Just like I can remember who my first grade teacher was AND have no clue who any of my college teachers were - I think we can all remember those first few trades. I had just sold a business that I had lost interest in so I started trading with a well capitalized account. I was not afraid of losing either financially OR in general - I was used to doing very well at anything i tried to do AND assumed this would be the same. I got a DBC data feed which was FM at the time - read a few books - opened my trading account AND did my first SP500 trade. AND wouldn't you know it BUT some how this trade was a 1.20 winner @ $500 per point - damn this was easy. Next trade coming up BUT this time when I called to exit another profitable trade no one answered the phone - so I redialed AND still no one answered the phone. By this time my winning trade had become a losing trade - no big deal I would just wait until it was ahead again AND call back. Of course it kept going down AND down - I had to get out of this thing. I called AND the phone was immediately answered AND I gave them my order for my winner that turned into a $750 loser. Shortly after the trade was closed it went back up again - so I called again AND re-entered the trade. It was slightly profitable - nothing to do so I waited. It came back down AND I exited the trade with another loser AND it kept going down BUT I never did take a short trade. To say that things got progressively worse is an understatement. IF it wasn't a brokerage problem OR a data feed problem - it certainly wasn't my fault - let alone I was getting out to soon AND getting a small gain OR thinking that all I had to do was wait a little longer AND a losing trade would become a winning trade. I realize I had no idea what I was doing OR why this was happening. HOW could I be wrong so often - oh yeah it wasn't my fault -- IF the broker would always answer the phone AND IF that damn data feed would remain connected then I would be winning. I did NOT know that what I was doing was an emotional response to thinking I would be right so I waited out losers BUT then IF I was right I was afraid my winner would disappear [they probably would just NOT answer the phone again] so I just closed the trade as soon as I could. I was developing fears that were taking over my actions AND thinking processes AND didn't even realize it. I still had plenty of money AND remained confident - I was used to doing things well. BUT I still couldn't win AND then the losses were starting to become a factor AND even worse - I was also changing. I became more AND more negative - I quit doing other activities to spend more time staring at charts. AND I was developing a worse AND worse temper - screaming all the time AND breaking things. AND IF not for an absolute angel for a wife - I presume I would have found myself without a family too. AND one day I was looking through some of the reports that DBC offered AND saw one that was for OEX/SP500 trading AND ended up subscribing to the service. It turned out to be a GREAT service AND I learned a tremendous amount about the markets AND managing - it's certainly where I came to understand about trading the markets without OPINION or BIAS to direction. BUT I still could NOT become profitable trading the SP500 AND quit trading it - I traded OEX options which I became profitable at. So I didn't need to trade the SP500 I could just trade options instead. I didn't think I was making excuses AND rationalizing for the reasons I couldn't trade the SP500 - it just all seemed logical that the important thing was to find something profitable to trade. At the time it was a terrific decision BECAUSE what had happened to me emotionally was never going to allow me to trade the SP500. AND actually I feel that way today - that there are so many things that can be traded that it doesn't matter which one it is AND what is critical is to find the one that you can become most comfortable with from an execution AND from a mental standpoint. NEVER put yourself down IF it turns out you can't do something - NO ONE needs to be an index futures trader. BUT it still bothered me. WHY couldn't I trade the SP500 - WHAT was wrong with me that I couldn't do this. Part of the service I belonged to included seminars every 6 months AND at the one I had just attended there was a presentation by an OEX market maker. After a short discussion he turned his presentation to trader psychology AND work he was doing in training floor traders through the emotional aspects of trading. I had never heard of OR thought that any of these concepts existed - I sure know that the person who ran the service didn't believe in them OR ever mention them. I started studying different aspects of psychology AND regardless of what it was related to - the concepts of overcoming emotion AND fear AND pain avoidance were central themes. It didn't matter whether it was trading OR business OR athletics - your knowledge AND talents were NOT enough - you had to know how to work with yourself INSTEAD of having yourself work against you. There was NOTHING wrong with me - there is NOTHING wrong with anyone BUT I sure came to find out that I really didn't know the first thing about myself OR about trusting myself OR about how to use any strengths that I had to my advantage WHILE trying to keep TYPICAL emotional responses from being a problem that undermined everything. AND that is the challenge that we all have: to quit beating the shit out of ourselves over something that we cannot control WHICH is what the markets are going to do next AND THUS to quit beating the shit out of ourselves because this lack of control is going to thus cause losses. Eventually I became able to control my emotions [never have been able to eliminate them AND really it's not my objective] AND gain the self-trust that regardless of not knowing where the market would go - I could at least know what I was going to do regardless and could be disciplined in what I did. This led to repetition and consistency which the allowed me to shift my focus to trading method and trade management AND become a profitable trader. It didn't seem to matter WHAT I read - WHAT it was written about - WHEN it was written - psychology AND your control of yourself were constant themes in achieving success.
In an inner conflict, a part of your self is
interfering with positive growth in your life. You must not
underestimate this inner opponent, for it can be as powerful as
that part of your self that desires change. It draws on the
same strengths and is aware of the same weaknesses. To
overwhelm your inner opponent…whether it is a habit that should
be broken or a psychological barrier that must be overcome…you
must develop a strategy that will refocus your energies and
restructure your personality. As difficult as this sounds, it
is the key to a certain and lasting triumph.
The costs in overcoming inner conflicts are
primarily emotional ones, and only through discipline and
commitment can they be met. To emerge from this CHALLENGE
successfully, it is important to keep in mind that you are not
attempting to destroy that part of yourself you wish to
overcome. Instead, you are usurping its strengths so that you
can put them to work in your new orientation.
Once a challenge is begun, an inner opponent must
never be given time to rest and recuperate. Your inner conflict
must never be far from your awareness as you continually gauge
its hold on your life and keep it in constant retreat.
Continual forward momentum and the “wearing down” of your
problem is the key to eradicating it permanently.
Your inner conflict developed because you have, at one time,
given it some control in your life. Now you must take that
away. Your inner opponent cannot survive long without your
support. When you continually refuse to yield to it, it will
expire. If its given a respite, however, its strength will
return and your challenge must begin once again. Therefore,
your determination is of critical importance, for only a
strategy that is constant and vigilant will triumph completely.
Why was one of these men able to amass a fortune
while the other never acquired more tan a few thousand dollars
at the same pursuit? Their chances were equal at the start so
far as capital and opportunity go. The profits were there,
waiting to be won by either or both. The answer seems to be in
the peculiar mental qualifications, highly potent in the
successful trader, but unpossessed by the other.
By proper mental equipment we do not mean the
mere ability to take a loss, define the trend, or to execute
some other move characteristic of the professional trader. We
refer to the active or dormant qualities in hi make-up; viz.,
the power to drill himself into the right mental attitude; to
stifle his emotions, such as fear, anxiety, elation,
recklessness; to train his mind into obedience so that it
recognizes but one master. These qualities are as vital as
natural ability, or what is called the sixth sense in trading. Some people are born musicians, others seemingly void of musical taste, develop themselves until they become virtuosos. It is the I WILL in a man which makes him mediocre or pre-eminent.
I do not think any discussion about trading AND/OR trader psychology can be done without a harsh realization -- the VAST majority of all traders lose. It is stated that 95% of futures traders lose all of their money within the first year of trading AND many of these people are ones whom are extremely successful in other walks of like. WHY is this - WHY aren't otherwise successful people also successful as traders. WHY is the other realization - the REASON that most traders lose is that they are NOT psychologically prepared to trade - they are NOT prepared to enter into something where they have no control over the outcome from the advantages that they may have developed. You cannot win trading: because your company is so large that you can buy cheaper than your competition - because your store has the best location - because your lab has the best equipment - because you can afford the best lawyer - because you can jump higher - because you can run faster - because you can throw the ball harder ETC ETC ETC.
"Trading is more than technical
indicators, patterns, and support or resistance. Trading is
psychological. Only the traders who have worked through those
issues have been consistently successful in their trades.
Trading inconsistency, misreading market direction, fear,
frustration, hopelessness, and 'giving it back' after several
successful trades are all symptoms of improper or dysfunctional
thinking."
"Without a sound trading
psychology there is usually little chance of repeated and
consistent success. BUT you can overcome fear, anxiousness,
confusion, frustration and feelings of hopelessness. You can
trade effectively and profitably when you can think and act
without self-destructive emotions and behaviors." “I think good trading is much more a psychological problem then it is methodological. I think that what happens is that fear takes over. And whenever a trader is trading from fear, we are absolutely, from a psychological standpoint, going to be the most consistent traders ever. The only problem is that we buy the tops and sell the bottoms. We do exactly the wrong thing when we’re coming from a fearful state of mind.” Trading Psychology Books
"The largest group of consistent losers is composed primarily of doctors, lawyers, engineers, scientists, CEOs, wealthy retirees, and entrepreneurs, Furthermore, most of the industry's best market analysts are the worst traders imaginable." "[the markets] confront the individual with some of the most sustained, adverse psychological conditions you can expose yourself to. The best traders think differently from the rest. The winners have attained a mindset -- a unique set of attitudes -- that allows them to remain disciplined, focused, and above all, confident in spite of the adverse conditions. As a result, they are no longer susceptible to the common fears and trading errors that plague everyone else." "The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely and without hesitation or conflict, admit it isn't working. They can get out of the trade -- even with a loss -- and doing so doesn't resonate the slightest bit of emotional discomfort. In other words, the risks inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence."
"Most traders don't believe that their trading problems are the result of the way they think about trading or, more specifically, how they are thinking while they are trading."
Trading Fears Every time you consider taking a trade THEN every moment you are in that trade [assuming that you do take it] you are confronted with uncertainty. This uncertainty most often is felt by traders as fear AND pain - specifically the fear of losing money AND the fear of being wrong. Ultimately your success in trading will come in great part as a function of your reaction to these fears. Trader A can not accept this fear AND pain - AND thus tries to avoid it. By definition this avoidance will be an unwillingness to consistently implement a trading plan/method according to the best analysis available at the time. They may have the best method that exists BUT they will still lose because fear AND pain avoidance will not let them follow the method. Trader B has accepted this uncertainty as inherent to trading AND instead of having uncertainty be felt as fear AND pain to be avoided - the trader instead is able to focus on their plan/method. I think this happens primarily because they have developed the self trust that they will make the decisions necessary AND once made they will perform what they decided to the best of their ability. They may be wrong AND they may have to take a loss BUT they won't continually make excuses OR exceptions that undermine self trust. Evaluate yourself - HOW do you react to the unknown - are you Trader A OR Trader B We will NEVER know what is going to happen next - BUT we can decide what we will do in response to WHAT happens AND trusting ourselves to act according to that decision will allow us to focus on trading what we see on the charts instead of having that effort undermined by fear. I cannot say that I trade without emotion - I am often frustrated by something that happens OR even mad at myself by how I reacted to OR misread something I felt I saw on the charts. BUT I do not see this emotion as fear OR as something that keeps me from acting how I feel is necessary OR when I feel it is necessary - I feel I can trust myself. I feel that I understand the core of my trading method very well AND can usually quickly process what I am seeing on the charts in the context of that method. I also think I usually do a good job of maintaining focus AND concentration - AND usually have the discipline to stay flat when I feel that focus is not there.
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