Trading psychology resources

[Andrea Wylan]

In theory, practice and theory are the same, but in practice they are different.

It requires discipline and focus. That is why they probably compare it to elite sports.

Just to give an example. You can't know which trade will work out and which won't. So if you decide to take some trades and not the others, you might end up unlucky picking the wrong ones and in theory you should be in profit but in practice you are down. You might get 3 losing trades in a row and so you decide not to take the next one and you bet the next one would've worked and paid for all the previous and then some. You take the trade, it goes in your favor and then baam it reverses and stops you out. The next time you see your trade working and in profit you know that it will keep going but it's that fear of losing profits and YOU RUSH to take profits only to see the price continue moving in your favor.

Sh*t like that is what i am currently struggling with the most.... The solution is probably to focus on executing the current trade to the best of your abilities.

I totally get what you’re saying. See my response above. A lot of this is The subconscious, patterns and habits and beliefs from the past. Things that have nothing to do with trading get in the way of trading with discipline, or maybe even Get in the way of elite athletes, As you mentioned. It’s the mindset. Remember that book, the inner game of tennis? This is the inner game..

 

[themickey]

In theory, practice and theory are the same, but in practice they are different.

It requires discipline and focus. That is why they probably compare it to elite sports.

Just to give an example. You can't know which trade will work out and which won't. So if you decide to take some trades and not the others, you might end up unlucky picking the wrong ones and in theory you should be in profit but in practice you are down. You might get 3 losing trades in a row and so you decide not to take the next one and you bet the next one would've worked and paid for all the previous and then some. You take the trade, it goes in your favor and then baam it reverses and stops you out. The next time you see your trade working and in profit you know that it will keep going but it's that fear of losing profits and YOU RUSH to take profits only to see the price continue moving in your favor.

Sh*t like that is what i am currently struggling with the most.... The solution is probably to focus on executing the current trade to the best of your abilities.

Very good post!
For those who don't exactly undertand; if you get trading signal(s) which your system understands to be highly probable setup, in theory you should take all the trades on condition you have the trading capital to allow.
But your psychology prevents you. (Fear, doubt, stress etc).
Much of this hesitancy from past behaviour where winning setups turn out to be losers.

I have the same problem, but there are ways around it.
(a) You need plenty of trading capital
(b) You need some undertanding on the probabilities of which way the broader mkt is heading.
(c) These days I'm reducing my trade size down to ridiculous size (very tiny) then easing in with additional trades. Badically I buy in again after a position is partially established on pullbacks and due to further trade confirmations. My calculations are, although brokerage increases I save due to getting in higher win rate and at times cheaper prices.
(d) Trading needs to be treated as a game, when you play chess, you need to/forced to take your move. Trading likewise, there is no room here for cowards, if you can't take trades due to fear, bugger off as it's not for you.
(e) It pays at times to have a break and rest up a bit.

 

[Akhaldanos]

@orbit23: In fact, what you've described in your example is the sole reason why I prefer 100% rule-based systematic trading over discretionary; it is quantifiable and executable, just enter on a signal no matter what and... true, many of the entries and exits are painful, but it's worth it.

More of a problem is to actually KNOW that you have a profitable strategy, but that's another topic.

 

[themickey]

I'm fortunate in the fact my system only usually gives me a buy signal a couple of times a week.
If it were every day or all day, I think it would be too much to handle because there is more to my system than just willy nilly taking a buy signal. I buy from a quite large several hundred stock universe so I gotta check up on a few other things like recent announcements and see if the media has been chin wagging about them.
Most often on a buy signal I deliberately wait awhile to see how the other buyers are reacting.