North_Face
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Trdr,
Interesting thread choice, hopefully it gets some discussion going.
I have read many takes from different authors on the importance of looking at gains/losses as either 1)units, 2) percentages or 3) dollars. There are arguments for each.
I am currently on my second reading of Steenbargers "Psychology of Trading" and in chapter seven he addresses this issue.
A trader may get into the mindset that he only wants to risk $500 on a trade before his stop is hit. On a 50K account that is 1%. As the trader increases his equity, if he keeps that same mindset of dollars rather than units or percentages he needs to be able to not be attached to that magic number of keeping losses to $500. If the trade size is maintained as a constant in terms of the percentage of equity, then the allowable loss per trade must increase as well. If the account grows to 100K, then the $1000 loss is no different than the $500 was previously in terms of percentage of equity.
The problem psychologically comes in when the trader must come to terms with still being successful while losing more on his losses. If losing more than $500 per trade is uncomfortable then the trader finds themselves out of the zone that allowed them to trade emotion free, in regards to dollar losses, previously.
The trader may find themselves taking 2 steps forward and 1 step back if they are not comfortable taking larger losses to coincide with taking larger initial positions.
For me personally, I find it better to keep things on a percentage basis rather than think of dollars. After I had adjusted to thinking of the trade size and stop-loss in terms of percentages I still found myself going back to thinking of success in terms of dollars after the trade was complete and I was entering the final numbers on the P&L in Excel. The gains and losses are staring you right in the face there in terms of dollars so it would seem that you have to acknowledge it then that losses were larger ... though profits were larger as well. Although the profits were larger, I did find that there was still a psychological impact from seeing larger losses in terms of dollars ... though they were no larger than previously, in terms of percentages.
The solution for me to combat that was to focus more on the graphing of my equity curve on a daily basis. Through graphing the equity on a daily basis I was able to come to terms with larger dollar profits by being able to look at it in graphical form rather than the columnar form of the spreadsheet. If the trajectory of that curve changes then I need to determine what is going on that has had such an effect.
Just my take ... curious to hear the thoughts of others.
NF
Interesting thread choice, hopefully it gets some discussion going.
I have read many takes from different authors on the importance of looking at gains/losses as either 1)units, 2) percentages or 3) dollars. There are arguments for each.
I am currently on my second reading of Steenbargers "Psychology of Trading" and in chapter seven he addresses this issue.
A trader may get into the mindset that he only wants to risk $500 on a trade before his stop is hit. On a 50K account that is 1%. As the trader increases his equity, if he keeps that same mindset of dollars rather than units or percentages he needs to be able to not be attached to that magic number of keeping losses to $500. If the trade size is maintained as a constant in terms of the percentage of equity, then the allowable loss per trade must increase as well. If the account grows to 100K, then the $1000 loss is no different than the $500 was previously in terms of percentage of equity.
The problem psychologically comes in when the trader must come to terms with still being successful while losing more on his losses. If losing more than $500 per trade is uncomfortable then the trader finds themselves out of the zone that allowed them to trade emotion free, in regards to dollar losses, previously.
The trader may find themselves taking 2 steps forward and 1 step back if they are not comfortable taking larger losses to coincide with taking larger initial positions.
For me personally, I find it better to keep things on a percentage basis rather than think of dollars. After I had adjusted to thinking of the trade size and stop-loss in terms of percentages I still found myself going back to thinking of success in terms of dollars after the trade was complete and I was entering the final numbers on the P&L in Excel. The gains and losses are staring you right in the face there in terms of dollars so it would seem that you have to acknowledge it then that losses were larger ... though profits were larger as well. Although the profits were larger, I did find that there was still a psychological impact from seeing larger losses in terms of dollars ... though they were no larger than previously, in terms of percentages.
The solution for me to combat that was to focus more on the graphing of my equity curve on a daily basis. Through graphing the equity on a daily basis I was able to come to terms with larger dollar profits by being able to look at it in graphical form rather than the columnar form of the spreadsheet. If the trajectory of that curve changes then I need to determine what is going on that has had such an effect.
Just my take ... curious to hear the thoughts of others.
NF
new_trader
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Trdr said:
Psychologically money means nothing very profound. My feeling of Security & Success is proportional to the amount of money I have. I think of my trading in terms of points, not money.
Epigrams/
"Stockbrokers take your money and invest it until there is nothing left". - Woody Allen (I think)
"The richest people of all are those with the fewest wants"- Don't know
charliechan
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i think its important to remove the thought of money from trading.
think of the balance as points or something.
most people have too much baggage when it comes to emotion and money. losing money or the thought of creates fear. fear will limit ones ability to focus on the structure of the market (as will confidence or most emotions)
this is why they say a frightened trader is a dead trader, never borrow money to trade, never trade with money you need to live with etc etc...
think of the balance as points or something.
most people have too much baggage when it comes to emotion and money. losing money or the thought of creates fear. fear will limit ones ability to focus on the structure of the market (as will confidence or most emotions)
this is why they say a frightened trader is a dead trader, never borrow money to trade, never trade with money you need to live with etc etc...
LongandWrong
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North_Face said:
This, to me, is the key. I reckon you just need to follow the percentage numbers in terms of p/l and let your equity graph show you the 'bigger picture.'
However, recently on a contrary level, I suffered my biggest ever loss when my a/c equity was at its highest ever level. Things went so much the other way in terms of managed and percentage risk that I managed to lose sight of both. Both the actual and percentage risk-level of a particular position I was in momentarily became meaningless and I genuinely thought my account size could swallow any loss. Big, big mistake for me = big, big lesson for me :cheesy:
In my eyes, it still comes down to discipline....
" The processes of trading now consume you emotionally.
You won’t be losing money so much as you’ll be losing what money means to you psychologically. The minute you start using money psychologically you’re banging nails into your trading coffin. You’ll start losing big time because you won’t be losing money so much as losing what money psychologically means to you. In other words you will be losing the representation of the things that are important to you. When you start losing the psychological representation of what’s important to you, you’ll freeze, start acting emotionally and try all sorts of scrambling, compensatory behaviours. You’ll panic and you’ll go to pieces. The only time relief will come is when you’ve wiped out your account. You’re on the mat and you’re shell-shocked.
How could that happen to you? "
You won’t be losing money so much as you’ll be losing what money means to you psychologically. The minute you start using money psychologically you’re banging nails into your trading coffin. You’ll start losing big time because you won’t be losing money so much as losing what money psychologically means to you. In other words you will be losing the representation of the things that are important to you. When you start losing the psychological representation of what’s important to you, you’ll freeze, start acting emotionally and try all sorts of scrambling, compensatory behaviours. You’ll panic and you’ll go to pieces. The only time relief will come is when you’ve wiped out your account. You’re on the mat and you’re shell-shocked.
How could that happen to you? "
Another way is to look at your profits/losses over a longer period. You know your methods and trading practices are sound. Instead of looking at each trade as a profit/loss in money, try to think in terms of a period, say a month or a quarter, that you know you make money over. What is your percentage of losing trades in a month's trading? Each trade is just a small part of the greater picture. Your stoploss or profittaking strategy should not be compromised by the thought of $$$$$$. 
strewthmate
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Money
Very interesting topic,
I've done some work with a guy called Peter Koenig. He's a fascinating and humble man who's lived his life as one big experiment with money. His central idea is that money is meaningless/ blank/ neutral. "Money" itself means nothing until you project something onto it. This might be power, fun, glory, happiness etc. For example if someone were to come down to outer space and us to hand them a fiver, that piece of paper would be initially meaningless. It is in fact us, society that are projecting meaning onto that piece of paper.
What struck me was the similarities with what Mark Douglas has written in the book "Trading in the Zone". Douglas writes that the markets are neutral, therefore we bring our own perceptions to create what we think the market is.
Our problems with money/ markets can be a product of our unconsious projections onto money. Therefore one way of helping our problems in these area may be to become conscious of these projections.
Dave
Very interesting topic,
I've done some work with a guy called Peter Koenig. He's a fascinating and humble man who's lived his life as one big experiment with money. His central idea is that money is meaningless/ blank/ neutral. "Money" itself means nothing until you project something onto it. This might be power, fun, glory, happiness etc. For example if someone were to come down to outer space and us to hand them a fiver, that piece of paper would be initially meaningless. It is in fact us, society that are projecting meaning onto that piece of paper.
What struck me was the similarities with what Mark Douglas has written in the book "Trading in the Zone". Douglas writes that the markets are neutral, therefore we bring our own perceptions to create what we think the market is.
Our problems with money/ markets can be a product of our unconsious projections onto money. Therefore one way of helping our problems in these area may be to become conscious of these projections.
Dave
Unemotional focus
Outside of the trading environment money means primarily freedom in my view. It provides you with the freedom to pursue those things that satisfy you, whether they are material goods, travel, lack of worry etc. Of course it can also bring misery when it is misused and pursued for its own sake, without taking into account the consequences on, for example, personal relationships. As strewthmate said it is endowed with the projections we place upon it.
Within the trading environment it should on a very different character. If we continue to project our personal meanings onto it i.e. become emotional about it, then it will get in the way of trading.
Within trading we should treat it like any other business. It is an asset that is increased by the amount of profit we make, which comprises the net of our revenue from the sales of instruments less our expenditure (losses from the sale of instruments and other expenses such as data feeds etc).
Losses resulting from the faithful pursuance of our pre-formed strategy is a standard business expense and should be treated psychologically as such i.e. coldly and with acceptance. That does not mean to say that we should look at ways to reduce it.
Losses resulting from a divergence from our pre-formed strategy, due to allowing emotions to take control, are not a standard business expense, but represent a lack of control even negligence. These should be cut out immediately.
With regard to lot size and stop losses I would agree with North face that a percentage would be better than actual $ amounts. However I do not really think that either are the best method of controlling this potential business expense. This is because both are generalisations resulting from the initial concept of "this is how much money I am prepared to lose".
They are not related to the particular instrument, market, market conditions and volatility. The stop should be made as tight as possible. This focus on the specifics of the trade to set it at a level that reflects your skill, experience and accuracy with regard to the entry and exit strategy for this trade. When this is done the stop will not be based on a fixed amount or fixed %. It will simply be set at the most appropriate place.
Charlton
TrdrTrdr said:
Outside of the trading environment money means primarily freedom in my view. It provides you with the freedom to pursue those things that satisfy you, whether they are material goods, travel, lack of worry etc. Of course it can also bring misery when it is misused and pursued for its own sake, without taking into account the consequences on, for example, personal relationships. As strewthmate said it is endowed with the projections we place upon it.
Within the trading environment it should on a very different character. If we continue to project our personal meanings onto it i.e. become emotional about it, then it will get in the way of trading.
Within trading we should treat it like any other business. It is an asset that is increased by the amount of profit we make, which comprises the net of our revenue from the sales of instruments less our expenditure (losses from the sale of instruments and other expenses such as data feeds etc).
Losses resulting from the faithful pursuance of our pre-formed strategy is a standard business expense and should be treated psychologically as such i.e. coldly and with acceptance. That does not mean to say that we should look at ways to reduce it.
Losses resulting from a divergence from our pre-formed strategy, due to allowing emotions to take control, are not a standard business expense, but represent a lack of control even negligence. These should be cut out immediately.
With regard to lot size and stop losses I would agree with North face that a percentage would be better than actual $ amounts. However I do not really think that either are the best method of controlling this potential business expense. This is because both are generalisations resulting from the initial concept of "this is how much money I am prepared to lose".
They are not related to the particular instrument, market, market conditions and volatility. The stop should be made as tight as possible. This focus on the specifics of the trade to set it at a level that reflects your skill, experience and accuracy with regard to the entry and exit strategy for this trade. When this is done the stop will not be based on a fixed amount or fixed %. It will simply be set at the most appropriate place.
Charlton
Here's the reply Cheese gave on EliteTrader:
"What money means to you psychologically? this question could only come from someone with little or no money."
My reply: thank you very much for responding and providing the correct answer – “little or no money”.
This thread is researching ‘pulling the trigger/fear of trading/failure’, subjects repeatedly posted here and on other forums.
Quotes are from an article authored by Paul Counsel and is all I found on the web written by him.
Personally the ‘what money means to you psychologically’ threw me for a loop when I first read it — as did Cheese's answer — succinct and I think accurate.
While this simple answer ‘little or no money’ now appears obvious, it seems to me the problem is that relative to their personal wealth, those individuals experiencing trading problems haven’t answered or even considered asking what amount ‘little or no money’ means to them, what amount of loss would reduce their wealth to ‘little or no money’, and were it to occur, how would loss of their money/wealth affect them.
Some/most/all individuals won’t know the answers until experiencing a loss or series of losses sufficiently large enough to hit their personal ‘little or no money’ level. Whether or not losing traders become financially bankrupt, they are “on the mat and shell-shocked” — psychologically bankrupt.
The common problem for many such traders is being unable to continue or to re-start trading.
The next question is: having been hammered in such a way, how do traders recover from such psychological trauma and begin trading again ?
The full article ‘Towards an understanding of the psychology of risk and success’ is attached and appears here: http://propertyinvesting.com/psychology.html
Paul Counsel has written and published ‘The Infinite Wealth Trilogy’ available here:
http://www.thewealthtrilogies.com/new.html I haven’t read the books nor am I an ‘associate’ promoting the books.
60 minute audio interview of Counsel:
http://www.marktse.com/recommend/millionaire-audio.php
"What money means to you psychologically? this question could only come from someone with little or no money."
My reply: thank you very much for responding and providing the correct answer – “little or no money”.
This thread is researching ‘pulling the trigger/fear of trading/failure’, subjects repeatedly posted here and on other forums.
Quotes are from an article authored by Paul Counsel and is all I found on the web written by him.
Personally the ‘what money means to you psychologically’ threw me for a loop when I first read it — as did Cheese's answer — succinct and I think accurate.
While this simple answer ‘little or no money’ now appears obvious, it seems to me the problem is that relative to their personal wealth, those individuals experiencing trading problems haven’t answered or even considered asking what amount ‘little or no money’ means to them, what amount of loss would reduce their wealth to ‘little or no money’, and were it to occur, how would loss of their money/wealth affect them.
Some/most/all individuals won’t know the answers until experiencing a loss or series of losses sufficiently large enough to hit their personal ‘little or no money’ level. Whether or not losing traders become financially bankrupt, they are “on the mat and shell-shocked” — psychologically bankrupt.
The common problem for many such traders is being unable to continue or to re-start trading.
The next question is: having been hammered in such a way, how do traders recover from such psychological trauma and begin trading again ?
The full article ‘Towards an understanding of the psychology of risk and success’ is attached and appears here: http://propertyinvesting.com/psychology.html
Paul Counsel has written and published ‘The Infinite Wealth Trilogy’ available here:
http://www.thewealthtrilogies.com/new.html I haven’t read the books nor am I an ‘associate’ promoting the books.
60 minute audio interview of Counsel:
http://www.marktse.com/recommend/millionaire-audio.php
Someone wrote to me:
“I will assume in this case that their fear of trading has reduced them to poverty... ”
I think the quip goes to the emotional/psychological heart of the loss reaction.
It’s not so much ‘fear of trading’ as ‘fear of losing money’, abstractly — ‘fear of poverty’, a rather absolute state to be in, a terrifying thought one may be reduced to that state.
I tried the NLP technique ‘Eliminating Fears and Phobias’ and found it worked very well, did a little research into using NLP to cure the ‘fear of trading’ thinking similarly easy self-help techniques would be available. Based on expert opinion a whole program is required as well most likely the assistance of an NLP trainer. One is tho likely to become a better overall trader since one’s examining and rebuilding so much of one's modus operandi not just curing the ‘fear’.
Thanks for your contributions.
For those interested I’ll post an ‘Eliminating Fears and Phobias’ pdf on a new thread.
“I will assume in this case that their fear of trading has reduced them to poverty...
”I think the quip goes to the emotional/psychological heart of the loss reaction.
It’s not so much ‘fear of trading’ as ‘fear of losing money’, abstractly — ‘fear of poverty’, a rather absolute state to be in, a terrifying thought one may be reduced to that state.
I tried the NLP technique ‘Eliminating Fears and Phobias’ and found it worked very well, did a little research into using NLP to cure the ‘fear of trading’ thinking similarly easy self-help techniques would be available. Based on expert opinion a whole program is required as well most likely the assistance of an NLP trainer. One is tho likely to become a better overall trader since one’s examining and rebuilding so much of one's modus operandi not just curing the ‘fear’.
Thanks for your contributions.
For those interested I’ll post an ‘Eliminating Fears and Phobias’ pdf on a new thread.
foroom lluzers
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After 11 years , there is no knowledge on this subject on the forums .Please search on google , because the answers are available from psychologists and researchers.
https://hbr.org/2006/01/decisions-and-desire
https://www.google.co.uk/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=emotional+brain+money
Your Brain Does Really Weird Stuff When It Thinks About Money
search on google videos with words emotions and money
HeavLeighGill
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Money is stressful in general. If you don’t have enough that is. I know it’s technically meaningless, but it isn’t so meaningless if you can’t afford things like groceries. I think a trader with a lot of money had a better chance of brushing off losses than one that doesn’t know how they’re going to pay rent.
Jungletrader
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It's a means to an end but I like to have savings and having extra makes me feel comfortable.
I'm not into flashing the cash so to speak but love been able to treat family to dinner without worrying about next weeks rent bills etc
I'm not into flashing the cash so to speak but love been able to treat family to dinner without worrying about next weeks rent bills etc
WalletInvestor
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One of my favourite money related quotes is "money doesn't buy happiness above $90.000/year". This is a finding of a 2010 study, adjusted to 2021's price standards. It essentially highlights that, while there's truth in the saying "money doesn't buy happiness", being financially stable and able to maintain a certain standard of living is important for our psyche.
Farm Yard Forex
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It is a tool that enables me to do things. I treat spare money as employees that need to work for me to try and make money while I can't actively make it myself. I also think that money is a game and that it is important to understand the rules of the game in order to get ahead. The wealthy often understand the rules better than most and that is how they not only make more money but keep more money.
WalletInvestor
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I agree that it's important, and even if someone isn't motivated by large amounts of money, having financial stability is important for everyone.
Arnav Deshmukh
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When we experience losses in trading, it can make us feel fearful, angry, or frustrated. These feelings may cause us to make impulsive and unwise decisions, which can make our losses even worse.
To me, money is a tool for security and freedom. It's about having the peace of mind to enjoy life without constant worry, and the ability to make choices that align with my happiness and values. It's less about the flashy stuff and more about comfort and opportunities.
