My final conclusion on trading

Beginner Questions Trading Psychology
1

Hi all,

Ever wondered why trading in general looks so easy but happens to be unachievable by most people? I am going to give you an explanation that may shock some of you but if you think about it for a while, it makes so much sense.

Trading may be different from Gambling in many ways, and I deeply believe in this after all the years spent in order to master it but they have something in common which is the fact that they are very likely to generate an addiction in people who start performing it on a regular base.

What you are doing when trading is opening yourself to an outcome where you may possibly make money, and almost as importantly, get the pride from having been right which will both generate happiness signals in the brain. You are then short-circuiting the reward path of your brain by generating artificial rewards on a repeated base or at least on a much more frequent and faster base that what your brain is used to in normal life events. In the opposite, when you lose, it generates frustration as the outcome is not the expected good feeling. This makes you feel the urge to replace a trade in order to get back to that feeling of reward. This compares to a gambler pressing the spin button on a slot machine. The difference is that it has been wide spread that casinos are addictive and it also carries a rather bad reputation. The problem with trading is that it gives the image of a very prestigious thing to do and no one ever mentions its addictive component.

If you don’t believe in the above, just ask yourself this very simple question: Why do weekends suddenly feel so bad when they used to be the best days of the week?

So now the question: Why is it so hard to master it?

Well, obvious, because you are fighting against an addiction which is known to make people behave in an irrational way.

Think of some of the beginners mistakes that are mentioned again and again:

1 Overtrading
2 Revenge trade
3 Overconfidence after a series of win
4 too big lot sizes (tendency to increase the lot size gradually)
…

Of course not all people get hooked at the same intensity but I believe that everyone gets impacted at different levels which are strong enough to make it hard to stay in control and master it.

Now, I am not saying stay away from it, but I just want to make people aware of how big the enemy they have decided to fight is.

This explains why it is almost all about mastering your emotions: this is the point you get rid of the addiction and only then will you start making money consistently and without suffering. Keep this in mind and give it the time, it’s the only way.

I believe you have three sorts of traders:

1 The ones who never get rid of the addiction or get rid of the money before the addiction (very common group of people)

2 The ones who get to the point of making consistent return but somehow never manage to get rid of the addiction and suffer all the way

3 The ones who finally get rid of it and make consistent money with no pain

(It could as well be a path and everyone is set to finally reach number 3 but at various speeds.)

Personally, I have been stuck in 2 for too long and decided that it was time for me to at least take a long break until I sort other things in my life but most likely to find another way out in life.

I wanted this to be my last contribution to a forum on which I used to spend a lot of time and which I really enjoyed reading on an almost daily base even thought I have been mostly silent for the last year or so.

I wish a lot of success to everyone and hope that the above will raise some sort of healthy awareness.

Yves :13:

Je suis Charlie

2 Likes
2

The path to becoming a professional in any industry is going to be challenging.
Learning curves may not align for every single person who tries to trade- some may see success quickly, others over the much longer term.

Call it an addiction.
Call it stubbornness.
Call it whatever you want.

But, you should NEVER give up on [B][I]anything[/I][/B] which you can’t go a day without thinking about.
True success is measured by how many times you pick yourself up when you’re down.
True success, to me, isn’t any tangible item money could buy.
True success comes with an unnerving persistence that you will never quit no matter how tough it gets.
True success comes with revealing yourself to yourself.

Jake

3

Big +1 with jake. Gezz i always feel dumber after reading a post like this that focuses on emotions and the relationships to gambing.

Trading is a business. You have a vision, mission statement,values, short term long term business strategies, policies, procedures, processes do I need to go on. Where in business do we focus on the profits. You dont. No different trading/speculating. Why do most people fail because they fail to plan. How many truely have a complete business plan (trading plan as the industry calls it)

4

Anyone saving money or holding assets denominated in a given currency has taken on currency risk. During previous monetary eras, the common man did not have this same risk (because of fixed exchange rates). But today, in this free-floating global monetary system, everyone is at risk.

Gambling is the creation of risk for the purposes of thrill seeking. The risks involved in gambling are produced artificially for fun. Currency risk is not risk that is created for the purpose of thrill seeking, it is engendered in the monetary system which is key in the effort of society to produce economic gains and in the business and political environment wherein these endeavors are undertaken. And the taking on of assets denominated in a given currency or the currency itself does not produce risk at all, it merely transfers that risk from one party to another.

Selling one’s financial assets does not destroy risk, it merely transfers it to others. Saving dollars does not destroy currency risk, it IS currency risk.

Forex trading could be an obsession for some, but so can entrepreneurship in any industry. The obsession and work of forex traders is not pathological in nature nor is it gambling in the same way as is a casino game. The greatest in most industries are very obsessed with their work and our society is better for it and that includes the financial industry and forex.

5

A trading system is a group of specific rules, or parameters, that determines an entry or exit point for a given equity.
Combinations of technical analysis indicators and oscillators are often used to create the rules used in trading systems.
Once they are created and working properly, trading systems can take all emotion out of trading and save you a lot of time; however, they can be difficult and time consuming to construct and perfect.
Many trading systems have proven to be effective over time. But some of the trading systems sold on the market have been scams. Most scams can be detected by looking at the promises they make - if it sounds too good to be true, it probably is!
Trading in the currency market can offer more liquidity and lower transaction costs, but also more volatility and a limited selection. Equity markets have limited liquidity and high transaction costs, but a more diversified nature. The futures market - although typically reserved for advanced traders - offers high leverage and potential profits, but is more difficult to tame with a trading system.
There are two main types of trading systems: those that follow the trend and those that go against the trend. Although similar in terms of risk, they offer different ways of profiting.
Your trading system must make money, limit risk, be composed of stable parameters and have a stable time series.
Software can help you speed up system development and automate trading.
The six steps involved in creating an effective trading system include (1) set up, (2) design, (3) decision making, (4) practice, (5) repeat and (6) trade.
Optimization should be avoided in most circumstances.
The four steps in the process used to troubleshoot any problems with your trading system include (1) identifying the problem, (2) evaluating the problem, (3) considering the alternatives, and (4) implementing a solution.

6

Hi all,
Coming to my final conclusion about trading ,I feel trading is a good option to create money but you need to :
Keep patience
Be positive
Ready to take risks
And don’t be greedy because market can take you down on sudden.

7

I do hope that is your final conclusion.

1 Like
8

My final conclusion on trading ,

Trading is gambling. Who are we kidding?
You make a bet. Get it right, you make a profit. Get it wrong, you can cry.

However, Trading is not a coin flip. Coin flip is always 50/50 in terms of probability. There are traders around with uncanny accuracy. Their power of observation and flair in comparatives are unparalleled. They are indeed a rare breed.

Seemingly, no amount of practice will an average person be able to attain god-like trading accuracy of a trading genius. Even though, with tenacity and Grit, perhaps we may get close to that level of trading accuracy, unfortunately an average person will always be outclassed by the prodigy.

Trading is exhausting. A Life force sucking turbine that drain every bit of psyche out of you. In exchange for the elusive dough.

Question, is it worth it within the span of our fleeting life?
Personally, i don’t think so. But lamentably, i seek redemption in Forex trading.

2 Likes
9

I agree that many people treat trading as gambling. And surely it can be addictive, actually it is addictive. I used to be so addicted that constantly was overtrading and was upset with myself. Later on I realized that it’s all about the emotions control which is quite hard to achieve and takes a lot of time and efforts. The other issue that I quite often notice is indeed the tendency to increase the lot size gradually and this is connected with becoming overconfident after making some good profits. For me this is a big mistake as placing bigger and bigger volumes can very quickly turn against you (as it happens in most cases) and all the profits are gone for good…just like gambling haha :smiley:

10

Very insightful, and as someone who has been in and out of trading for the past 7-8 years with many gaps for real life stuff…I totally agree. If you come back, you may discover that it’s easier and you’re more patient and the addiction is dulled. Good luck to you whatever you decide!

11

Very good material. Overall trading requires iron discipline, and I’m talking not only proper time management, but also about the emotional side. A lot of traders are getting to excited and they cannot stop. This usually leads to opposite results.