Emotions when trading - page 24
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Remember Elder again. He talked about a stool with three legs: analysis, risk management and psychology. Remove any one of them and the stool collapses... I see, now you are thinking that risk management is missing in my trading. It is not completely absent (I open with minimum lots), but there is some digression. I wrote about it. At the very beginning of a capital life you have to take risks. And then, everyone has his own objectives. After taking a profit, the capital will be more than doubled (if the correction model fully works). And subsequent transactions will no longer be as risky. Capital ensures survivability. If the correction model does not work or does not work completely, the profit will not be large. But it is not a problem, because time goes on and there will still be a chance to hang the sells on the way to the target.
But back to the stool... I want to say more about one of those legs - the psychology...
As a rule, people who entered the financial market, and after several defeats continue to learn how to trade - are intellectually developed people. People are far from being stupid... It is not difficult to learn to correctly identify trends, analyze what is happening and make decisions. I'm sure every "stubborn" trader often correctly identifies the direction of the Market. But almost never gets to the point. The trend predicted by the trader develops without him. The trader has already lost his money and recorded a series of losses. Immediately after that the trader sees that it turns out he should not have touched anything.
In fact, there is nothing complicated about risk management. But almost everyone has difficulties with psychology. It is psychology that is the main barrier of success. It is very "painful" to a person to watch positions opened by him going into redemption. And with every fresh impulse in the trading terminal your account dies in quick convulsions. The trader who is sitting in front of the monitor is nervously shaking his leg, biting his nails and contorting his face ... But he can do nothing. He is seized by doubts. Sure, if he was right, it would be plus, not minus...
Either he lets the minus grow a bit, or immediately after the market "scared" him, the trader closes his position(s) and fixes the loss. In this case, the trader sees that he turns out to be right and the Market gradually moves in a predicted direction, though with some fluctuations (that is what took him out). It seems to me that the logic of defeat lies here. In fear. A person does not want to observe floating minus on his account. He wants to immediately see a floating plus, which must also quickly add up. I know how nice it is to see powerful bursts of profit. And how unpleasant it is to see big spikes in losses.
This is why Elder and other "Gurus" emphasise the so-called action plan. Earlier I asked to remember again the example from the book about the boss and the employee... Notice, you almost always analyse the Market correctly, which means you can make an action plan. You follow the news, you read analytics, you watch the chart on the monitor. You have more than enough of everything you need for a proper plan. You can even calculate possible profits and possible losses in advance. What's left is the easiest and, at the same time, the hardest part - how to get through it... How to psychologically survive the moments of rising and falling equity...?
And here is where the most interesting thing begins. Everyone has to find the "reference points" for himself, which will help him to keep "in shape"... We are all different, our lives are different, our world view is different... And so each of us has its own way in this context. The main problem has been identified. All that remains is to find a way to help us through it. It is enough to go through it at least once in your life, get the result, and it will be easier in the future. Further on you can add to it or, on the contrary, take something away. You can model in various ways. Everything will work here. Any measures and methods will do, as long as they help psychologically to overcome the fear of anticipating deficiencies in the account. Because there are no pluses without minuses. In most cases you may see floating profits at the beginning, but after a while they turn into losses, which keep on growing. This is not the case with me: at first I have a floating loss, which then turns into a profit and keeps growing until I reach my target.
When I hear moaning and shouting about how impossible it is to make profit on the Market, I immediately get the picture I have just described... :-)
I would like to ask you a question:
When you read books, do you take note...? Do you absorb anything from what you read...? Or do you listen to those ignoramuses who tell you: "Well, read more... There are so many authors out there..."
When you trade manually on small time intervals - you have less time to analyze and make decisions. When you trade on larger timeframes, you have more time to analyze and make decisions.
Do not swim against the current. Learn from others' mistakes or your own. And read smart books, so that it would not be like in the principle: "In one ear flies in, in the other flies out. You don't have to follow everything in the literature. Only take on board what you think is appropriate. You yourself said that suddenly something interesting and useful will appear in a dialogue... Well in books not less useful. Simply not all authors should be read, but only those who write bestsellers in their kind. Clearly, there's plenty of trash everywhere.
I always wish they'd invented the learning method a la "lawn mower" :-D Maybe the forces between those who earn on Forex and in the world have been radically redistributed. Well, with the current increasing speed of technology development I think it is not far off!
When a trader understands that emotions are bad for him - then he should switch to robots
PS. The less "rubbish" a trader has in his head, the faster he will reach his goal. Theoretically, the traders who do not know what to do with the market, and who do not know what to expect from the market, do not get lost in the clouds.
Very useful lecture - I even took notes. I understood that I should work with limits, corrected sellstopi to BUYLIMITI, and obtained good results when following the trend and with small bounces... Thanks for the idea
Z.I., burned the grail:-D
Knowing less makes you sleep better. If we didn't know about forex we would sleep much better :-D
Insomnia is from idleness, not enough stress on the body.
I'm sorry, I don't know how to deal with this. It's lying in drafts and I don't know how to put it into the pending category. So I guess it's not meant to be.
Got it. Great start!!! Looking forward to the sequel!
Didn't make it through to the end the first time. Don't know if I'll be able to do so after publication, but the drawings are clearly no good!!! Even on the very last one the numbers can barely be seen. And by the way you describe some kind of channels and levels - even I did not fully understand where to look )))
I've been trying to force myself to sit down and formalize, to put all the pieces of the puzzle together - which market participants are where, at what stage, and what drives them. I see that you have succeeded!
So all in all, sitting in long drawdowns or trading against the market (even in a momentary correction) is not good.
These are the people who have made the right conclusions and are not chasing every fluctuation in the Market. Fluctuations are more likely to result in a loss, not the other way around. You have already lost 50% of your deposit by trading the news, you gave an example yourself. Trading on the news - you risk disproportionately more than those who open in the direction of the trend (even with drawdowns).
Successfully trade on exiting macrostatistics can only be those who publish these statistics (and their "proxies"). These are the staff of statistical services. They are 100% insiders. They know what others do not know yet. This allows them to open positions in large lots in the right direction. It is enough for them to make a very small fluctuation after the publication of the data, in order to lock in large profits. And next time they will do the same. That is why they, and many other super rich people, become so for this very reason. But we can't do that. We can't know what data will come out at any given moment. We may not be able to guess the direction. And that is our weakness.
Never trade on the news if you trade manually. Sharp market fluctuations in either direction can be picked up well by scalper robots (not many), but not by humans. Even the settings of some auto-systems take into account the economic calendar. In this case a robot pauses trading at the moment of statistics publication.
Maybe you need to spend more time on analytics. You obviously have this "stool leg" limp too... Time will show you the strength of the trend. You will understand what a trend is and how strong and unstoppable it is. Especially in times of inverse correlations in monetary policy. In fact, today is a historical period that you can wait for years. Such opportunities will disappear, for example, if Europe rolls back stimulus measures.
There are pullback patterns where a return to the moving average level is more profound. The price did not "bounce" as you say and continued going up, for example. This happens often, I do not need to look for examples, I remember such moments very well. And by the way it happens more often in short-term timeframes, not in long ones. The older the TF, the more significant it is.
We could not open the first position at the low level but then we would miss a possible movement (because the conjuncture is so). We could sit and wait for the pullback to occur and then enter the market. Everyone has different trading manners. For the situation, which is occurring nowadays, another tactic, less risky, but less profitable, might be useful; a correction comes, and after it you pull up Sell Stop on a decent distance, so as not to be hurt by the noise. When the Market continues to move down, it will activate the Sell itself. But there is a chance that the price may hit the order, open it, and continue to correct. That tactic doesn't seem appropriate to me today. It's better to put Sell Limits on historical levels.
You do not need to look for the holy grail. You have it. It sits deep inside of you. No one in the whole world can help you. Only you can take it.
I would even be sorry if my supposed pattern of pullback is not complete and not all of the sells are activated, or even half of them (I'll earn less). I have put so many of them because the market may continue the downward movement at any moment, and it is not known from what levels (therefore we have chosen the levels of the nearest consolidations and rebounds). As it is felt that any spurs upwards are being sold (it is the impatient bidders who are the most impatient). Still hope that next week will bring a deeper pullback upwards due to the release of positive statistics in Europe.
Often I have noticed how surprisingly the fundamental environment literally overlaps with the technical picture. Or the technical picture repeats (reflects) the fundamental one... By the way, I didn't wait for the first Sell Limit (1.14590). The bears are in a hurry and sell. But we are waiting for the statistics on Germany and continuation of dialog between EU and Greece. Generally speaking, it is going to be a busy week. So, it is quite probable that the levels will be activated. There will be a lot of volatility. In any case, as I have already mentioned, even if the pattern does not work out fully or halfway, in the future, on the way to the target, there will be pullbacks and sells may be set up. Trend is your Frend. This is like a proverb, or proverb.
On the subject of risk again - at the beginning of the capital's life, sometimes you need to take risks. The volume of risks can be increased or decreased depending on the general market conditions. The aggressiveness of trading can be increased or decreased depending on the environment.
I remember an excerpt from a war movie, where military commanders gathered in Stalin's office and decided how to proceed, not really believing Zhukov. Zhukov then replied that due to the current situation the enemy would act in this way and not otherwise... I liked these words very much... :-)
In this case, it's more like the opposite! Even at night my brain is trying hard to find the grail :-D