What was I thinking?

[Newtron Bomb]

After a bit of a chat with Rossord, Ford and a few of the others in the chat room I though that it would be a good idea to start a thread about the trade that we stopped ourselves from putting on or trades that we shouldn't have put on.

All traders are prone to this from time to time from the newbie to the most seasoned of traders.

I was hoping for this to identify the mental blocks that we put on ourselves when we trade.

My most recent example of this has been in trading gbp/usd (cable). I had basically convinced myself that there was more in the move up past point 1 market on the chart. (This trade has been commented on in another thread, GBPvsUSD ) At the time i just stopped myself out (for a profit) and did not head my own advice and analysis because i had preconditioned myself look for a long... as you can see this did not happen. The analysis that I posted on the other thread was that there was the possibility that there would be a third wave down and a short trigger for me would be at 1.6600 level. There was further opportunity to at point 2 on the chart to find an entry for both long and short but again preconditioned for a long that never happened (I actually got whipped once at that level before the penny dropped)

Conclusion

Always have your opinion of the possable scenarios to act out as i did but NEVER precondition yourself to only one outcome.

There is a lesson in every trade if you look

Hope this helps some of you new or seasoned traders :cheesy:

 

[waqr]

Conclusion

Always have your opinion of the passable scenarios to act out as i did but NEVER precondition yourself to only one outcome
.
[/B][/QUOTE]

Newtron,

Perhaps its better not to have an opinion.

 

[rossored]

Nice one NB, glad to see that you took the plunge and started the thread!

Waqr...easily said....but not so easily done.

Doesnt it always come back to the "trade what you see" philosophy? I find this is wonderfully easy in practice, and certainly pre-market, as I sit there saying "hmm, i should do so-and-so today, and act totally on what I see"....but I think the truth is that we all, no matter how hard we try, develop some opinion of what we feel might happen.

The thing I've slowly begun to realise is this : it's not unreasonable to expect the market to do something , perhaps based on whatever you see. But it is unreasonable for you to expect your view to be right all the time, and that is the problem with traders. We never want to be wrong, and don't want to accept that this will happen from time to time.

What happens one day will not happen the next, or from one pattern to the next. No day or pattern will ever have an identical outcome : there are too many variables in the market. The traders who were trading yesterday may not be trading today, or there may be more or less people trading the market today, and all these things (and more) are what make the market move.

As one of the basic TA rules states, market action is repetitive, and as market action is driven by people and thier opinions, wouldn't it be advantageous sometimes to have an opinion? Of course, then you come back to what I've mentioned above, regarding who is trading today vs yesterday, and what effect that might have on the market. I mentioned a good example of this on this thread http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=5888

So, its a bit of a catch 22, isn't it?

Anyway, i think you're probably right. But I may be wrong.

 

[barjon]

this is all a bit deep for me!

aren't we just playing with words? surely whenever we enter a trade we are exercising an opinion as to what's going to happen next. at best (maybe) it's a trade based on our opinion of what the market is telling us.

more crucial, perhaps, is our ability to change that opinion as the evidence unfolds. i have a nasty habit of rationalising my opinion and finding some ta evidence somewhere to keep supporting it (and there's always something!) in the face of mounting evidence to the contrary. i like trader333 approach which if i've got it right is - if it doesn't do what you expect (your opinion) immediately then get out. sound advice - i only wish i could follow it more often.

good trading

jon

 

[Newtron Bomb]

Rossored
Thanks for the words of support. I think your words explain pretty much the direction i was hoping thread to go.

barjon
What you say is right about trader333's approach but you also describe your rational for finding something in TA to agree with your opinion. This a variation of the preconditioning I was describing.

We can all convince ourselves that a particular outcome will happen and if you look hard enough find evidence to support it.

As a result of a few similar incidents like the one i described I went back to basics and at the moment looking for safe entries... by safe i mean if it doesn't stand out i dont trade it and more importantly dont go looking for something that isn't there.

Based on the set ups i look for i decide on a few of the most probable outcomes and continually update my trading plan as new information becomes available. Some times we fixate on only one outcome these are the trades or missed trades that i was hoping to share as we can all learn from them no mater what our experience.

This is a business and all successful business' have a business plan

 

[waqr]

newtron,rosso & jon

If you guys are trading a specific system with definite entry and exit signals then why do you need an opinion ?

You're driving down the road . the traffic light turns red you stop, it turns green you go...........there's no need to debate the issue unless you're a learner who has'nt sufficent faith in your ability to react to the signals.

Your opinion is simply an internal debate about the validity of the signal and the result is continually second guessing your set ups/signals.

 

[Newtron Bomb]

I see what you mean waqr but regardless of the system mechanical or otherwise we apply blocks to our systems or strategies which i dont think it matters how much experience you have, it will happen. I was hoping to share them so that others could see the metal blocks that occur to trading and learn from them. I think perhaps the frequency of them will be more from a beginners stand point

I think Rosso said to you its easy said than done some times. Do you trade yourself? because i think that you wil have experienced this at some point in your trading career if you have. And i would challenge anyone to tell me that they have not convinced themselves to do a trade or not to do one and regretted not making an educated decision.

 

[barjon]

waqr

My traffic lights often spend time at red and amber or amber. Sometimes go red to green to red again before i've got the car started. Then again they sometimes turn back to red when I'm halfway across the junction . If you've got some traffic lights that let you motor serenely to the promised land how much do you want for them!!

good trading

jon

 

[waqr]

Newtron,

You are saying that no matter what the system dictates you "apply blocks"..........I think this is what I call second guessing the system, and you go on to say that no matter how much experience you have it will happen. Well let me just say that the more experience you have of the futility of this second guessing/"apply blocks" approach the more likely you are to come round to my way of thinking. i.e. write down what you have to do and do it. The thinking part of the operation happens when you make your plan, not when you implement it.

In answer to your question........yes I do trade, frequently and for many years, and I remember many years ago reading "plan your trades and trade your plan". It took me many years to understand and to appreciate how valuable that comment is.

You mention regretting a trade. Of course one regrets a bad trade and especially a missed trade [hindsight's a ***** !] but its part of the game and if you can spare yourself the agony of mentally debating every setup and rather concentrating on implementing your plan then regrets wo'nt be a problem.

waqr

 

[Newtron Bomb]

This thread did seem like a good idea when we talked about it in the chat room.

I think that we are reading from the same page just looking at it from different perspectives I do agree that you should have a plan and trade it which i do.. but from time to time a trader may deviate from it for a number of reasons as, i believe, do all traders no matter how much experience. Some aspect of trading do not fit into the red light or green light category as with your traffic light analogy and it is at these points that a trader may hesitate from a mental stand point.

All traders must go through this at some point i just wanted to share these points with others so that they can learn from it.
We can all have a strategy that performs well but lack of faith may be one reason not to trade it may be as simple as a bad run of trade that may make you hesitate, new information once the trade has been place may make you think that you have not made the correct decision. In my example above i preconditioned myself for a long even though i had planned for a possible short. Even when i set out along this path i have never knowingly preconditioned myself for a trade. so i dealt with it and moved on.

As this is what this board appears to be all about, sharing it may help others learn.

I think that it is clear that you do not agree with the way i have presented it perhaps you could share a time when you have hesitated to trade or had second thoughts after you have put a trade on. Tell us what you learned from it or how you overcame the hurdle for the next time a similar circumstance happened. This is the process that all traders who are successful go through but focusing on the metal aspect.

Due to your many years of experience i expect you will have to think back some time to remember such an occasion. I hope that you can remember such a time and add it to make a valuable resource for others.

Thank you waqr :cheesy:

 

[oatman]

Your preconditioning is the strength of your opinion.

 

[Les Carlin]

newtron,rosso & jon

If you guys are trading a specific system with definite entry and exit signals then why do you need an opinion ?

You're driving down the road . the traffic light turns red you stop, it turns green you go...........there's no need to debate the issue unless you're a learner who has'nt sufficent faith in your ability to react to the signals.

Your opinion is simply an internal debate about the validity of the signal and the result is continually second guessing your set ups/signals.

A really interesting thread. waqr, you are talking from the perspective of an experienced trader, not so? I think what is also being talked about here is the process of learning to trade. And that's never an easy matter for someone who is new. It cannot be just a matter of having a strategy and a plan and then just following it. If so there would be many more successful traders and this business would be very easily learned.

What prevents people from being able to plan their trades and trade their plans, is the discipline/psychology stuff. You're right to mention that people can have a lack of faith in their tradeplans, but then ask yourself why this is so. Often it comes back to a lack of faith in oneself when in the position of risking ones money. Remember it is happening at the beginning of one's trading career and so there are many things to be learned and tried out. There is bound to be a lot of nervousness and failure to implement one's strategies in the beginning. But later on i think these patterns of anxiety may also emerge, especially when trying new things - markets, strategies, timeframes, etc

I wonder - are you saying that when you learnt this business, you never had any qualms about making your trades? Or that when you make any significant changes nowadays you are completely without anxiety and don't make mistakes as a result? If so you would be an exceedingly rare person.

 

[waqr]

This thread did seem like a good idea when we talked about it in the chat room.

Newtron, Apologies if I've spoilt a good idea. I'm not the most diplomatic or tactful fella' on T2W

Les, I've read your post a couple of times and I guess the message is that experience is far more valuable when learnt first hand ? ...........so no more posts from me on this topic.

waqr

 

[Newtron Bomb]

waqr
my apologies also, i do have difficulty in find the right words to explain my self sometimes.

I've read your post a couple of times and I guess the message is that experience is far more valuable when learnt first hand ? ...........

You are correct some of the best lessons are learned first hand, but learning the best traits from others is called NLP neuro linguistic programming (hope thats spelt correct) and it can prevent you from making the same mistakes as others... as a child we learn from our parents or teachers what they think is the best way is, but we seem to stop learning from others when we get to adulthood

Les
Am glad you posted being the resident psychologist, perhaps you can shed some light on some of the traits that may cause traders to apply blocks on themselves. I for one am finding the mind increasingly more fascinating.

At the moment i am of the view that all traders experience this phenomenon the frequency may be more the lower down the experience ladder, but it does not mean to say that a more experienced trader does not go though the same mind set. Some common trait could be exposed as to why such an event may occur and knowing how someone else has dealt with a similar problem may give some direction to how and individual can deal with their particular block. I was hoping for people to pass on those times as i didnt think it was a side of trading that has been explore on these boards.

We all talk about the best set up to trade a particular pattern or indicator but what about the minds set up?

I believe the mind to be the most important tool and if it not kept sharp a trader will run into problems. Am sure some of us have seen traders follow there rules blindly red light green light fashion (warq's analogy) loose a bundle, loose faith in what they are doing and then sit on there hands while they watch a winning phase of their mechanical strategy gain faith back and then start trading the loosing phase. Ive seen quite a few traders do this and the ruin in causes, i for one did not want to be the next in a long line of them the next time i hit some block.

I keep a diary for trades and a part of that is reserved for how i felt during a trade. Thankfully not so much of this is filled up on a regular basis now

For example, If i dont feel any anxiety then i record a safe trade, if im nervous for some reason then i try to identify it and deal with it. If i got nervous trading a particular set up so an action may be for me to reduce my size when that set up occurs until i have more confidence, if i had noticed from my trading diary side that it is not profitable for me a lot of the time i may cut it from my strat knowing my subconscious was trying to tell me something.

This one aspect of my approach to trading with a clear mind, it has helped me develop successfully :cheesy:

 

[lockstock]

Great thread NB,

Problem is people ( gamblers) only like to tell you about their winnings & how good they are.

I think if we were all honest- this thread would have received the biggest number of individual charts posted.

Waqr- I seem to remember you posting something about chasing losses- how about starting with posting a chart or charts of where you made that particular mistake.

I think the biggest strides made in any aquisition of new skills is when you get it wrong, especially if it hits you financially.

 

[rglenn]

I must say that I have had the unfortunate experience that Newtron Bomb has talked about.

This is purely because I am still on a learning curve and want to find out the best system to use that produces the most profit in a given period. i.e a month

The reason that I things went a bit wrong was because I was using too many methods at the same time and probably lost myself into which rules I was using.

I am only using one method at present and now better able to determine the weaknesses of this method before trying anything else.

I think if you have a tradable system that is bringing in the dollars/pounds why change it.

The problem we can have especially on t2w is to be overloaded with info.

We read what other people are doing and maybe try to incorporate it into our method because it may seem that they are doing better than us - and this may ruin a good system.

 

[barjon]

I've been playing this game (non-professionally) for over 25 years and still I can't exclude the emotional baggage completely.

OK it may be that I'm a lousy trader and always will be, but I would merely invite everyone to compare their paper trading to the real thing. I would make my biggest trade on a result that, for the vast majority, their paper trading outstrips the real thing.

Why? Self evidently there's no emotion attached to paper trading.

Waqr - you never did tell me how much you wanted for those infallible traffic lights of yours!!!

good trading

jon

 

[oatman]

Barjon,
I'm with you, paper trading is a waste of time apart from practising pressing buttons.

Cheers

 

[Newtron Bomb]

Concurred. Paper trading does have its uses but i think you could realistically halve or more any figures that you paper trade.

Is there anyone else who would care to post a trade or lack of trade for "what was i thinking?"

 

[bonsai]

RGlenn, I suspect you got it in one.
Most individual systems can be used to trade if you learn their
characteristics. The best way to do that is to concentrate on that
one approach.

A different indicator will usually top or bottom at different times
and serves only to confuse.

Trying to emulate what others do is a touch of 'the valley is
always greener on the other side ' ? And our reluctance to accept
losses as 'a necessary evil'.

But that is the second trick. ?