How to create the pain-free state of mind

[JungleJim]

Starting Small

The Bramble

I don't understand your 'small trade' theory to overcome feelings/emotions. You seem to be saying I'm not allowed to make the trades big enough to care about them. Fine, but if I make 10 of those trades that as a whole do very well or very badly then I will still have the problem of fear and greed with regard to the next 10 trades as a whole. Isn't that like saying I love my wife/husband but really don't care about them on a day to day basis.

Tuffty -

When I first started trading I traded very small amounts and I made lots of mistakes. I learnt from my mistakes and as I built up my own system and became more sure of my abilities I increased the amounts.

Everyone -

I think that emotion gets in the way of trading and a trader should work towards trading without emotion. I believe that emotion blocks intuition which draws on our experiences that are stored in our subconscious. By removing emotion from trading we are opening the channel to our subconscious and thus allowing intuition to flow freely. This may be what the book is refering to.

 

[Tullibody]

I have a copy of the Disciplined Trader by Mark Douglas. It cost $34.99 (actually 92 Malaysian ringgit) but I'll sell for £20.00 inc post & packing. Just PM me.

 

[TheBramble]

The Bramble
One can choose not to feel emotions. Conditioning is one such method, alcohol another.

Amen to that!!!

 

[Tuffty]

JungleJim,
I note you talk about emotion in a negative sense in that it 'gets in the way of trading' and 'blocks intuition'. You seem to feel very negative about emotions when mixed with trading. What methods do you use to remove emotion from trading and do you think it is possible to seperate the two (in a healthy way)?

 

[Tuffty]

This board seems to have lost momentum.....I thought it was a good thread and I believe emotions are the most important part of trading. Looking at the number of threads on this subject compared to others people seem to have other proirities.

TheBramble, You appear to suggest conditioning is a good way to deal with emotions. I have reservations with this. I think conditioning is a way to not deal with emotions. You can 'trick' yourself that your trades are small and therefore don't matter. Sooner or later you're going to have to deal with the fact that you've been conditioned (or the conditioning may lead to some other behaviour that isn't beneficial to you).

What does come across from the replies on this board is that most people seem to be having internal fights with their emotions and view them in a negative manner.

 

[zigglewigler]

Greed is goooood.
Fear is okaaaay.
We are all trading because of some higher level of greed that most people don't have, many are happy with six shillings a week. So you want to take out all the emotion of trading? What the hell will motivate you? You're a greedy b'stard and don't you forget it. The yin and yang of it all entails a need for fear. You don't want to be a poor miserable b'stard do you? You should have a healthy dose of that fear.

The trouble with fear and greed, is that their timing is usually off. So to maximise profits, one should be greedy, but unfortunately fear takes hold, and trades are closed early in case you end up with nothing, when they should have been left to run. And with losses mounting, not enough fear lets them rise further. You're greedy with a perverse optimism that your cruddy trades will come good.

You need greed and fear. But you must channel them and not suppress them. The appeal of rock climbing is conquering fear, because you are greedy for the exhilaration at the top.

Robots could well be very effective traders, but without passion for what we do, we can't succeed. With no emotions to contend with, there is no passion. Ask any civil servant.

 

[juanbyte]

If it ain't them cheating skewing spread companies its them emotions.
mmmm


78 July / August 2004 TRADERS´
TRADERS´: How important is the psychological element?
WILLIAMS: I differ on this from most people. I really don’t think
it is important at all. If you have a good system, one’s mindset is
not the problem, unless the trader is risking too much. That always
wreaks havoc with one’s emotional state. As a mechanical trader
it is just a question of placing orders. People who have
psychological problems trading don’t have a good system or
technique to follow. The problem is not the mind. The problem
is what you are minding in your trading.

 

[TheBramble]

Lynn, are you pain-free yet?

 

[Racer]

Ice cool trading that is the ulitmate way to trade..
Not thinking about the amount lost or gained, just is it a good trade or a bad trade.. cut it or run it...

 

[Tuffty]

juanbyte, In the Global Investor book of Investing Rules Larry Williams has a lot to say about emotions 'Ultimately this is an emotional game - always has been, always will be'. His comment in the Traders Magazine Interview about it not being important IF you know what you're doing seems to be consistant with this. The markets will always mess you up if you don't have a sound strategy. I guess it also depends on how you invest. A contrarian discresionary trader needs to be very sure of their thinking if they're not going to be fluked out of their trade. However, a mechanical system trader may not ever be fluked out of an individual trade, but they may still be fluked out of a system if it has a poor run.

 

[juanbyte]

Tuffty

The original question of this thread was "How to create a pain-free state of mind"

The only thing I can think of that would cause pain is having losing trades.

I like to break things down into simple questions e.g.

What is being done now?
(The trading method must have painful losing trades)

What else can be done?
(Become a Vulcan, their emotions are buried very deep)
(Stop what you are doing now and do something else)
(Find a method with a high win rate and lower losses with the use of stops)

What should be done?

If what you are doing now gives you pain, just stop doing it and find something that is easier to trade.

I would find it difficult to trade a system that had a 30% or 40% win ratio. There are 2 reasons for this, one I do not like losing and second I know mathematically there is a far greater chance of long losing runs with these compared to a method that wins 90%

You should analyse all of your trading, again for 2 reasons. Firstly the longer your method has proved to work over the long run the more confidence this gives you in placing a trade. Secondly you mention a fluke, any fluke positive or negative will affect your win/lose and risk/reward ratio, these inturn alter your money management calulations and the amount you should risk.

Why people complicate trading is beyond me, making money is simple, buy when prices are rising and sell when prices are falling, doing the opposite is illogical and means you will lose money.

I have just backtested someones system that bought when an indicator crossed down a certain level and bought when it crossed up another level. It lost 30% of the capital in a year simply because it was going against the trend.

 

[Tuffty]

juanbyte,
The system you tested sounds attractive if it’s turned upside down +30% in a year rather than –30%. You could be onto something there!

 

[juanbyte]

Tuffty

It was rubbish because it went against the trend and lost ovrall.

I changed it a little and from 120 trades over 30 days it produced 1368 points profit which depending on the amount you risk could be 40% per week with a 74% win rate.... now that's good.

I am testing it live for a few months