Random Rabbling about Trading, Psychology and MoneyMaking (everybody welcome to join)

Trading Discussion
1

The Winners Fallacy.

is a strange construct.

you might wonder if it exists, what it is.

i tell you, it does exist, and ill tell you what it is. but to understand this strange concept is up to you, and most will not understand it.

ever had that feeling. once you accomplished something you have a day or two of “godmode feeling” like-ish-ness that you can achive anything and win no matter what.

yes you had it, everybody has it or had it at least once in his life.

its a feeling that makes addicted to it.

the real addiction of any beeing. success

the only addiction that bears positive fruites.

and then? a day passes or two, and you suddenly feel very very down. in your consciousness you dont know why you feel down. you should feel great, you accomplished your goal. you are a winner.

but in your subconsciousness you know what has happened.

you have won. and that ruines your mood.
why? how? huh wtf?

you achived your goal. theres nothing after it, all you desired and dreamd of has come true, and you realize it aint as important as you thought it might have been to you while you were running for it. even more than that, you have nothing to associate yourself with anymore. when you are a doctor and people ask you “what are you” you say “im a doctor” you associate with your profession. once you achived freedom to not having to do that profession for living anymore, what can you when someone asks you “what are you?”?

ive had this winners fallacy 3 times in my life.

1st when i finished my Mstr.Sc.
2nd when i sold my company
3rd. when i managed to make money with trading to not depend anymore on work to make money

and im not talking about “money to pay bills” im talking about accumulation of the unneeded.

and what then? each every of those “wins” made me feel miserable after a few days only.

is it only me or did you as well have the winners fallacy in your life?

anyways, what im trying to say:

i believe that experiencing the winners fallacy in your life at least once, your subconsciousness knows how bad it can be, and it works against you when your “dream” is to be a sucessfull trader and make money trading.

while you dont earn money with it, but accumulate losses, it is your dream. you put many hopes in it, to not work anymore, to be independant etc. etc. but deep in your subconsciousness you are affraid of reaching that goal and find out that it isnt as good as you immagined.

you sabotage yourself without even knowing it, in order to not reach your goa, for it to stay a dream of which you can dream of and it gives you a warm dopamine filled feeling of comfort, a goal to strive for, a reason to get out of the bed in the morning.

i believe that many people fail in trading because of exactly this winners fallacy.

how to avoid this self sabotaging concept?

here is the answer:

you must see “money making in the markets” as a step to your real goal, not your final goal.

your final goal you may ask? it can be whatever you like, but it has to have a meaning which makes you get out of the bed in the morning.

money for retirement is no final goal, as when you reached your traders success you can retire and you become “workless”. it doesnt add meaning to your life in the form of “i am a person who is needed and not easily replacable”

just to make money? no thats not a real final goal as well, as you once manage to make enough you feel just as empty and unneeded as if you retired.

a final goal must lead you to something that is actually not achievable.

if you see the statements of innovators, scientists and tycoons who “made it” you will see that they are never satisfied and never “have had enough”. they always strive for a goal, or more goals that actually sound insane.

just look at 2 examples from your real life:

Mark Zuckerberg: my goal is to change how people communicate on the entire world, make them come closer together and change their life for good.

Steve Jobs: my goal is to change how people communicate on the entire world, make them come closer together and change their life for good.

Bill Gates: my goal is to change how people communicate on the entire world, make them come closer together and change their life for good.

are those realistic goals? for sure not, and they can never be achived.
but what did those goals do good for the 3 guys named? they never stopped running after their unachivebale goal.

so, if you want to be a winner in the game of “who takes whos money away” a.k.a. trading, speculating, investing- then your goal can not be to be a winner in the game of “who takes whos money away” but must go further than that. and when you dont achive your final goal, it isnt that bad at all, because when you look back on the trackrecord of your life you wil see you achived the steps towards your final goal, and that made you more sucessfull than 99,5% of the worlds population.

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2

You mentioned you make money from trading. Would you share your strategy please?

3

yes.

but its abstract and very unfamiliar to people on this forum.

ready?.. --: make more than you lose

4

Yep. I thought you were chatting rubbish but just wanted to give you the benefit of the doubt. Thank you for proving it.

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Surely he could make up quotes which were at least a BIT different ?

I’d LOVe to see a copy of his supposed MSc thesis ! :roll_eyes:

6

can you please elaborate the money management you have right now ?

7

Good morning.

Interesting topic. Although I’m not QUITE sure I’m able to make full sense of the first post.

But here’s my contribution to the topic anyway.

I can tell you that psychology in this business is one of the most important factors and will make the difference between a successful trader and a loser. And here’s how I know:

Last week cost me a lot of money. And I’ve spent the last few days trying to analyze why this happened. And it actually comes down to nothing more than psychology. Bearing in mind that I’ve made consistent (and sometimes rather large) profits for the last five years or so and not to mention the stellar gains that I made in July of this year (which is when I started intraday trading with the market internal data). And then all of a sudden: the wheels fell off last week. And here’s why:

I distinctly remember posting on a thread (not sure if it was one of my own or one of @Falstaff’s threads) on more than one occasion at the beginning of last week to the effect that I wasn’t feeling on top of the world and wasn’t with quite with it or in the mood for this. And while I didn’t realize it at the time: it was simply because the week before I had no choice but to withdraw profits as well as capital in order to pay the coming month’s bills. And only at the beginning of last week did the harsh reality set in that I was about to reach an inflection point whereby unless I amped up my trading there is no way that I was going to be able to hold out financially until I received my commissions owing to me iro. of the property deal (that some know about of course but for the purposes of this thread the details are irrelevant). The end result is that subconsciously I began sabotaging myself and my trading essentially by increasing risk and rushing trades. As a result: with each successive loss over a period of two days fear then started to creep in and this in its turn resulted in me realizing losses on what actually would have turned out to be highly profitable trades. The point is: there are no flaws in my trading systems. The only thing that changed was ME and my mindset. And therein lies the lesson and my reason for posting on the topic.

Now fortunately: I at least managed to cut the losses and stop trading (on Friday) in order to just take a step back from things and to give myself time to analyze what happened and what went wrong. In the normal course of business: I’d probably not consider the losses sustained too serious albeit it that they represented about 32% of the capital that I had in my account last Tuesday night. Unfortunately though: in the situation that I find myself in currently (and my entire reason for HAVING to trade full time at this time and with minimal capital) (minimal by my standards anyway): that is indeed a very material figure. And I can tell you that it is probably one of the hardest things to do in this business to get back with the program, revert back to the way you had been trading before the proverbial ■■■■ hit the fan, and now with reduced position sizes and position sizes that are once again in line with what was a very carefully calculated method of position sizing.

Now let me also say this:

I’ve been chastised for the above to the point where one could easily construe some input received as my being deemed a fraud what with all of my posts and preaching on capital requirements, risk management, trading methodologies, the list goes on. I am no fraud. And I stand by every single post that I have posted in the last three months and will continue to do so. The fact of the matter is: no matter HOW good you are and for no matter HOW long you’ve been making money in this business: this can happen to you and when you least expect it. In my case: personal circumstances changed and I was prematurely forced into this business on a full time basis and had no other choice (and still don’t have a choice at this present time). And until a person is in this situation: it will not be possible to fully understand or comprehend the pressure that is brought to bear on a trader. This is very different from doing this as a mere hobby or taking the odd trade here and there in order to make a little bit of extra cash.

I’ll tell you one other thing that will never cease to amaze me: when people are doing well there’s no comments from the peanut gallery. But ■■■■ up: and everybody has input and an opinion. The reason for this is beyond my comprehension to be honest.

One last thing on the topic:

As I think I may also have mentioned somewhere: be VERY careful when you’re doing well. I can tell you that my trading statistics for at least the last five years have been stellar when it comes to percentages and statistics (barring my Gold trade of last year with which some may be familiar). So much so that losses were pretty few and far between and almost to the point where I was genuinely surprised to have to incur a loss (this being while I was trading off and on and on a part time basis using my TPS trading system). And then when I started trading intraday with the market internals: I think I had three losing days (and small losses) out of and entire month i.e. closed every other day at profit. The end result of all of this: overconfidence. In other words: being consistently profitable can be, believe it or not, a reason for failure in and of itself. It is very easy to become overconfident when you’re winning +85% and above of your trades type of thing as very easily a time comes where you are SO confident in your abilities and trading systems and methodologies that one could very well throw all caution to the wind and start over trading simply because your belief may be that your position sizes will make no difference so why not up the ante because you’ve been doing so well. Problem is that the remaining 15% of the time (in my case) when you are losing may come at JUST the wrong time (Murphy and his law). So now instead of that losing streak only costing you a small portion of your capital: it ends up that those few losing trades at JUST the wrong time will set you back significantly. And while I may still be up for the last three months: I’m nowhere near to where I was just five days or so ago. And it is a hard pill to swallow I will tell you.

But and now that the dust has settled: I shall take things back to where they were and carry on from tonight and going forward (and frankly I don’t have a choice at this particular point in time i.e. if I had a choice at this time I for sure would wait until I received my money and then be trading with the capital that I am used to and should be trading with).

So that is my contribution insofar as the psychology of trading is concerned. And as is usual with my posts: this is not some theoretical and random babbling being taken from a book. This is real and happening.

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8

Thanks dale. Sorry to hear the unfortunate turn but I’m glad you’ve recognised it and reverted back. Most times, people spiral down and blow their account. Ego gets involved.

Quick question, for my own understanding. You said there was no flaw in your trading system, the only thing changed was you and your mindset. But I believe there was a flaw in your trading system as you started taking higher risk in your trades. So at that time, your trading system was flawed, your original trading system was
not flawed but you weren’t using that one. Also you made a conscious decision to trade larger positions for your reason but you also knew the downfall but still traded it because you had to. I dont think overconfidence was the reason for your loss, it was the need for capital to pay bills. And we all know you should always have capital for day to day living. I feel anyone who knowingly trades large size per trade and then goes through a string of losses cant blame mindset as they actively made that choice. What do you think? This might be a circular discussion as theres a lot of overlap.

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You my friend are number 265.875.076 person to ask for a trading system on this site. Nobody can count anymore the faceless noobs that come here and ask for a holy grail. A system that makes them money without them using their brain.

The funny thing is, even if you give them what they want, they wont say thanks, they wont appreciate your help, they will, in 99% cases say “hey dude now that you provided it to me go ahead and backtest it for me” showing the utmost highest level of mental lazyness that exists. Then they will say “hey please spoonfeed me the system as im to dumb to even understandvthe easy way of things” and even if you do all that, the last word you will see in their vocabulary is “thanks”. And in the end they will fail anyways as they have nevr learned disciplij and to appreciate what they have been gifted.

You are noob number 265.875.077 who asks for a system.

What answer did you expect?

Why do you expect me to make you money? When you see a guy in a maserati on the street wearing a 20k rolex, would you go to him without knowing him and ask him “hey help me, i want the same sucess as you, i wont say thanks, i will doubt you on every step on the road and i will tell your secret to every random idiot i know or dont know”. Will you do that? And if you did, what do you expect his answer will be?

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Yes. If you remember i saw at wednesday after the fed announcment that you are facing problems in your daily routine.

I wanted so badly to tell you to just have a brake of a day or two, but i know from my own experience that would have nod made you to stand up from your computer and actually hage a brake.

People underestimate one thing that you and i know.

A good trader is good at trading.

But he is:

A master in psychology of knowing himself
He is a master in exercising patience
And he is a master in selfimprovement

The focus lays in this fact, that if you want to be good in trading you must be a master in 3 other things.

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11

You can see anything you want.

Lets play a game, you show me yours i show you mine.

Good idea?
Oh right. You dont have anything to show.

My thesis was about how to impose stimulus to private small car mechanical repair stations in far east europe (Not EU) and west asia. Or more exactly the debate of wether to impose bans or stimuli to fight the problem and which forms of stimulus/solution/ban could solve the problem. As they were using the used engine oils (waste oils which they exchange in the regular maintance) as heating fuel for private houses. That is highly cancerous for the population and highly damaging for the environment which was proven by tests of groundwater which had heavy metals and toxious chemicals in it, in an increasing amount since the collapse of the communist regimes in the 1990ies. This was a big problem untill 2009, i wrote my thesis about it in 2008.

In 2019 this problem doesnt exist anymore as it has been solved.

12

I think, and I’m happy to be corrected if wrong, that what MrDE is referring to in his opening post is “The thrill of the chase”

Can’t remember where I first read about it, but it refers to the excitement found in chasing something (Money, wild animals, women) as opposed to the anticlimax felt when this has been achieved and you ask yourself “what now?”

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13

Perfectly said.

The expirience of former achived goals and the memory of this very bad and hurtfull “what now?” -feeling is stopping a lot of people from beeing successful in trading. Especially condidering that trading for living or retirement be the ultimate goal it creates a feeling of beeing “unnecesarry” once achieved.

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Thanks for the post. And a very nice one at that. Your assessment of the situation is intriguing and gave me much food for thought actually. Put another way: it puts another spin on things but one that leads to much clarity.

As you quite correctly state or assume: the ORIGINAL trading system(s) or methodologies is/are not flawed. But as a result of psychology: the trader (myself in this case obviously) is no longer trading the ORIGINAL trading system (whether it be one or several of the ORIGINAL rules that have been broken). Point is: I never thought about it this way until I read your post. Very interesting. And in some ironic way: makes me feel NOT so bad. But is it psychology or an actual need to make money on a monthly basis or is it that the two are somehow related.

Look and in my case: one could make the argument that I should never have started trading again (and particularly not full time) with the capital that I had at my disposal in the very first place. To put that into perspective: even a consistent 10% per month (and to me that’s a lot i.e. I’ve always felt that anything over and above that is a bonus and not something that one should get used to) (but this of course based purely on my own stats. for the last few years) would only have covered a MAXIMUM of half of my bills (without having to withdraw profits WITH a portion of capital every month). So one could argue that the exercise was flawed from the get go (and I would have to agree). But I didn’t, and still don’t, have a choice at this juncture. Why I mention this is because I myself have mentioned many times that I do believe that the number one reason for failure in this business is being under capitalized and I stand by that (and if nothing else I’ve inadvertently reinforced such belief).

The above all being said: one could ACTUALLY also argue (in spite of my previous post) that it could ALMOST be understandable or excusable to be risking more per trade under the circumstances but given the success rate of at least two of my trading systems. What IS inexcusable though is trying to force trades. My intraday trading is based solely on pivots. And up until last week: I was quite happy to place limit orders and wait for the market to come to me. And if it didn’t: well then it just didn’t and that was the end of that. But came last Wednesday and Thursday: I began front running trades (for want of a better phrase to use). The reason: being concerned that a trade would be missed and an entire day would then pass without making any money. The result: getting into trades too early. Given that it’s pivots though: that in and of itself not the problem. The problem then becomes that because you’re in too early the temporary loss (as price continues to where the ACTUAL entry point should have been) is now far bigger. The result: bailing on trades too early (trades that otherwise would have turned nice profits). And as a matter of fact and in just typing THAT last statement: interesting that getting into trades too early resulted in CLOSING those same trades too early!!!

One other thing that I know I’ve posted about before but yet fell into the same trap and that is this thing of getting ahead of yourself. I can see it in my posts from just the last month. The more I made the more cocky my posts. No question about that. But then it begs the question (and MAYBE this is closer to the INTENDED topic of this thread): is there a time in this business when you can actually sit back and actually enjoy, and even revel, in your successes. In a normal job: you may be lucky enough to find that you’re working for a company and you’re happy and love what you do and look forward to going to work every single day (been there on one or two occasions in my life). In this scenario: no way could that or would would that mindset jeopardize your success and advancement. But in this business: I personally find the opposite. Matter of fact: when I started posting here again I made some comments that I know upset some people such comments to the effect that this is nothing more than a means to an end and nothing to be enjoyed. As the weeks went by though: I found myself letting myself go and actually started to enjoy trading again and once again (as happened in the past years ago) became obsessive about it. And I cannot help but wonder if this too has a negative effect on performance (at least for me).

Lastly: it’s also become rather apparent to me that one can detail a trading system or methodology to the letter. But the one thing that you cannot document or factor into the equation is trader psychology. And come to think of it: this was proved beyond any doubt in the Turtle Experiment. On point: there’s that other thread where I believe I’ve wasted a lot of time summarizing my trading systems and thoughts on matters trading related. And to the extent where I was pretty much guaranteeing success with the said trading systems. But the one thing that I cannot factor in is the trader’s ability to mechanically trade the said trading systems. And I never actually thought about that (or, rather, I guess I forgot about this aspect).

Anyway. Mistakes made. For whatever reasons. And certainly nothing I can do about what happened last week. But obviously I can change what happens this coming week. The irony of it all: this temporary situation is now indeed a temporary situation as of late Friday. In other words: it may even be prudent for me to just sit this all out until I get paid now. But for some or the other inexplicable reason: that’s almost like throwing in the towel and I cannot find it within myself to do that. Is that wrong??? I mean: it’d be very easy for me to come along in two or three month’s time crowing about how great life and trading is and with a 700K trading account now wouldn’t it (which would mean I’d only have to make around 2% per month at my current rate of living expenses and that’s most certainly doable in my case). Dunno. For some reason that seems rather disingenuous to me. And an interesting conundrum to me at this time.

Oh well. I guess I could also say for anybody watching what’s going on: “do as I say don’t do as I do”!!! LOL!!!

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Wow! That was some post Dale. They don’t come much more open and honest than that

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Hey.

Thanks for that.

What can I say. I try to tell BOTH sides of the story. Never do I want to go down in history as being one of those that are rather vocal about success but economical with the truth when it comes to losses (or worse still keep a low profile when things are not going well). And while it quite possibly could open me up to ridicule in the future: I actually don’t give a ■■■■. My intentions on this site have always been to try and help others and if posts such as those here help but one person to deal with something like this well then I’ve accomplished something worthwhile in my opinion.

I suppose the entire point is that it’s all good and well to have a trading system or methodology that’s been carefully developed and constructed and tested and shown to be consistently profitable. But that could very well be only half of what’s needed in order to be successful over time. And I like to think that because it’s 'lil 'ol me that it puts things into perspective in a way that all of these books on the subject cannot or do not (as egotistic as that may sound). Point is: I’ve read MANY books etc. on the subject of trading psychology. But for some reason (for me anyway) it’s just words on a page. Maybe it’s different coming from a peer as opposed to coming from some or the other famous trading guru (and who at the end of the day one is never really sure of their motives for writing such books in the first place).

Suppose if the truth be told and from my point of view anyway: this business is, was, and will always be a total mind ■■■■!!! LOL!!! (Trading full time for a living or to pay the bills that is i.e. part time and with other income and money in the bank: walk in the park actually).

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For what it’s worth though (and this seem befitting in the context of this thread):

The high stakes in my case aside: there’s usually some good that comes from making mistakes (as uncomfortable as it may be at the time). And I guess that’s why it’s important to at least implement SOME form of risk management (not throw it ENTIRELY to the wind which fortunately I did not do) so as to be able to take a step back and be able to continue.

Case in point:

I’ve been “taught” to monitor something called the Arms Index when trading intraday. And what I couldn’t fathom last week (Wednesday or Thursday i.e. I forget which right now) was the fact that the Arms Index was following price as opposed to it being divergent (divergent being the norm.). Turns out that the Arms Index is, under certain circumstances, mathematically flawed. And it just so happens (Murphy and his law once again) that at or about the very same time I decide to trade like an imbecile such shortcoming manifests itself. Point is: this is something I knew nothing about until Friday morning. Now while this is no excuse for my behavior: I learned something and something very valuable for going forward. There is an alternative to the Arms Index and one that does not exhibit such shortcomings.

Point is really I guess: it’s usually not all doom and gloom as my posts on this thread may lead one to assume (then again: this not a statement I would have been able to make with conviction last Thursday night of course).

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For guys reading, arms or trin is a breadth indicator - the theory is simple - if the index , say S&P is rising, is it being led by a ‘breadth’ of stocks or by just a ‘narrow’ few.

If broad then the rise is healthy.

Nowadays there are other means to determine breadth without the need for maths.

In stocks the market behaves instinctively - in trouble times we always need toilet paper - consumer staple sector - if oil is under pressure then the energy sector will feel it.

Techs? - who needs that if there is a trade war with china?

Note the ‘safe haven’ of real estate Friday:

Courtesy of sectorspdr.

S&P_ETF's

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Lol if you dont have a system you can just say so. The guy in the Maserati isn’t telling me he has a trading system so not to depend on work. You mentioned it so I thought I would ask. I thought this was a place everyone would help everyone. The difference between me and you is I wouldnt after the fact say I wanted to tell you to take a break. If I noted someone was over trading I would post it straight away. I dont want people to waste time and make the same mistakes I did.

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dale did you fall asleep with your face on the keyboard or why are you replying since 45 minutes?:joy:

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