…
…
…
To each their own, I am not agreeing or disagreeing with you but you contradict yourself. You said mastering the psychology of trading is a myth and that once you understand the math you will trade without emotions. I can agree with that, but it is part of mastering the psychology. Fear is an emotions or as I refer to it the lack of knowledge, once you understand xyz that fear can go away. Once you are educated about the topic you have mastered the fear or big part of trading psychology.
In the headline of your threat your are pointing out that there is a myth in a trading psychology, but in the text you actually are saying that there is no myth since you find your way to become a successful trader. I believe that trading psychology is playing a main role in the trading process but once a trader get enough educated than trading psychology will stay away.
I think philosophy may be a better term for the subject matter that many refer to when they say “psychology”. How and what one thinks and believes has a tangible effect on emotions. If I tell you your father just passed you may have a physically detectable neurological response. But you may also say: “My father is sitting right here, he is fine.” The neurological response is a function of what data you accept and how you evaluate it
Putting on a trade fixes one’s trading account value to the value of whatever is traded at some specific ratio. It is therefore understandable that the trader becomes emotional with changes in the value of that instrument and that the intensity of those emotions increase with the ratio by which those changes in value impact the trading account.
But all of that depends on the specific beliefs accepted by the trader. If he believes his trading plan will profit in the long run then losing trades will bring about different emotions than they would if he just thought he had lost money never to see it again, or that his whole plan has just been proven a loser.
Two traders with the same account size taking the exact same trades in the exact same sizes could have very different emotional responses to the same outcome simply because of their beliefs. Thus the determining factor is philosophy. How one thinks and the conclusions that result from that thinking are what effect psychological responses to external information.
Many make the psychological battle facing traders out like it is something of a test of faith, that traders who believe the most move the market with their mind or something. It is as if to say that Trader Joe is profitable because he can take a lot of pain and suffer through travail and stick to his guns all the way to a profit. But we know plentry who stick to their guns all the way to a margin call. There is a great book called What I Learned Losing A Million Dollars. The author mentions how casino games have defined parameters and gamblers always know when a hand or game is done and what the results are. But in trading, the trader decides those things and thus can ride losers deep into mayhem. Philosophy, how we think, determines how we will set those parameters and thus whether we will stick to them and how we will feel about them. The book concludes with the advice that (and I will paraphrase) “if something hurts don’t do it”.
Establishing a philosophy that is not at odds with external data and establishing trading parameters based on that philosophy keeps one from doing things that hurt. That doesn’t guarantee you profitability, nothing does, but it at least makes the emotional factor one that promotes a disciplined execution of your implementation rather than one that has you breaking your rules and taking revenge trades.
Not that I know anything, I am just waking up on Halloween with a mind on candy.
-Adrian