Trading psychology resources

ironchef said:
How do I know I have a real edge?
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I talked about this in another thread. Your edge should be something like this, if it is real.

Explicit - information, technology, infrastructure, industry knowledge, time advantage.

Implied - experience, TA, FA, knowledge of inter-market relationships, complex math, financial modeling, programming skills.

Ultimately, you will need some kind of predictive model or technique. Implied edge is never really a sure thing. An explicit edge always does something for you that is unfair.
 
Just today. Had a trade that I KNEW has a very nice edge + within proper context, it's a killer.

I've had limit orders set and got filled nicely. Then i wake up, check the higher timeframes and it looked in my favor. Then i go into 1 minute chart, i see that it could go just slightly higher, i close position, re-open slightly higher. I get filed higher, it drops down to support and i say this is where i could still get f#, should cover here and reshort on a bounce. And that's where shit goes south. I do not cover at support, then it bounces and i'm pissed and i cover at the top and after that it just drops hard(those were minor moves on a 1min, which shouldn't even bother me tbh). I see everything breaking down, i FOMO market short, with a nice stop loss, then it stalls for a few minutes and i think ooh maybe i was too impulsive, there is some support on 1 minute and i get out of the short breakeven... And it dumps for a nice 3R instantly after that.

Also had a very nice trade yesterday, one of my favorite setups with biggest edge, yet in the moment afterwards i had some doubts and i closed it prematurely for whatever the reason, having only banked a very small fraction of what i should've.

And there have been so many times, when i planned the trades on daily, 4H and i say to myself "finally a time to buy right, sit tight"... and i got filled right before a big trend started, yet after getting filled, in the heat of moment i saw those instant profits and without thinking, i panick market close the position because i see a potential threat to my PNL on a 1minute chart(which is nothing but noise in my case..).

Obviously it's stupid and afterwards i am like what the f# happened there.

While you do need an edge for profitable trading, it's not sufficient. By itself, it means shit. It's all about the execution and execution is about psychology.

Our brains/processes are designed for short term survival. Not to mention all the emotions, greed, fear, lust, ego... We are programmed by default to step on our own d*ck when it comes to trading.
 
orbit23 said:
...While you do need an edge for profitable trading, it's not sufficient. By itself, it means shit. It's all about the execution and execution is about psychology.

Our brains/processes are designed for short term survival. Not to mention all the emotions, greed, fear, lust, ego... We are programmed by default to step on our own d*ck when it comes to trading.
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That's the thing, a trade strategy with an edge is just part of the trading plan.

If the rest of the trading plan becomes problematic before or during the trade...it negates the edge.

Another part of the equation that goes with trading edge, psychology is the trade experience as in being able to adapt in a trade when new problems or events show up during the trade.

My point, profitable trading involves a lot more than just an edge in the trade strategy...it involves a lot of things that most of us do not talk about or not able talk (express) about.

I remember a big advocate of the ACD thread (Elitetrader.com biggest Technical Analysis thread) once stated to me in another thread here in the Psychology section that Psychology is Voodoo (his exact words). I was really surprised by his comments considering he uses TA without any automation...essentially he's a discretionary trader. He then goes on to say that if you have an edge...there's no need for the psychology.

Months later, in the ACD thread, he states to someone else that he had a tough trading day and will take a break from trading to sort through some personal issues.

That's exactly my point and he proved it for me. Psychology that impacts our trading can be trading related or not related to trading. Simply, it can be an issue outside of trading that impacts our cognitive decision making process while trading when real money is on the line.

Another example, the most profitable trader that I know and making 6 figures for many years as an institutional trader plus another 6 figure performance bonuses...goes thru a nasty divorce and losses custody of his kids. It was enough personal stress that he had his first losing trading month in many many years.

The firm he works for hires a behavioural finance therapist to get him back on track although I prefer to call them performance coach like the psychiatrist Wendy Rhoades in the TV show Billions.

Anyways, he did get back on track. Another point I'm making, if professional institutional trading firms see the need for psycho therapy, behavioural finance therapist, psychologists to help their employees stay in top mental performance...
  • Why are retail traders so reluctant to make the same connections ?
Behavioural Finance is one of the fastest growing job opportunities on Wall Street. There's a growing number of business that call themselves Behavioural Quants / Quantitative Behavioral Finance (I'm not joking) that help financial institutions optimize their investment / trading decisions via things like decision science, psychometrics and even algorithms.

Another point, do not believe the cognitive decision making process can not be measured.

Dazz said:
When it comes to the world of science, psychology isn’t one. It is a subject area that is too subjective; conclusions are mushy, and not falsifiable or repeatable. As a college major, it is not in the top 20 (or 30) highest paying majors but in fact one of the lowest. The same is true for graduate school salaries. Trading psychology recommendations are outright silly: Consider the statement: “The most important attribute for making money in financial markets is self-confidence” but how is confidence, self or otherwise, defined and measured? If self-confidence cannot be defined or measured, it cannot be understood so how can it be the most important? The same can be said for this statement: “Do not trade money until you are fully confident in your strategy”. Since “fully” cannot be measured it is useless. Consider the list of 6 keys to managing trade psychology [ttp://adamhgrimes.com/blog/keys-to-trading-psychology/] which include “have an edge” (what is that exactly?); to know thyself (who me?) and avoid emotional mistakes (My, oh my).
11 Easy ways have not been measured, verified, authenticated and replicated.
Grade F.
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wrbtrader
 
Last edited:
Execute your edge and walk away. Especially if you're trading off daily and 4 hour charts, you should be able to walk away after you put on your trade. Make that part of your process.


orbit23 said:
Just today. Had a trade that I KNEW has a very nice edge + within proper context, it's a killer.

I've had limit orders set and got filled nicely. Then i wake up, check the higher timeframes and it looked in my favor. Then i go into 1 minute chart, i see that it could go just slightly higher, i close position, re-open slightly higher. I get filed higher, it drops down to support and i say this is where i could still get f#, should cover here and reshort on a bounce. And that's where shit goes south. I do not cover at support, then it bounces and i'm pissed and i cover at the top and after that it just drops hard(those were minor moves on a 1min, which shouldn't even bother me tbh). I see everything breaking down, i FOMO market short, with a nice stop loss, then it stalls for a few minutes and i think ooh maybe i was too impulsive, there is some support on 1 minute and i get out of the short breakeven... And it dumps for a nice 3R instantly after that.

Also had a very nice trade yesterday, one of my favorite setups with biggest edge, yet in the moment afterwards i had some doubts and i closed it prematurely for whatever the reason, having only banked a very small fraction of what i should've.

And there have been so many times, when i planned the trades on daily, 4H and i say to myself "finally a time to buy right, sit tight"... and i got filled right before a big trend started, yet after getting filled, in the heat of moment i saw those instant profits and without thinking, i panick market close the position because i see a potential threat to my PNL on a 1minute chart(which is nothing but noise in my case..).

Obviously it's stupid and afterwards i am like what the f# happened there.

While you do need an edge for profitable trading, it's not sufficient. By itself, it means shit. It's all about the execution and execution is about psychology.

Our brains/processes are designed for short term survival. Not to mention all the emotions, greed, fear, lust, ego... We are programmed by default to step on our own d*ck when it comes to trading.
More...
 
orbit23 said:
Basically looking for any useful trading psychology resources that you can recommend. Doesn't necessarily have to be completely trading related.

My collection so far

I've read a lot from Brett, also from alphamind and listened to some of the podcasts, i've watched some of the Mark Douglas presentations and watched the YT review of the book(didn't actually read the book, but i get it what he means) and also just most recently found that Rande Howell on youtube and i think he is the best to explain the psychology of trading and the theory behind it. Maybe there are more gems like this.

Anyways, i am sure there are a lot more resources, but i am looking if you have any personal recommendations for trading psychology.

Not sure there is much new to find out, but it's fine for me if it overlaps. The more confluence, from as many independent resources just means that there must be something to it. (same as with charts hehe)
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I Coach traders on psychology and mindset, so I have an opinion on this. I think the books can be helpful especially if you’re pretty close to succeeding. For a lot of Traders, they aren’t, and they need to do more work before they can attain discipline.

It can be extremely beneficial to have a person to work with that can help you uncover your specific issues. It’s hard to do that with a book. It’s like when you go see a counselor to get help on an issue they can talk with you about it directly. . . Rather than trying to figure it out yourself. It’s hard to see your own blind spots.

I offer a free consultation if someone is interested in working on mindset and improving discipline and the Trading books, etc. have not been enough. Message me if interested.
 
Andrea Wylan said:
I Coach traders on psychology and mindset, so I have an opinion on this. I think the books can be helpful especially if you’re pretty close to succeeding. For a lot of Traders, they aren’t, and they need to do more work before they can attain discipline.

It can be extremely beneficial to have a person to work with that can help you uncover your specific issues. It’s hard to do that with a book. It’s like when you go see a counselor to get help on an issue they can talk with you about it directly. . . Rather than trying to figure it out yourself. It’s hard to see your own blind spots.

I offer a free consultation if someone is interested in working on mindset and improving discipline and the Trading books, etc. have not been enough. Message me if interested.
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Also, a book can not customize itself specific to the trader's needs whereas someone that's discussing the problems with the trader...that person is able to do that.

There's also the obvious ongoing situation involving Coronavirus...a lot of things will be more online (e.g. telecommunication, telephone, video conferencing)...a new way for the mental and health practitioners.

Yesterday did a video chat with my doctor about a knee problem. He liked the way that it was healing and asked me a few questions about it. In addition, I took my own blood pressure and it's program to send the data automatically directly to his medical office...he received that data too (less than a minute).

There's going to be a new way of doing things because of the Coronavirus but the more serious issues...someone will obviously need to go to the professional's office for care.

Simply, a lot of things will change and I suspect its going to be that way for you too as you work with your clients.

wrbtrader
 
Discretionary trading is a performance activity. This is especially true of intraday trading of a leveraged instrument like stock index futures. (Stock trading is child's play.) As a performance activity, the level of performance from day to day can vary for reasons unrelated to dealing with the market aspect but dealing with the trader's personal aspect. Adequate rest, good nutrition, a stable personal life, etc., all contribute to performing well and, just as important, to sustaining good performance.

A trader who has the knowledge and skills to read his market and connect with the opportunities he sees has little use for " trading psychology." Misreads do occur and opportunities are sometimes missed or not taken fully advantage of, but this is the nature of the game. There is always room for improvement.

A trader who lacks knowledge and skills to be operational in his chosen market usually underestimates his deficiencies in these areas. Acquiring understanding is a haphazard process when learning on one's own, and thus he lacks the understanding of how much work goes into developing a super-duper method and how much further work goes into having complete trust in it. With all the prepackaged "edges" and plans and systems available, he thinks the reason for his lack of success lies in his "psychology." And so the sidetrip begins.
 
savoir said:
Discretionary trading is a performance activity. This is especially true of intraday trading of a leveraged instrument like stock index futures. (Stock trading is child's play.) As a performance activity, the level of performance from day to day can vary for reasons unrelated to dealing with the market aspect but dealing with the trader's personal aspect. Adequate rest, good nutrition, a stable personal life, etc., all contribute to performing well and, just as important, to sustaining good performance.

A trader who has the knowledge and skills to read his market and connect with the opportunities he sees has little use for " trading psychology." Misreads do occur and opportunities are sometimes missed or not taken fully advantage of, but this is the nature of the game. There is always room for improvement.

A trader who lacks knowledge and skills to be operational in his chosen market usually underestimates his deficiencies in these areas. Acquiring understanding is a haphazard process when learning on one's own, and thus he lacks the understanding of how much work goes into developing a super-duper method and how much further work goes into having complete trust in it. With all the prepackaged "edges" and plans and systems available, he thinks the reason for his lack of success lies in his "psychology." And so the sidetrip begins.
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if you don’t have your own challenges with emotions in trading then you may not understand the need for psychology. As someone who works in this field I see it all the time that traders can change their behavior through working with their emotions.

In fact, I think it is the most important part of being a successful trader. If you don’t struggle with this, then you may not have any awareness of it. It’s like if you’ve never been depressed then you don’t know what it feels like For people who are depressed, as an example.
 
Andrea Wylan said:
if you don’t have your own challenges with emotions in trading then you may not understand the need for psychology. As someone who works in this field I see it all the time that traders can change their behavior through working with their emotions.

In fact, I think it is the most important part of being a successful trader. If you don’t struggle with this, then you may not have any awareness of it. It’s like if you’ve never been depressed then you don’t know what it feels like For people who are depressed, as an example.
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You are someone who works in this field, as you say, so what else can be your viewpoint?

Emotions are natural. In trading, it is useful to be aware of them. It is not useful to see them as a challenge to work through. They are informative.

The freakout the OP experiences after he puts on a trade is his brain telling him something useful. It is telling him he doesn't know what he is doing. In other words, he has not done or is incapable of doing the necessary work to build his trading mind to an operational level. He can tell himself and the readers of a public message board otherwise, but he cannot fool his subconscious that sends signals to his brain when he puts on a trade.

Emotional therapy may alleviate the freaking out. But that's not automatically an improvement.
 
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