Psychology

Trading is a Journey in Self-Discovery

I know a trader, let’s call him Leon. He day trades Futures. He has been actively trading for several years. His profits are erratic and undependable, often going dramatically up and down in the same session. When Leon is making money his confidence soars and he feels like he is a power trader. On the other hand, when he loses money, which is more times than he cares to admit, he feels like a failure, a loser and stupid.  For quite some time Leon has wondered why he can’t be consistently successful, and why his drawdowns tend to be much larger than his profits.  He wonders this even though he has no Business Trade Plan, doesn’t consistently document his trades and despite having numerous rules, tends to violate them regularly.  Leon doesn’t have a clue and wonders why he can’t get different results even though he continues with this pattern of behavior. Leon is out of control and unless he changes he is headed for a financial ice-cold shower.  Are you Leon?

If you want to change your behavior, you must first change your thinking and since much of your thinking is driven by your unconscious, you must become aware of your underlying self-sabotaging beliefs that drive thinking, emotions and behavior.  Trading is arguably the most difficult business venture on the planet; why?  Because we are talking about money, and with every tick while in a trade you are either gaining or losing money. But, it goes beyond that.  Money is not only the cornerstone of our society, it is tied up in your identity.  If you are winning it, you often feel powerful, competent, intelligent or “good looking” and if you are losing you feel impotent, incompetent, stupid or “ugly.”  The fact of the matter is that when you go to the market you invariably are expressing yourself; whether you want to, try to or feel a need to, it doesn’t matter, you are and will express yourself.  And, when expressing yourself your behavior is tied much of the time to unconscious beliefs.  Actually, when you are in the markets, every blemish, weakness and character flaw in your personality will be challenged, called out and tested.  Now, that doesn’t mean that the markets are doing that to you.  On the contrary, the markets have no intention for you – even though you may have often wondered how the markets knew that you just placed a long trade and how they chose that exact moment to reverse!  Also, there are no rewards, punishments, pain or risk in the markets, only consequences.  You provide all the rest.  And, with changing yourself, you must provide all the ingredients for that as well.

You can’t change what you can’t face and you can’t face what you don’t know.  Awareness is key.  The more aware you are of your underlying self-sabotaging beliefs the more you can position yourself to begin to address these issues – one at a time.  Now, you might be asking; how do I do that?  How do I become more aware if these limiting beliefs are unconscious.  Good question!  You become aware by simply asking questions of yourself, and by introspection and more importantly by personal observation as you are going through market observation.  By checking yourself and checking the market you’ll begin to gain an awareness of why you have no Business Trade Plan or failing to follow the one you have.  Why you have no Trade Journal, or failing to document in it.  Why you are continuing to do things that you say you must stop doing; and why you are failing to do those very things that you say you must do.  Once you identify the underlying self-sabotaging data, you can begin to deal with them…one issue at a time.

So, trading is a journey in self-discovery, and you must begin to pull back the layers of your unconscious onion, one at a time to begin to realize and recognize what is motivating you to behavior that is producing results that you don’t want.  There are essentially two kinds of data with respect to trading.  Many traders miss this fact and therefore miss a very important set of variables that impact heavily upon their trading.  One type of data is mechanical data, which are everything that have to do with the markets; that being, news, technical analysis, instruments, indicators, etc..  This data is external to you.  The next type of data is internal data, which are everything that have to do with your thoughts, emotions and behavior; in other words the T+E+B=R equation which impacts upon every outcome that you get.  You must manage this equation in order to manage your results.

Trading is a 100% mental and emotional game.  Either you are preparing, analyzing, processing or executing while trading; all of which require mental and emotional tools.  If you don’t have mental and emotional tools that’s like driving without a steering wheel; and you will not only lose your way but you will crash and burn without it.  And, you can’t steer if you are driving blindfolded.  You must become aware of what is between you and keeping commitments with consistent follow-through. In Mastering the Mental Game we teach you tools and techniques to put the steering into your trading while helping you to remove the blindfolds as well in order for your journey to be a joyful and self-fulfilling one.  Remember, you can’t change what you can’t face, and you can’t face what you don’t know.

May all your trades be green.

Dr Woody Johnson can be contacted at The Online Trading Academy

Dr. M. Woodruff Johnson (known as "Woody") is the author of "From Pain to Profit: Secrets of the Peak Performance Trader". He has actively and successfully traded stock options, forex and futures for around 10 years. He was a former Executive Director of the Kaiser Permanente, Watts Counseling and Learning Center and holds certificates in Accelerated Learning, Neurosensory Development and hypnotherapy as well as others. He is dedicated to helping others achieve their goals and get the results in trading and life that they desire.

Dr. M. Woodruff Johnson (known as "Woody") is the author of "From Pain to Profit: Secrets of the Peak Performance Trader". He has actively and success...

NVP

Legendary member
36,767 1,880
Peel my onion !

not bad .....but you have to be way down the learning pipe before this stuff makes a difference...dont worry about peeling your onion till you understand the complete insides and outs of Markets , Trading and your own system - then start the soul searching

most people think 3-6m is enough .....I say 10,000 hours

N
 

BeginnerJoe

Senior member
3,329 350
Re: Peel my onion !

I say 10,000 hours
Must be a slow learner.

The truth is there is nothing wrong with people. But there is something wrong with the market. If people look inwards, they will never find what they look for.
 

the hare

Senior member
2,949 1,283
Re: Peel my onion !

If people look inwards, they will never find what they look for.
I'm broadly in agreement with you, but I think there comes a stage where many people might have too, particularly those drawn to a more discretionary approach.

The problem is that psychology plays a part in every single aspect of the game, and that also includes the way we approach research, out beliefs about how markets operate, how we view a chart, our work ethic etc. I'd wager there are a great many people struggling even at these levels who may benefit from. A little self analysis and professional help

Im not sure this stuff is appropriate for discussion in public, and we are unlikely to get anyone to say very much anyway.
 

Billy Gates

Active member
161 14
Re: Peel my onion !

Must be a slow learner.

The truth is there is nothing wrong with people. But there is something wrong with the market. If people look inwards, they will never find what they look for.
I would tend to disagree. In my view it is the complete opposite. There is nothing wrong with the markets, the problem lies with the people.

If they don't look inward they will never find the answer.
 
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normbeef

Well-known member
358 48
Re: Peel my onion !

I would tend to disagree. In my view it is the complete opposite. There is nothing wrong with the markets, the problem lies with the people.

If they don't look inward they will never find the answer.

Funny, the years tick by and the message is always the same..

Trading is without doubt a "blend" of psychology and skills.

Starting out for most people is without doubt better if the psychology part is in place to start with. All that is required is rock solid discipline and organisation.. thats all..

then the "market" skills follow... most people dont have any disipline, and they dont learn... ever :cry:
 

counter_violent

Legendary member
9,697 2,471
Re: Peel my onion !

I'm broadly in agreement with you, but I think there comes a stage where many people might have too, particularly those drawn to a more discretionary approach.

The problem is that psychology plays a part in every single aspect of the game, and that also includes the way we approach research, out beliefs about how markets operate, how we view a chart, our work ethic etc. I'd wager there are a great many people struggling even at these levels who may benefit from. A little self analysis and professional help

Im not sure this stuff is appropriate for discussion in public, and we are unlikely to get anyone to say very much anyway.
Well, just for fun, lets take this bit about how we view a chart.

The discretionary trader.

I'd say that the vast majority of single instrument monkeys have one chart on their screen...
ok so maybe as they get a little further down the line they decide that multiple time frame charts and more screens make the picture clearer....
even further down the line they decide that their chosen instrument would benefit from looking at correlation...
and so it goes on.

The point is...at any point in time..price can do one of three things, up, down, or sideways.

Might just as well toss a coin and hope for the best :LOL:
 

BeginnerJoe

Senior member
3,329 350
Re: Peel my onion !

Might just as well toss a coin and hope for the best :LOL:
Coin tossing will no more increase the chance of success in trading than in playing roulette. The odds are fixed in both, except the odds in trading is significantly lower. The only saving grace for trading is the unlimited nature of the reward. The reason some people win in the market over the long run is to do with the fact that they understand the reward and not because they know how to win more often.

The key to trading is to understand what is out there. No amount of psychological introspection or massaging will change the the odds on a roulette table. To focus on the psychology, which has no effect on the odds, is a waste of time.
 
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Billy Gates

Active member
161 14
Re: Peel my onion !

The key to trading is to understand what is out there. No amount of psychological introspection or massaging will change the the odds on a roulette table. To focus on the psychology, which has no effect on the odds, is a waste of time.
Once again i have to disagree with you Joe. Everything one does has some degree of psychological involvement in it. Its just that in most cases your psyche is doing it subconsciously.

It is not about the odds but its how you handle them odds that makes all the difference. Therefore psychological introspection is no waste of time. If people traded just based on the odds or played roulette just based on the odds then they would all be losers. It is the fact that they can deal with winners and control their greed, or deal with losers and control not the next trade that makes all these games possible.

If you cannot handle the existing odds then the odds against you increase. How will you do this without focusing on the psychology aspect?
 
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BeginnerJoe

Senior member
3,329 350
Re: Peel my onion !

Once again i have to disagree with you Joe. Everything one does has some degree of psychological involvement in it. Its just that in most cases your psyche is doing it subconsciously.

It is not about the odds but its how you handle them odds that makes all the difference. Therefore psychological introspection is no waste of time. If people traded just based on the odds or played roulette just based on the odds then they would all be losers. It is the fact that they can deal with winners and control their greed, or deal with losers and control not the next trade that makes all these games possible.

If you cannot handle the existing odds then the odds against you increase. How will you do this without focusing on the psychology aspect?
How silly would it sound if a loosing roulette player goes to a shrink and asks for help to improve his results ? Afterwards, the outcome is predictable, he will loose some more. The reason is he is supposed to loose, because he is put into a situation by someone to loose. Changing the player's psychology does not change the behaviour of that someone who put the player in a position to loose. The problem isn't the player, but that someone and what he does.
 

counter_violent

Legendary member
9,697 2,471
Re: Peel my onion !

To focus on the psychology, which has no effect on the odds, is a waste of time.
“The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.”

Perhaps you can explain this then Joe.
 

BeginnerJoe

Senior member
3,329 350
Re: Peel my onion !

“The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.”

Perhaps you can explain this then Joe.
Quit easily. Those men spent too much time working on their psychology, and not enough time on studying what is out there and how things out there work. The inability to wait for the market is a sign of not understanding the market or having an insufficient understanding of the market. Working on the psychology of patience does not help in that situation because the market moves fast some of the time, and moves slow some other times. Being blindly patient is as big a looser as being blindly impatient. The key is to understand the market and apply a correct level of patience.

In actual fact, if you know what you are doing, patience is irrelevant. If the correct risk control is put into place, having an incorrect level of patience needn't kill you. So it is a question of technique and not psychology.

In trading, seeing is better than thinking. Therefore people need to work on their eyes and not their psychology - maybe getting a pair of glasses could work, or worth a try at least.
 
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Billy Gates

Active member
161 14
Re: Peel my onion !

Quit easily. Those men spent too much time working on their psychology, and not enough time on studying what is out there and how things out there work. The inability to wait for the market is a sign of not understanding the market or having an insufficient understanding of the market. Working on the psychology of patience does not help in that situation because the market moves fast some of the time, and moves slow some other times. Being blindly patient is as big a looser as being blindly impatient. The key is to understand the market and apply a correct level of patience.

In actual fact, if you know what you are doing, patience is irrelevant. If the correct rick control is put into place, having an incorrect level of patience needn't kill you. So it is a question of technique and not psychology.

In trading, seeing is better than thinking. Therefore people need to work on their eyes and not their psychology - maybe getting a pair of glasses could work, or worth a try at least.
The importance of knowing what you are doing cannot be overstated enough. But that is not an argument against the application of psychology.
Even if you do know precisely what you are doing it is a simple fact that you are still applying psychology, either consciously or subconsciously.

The very first thing that will strike you, if you completely understand the markets is the reasons why most traders fail and why most never get to that point.

Although the reason for this may be what you say, a complete understanding. Getting there is not achieved without a tough mental journey.
 

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