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Trading Phychology

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  • Trading Phychology

    This is personally my favorite subject. In my opinion trading is 80-90% mental. Trading "systems" are only as good as the trader using them. In this thread I will be using real life examples from my live account showing the good, the bad and the ugly...;-)
    "The trend is your friend - until it bends at the end"

  • #2
    Thanks Joe,

    I totally agree that this is the reason that many traders fail. I know personally this is what I struggled with when trading full time.

    Whether you're winning or losing, a streak of either will mess with your head.

    If you're winning - you will think you are a trading god and can't be beaten. That's when you start bending your own rules.

    If you're losing - you will think you're strategy stinks and try to adapt it. However in reality it may be due to a poor run of luck and the strategy is in fact sound. It just needs more time.

    I'm interested to hear what you you go through, especially after you build your account up to a scarier level.
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    • #3
      Nick you nailed it exactly...Last September I had run my little account up over 700% over a 9 month period...Then I got sloppy and took a nice big fat DD....It was "only" $450 dollars but it still stung. I could only Imagine how I would have felt if it were $4,500 or $45,000!

      My thoughts are that if I work my way up to a larger account instead of just depositing a big chunk, I will incrementally learn how to manage my trades and risk and slowly learn to control my emotions as my account grows. I really am in no rush. I have my "day job" to pay my bills which I enjoy as much as I enjoy trading. I'm looking at this as a journey and I don't want to take any short-cuts...;-)
      "The trend is your friend - until it bends at the end"


      • #4
        Dealing with losses

        Well I was hoping that I would never have to write this post...hehehe...but it was inevitable that the day would come and while I have a loss fresh on my mind, no better time than the present!

        Today I took a 9.5% DD on my account on 3 trades that went against me. When you take a loss like this there are certain things that can happen to your mindset that you must try to avoid:

        Doubting your system or method

        Dont let a loss cause doubts in your method (unless of course you're really are not sure your method gives you an edge). One of the worst mistakes, and I have been guilty of this myself, is making adjustments to your method to try to avoid losses. Losses are part of trading, they cant be avoided. What's important is that you follow your trading plan and know ahead of time what your willing to risk.

        Revenge trading

        Dont take your losses personal. You're not going to "prove" anything to the market. Think like a casino and not a gambler. If a player hits big on the roulette table, the casino does not get upset, they just keep spinning the wheel knowing that their edge gives them a positive expectation over time.

        Don't feel like you have to "make back" a loss

        It's sucks to lose. It sucks when one large loss wipes out a week of gains. But you can never get back a loss. What's done is done. If your think you need to "make back" a loss, it will more often than not lead to trading errors, and more losses

        Don't chase the market

        After you take a loss, it is best to close your trading platform and take some time to regroup. You may need a couple hours or a couple days. You'll know when you're ready to trade with a clear mind and when your mind is clear, get back to business!

        I've been guilty of all of the above at one time or another, most of us have. Do your best avoid these pitfalls and as you gain experience you will find that while its never pleasant, losses are not the end of the world!

        Happy Trading!

        "The trend is your friend - until it bends at the end"


        • #5
          Hey TraderFx,

          Just been going through your posts. Great stuff and looking forward to learning loads from a man who clearly has the experience!

          Trading Psychology - it is definitely the thing that stands between success or failure in this game for sure.

          I've had a similar experience to yourself (on a shorter time frame of 4 odd years) of being up a lot on many occasions and blowing it through denial and that I knew better than the market. In a simple sense, I think if you have watched the markets for a year or two, you know enough to be right more than you are wrong and get on some great runs.. but human emotions start to cloud the judgement and that 1 small loser that you didn't want to take, turns into a huge DD and back to square one (This is were rules and strategies come into play but that is for another thread).

          The key is to dust yourself of and try again as you are showing!

          Looking forward to following your journey. Maybe even get onboard your Signal if/when it becomes available, so I don't have to worry about my own emotions



          • #6
            Thanks Phillip!

            It does take some time "being in the game" before this all starts to become second nature. I used to second guess every losing trade I made. Should I have taken the 10 pips?, why didn't I get out when I was almost B/E...etc...The fact is we have not idea when we are going to take a loss...so if take the 10 pips now does that not mean that I should always take 10 pips and miss out on all those nice 50+ pip trades?

            One thing I am very confident in is my method of finding good entries...exits still need a bit of work, but that is something that can always be improved no matter how good you are (and I don't consider myself to be an FX AMP or TA....yet!). Statistically I know I run in streaks. When I get "dialed in" to a currency I tend to have a lot of consecutive wins. Without sounding cocky or boasting, it really is not uncommon for me to have a 30+ percent account run up in a month or less, so I have that in my mind when I am struggling to let go of a looser. It's a lot "easier" to make up 10% than 30 or 40...hehehe.

            I'm looking forward to documenting my progress here at LiveForexTrading.info and maybe one day become a team trader...we'll see!

            Happy Trading!

            "The trend is your friend - until it bends at the end"


            • #7
              Trusting your system

              Well this is a great time to post on the Trading Psychology thread with a perfect example regarding trusting your system and how your state of mind can effect your decisions

              I've spent over two years, 1,500+ trades and probably close to 2,500 hours in front of a monitor developing, refining and "perfecting" my current system. I am 100% confident that it gives the statistical edge I need to be consistently profitable over time. I've done well with it and I see signals that I miss not being able to trade 24/5 go on to be profitable. This is a great entry method. So why cant I take JPY shorts?

              I am trying to train my mind that currencies are just lines on my chart...that what happened yesterday or even 4 hours ago has nothing to do with whats happening now...JPY is not the strongest or weakest currency...I seem to be able to take signals in either direction on the other currencies, but JPY is SO HARD for me to short! The main reason is that I have been "dialed in" to JPY for long plays for over two months...JPY has never let me down on the long side...the only losses I have taken were fear based, again not trusting my charts or my ability to recover.

              Today I got a bit of a "triple whammy"...this thew me off mentally and even thought we came out with pips, I missed some really good opportunity by getting "tunnel vision":

              1) I went short JPY. I chose GJ because I felt it had the most potential at the time.
              2) I screwed up my signal account by changing the password and not letting Nick know about it. I did not know that it effected things on his end. Now I do.
              3) The trade quickly went against me. Given the fact that I forced myself to take the signal, this move was causing a huge inner conflict...I began to doubt everything...and that is no place to be.

              My original trade plan was to only take 1 position since I have this "JPY issue", and knowing how JPY behaves, if the trade went against me the plan was to either add to GJ or find a couple better pairs to add, or both. Once I entered the trade I realized it did not copy to the slave...Nick quickly took care of that and my clients actually benefited from my blunder, but at this point I was in a state of confusion and just wanted to be out of the trade. What wound up happening is that even thought JPY did do almost exactly what I thought, I refused to enter a EURJPY and USDJPY that set up perfect...In my mind I felt like I was in a "hope and hold" trade...even when everything was telling me this was playing out exactly as expected.

              In the end I banked 12 pips...I felt like I had recovered from a trade that was -150 pips, when in reality the trade was never more than 35 or so pips against me, which for the way I trade is just a little speed bump. Even though we made pips this trade was failure because I did not follow my trade plan. For that I apologize to my subscribers...I left a lot out there that we should have got...but at the same time I am happy to error on the side of safety...so that is one thing I did do well...gotta take something positive from a 12 pip winner...

              Happy Trading!

              "The trend is your friend - until it bends at the end"


              • #8
                Dear Turtle Forex (and also dear Nick),
                I donīt know really where I can put on my question so I try it here to a professional trader like you:
                Can you please explain your point of view, why the most signals have such big problems in the moment ?
                Is there a common change etc. in the forex market and the traders have to adapt it ?
                Thank you


                • #9
                  Originally posted by alexgrote View Post
                  Dear Turtle Forex (and also dear Nick),
                  I donīt know really where I can put on my question so I try it here to a professional trader like you:
                  Can you please explain your point of view, why the most signals have such big problems in the moment ?
                  Is there a common change etc. in the forex market and the traders have to adapt it ?
                  Thank you
                  Alex, I really cant speak for anyone's method but my own. There are a number of reasons why signals may underperform:

                  1) The method works best in ranging markets, but markets are trending
                  2) The method works best in trending markets, but markets are ranging
                  3) The random nature of the market just happens to be going against a methods normal "edge"
                  4) The trader has developed a market bias they refuse to let go of
                  5) The trader is making mental errors in entry or exits
                  6) The trader has experienced a string of losses and is revenge trading
                  7) The trader caught his wife in bed with his best friend

                  My point being it can be one of many things alex....the market offers an unlimited amount of opportunity to make or loose money on a daily basis. I wish I could give you a more direct answer but the fact is there is no single reason. Hope this helps..

                  Happy Trading

                  "The trend is your friend - until it bends at the end"


                  • #10
                    The one, only, and by far the best book synthesizing psychology and investing. In addition to providing modern, scientific knowledge about psychology, this book provides a mirror into the mind and wide breadth of knowledge of one of the leading


                    • #11
                      New to your forums and web site. First, this is a nice place with some very good traders and I can appreciate how some of you trade. I have ways I trade and I am usually very successful but for 98% of the people who trade forex don't have the patients to trade it properly.
                      I will post some of my ideas and styles later.

                      but I wanted to say your #6 is probably the big reason why traders fail in FX as its why in the past I have blown a few accounts.
                      also and #7 I just changed the word from "him" to "her" and visually it was better.