Dealing With Doubt, Fear and Conflict While Trading

Beginner Questions Trading Psychology
1

Since starting to trade with a live Micro account almost a year ago after several years of practice trading, I have gone through many feelings.

[B]Doubt, Fear and Conflict being the main ones.[/B]

On average I make one trade per day if, and only if I can see the trade has the probability to reach fulfilment of my expectations.

However, since starting to trade with real money the title of this thread has hit me hard. This has caused me to lose some of the confidence I spent several years building up via a practice account. The result is that my account is taking hits like the megatrons in Transformers and slowly dying. Ideally I would like to reach a point where I can become independent of employers and not have to rely on payrolls “[I]Ad nauseam[/I]” (its making me sick to be employed by others).

Subsequently, after placing a trade the fears and doubts have set in when a trade goes counter to my expectations. The trade is removed despite a loss. Upon examining the probabilities in retrospect, the larger proportion of trades have gone according to the way I saw them playing out.

So my question is How does one deal with the [B]Doubt, Fear and Conflict[/B] while trading with real money?

2

Good question. Lets flip this back to you …
Do you have a strategy that you trust and have full confidence in?
Do you follow this strategy meticulously?
Do you have a trade journal?

Read “trading in the zone” by mark Douglas. It won’t change your life but may give you some ideas on how to deal with fear. It seems like you have a logical approach and just need to sort out the psychology part of your trading…

3

Hi MrChilled

Thank you for your reply.

I’ll split this up into each of your questions.

Taking the last 1st. [B]Do you have a trade journal?[/B]

Reality is No unless you count MyFXBook as a trading journal.

[B]Strategy[/B]

After discovering Elliott Wave Patterns independently of Mr Elliott about 18 months or so ago, I use these as a canvas for adding other technical indicators into the picture.

[B]Stages. [/B]

  1. Check to see what the pattern is doing across all available time frames in the charting software I use. This is normally from the 1 minute time frame up to the daily. However, recently the company I use for trading has added in a weekly time frame. Muchos Gratis :slight_smile: (Question is how do I adjust my stops to accommodate and do I have the guts to allow significant draw-down?)

  2. Look to see what special formations have developed E.g double inside days. Which direction is this most probably going to go in based on oversold/overbought situations and are there any other clues in lower/higher time frames that will have a bearing?

  3. How do these relate to the current Elliott wave pattern I can see? What relationship does this have to the Elliott Wave backdrop canvas?

  4. Check to see if there is any divergence? If so where is the divergence heading?

  5. Has the instrument hit a pivot point? If so what is the market saying about this? What bearing has this got to do with fibonacci and the golden ratio?

  6. Is there a trade? If YES so when is the right time to take said trade? If NO move onto the next instrument.

[B]Follow Meticulously[/B]

Yes. I have developed my plan and carry it out for all trades.

[B]This was my trading plan prior to opening a live account. [/B]

My Trading Rules – Re Defined

  1. Never trade when: a) Tired b) Drunk c) Or out of sorts. Remember mistakes can be costly
  2. If in doubt don’t do it because you will be wrong
  3. Read the signs, if the signs are opposite to your thoughts don’t try and buck the trend
  4. Even if the signs are superb don’t make any purchases late on a Friday, the spreads will become smaller on a Monday and the trade will still be there
  5. Its better to get out early than lose your shirt (think of all those poor guys who jumped out of windows because they got it wrong)
  6. Check all timeframes and recheck before placing an order. If in doubt you are probably right and should not do it.
  7. If you make a mistake think about why you got it wrong and learn from it a) How can I do that better next time? b) Where is the root of my mistake? c) What made me make that mistake in the first place? d) When did I think I was right and why?
  8. Never commit more than 50% of your actual account balance
  9. Don’t rely on NAV. If trades turn on you it will bite you hard.
  10. Never use more than 5% of your account balance for any trade.
  11. Make sure you disregard NAV when calculating a trade.

Since then I have revised this, especially:

  1. Don’t commit more than 20% of account balance
  2. Don’t commit more that 1-3% of account balance to any instrument, including correlations.

As you can see, my trading plan has developed and been refined in some areas.

Thank you for the book title. I will obtain a copy and “trading in the zone” by mark Douglas.

4

Start a trade journal and journal EVERYTHING from emotions, why you took the trade, how you reacted. You’ll be amazed what you will discover, what works, what doesn’t work … honestly I cannot stress this more. It’s like a programmer not righting notes on a 5,000 line of code. Or a doctor not having notes for patients and every time the doctor sees that patient, goes “so remind me what the problem was”. I’m confident your trading will move up to the next gear. Good luck.

5

Been there as well… And one black day did it all for me. Couldn´t trade for a while. Now I hardly feel it anymore. I deliberately exposed myself to watching trades go by, profits and loss. Over tiem it became easier and in the end Icouldn´t care less.

In short, it is normal. It is excellent that you recognized it. The people before me already gave some good advise, but what I want to say is that the pain will almost go away over time. Don´t walk away from it. Force yourself to do the trade and let it go. Don´t cut profits and let it be a loss if it is a loss. The moment you take control over the trade, the trade setup was probably not correct and you should not have entered in the first place.

6

Spuzzana,
the basic template to address these issues contains the following:
having a trading plan and executing it as consistently as possible
treating trading seriously/as a business
acknowledging losses as part of trading
tons of hours of practice and study to gain confidence and experience
respect for the markets you are trading; personal humility

7

mrchilled
Start a trade journal and journal EVERYTHING from emotions, why you took the trade, how you reacted. You’ll be amazed what you will discover, what works, what doesn’t work … honestly I cannot stress this more. It’s like a programmer not righting notes on a 5,000 line of code. Or a doctor not having notes for patients and every time the doctor sees that patient, goes “so remind me what the problem was”. I’m confident your trading will move up to the next gear. Good luck.

IdeFX
Been there as well… And one black day did it all for me. Couldn´t trade for a while. Now I hardly feel it anymore. I deliberately exposed myself to watching trades go by, profits and loss. Over tiem it became easier and in the end Icouldn´t care less.

In short, it is normal. It is excellent that you recognized it. The people before me already gave some good advise, but what I want to say is that the pain will almost go away over time. Don´t walk away from it. Force yourself to do the trade and let it go. Don´t cut profits and let it be a loss if it is a loss. The moment you take control over the trade, the trade setup was probably not correct and you should not have entered in the first place.

FringFX
Spuzzana,
the basic template to address these issues contains the following:
having a trading plan and executing it as consistently as possible
treating trading seriously/as a business
acknowledging losses as part of trading
tons of hours of practice and study to gain confidence and experience
respect for the markets you are trading; personal humility

Hi Mr Chilled, IdeFX and FringFX thank you for all your comments. Since reading your reply’s I have looked at each element of my trading plan, checked the indicators I use and thought about my trading history.

Conclusions are, that I do have the ability to trade and trade well.

IdeFX
Been there as well… And one black day did it all for me.

Where I have gone wrong in the past you touched upon a raw nerve.

This resounded very deeply. It is also a point at which I revised my trading plan to reduce risk when trading correlations. Very early this year on the AUD…NZD/ JPY…CHF…USD pairs there was significant correlation. Looking at the way the waves had developed I took a number of positions across them. It transpired that I had miss counted the wave formation on the monthly although the weekly count was continuing as expected. Well to cut a long story short the trades reversed and I ended up with a 30% hole in my account.

That I believe was the pivotal point at which my doubts, fears and conflicts came into play. Like you I didn’t trade for quite a while afterwards.

Taking your all your feedback on board I have produced a summary of the only trade carried out since the original post.

Are these the types of entries you place in your trade journals?

EUR/AUD 12th Dec 2012 LONG

Currency is in a general downtrend and forming a Bearish wedge of A,B,C,D,E on wave 4. At time of trade the wedge is in the E part of the correction heading towards the top level of the wedge.
TP set at 1.23831 with initial stop loss set at 1.23400 trailing stop 5 pips behind stop loss. Pips win should be 24 pips. A reversal should occur around the 1.23831 level and head downwards into wave 5. Main PP level is 1.23579 where the currency is bouncing currently.

Trade taken consisting of 3% of account balance.
Anticipated length of trade 24 hrs

[B]Indicators:[/B]
Elliott Wave Count: Current Wave 4, E portion of correction.
Bullish divergence 15 min TimeFrame
Price Close contained within +1 and +2 bollinger bands 5 min timeframe
.682 of C = top of the pennant for E
RSI above 50
MCAD crossover to the buy side

[B]Feelings.[/B]
Confident upon taking trade. Although the trade is a long trade against the current overarching daily and monthly trend.
Nervous watching the trade develop as it weaved backwards and forwards across the PP line for most of the day.
Delighted the trade hit TP at 17:28 GMT

8

Thoughts in Retrospect.
How could I have done this trade better?

  1. Having identified the price close contained within +1 and +2 bollinger bands taken the trade after initial bounce rather than continue analysis.
  2. Waited for the second bounce of the new trend being established.

(a) Entry points would have been similar around the 1.23510 level
(b) Profit would have been an extra 10 pips.

9

Through practice on REAL account, I guess. Invest some $100 and slowly see what you can do, and WHY do you experience those emotions.

I’m going to do the same. I experience similar problems as you, and I totally understand you.

All the best. :slight_smile:

“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”
-Mark Twain.

10

Hi NorwoodFX

Your handle suggests you may reside in Norwood London UK.

Maybe you missed this part of my original epilogue:

However, since starting to trade with [B]real money[/B] the title of this thread has hit me hard.

Unusually today I took out two trades basically 2nd and 3rd steps towards conquering the fears, doubts and conflicts within. One missed hitting TS to lose 0.03% of account value. In retrospect this was caused due to 1. using SL and TS to tight to allow breathing room for the volatility in the instrument in question 2. Not waiting quite long enough for full confirmation support had properly broken. Noted afterwards the instrument rebounded off the PP level for the 4th time today which would have taken out my original SL. After rebounding it left behind a trail of long upper wicks as it moved back down because the bulls just didn’t want to let go that easily.

Jumped back on the horse just over an hour later after re-evaluating the charts and coming to the same conclusion. Noted that I should wait to confirm 1. the bounce was complete 2. breaking of the support level properly confirmed 3. Widening SL and TS to accommodate volatility. Took the same trade at an almost identical level. The second was a resounding winner and added 0.98% to account value. Wins to loss ration since original post 2:1. Value added to account 1.24%.

Also noted after crossing the winning line after the final bounce, any retracements did not go anywhere near my original SL or TP levels.

All of the dialogue above regarding the two trades has been noted and interlinked in my new Traders Journal :slight_smile:

Baby steps I know, yet there is hope and light at the end of the dark tunnel. Just need to continue doing this on a regular basis and build a good track record. :32:

Just want to say thanks a million for your suggestions ladies and gentlemen.

11

[B][U]How to deal with Doubt, Fear and Conflict[/U][/B]

Find a statistical edge.

Study your trading strategy well and find out it’s winning rate and loosing rate. Like 65% winners and 35% looses. You may manually do this on historical charts. Do this for few years. ( I did for more than 10 years). Do it on random years. Find out statistics for each year, they may differ.

Then you know what you are dealing with. You will learn that you need to take every trading signal. You will learn that some will end up as losses while most of them as winners.

Now you will not have doubt or fear as you know your statistical advantage. You will know that there could be better years and worst years. There will be no conflict as your trading plan is simple, you just take your signals, set TP & SL and wait for the market to fill one of them. Don’t try to think what will happen next, as nobody knows it, except those who has enough money to move the market :wink:

Just my 2 cents…

12

The good thing here, is that you have been able to analyse and identify the cause of the loss, and the value was tiny. Better to lose small as a result of risk management that was just a bit tight, that you can then analyse and adjust, than to lose big through foolheardiness or impulsiveness. :slight_smile:

13

True. Damn, I’m starting to think that psychology is 90% of this damn thing. Everything else is minority.

“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”
-Mark Twain.

14

I’m smiling while reading this post, because it’s also my story, and I think everyone’s story

Cheers

15

Hi eliescuadrian

Opened the live account December 2011. After my initial big loss early March last year which accounted for about 30% of my account, I didn’t do any trading for several months. At the time I enjoyed almost 75% track record for correct trades and had added about 27% to my equity in 3 months.

Since then I have lost a further 4% of the account. When I wrote this, my trading was going no where fast. My win ratio had dropped to 63% and winners were far, far smaller. Spent a long time just about managing to break even most of the time with trades mainly because I took them off far to early. That was a marked difference from the early wins prior to the big loss where I was in denial that things were not going as expected. Losing trades since then have been markedly smaller and only account for less than 0.05% of account value each time.

With hindsight after arriving here at babypips I now realise quite a few things from my studies here:

  1. Incorrect risk management not compatible with my preferred style of trading (Swing/Position)
  2. Shortfalls in my trading plan
  3. Analysis squiffy eyed in some respects and the main analysis ideally used as a back drop or canvas (Elliott Wave Principal)
  4. No trading journal as a reference point for all trades taken and the reasoning behind them, what was I seeing at the time, what supporting evidence was apparent
  5. Insufficient data collected regarding my preferred instruments (e.g. What happens during significant news releases, which ones are important and at what times of the month, are the big market movers in a buy/sell program, where do the instruments typically retrace, Asian open/close, London open/close, New York open/close)
  6. Understanding price action

And so on. The list is much longer than this and it makes me wonder how I managed to make such a large amount of profit from the get go.

So now I am working on each refining each of the above and other elements besides.

In other areas of my life I have been beset with Fear, Doubts and Conflicts. What did I do.

[B]I conquered them[/B]

16

you told my story again, for what I’ve seen also among my friends this is the game, you with yourself and conquering your fears, some people just can’t, others quit to early, but some manage to go thru all the process. They are the winners.
Good luck, or how you say in UK Cheers Mate

17

I think too much emphasis is put on trading psychology. If you are trading using a good system then you will make money, which will make you confident, which means there will be no problems about trading psychology. I find that people selling rubbish trading systems usually use ‘trading psychology’ as there get out clause. As soon as I see this in a description I instantly turn away. If you’re having problems getting int he right mindset for trading you either shouldn’t be doing it or you are trading a rubbish system

18

Hy,
nice attitude, so what system you recommend? because I’ve tested a few and they all involve fear and psychology

Cheers

19

It is better to not to ignore these feelings of emotions. It is natural to feel the way we do, expecially when money is involved. No body wants to lose and this is why the feelings come too often.

20

The only time that I feel Doubt, Fear and Conflict is when I am not that confident in my trades. The first time that I tried trading I was shaking like a leaf. Eventually I got over it and I noticed that the more times trade, those feelings gets less and less. Try to limit yourself with one trade first and then increase the frequency until you are able to trade confidently.