Best Thread Trading Psychology

[Triggerfish]

Re: Why ' Traders ' lose

An edge is not a trading method , system or or psychology. An edge exists even before the dice is rolled.A casino has an edge before any gambling starts with punters.

Does any trading method really have an edge?Most methods don't work consistently.

Is it possible that if someone knows the edge, then apply a method based on that edge.....?.....then there is no need for psychology!

 

[15 min tlb]

Re: Why ' Traders ' lose

Is it possible that if someone knows the edge, then apply a method based on that edge.....?.....then there is no need for psychology!

Psychology still dominates the trader despite having a good method based on an edge .Fear ,greed ,discipline ,emotions ,ego and all the psyche ,comes into play , kicks in when applying the method or edge.

Here is an example

http://www.trade2win.com/boards/forex/164894-joe-john-method-live-calls-9.html#post2078334

 

[Triggerfish]

Interesting.....so say for example based on the casinos "edge".....am sure you will agree with me that to the casinos, there is no psychology involved, no fear, no greed, no need for discipline, no emotions and no ego.
This is because the "edge" is at work.

So if a trader knows the edge and applies that edge.....then how can there be psychology?

 

[bbmac]

You are not comparing like for like although there are similarities not least in the basic concept of an ' edge '- the casino's edge is built into the games they provide and as a result of uneducated/mug punters ...an edge that we employ as active manual/discretionary traders involves the execution of that edge - ie a trading decision to made each time it does/does not/does nearly etc set-up....ie human intervention that involves emotions/feelings etc...

In the 'perfect' world a trader should apply/act on his edge when it appears with impunity/without emotion etc...but in reality - most struggle with this.

G/L

Interesting.....so say for example based on the casinos "edge".....am sure you will agree with me that to the casinos, there is no psychology involved, no fear, no greed, no need for discipline, no emotions and no ego.
This is because the "edge" is at work.

So if a trader knows the edge and applies that edge.....then how can there be psychology?

 

[Triggerfish]

You guys notice something very interesting here?
15 min tlb noted:
Q: An edge is not a trading method , system or or psychology. An edge exists even before the dice is rolled.A casino has an edge before any gambling starts with punters.

Then 15 min tlb noted:
Q: Psychology still dominates the trader despite having a good method based on an edge .Fear ,greed ,discipline ,emotions ,ego and all the psyche ,comes into play , kicks in when applying the method or edge.

He is right in his initial comment but then it is contradicted in his second comment.

The point am making here is this.....saying what an edge is does not mean one who understands that edge......they are two very different things.

I will come back to your comments later bbmac.....something to attend to.

 

[15 min tlb]

You guys notice something very interesting here?


Then 15 min tlb noted:
Q: Psychology still dominates the trader despite having a good method based on an edge .Fear ,greed ,discipline ,emotions ,ego and all the psyche ,comes into play , kicks in when applying the method or edge.

.

What I should have said is , psychology still dominates the trader despite belief in a methodical edge .This edge may not exist , since most methods are based on specific market conditions and set ups , conditions which can dissapear for extended periods of time and set ups which may not materialize .

 

[bbmac]

Oft quoted Mark Douglas (author The Disciplined Trader, Trading in the Zone etc...) makes the point about the ' profit gap ' - ie the difference between having an ' edge ' and actually see-ing profit from it in your own hands - and this gap is almost always the pschology of ther trader.

G/L

 

[bbmac]

Consider the following....A trader has an edge and he knows that in his back tests and his live forward trading of it so far that it's strike rate (ie winning trades as a % of total trades at say 1:2 risk reward ) stands up at 60% and he has a positive expectancy/trade as a result- so far so good...what he may not know is that at such a strike rate there is a 70.4% chance of a consecutive losing run of 4 trades - in any 50. This in fact he has encountered this a few times and although he thinks he is a bit overleveraged - risking 3% / trade because he has a small a/c in $ terms - this 12% drawdown was soon forgotten on each occassion as he recovered his account to a new profit hi - sticking to his risk and trade management rules and ensuring he closed the winners at 1:1 R:R ...so that chance of a consec losing run of 4 is more probable than just possible -= ie well over 50%. What he doesn't know too is that the chance of a consec losing run of trades of 5 is 37.2% in any 50, 6-16.9% , 7 - 7%, 8 - 2.8% and 91.1%....so although not probable (ie over 50% chance) - but possible within any given 50 trade sample...so he carries on trading and suddenly he has 5 consec losers - his account is -15% - he hasn't experienced this before and it destablisies him - then the next trade loses too - this makes 6 consec losers, - what does he do now ? - he is -18% down in his a/c - this is unchartered territory - he wasn't prepared for this - so on the next set-up - he sits it out fearing more loss- sods law ! - it's a winner-never mind I'll take the next - he does - it loses - not a consec loser beacuse it followed a winner but he missed that winner - so the next set-up comes along and it starts to go in his favour but then price turns and comes back to his entry level - fearing more losses he takes b/e...interfering on the esential 1:2 R:R on which this edge relys...and so and so on....

You can see how when dealing with human emotions - it can destabilise an edge. This is one example the 'psychology' at play even with a proven 'edge' with a positive expectancy.

G/L

You guys notice something very interesting here?
15 min tlb noted:
Q: An edge is not a trading method , system or or psychology. An edge exists even before the dice is rolled.A casino has an edge before any gambling starts with punters.

Then 15 min tlb noted:
Q: Psychology still dominates the trader despite having a good method based on an edge .Fear ,greed ,discipline ,emotions ,ego and all the psyche ,comes into play , kicks in when applying the method or edge.

He is right in his initial comment but then it is contradicted in his second comment.

The point am making here is this.....saying what an edge is does not mean one who understands that edge......they are two very different things.

I will come back to your comments later bbmac.....something to attend to.

 

[Triggerfish]

Hi bbmac
Under post #64:
Well, am comparing "like for like" because it should be.....(the edge itself).....there should be no difference, the only difference are those of self opinions.

You also noted "concept of an edge".....are you saying that an edge is only a "concept" and cannot be found?.....yet you said it yourself that "In the 'perfect' world a trader should apply/act on his edge when it appears with impunity/without emotion etc...but in reality - most struggle with this."
So at least you are "aware" that it is possible.....now I wonder if you can see the connection between a "perfect" trader in relation to the market itself?.....now this is NOT easy.
Would you not agree also that those who struggle simply do not have the edge?.....because surely, if one can have it, understands it, comprehends it, then the trader is the edge itself?

Under post #68:
Interesting but the trader needs to cut his losses when he is wrong!.....more importantly, that trader does not have an edge!

 

[bbmac]

Possibly semantics to some extent, but I subscribe to the thesis that an edge is an edge or it is not - then there is the 'profit gap' that may exist with a trader using that edge as his approach to the market, and when that is bridged then the trader can make that edge profitable for him.

G/L

Hi bbmac
Under post #64:
Well, am comparing "like for like" because it should be.....(the edge itself).....there should be no difference, the only difference are those of self opinions.

You also noted "concept of an edge".....are you saying that an edge is only a "concept" and cannot be found?.....yet you said it yourself that "In the 'perfect' world a trader should apply/act on his edge when it appears with impunity/without emotion etc...but in reality - most struggle with this."
So at least you are "aware" that it is possible.....now I wonder if you can see the connection between a "perfect" trader in relation to the market itself?.....now this is NOT easy.
Would you not agree also that those who struggle simply do not have the edge?.....because surely, if one can have it, understands it, comprehends it, then the trader is the edge itself?

Under post #68:
Interesting but the trader needs to cut his losses when he is wrong!.....more importantly, that trader does not have an edge!

 

[Triggerfish]

Hi 15 min tlb:
I hope you are in agreement with me that your first statement is true? if not, from what you are saying now is in finer details, it is not corresponding to what your first statement says?

You noted "This edge may not exist", now you are watering down your initial statement are you not?

OK, lets say I have a casino, one premises and I have decided to let "YOU" run it for me. Everything is set-up and ready to go into business, all the dealers are there, you just need to look after the place for me. Now am sure you will agree with me that this casino will make us money. Now all you need to do is give the customers a good service, simple.....yes?
Now the premise makes money because the edge (I assume you already know what it is). You see how YOU have not altered the edge here?
Now say I was very greedy and I wanted more so I offer you a commission (10%) on any extra made for the year. So all you need to do here is get more customers into the casino so they can bet.....agree? because the more people bet, the more we will make.....Again, the edge has not been altered.....agree?

So the edge on the casino can be "defined", "known" and can be "described" in advance of starting the casino business.....but more importantly, it can be grasped.
Now is it not possible an "edge" can be created before trading?.....but the question then would be does it work?

If the casino is "operating" with an "edge".....then.....is it not possible that a trader can "operate" with an "edge" in the markets?
If that edge is successful then human emotions are irrelevant.....it is only relevent when the trader does not have an edge.....yes?
I believe that edge is "ALL"

 

[the hare]

All i will say is that anyone crazy enough to allow El Cid to manage their casino needs sectioning under the mental health act !

 

[15 min tlb]

Hi 15 min tlb:

If the casino is "operating" with an "edge".....then.....is it not possible that a trader can "operate" with an "edge" in the markets?

A trader can operate with an edge , my mentor does it by employing assistants who detach his emotions from the edge, by executing the edge.

Wanted trading assistant - Forex Trading | MetaTrader Indicators and Expert Advisors

He treats trading as a proper casino business , has a $1m account and his staff cost him $20k a year.He makes about 150 % a year.

 

[15 min tlb]

All i will say is that anyone crazy enough to allow El Cid to manage their casino needs sectioning under the mental health act !

That is why you are as good as a moderator , in the t2w zoo.

 

[Triggerfish]

Oft quoted Mark Douglas (author The Disciplined Trader, Trading in the Zone etc...) makes the point about the ' profit gap ' - ie the difference between having an ' edge ' and actually see-ing profit from it in your own hands - and this gap is almost always the pschology of ther trader.

Yes, this is the other thing.....with that edge, it must come with profits. The best ones are those who use their edge to gear against the markets so to take advantage of it as they know it is right.....and being right, they must be able to adjust accordingly to the situation and apply the conviction to take maximum advantage of it, therefore a good trader should not be stuck with risk/reward ratios as they are tool for those who do not know what is about to happen as this is limiting their winners.....It must be true also those who know will go ALL IN when the situation is right.

emmmm.....edge and profits works hand in hand!

 

[15 min tlb]

If that edge is successful then human emotions are irrelevant.....it is only relevent when the trader does not have an edge.....yes?
I believe that edge is "ALL"

NO! human emotions are still important when the trader does have an edge , as BB Mac explained.It is the nature of trading when rewards are few and small losses are plentiful.

 

[Triggerfish]

OK.....so what happens if you know that the markets are going to go up, you will trade a high amount on it.....now this is based on the edge, not guess work!

Would you not agree with me that emotions then are just nothing, just mind made, in fact, if one is sure he is right, then he will do it.....would he not?.....What I mean is this knowing can OVERCOME the emotions?

Example would be: Soros on the BOE.....ALL IN.....NO EMOTIONS.....he "knows" he was right!!

 

[bbmac]

Soros has the money to move/influence the market..most do not. The trouble is that no one can be certain they are right even if your edge sets-up - all we know is that on x % of times in the past it did set-up it produced a gain...the rest is about money and risk amanagement optimised to that edge. It is not known in advance which individual trades will be winners or losers - ie there is a random distribution of outcomes that result from playing an edge.

G/L

OK.....so what happens if you know that the markets are going to go up, you will trade a high amount on it.....now this is based on the edge, not guess work!

Would you not agree with me that emotions then are just nothing, just mind made, in fact, if one is sure he is right, then he will do it.....would he not?.....What I mean is this knowing can OVERCOME the emotions?

Example would be: Soros on the BOE.....ALL IN.....NO EMOTIONS.....he "knows" he was right!!

 

[Triggerfish]

Hi bbmac: Quote:
"No one can be certain they are right"
Am not sure if I would agree with this statement.....it can be known in sense of direction.

Then if what you say is true, then you must agree with me also that a trader is only paid for being "right".....then there are successful traders around, for them, they have to be right to be successful.....now, the only thing is the most successful ones are the ones who are "consistently right" and not only that they know they are right, they must pile on it based on their thinking/conviction.....that is why they make SO much!.....would you agree?.....you only get paid for being right...no?

 

[the hare]

Then if what you say is true, then you must agree with me also that a trader is only paid for being "right".....then there are successful traders around, for them, they have to be right to be successful.....now, the only thing is the most successful ones are the ones who are "consistently right" and not only that they know they are right, they must pile on it based on their thinking/conviction.....that is why they make SO much!.....would you agree?.....you only get paid for being right...no?

What do you mean by right, you keep using this term without defining it.