading for any plan deals in several ways with the beliefs of the trader. Trading plans often leave out beliefs as you may be just noticing.
Adding in the beliefs to the plan along with the original plan and the added psychological aspects of the plan completes a triad. You will find yourself in a very very strong place to begin to iteratively refine what you do to make money.
Looking at steve, thunder and gringinho compared to those I mentor (I rank them too) all have relatively few beliefs that they carry from their life experience that are counter to making money trading. The informal process has to start with consciously detecting beliefs that you have that interfere with making money. I am a depression baby, my parents are work ethic oriented, and I was taught to compete in sports, and in BSA to do the oath and law.
Everyone starts somewhere to deal with the best possible beliefs for making money. By simply journalling your trading, your emotions, your screw ups, and your successes and failures, you get to make continuing changes. By replacing common myths that you belief with proper objective beliefs, you get to observe changes in yourself. Fewer and fewer unwanted (unexpected) emeotions will come up for you. At some point good feelings will outweigh bad feelings. Good feelings are ones that work for making money. You build on those and associate them with beliefs that work.
Any emotions that are negative and associated with failure can, be journalled and the associated belief rechecked, restated, and provisionally be used to replace what doesnât work.
None of this has to do with your strategy or trading approach. It all has to do with what surrounds that. Some people backtest. What is backtested is intellectual stuff.
Psychology deals with the emotional half of the sensing/emotion pair you use to monitor. It deals with how you compare the data and analysis with your beliefs. The train of events is monitoring and infusing an sensing/emotion then doing analysis, then making decisions (these come to be by engaging beliefs emotionally) and acting. You then get consequences. You will take this as experience and pile it up with other experience in your memory.
To journal informally, allows you to look at things. You see what you have. Think about what you want instead. Make repairs based upon the consequences you earned. Write out what you want. You will see the changes that are needed. Changing beliefs is the most helpful.
Your informal efforts are a book. The book is a resource. What is nice about reading this book occasionally is that it is not âoverdoneâ. It will grow longer and longer and never be âoverdoneâ.
The proper trading psychology is your book. It has the beliefs you need that you repaired and then used successfully to make money.
All of this is old stuff. Nothing new. Boring and dull.
In and of itself, it is neither good nor bad nor healthy nor unhealthy. The issue is not so much emotion but stress. Up to a certain level, stress aids in the decision-making process. Past that point and stress interferes with it.
The question becomes, then, why the stress, which is where "emotions" come into it: fear, doubt, anxiety, hope, greed, etc. Talking about one's "anxiety" isn't particularly productive because anxiety is not monolithic, because anxiety has many causes, and because anxiety can be either supportive or detrimental. Using "emotion" words enables one to be specific, which, in turn, enables one to examine the cause and possible solutions.
That's what Deming - the Quality Guru who made Quality in Japan become a reality - thinks about the psychologists in Quality Management Field: psychological exhortation tend to be smoke and screen. For him it is a fake to believe that best effort or will is enough if one doesn't have true knowledge to direct them in the good direction. He doesn't deny the role of motivation on the contrary but motivation without work is useless and work without knowledge also. So his SOPK (System Of Profound Knowlege) see the link in my signature.
http://www.maaw.info/ArtSumDeming93.htm
(although it's about management in industry you can transpose to trading if you take trading as a business. The advantage in trading is you don't have to compete with collegues you work for you.)
"Will best efforts bring improvement? No, Deming argues that best efforts not guided by knowledge will dig us deeper into the pit we are in. There is no substitute for knowledge. "
http://www.maaw.info/ArtSumDeming93.htm
(although it's about management in industry you can transpose to trading if you take trading as a business. The advantage in trading is you don't have to compete with collegues you work for you.)
"Will best efforts bring improvement? No, Deming argues that best efforts not guided by knowledge will dig us deeper into the pit we are in. There is no substitute for knowledge. "
C'mon Thunderdog, what is your response to the above...
I would go with " preying upon our weaknesses " as far as gurus are concerned.
Reading books and work on yourself is much better, if you feel you need it. If you are good trader chances are that you are smarter then guru anyway and you know yourself much better.
If you have a proper genetic make up to be a trader, you can be one, if you do not have it not even shacking up with Ruth Roosevelt for a year will help you . Or with Ari Kiev if you like him better .
Thank you all for your comments. I think there is some validity in what each of you had to say. However, in this case, it seems that Harrytrader voiced the concerns that I had when I started this thread.
As I said in my earlier post, I believe that proper psychology is essential to successful trading. My concern is whether we sometimes lean disproportionately on this element at the expense of the time and hard work it takes to research and develop a suitable trading strategy. I know that in my case I was more concerned with psychology when my trading method was less reliable than it is now. As my method gradually improved over time (and there is still much room for improvement), I became less reliant on what the psychology gurus had to say. Not that I dispensed with the basic elements of trading psychology, but rather that it played a proportionate role and not a disproportionate one.
My point is this. I have no doubt that there are people who have designed very good trading strategies but who may not be able to properly execute them due to poor trading psychology. However, I believe that this group is dwarfed by those who have put insufficient time and effort into a proper and suitable trading strategy and who are now looking to overcompensate for this shortfall with a disproportionate focus on "trading psychology." It is easier to read a book and ponder concepts than it is to put up with the endless tedium of trying to find a better way to trade. It is easier to say, "Enough is enough, there is no 'holy grail' (or whatever the modern term may now be) so I will just focus on me and my feelings." It is the path of least resistance. At some time or another, I imagine that we all reach this point. My guess is that the more we feel the "need" to focus on psychology, the more our trading strategy should probably be revisited, retested and reaffirmed. This, alone, may actually help our psychology. Well, at least that was the case for me.
To summarize, my guess is that the group of people who have an excellent trading strategy and poor trading psychology represent a small proportion of all traders. Therefore, it is probably prudent not to have the working assumption that we are in this group. When the market gives me a good drubbing I will look inwards. But I will also look at my method. I may not necessarily amend it, but if similar instances recur with any frequency I will see how I can improve my method rather than just recite my mantra a little louder. This is how I have improved my own method over time and I expect and hope that this is the way it will continue to improve.
Regards,
Thunderdog
As I said in my earlier post, I believe that proper psychology is essential to successful trading. My concern is whether we sometimes lean disproportionately on this element at the expense of the time and hard work it takes to research and develop a suitable trading strategy. I know that in my case I was more concerned with psychology when my trading method was less reliable than it is now. As my method gradually improved over time (and there is still much room for improvement), I became less reliant on what the psychology gurus had to say. Not that I dispensed with the basic elements of trading psychology, but rather that it played a proportionate role and not a disproportionate one.
My point is this. I have no doubt that there are people who have designed very good trading strategies but who may not be able to properly execute them due to poor trading psychology. However, I believe that this group is dwarfed by those who have put insufficient time and effort into a proper and suitable trading strategy and who are now looking to overcompensate for this shortfall with a disproportionate focus on "trading psychology." It is easier to read a book and ponder concepts than it is to put up with the endless tedium of trying to find a better way to trade. It is easier to say, "Enough is enough, there is no 'holy grail' (or whatever the modern term may now be) so I will just focus on me and my feelings." It is the path of least resistance. At some time or another, I imagine that we all reach this point. My guess is that the more we feel the "need" to focus on psychology, the more our trading strategy should probably be revisited, retested and reaffirmed. This, alone, may actually help our psychology. Well, at least that was the case for me.
To summarize, my guess is that the group of people who have an excellent trading strategy and poor trading psychology represent a small proportion of all traders. Therefore, it is probably prudent not to have the working assumption that we are in this group. When the market gives me a good drubbing I will look inwards. But I will also look at my method. I may not necessarily amend it, but if similar instances recur with any frequency I will see how I can improve my method rather than just recite my mantra a little louder. This is how I have improved my own method over time and I expect and hope that this is the way it will continue to improve.
Regards,
Thunderdog
You may be looking through the wrong end of the telescope. Doing the work to come up with a strategy that meets one's goals obviates the need for a lot of self-examination. "Feeling good" about one's trading is obviously no substitute for developing a strategy that justifies those feelings.