emotion vs. prediction

tomorton

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Feb 28, 2002
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#16
I was trying to quantify the series of indicators I use to help me trade, and discovered something interesting about myself. The indicators are Price Action, 7,14 moving average, 7 day RSI, and MACD. I loaded five years of data for a stock and adjusted the screen so I could quantify each indicator for the day's close as plus or minus, With weight going to Price Action only in case of a tie, I calculate a composite "indication" and then click forward one day to compare the "indication" to the reality.

I learn that my composite indicator is right about 60% of the time, but is much higher when trending, and around 50% when consolidating. More important I learned that I felt an emotional hit once I had an indication when the click revealed it was incorrect. I wanted it to be right and felt the hit when it wasn't.

By thinking the word, "indication" rather than prediction, I escaped part of the emotional hit. With practice, I hope to train myself to trade the series of probabilities and not charge each piece of data with emotion.

I want to keep myself in a state where I am aware of all the probabilities and accept each of them as a natural part of the trading experience---the final experience being winning in the probability of my system and not on the luck of the next price action.

Good work, going back over your track record. And yes, everything's easier when you're part of the trend.
 

Fugazsy

Well-known member
Nov 10, 2014
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#17
I read somewhere, maybe market wizards, that one of the great investors always had the "it'll never happen " attitude to all his trades.
It could be in life that one naturally builds up a negative view of one's actions especially in others etc. which will beat you in the end. Could be a way of lancing this mental boil ?

:sneaky:
yes, they do and they obstruct our perception in our next endeavour, it is a pain avoidance mechanism......
 

darktone

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Nov 2, 2003
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#18
Last edited:
Aug 10, 2015
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#19
I think you need to be concentrated during the process of trading. Emotion is not something what helps you to be concentrated.
 
Dec 9, 2015
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#20
No, focusing is all but impossible when you're nervous or anxious or even excited. Which is why it's so important to learn to control your emotions. The problem is, for me at least, that even if I control my emotions during trading afterwards I let and I feel the stress I would've felt a lot more keenly. In other words that control is just temporary. That can be very exhausting.
 

Pat494

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Mar 27, 2004
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#21
I think men generally have a much more sanguine approach to life's problems and that helps. No shrieking or throwing stuff about. Oh no.
 
Jul 6, 2014
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#25
When I emoted on each trade independent of the trades before it, my emotion matched the trade. I learned to smooth my emotions over a whole series of trades. It helped for me to believe that over a whole series the end result would be profitable. Recently I had 14 losses in a row; my confidence began to wane. I took a couple of days off from the market, confidence came back, I went back to the market with my same old system and took seven straight wins. When the 1st loss came, it came with little emotion except gratitude that I have learned to limit my losses and maximize my wins tuned to the current market. When the market moves against me and my emotions start to rise, I recall my resolve to trade and believe in the series rather than the individual, watch the stop line on my chart knowing everything is under control. I may move my stop closer to the negative price movement...but never away from it. A history of success in the series drains the emotion of a single losing trade...even a number of them as I mature as a consistently successful trader.
 
Feb 11, 2011
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#26
Forex market is not for those who are emotional and take any Trades based on their emotions and never base their predictions on their Knowledge and its really dangerous for any one who want to start Forex with such habit.
 
Dec 11, 2015
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#27
Forex market is not for those who are emotional and take any Trades based on their emotions and never base their predictions on their Knowledge and its really dangerous for any one who want to start Forex with such habit.
We're all emotional though. It's human nature to be emotional, there's nothing wrong with that. That said, learning how to control your emotions and keep a cool head is vital for any trader wanting to succeed.
 

tomorton

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Feb 28, 2002
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#28
For "emotions" in trading we normally think of Fear and Greed. Conjures up an image of a hysterical, manic, bi-polar, frantic trader.

But the term is loose in English and maybe we should keep in mind the danger comes form anything psychological which we project onto the trade, rather than objective information from a chart, etc. So, suspicion, hope, bias, optimism, pessimism, instinct - and all other mental "attitudes" and biases - are going to be prejudicial to objective trading.
 
Aug 21, 2016
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#29
we can differentiate between affective characteristics (eg. moods and emotions) and cognitive (eg. beliefs and expectations). As regards social factors (eg. Networks and social norms), they act facilitating or inhibiting the expression of a given behavior.
 
Sep 8, 2015
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#30
I don't think emotions should be the directing force when making a decision, whether you're entering a deal or something else. If you keep in mind that emotions are of a temporary nature, you will probably regret the decision you had made several minutes prior and lose a large sum of money in the end. My advice is before entering a deal, think it over for a few minutes and then, after calming down a little make the right choice.