Most learning is done through series of many repetitions. Most experts on brain function use a saying "The neurons that fire together, wire together". This means that the actions that we do over and over are having an effect on our learning.
Trading is no different than learning any other task in the sense that we must correctly execute our trades over and over regardless of winning or losing to build strong trading habits. Here is a great motivation on this subject from Motivation Mentor@aol.com
YOU ARE WHAT YOU REPEATEDLY DO
First you make your habits, and then your habits make you.
You become a slave to your constantly repeated acts.
What at first you choose, at last compels.
Your habits are either the best of servants or the worst of masters.
Your thoughts lead you on to a purpose,
your purposes go forth in action.
Your actions form your habits.
Your habits determine your character,
and your character fixes your destiny.
Once in motion, a pattern stays in motion.
Thursday, June 12, 2008
Thursday, May 8, 2008
Traders Obituary
The following is from my trading friend Kerry Syzmanski, proprietar of www.harmonicedge.com
Trade PsychologyTrader's Obituaryby Kerry Szymanski
It is a sad but simple truth that most people fail at trading the markets for a variety of reasons. Failure to research, formulate and follow a good trading plan is a common theme as is the inability to control emotions. Under capitalization and unrealistic expectations is another.
When you are new or struggling, it is normal to feel some self doubt and fear. There are no guarantees in trading and anything is possible. The most frightening factor in trading, however, may be the potential we have to wreck havoc on ourselves by becoming addicted to a pattern of losing. If we engage in a pattern of behavior that is strongly associated with losing, we will fail.
What pattern can be observed in losing traders? They trade impulsively. Impatience causes them to enter and exit trades prematurely. They either lose focus or become hyper focused. They add to losing positions. They don't book small losses but do book small wins. They get euphoric when they win and depressed when they lose. They risk too much on a single trade and get emotionally involved with the outcome.
Dr. Alexander Elder begins his trading day by saying: "My name is Alex and I'm a loser - I have it within me to do serious damage to my trading account today."
Perhaps this is a bit extreme but I think the basic idea is correct. Especially if we have an addictive personality type and find ourselves repeating destructive patterns simply because they feel familiar or comfortable.
Several years ago one of my trading friends, Leslie Jouflas, suggested a little exercise. It was to write my trading obituary. It sounds a bit morbid but I think it's useful. No one knows what we are doing in our trading rooms better than we do. If you manage to blow out your account, what will the steps be that take you from point A to point B? Take a few minutes to put this down in writing and then place it some place where in your trading room where you can easily review it once a day.
What is the scariest thing in trading? It's the fellow who stares us down in the mirror. If he doesn't do us in, we'll most likely be just fine. I don't keep my obituary posted on the wall anymore, but it's never too far away. Consider writing your own as a reminder of what you must avoid doing to preserve your trading account.
Traders Obituary
Here lies trader Kerry who blew out his account. He allowed himself to lose focus by permitting too many distractions and demands on his time. He traded too many markets, was overconfident and susceptible to trading "highs". This led to over trading and over use of leverage. He failed to control his emotions. Fear caused him to become too bearish and he resisted trading the long side of the market. He failed to take modest profits when offered and effectively manage risk. May he rest in peace.
Thanks Kerry!
Trade PsychologyTrader's Obituaryby Kerry Szymanski
It is a sad but simple truth that most people fail at trading the markets for a variety of reasons. Failure to research, formulate and follow a good trading plan is a common theme as is the inability to control emotions. Under capitalization and unrealistic expectations is another.
When you are new or struggling, it is normal to feel some self doubt and fear. There are no guarantees in trading and anything is possible. The most frightening factor in trading, however, may be the potential we have to wreck havoc on ourselves by becoming addicted to a pattern of losing. If we engage in a pattern of behavior that is strongly associated with losing, we will fail.
What pattern can be observed in losing traders? They trade impulsively. Impatience causes them to enter and exit trades prematurely. They either lose focus or become hyper focused. They add to losing positions. They don't book small losses but do book small wins. They get euphoric when they win and depressed when they lose. They risk too much on a single trade and get emotionally involved with the outcome.
Dr. Alexander Elder begins his trading day by saying: "My name is Alex and I'm a loser - I have it within me to do serious damage to my trading account today."
Perhaps this is a bit extreme but I think the basic idea is correct. Especially if we have an addictive personality type and find ourselves repeating destructive patterns simply because they feel familiar or comfortable.
Several years ago one of my trading friends, Leslie Jouflas, suggested a little exercise. It was to write my trading obituary. It sounds a bit morbid but I think it's useful. No one knows what we are doing in our trading rooms better than we do. If you manage to blow out your account, what will the steps be that take you from point A to point B? Take a few minutes to put this down in writing and then place it some place where in your trading room where you can easily review it once a day.
What is the scariest thing in trading? It's the fellow who stares us down in the mirror. If he doesn't do us in, we'll most likely be just fine. I don't keep my obituary posted on the wall anymore, but it's never too far away. Consider writing your own as a reminder of what you must avoid doing to preserve your trading account.
Traders Obituary
Here lies trader Kerry who blew out his account. He allowed himself to lose focus by permitting too many distractions and demands on his time. He traded too many markets, was overconfident and susceptible to trading "highs". This led to over trading and over use of leverage. He failed to control his emotions. Fear caused him to become too bearish and he resisted trading the long side of the market. He failed to take modest profits when offered and effectively manage risk. May he rest in peace.
Thanks Kerry!
Sunday, April 6, 2008
Las Vegas Style Trading
I was at the dog park recently and chatting with a regular doggie parent. He was telling me that he and his wife had lived in Las Vegas for several years. He then told me of how the gambling fever got him. This reminded me so much of how so many traders get "hooked" on trading.
He said that the first time he gambled he won 'big'. That was enough to do it, he said that it was so "easy". That is so typical of what happens to many traders just coming into the markets. They come in no experience, no research, just an idea that they can win. Sort of crazy isn't it? Then the worse case scenario happens...they win big! Yes, that is the worse case scenario because it seems to anchor into the brain that trading is very easy and there is easy money to be made.
From there it can be a very long, expensive and painful process for the trader to finally realize that trading is not so easy and they need to learn a sound trading methodology that can be applied in a systematic way in order to capture probabilites that do exist in the markets.
It has always been a curiousity to me that this business of trading is so unique in this way. Not a lot of brain surgeons, pilots, CPA'a, engineers, dentists, etc. ever would consider approaching their fields in this manner (not to mention it may be difficult to maintain clients if they did).
If you are coming into trading or have been at it for some time with no success, ask yourself if you are really approaching trading as a business or if you are approaching Las Vegas Style.
He said that the first time he gambled he won 'big'. That was enough to do it, he said that it was so "easy". That is so typical of what happens to many traders just coming into the markets. They come in no experience, no research, just an idea that they can win. Sort of crazy isn't it? Then the worse case scenario happens...they win big! Yes, that is the worse case scenario because it seems to anchor into the brain that trading is very easy and there is easy money to be made.
From there it can be a very long, expensive and painful process for the trader to finally realize that trading is not so easy and they need to learn a sound trading methodology that can be applied in a systematic way in order to capture probabilites that do exist in the markets.
It has always been a curiousity to me that this business of trading is so unique in this way. Not a lot of brain surgeons, pilots, CPA'a, engineers, dentists, etc. ever would consider approaching their fields in this manner (not to mention it may be difficult to maintain clients if they did).
If you are coming into trading or have been at it for some time with no success, ask yourself if you are really approaching trading as a business or if you are approaching Las Vegas Style.
Sunday, March 9, 2008
Anything Worth Having...
"I've missed more than 9000 shots in my career.
I've lost almost 300 games.
26 times, I've been trusted to take the Game Winning Shot and missed.
I've failed over and over and over again in my live.
And that is why I succeed."
Michael Jordan
I've lost almost 300 games.
26 times, I've been trusted to take the Game Winning Shot and missed.
I've failed over and over and over again in my live.
And that is why I succeed."
Michael Jordan
Thursday, February 14, 2008
How Many Ways to Mess up Trades - Let Me Count the Ways
It seems there are countless ways to make trading errors. And countless combinations of ways to make trading errors. Everything from missing trade setups to letting a profitable trade turn into a loser, to early exits, order entry errors, you name it and it can be done to mess up trading.
When you think about trading errors and how many ways there are to make errors and compare that to just the few simple steps needed to do what you are supposed to do in trading, it is remarkable.
Here is all you need to do;
1. Identify setup (your edge)
2. Have patience for setup to develop
3. Place entry order
4. Place stop loss order
5. Take profits or take stop loss
Thats it, of course you may be trailing a stop loss or adding on in a trend, but its pretty basic. So how can it be that the trading errors outnumber the "do the right thing" category by such a wide margin?
Maybe its possible that because in essence what we are supposed to be doing is so simple and basic we just have a hard time leaving well enough alone and give into the have to have something to do to feel productive mode. Of course the outcome will usually be on the unproductive side in the way of losses.
My suggestion is to review what your trade plan and trading setups are the you will look for the next trading day and make a commitment that you will simplify your life and trade only that. If the urge to do anything other than that comes along, take a nap until it passes.
And instead of counting the ways of making trading errors, count the trades that you did the right thing.
When you think about trading errors and how many ways there are to make errors and compare that to just the few simple steps needed to do what you are supposed to do in trading, it is remarkable.
Here is all you need to do;
1. Identify setup (your edge)
2. Have patience for setup to develop
3. Place entry order
4. Place stop loss order
5. Take profits or take stop loss
Thats it, of course you may be trailing a stop loss or adding on in a trend, but its pretty basic. So how can it be that the trading errors outnumber the "do the right thing" category by such a wide margin?
Maybe its possible that because in essence what we are supposed to be doing is so simple and basic we just have a hard time leaving well enough alone and give into the have to have something to do to feel productive mode. Of course the outcome will usually be on the unproductive side in the way of losses.
My suggestion is to review what your trade plan and trading setups are the you will look for the next trading day and make a commitment that you will simplify your life and trade only that. If the urge to do anything other than that comes along, take a nap until it passes.
And instead of counting the ways of making trading errors, count the trades that you did the right thing.
Sunday, January 6, 2008
Exposure and Trading
The following excerpt is from the book, ‘Be The Pack Leader’ by Cesar Millan. I am a great fan of his and have used his techniques to train my German Shepard puppy, ‘Gartley’. I came across this part on fear in this book and could not help but notice the profound similarity to trading. I hope that you enjoy this as much as I did and find it helpful.
This excerpt is when Cesar Millan asks his friend Dr. Alice Clearman to explain how exposure works as a technique for dealing with fear.
“Exposure is all about reinforcement in the brain. Whenever we engage in a habitual behavior in response to something we fear, we reinforce that fear. If we are afraid of spiders and back away from them, we reinforce that fear. Imagine a great fear of spiders. You see one in the bedroom. You run out of the bedroom and get someone else to kill it. Or you spray half a can of pesticide in your room. Or you call a pest control company. I’ve known one person who refused to sleep in her bedroom for three months after seeing a spider there!
The way it works is that they become more and more anxious as they approach the feared object or situation. In the case of spiders, if I’m afraid of them and I have to kill one, I become more and more afraid as I approach it. Maybe I have a shoe in my hand, poised to smash the creature. My heart is pounding, my pulse is racing, I’m almost hyperventilating. I’m terrified! I get closer and closer, sweating bullets. I suddenly decide that I can’t handle it! I turn heel and flee from the room, calling my neighbor and asking her to come over and kill the thing. The moment I run away, how am I feeling? Relieved! My pulse slows and my breathing returns to normal. I wipe my brow with a shaking hand. Whew! That was close!
Look at what I did to my brain. I had increasing anxiety as I drew closer and closer to the spider. Then I decided I couldn’t do it. I fled the scene and I had an enormous sense of relief. That relief – that feeling – was a reward. I rewarded myself for fleeing from the spider. I’ve taught myself, quite literally my brain, that spiders are indeed very dangerous creatures. I know this because of the feeling of relief I had when I left. The result is that I actually increase my fear. I have made myself a little bit more afraid of spiders every time I exit.”
Please feel free to post your experiences relating to this and any tips for traders they can use to manage fear in trading.
This excerpt is when Cesar Millan asks his friend Dr. Alice Clearman to explain how exposure works as a technique for dealing with fear.
“Exposure is all about reinforcement in the brain. Whenever we engage in a habitual behavior in response to something we fear, we reinforce that fear. If we are afraid of spiders and back away from them, we reinforce that fear. Imagine a great fear of spiders. You see one in the bedroom. You run out of the bedroom and get someone else to kill it. Or you spray half a can of pesticide in your room. Or you call a pest control company. I’ve known one person who refused to sleep in her bedroom for three months after seeing a spider there!
The way it works is that they become more and more anxious as they approach the feared object or situation. In the case of spiders, if I’m afraid of them and I have to kill one, I become more and more afraid as I approach it. Maybe I have a shoe in my hand, poised to smash the creature. My heart is pounding, my pulse is racing, I’m almost hyperventilating. I’m terrified! I get closer and closer, sweating bullets. I suddenly decide that I can’t handle it! I turn heel and flee from the room, calling my neighbor and asking her to come over and kill the thing. The moment I run away, how am I feeling? Relieved! My pulse slows and my breathing returns to normal. I wipe my brow with a shaking hand. Whew! That was close!
Look at what I did to my brain. I had increasing anxiety as I drew closer and closer to the spider. Then I decided I couldn’t do it. I fled the scene and I had an enormous sense of relief. That relief – that feeling – was a reward. I rewarded myself for fleeing from the spider. I’ve taught myself, quite literally my brain, that spiders are indeed very dangerous creatures. I know this because of the feeling of relief I had when I left. The result is that I actually increase my fear. I have made myself a little bit more afraid of spiders every time I exit.”
Please feel free to post your experiences relating to this and any tips for traders they can use to manage fear in trading.
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