a state of mind?
Hi Every one, was just wondering if anyone had any advice about dealing with loses or ways of protecting yourself from your mind linking past loses and now ones as i seem to keep reverting back to feelings that i can`t control and trying to punt my way out of trouble. thanks greg
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mister man
- Posts: 363
- Joined: Tue Jul 27, 2010 2:10 pm
clearly this is chasing loses and ive been guilty of that (still am occasionally).
in my view you have got to set yourself some parameters and stick with them. no matter what.
e.g total risk on any one market x% of bank
loss at X exit
profit at x exit
etc,etc,to suit your trading/punting style.
good luck
in my view you have got to set yourself some parameters and stick with them. no matter what.
e.g total risk on any one market x% of bank
loss at X exit
profit at x exit
etc,etc,to suit your trading/punting style.
good luck
There as been numerous posts covering the psychology of trading, probably worth having a look at some of them for a starter.
Controlling you, your own mind can be the hardest part to get right and perfect. Only you can do anything about it despite what you read, what you say you will do, when you get down to actual trading, only you can develop the discipline to control yourself.
Punting is not trading (im sure you are aware of that), and not a good way to correct trading mistakes. You got to get punting out of your mind completely if you don’t, you will never acquire the self discipline to trade.
Controlling you, your own mind can be the hardest part to get right and perfect. Only you can do anything about it despite what you read, what you say you will do, when you get down to actual trading, only you can develop the discipline to control yourself.
Punting is not trading (im sure you are aware of that), and not a good way to correct trading mistakes. You got to get punting out of your mind completely if you don’t, you will never acquire the self discipline to trade.
There are plenty of posts and books out there about the psychological effects losses can have on your confidence levels but very few of them point out a salient fact.
Whenever losses occur, as they do even with the most prudent traders, there is a reason that some traders survive whilst others go on a bender and attempt to gamble ones way back to the level. It is important to define why this is so.
Successful traders "know" how much they can lose or win in every trade because they are operating a tight enough ship and following an unwaverable profit/loss plan. The gains are expected to reach a certain level and losses are limited to always be below the level of gain. Successful traders know and "accept" their losing trades as minor irritations on their path to a positive P/L. Unsuccessful traders who fly by the seat of their pants placing trades on a whim, without a reason for doing so and without any knowledge of their risk/reward ratios, often find that they are just too footloose with their losses and often suffer a larger hit than can be sustained by profits when they occur. This then leads them to have to recover by gambling their way out of trouble.
If your method (business plan) identifies a "method" whereby your profit/loss balance is positive AND you are executing that method flawlessly, then the advantage you have over an undisciplined trader is that you have complete confidence in your method. Your losses are then simply acceptable blips in the path to a positive balance sheet.
Confidence in ones method and in ones execution of that method eradicates the feelings of disappointment, anger, frustration and the desire to recover losses by other means viz gambling.
Whenever losses occur, as they do even with the most prudent traders, there is a reason that some traders survive whilst others go on a bender and attempt to gamble ones way back to the level. It is important to define why this is so.
Successful traders "know" how much they can lose or win in every trade because they are operating a tight enough ship and following an unwaverable profit/loss plan. The gains are expected to reach a certain level and losses are limited to always be below the level of gain. Successful traders know and "accept" their losing trades as minor irritations on their path to a positive P/L. Unsuccessful traders who fly by the seat of their pants placing trades on a whim, without a reason for doing so and without any knowledge of their risk/reward ratios, often find that they are just too footloose with their losses and often suffer a larger hit than can be sustained by profits when they occur. This then leads them to have to recover by gambling their way out of trouble.
If your method (business plan) identifies a "method" whereby your profit/loss balance is positive AND you are executing that method flawlessly, then the advantage you have over an undisciplined trader is that you have complete confidence in your method. Your losses are then simply acceptable blips in the path to a positive balance sheet.
Confidence in ones method and in ones execution of that method eradicates the feelings of disappointment, anger, frustration and the desire to recover losses by other means viz gambling.
There are two wrong states of mind. Stopping after a loss or chasing it.
If you keep good records you will know how much you win and how often, both those metrics define how much downside you can bear. Failing to keep good records or failing to work within your systems constraints will always results in long term failure.
If you keep good records you will know how much you win and how often, both those metrics define how much downside you can bear. Failing to keep good records or failing to work within your systems constraints will always results in long term failure.
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rubysglory
- Posts: 309
- Joined: Thu Nov 04, 2010 7:02 am
State of mind is the single most component that will present itself as by far the biggest stumbling block to a traders success. State of mind is twice as important as strategy because everything revolves around the way you, the Trader, implement your plan. Warren Buffett is quoted as saying " the Trader is the weakest link in any trading system"
Unfortunately Greg, all myself and others can provide is good well meaning advice, and for the better part, if we are all honest, no doubt advice based upon experiences such as yours, for I suspect we have all at some time experienced the four human characteristics taht arise when we were 'apprenticed' - Fear, Greed, Hope an Ignorance.
IMO, one of the best pieces of advice given is Record Keeping. Keeping accurate race x race records is a must. Talk is cheap but the Numbers wont lie. Couple this with a banner of type within the line of sight as you sit at the computer - it may be a slogan, it may be your bullet point strategy or a picture of your loved ones. This must be your mantra. Finally, Trade small to begin with and get a grasp on the true value of ticks as a percentage of profit or loss across various price ranges. A one tick loss at odds of 10.00 is not the same as a 1 tick loss at 2.00.
You might also find some articles here that may help:
http://www.brettsteenbarger.com/articles.htm
rg
Unfortunately Greg, all myself and others can provide is good well meaning advice, and for the better part, if we are all honest, no doubt advice based upon experiences such as yours, for I suspect we have all at some time experienced the four human characteristics taht arise when we were 'apprenticed' - Fear, Greed, Hope an Ignorance.
IMO, one of the best pieces of advice given is Record Keeping. Keeping accurate race x race records is a must. Talk is cheap but the Numbers wont lie. Couple this with a banner of type within the line of sight as you sit at the computer - it may be a slogan, it may be your bullet point strategy or a picture of your loved ones. This must be your mantra. Finally, Trade small to begin with and get a grasp on the true value of ticks as a percentage of profit or loss across various price ranges. A one tick loss at odds of 10.00 is not the same as a 1 tick loss at 2.00.
You might also find some articles here that may help:
http://www.brettsteenbarger.com/articles.htm
rg
I read a book on trading once which swears by this method as a way to clear the mind of negative, success-inhibiting thoughts:
http://www.highlysensitivesouls.com/art ... gpages.htm
And unlike traditional meditation, it can actually be quite fun!
Jeff
http://www.highlysensitivesouls.com/art ... gpages.htm
And unlike traditional meditation, it can actually be quite fun!
Jeff
greg wrote:Hi Every one, was just wondering if anyone had any advice about dealing with loses or ways of protecting yourself from your mind linking past loses and now ones as i seem to keep reverting back to feelings that i can`t control and trying to punt my way out of trouble. thanks greg
Thanks to everyone that has taken the time to reply to my question. I now have a way foward and will look at some old posts re record keeping,i trade from a laptop so not sure which will be the best way for me to keep records?( any more input on this would be great)AS for the gambler in me I`ll have to keep fighting him!! Any tips on winning that fight would be good too! Thanks again to all greg
This is an excerpt of an interview with a commodities trader (taken from http://www.michaelcovel.com/2010/12/20/ ... ongstreet/):
IM: Do you take losses quickly ?
LONGSTREET: It is something that I’ve learned to do that I think is invaluable. You see, I try never to let a trade get to me to the point that I’m anxious about it. I’m not a master of my anxiety, so once I feel myself coming to that point, that alone is reason enough to get out of the trade. Once I begin to worry about it, I might better be out of it. There’s no way to recoup my losses by keeping this trade, since there’s no way I can.
A good trader doesn’t let fear or anxiety dominate him. He must demonstrate that he can by doing something about it and not worrying.
Most of the people who have traded commodities are walking dead men. They remember and fixate on the fear they experienced when they were wrong. Unless they can shake that, they’ll never trade well again. The experience has been so painful that they will remember it for the rest of their lives.
Jeff
IM: Do you take losses quickly ?
LONGSTREET: It is something that I’ve learned to do that I think is invaluable. You see, I try never to let a trade get to me to the point that I’m anxious about it. I’m not a master of my anxiety, so once I feel myself coming to that point, that alone is reason enough to get out of the trade. Once I begin to worry about it, I might better be out of it. There’s no way to recoup my losses by keeping this trade, since there’s no way I can.
A good trader doesn’t let fear or anxiety dominate him. He must demonstrate that he can by doing something about it and not worrying.
Most of the people who have traded commodities are walking dead men. They remember and fixate on the fear they experienced when they were wrong. Unless they can shake that, they’ll never trade well again. The experience has been so painful that they will remember it for the rest of their lives.
Jeff
greg wrote:Thanks to everyone that has taken the time to reply to my question. I now have a way foward and will look at some old posts re record keeping,i trade from a laptop so not sure which will be the best way for me to keep records?( any more input on this would be great)AS for the gambler in me I`ll have to keep fighting him!! Any tips on winning that fight would be good too! Thanks again to all greg
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rubysglory
- Posts: 309
- Joined: Thu Nov 04, 2010 7:02 am
No truer words spoken. Fear, Greed, Hope and Ignorance. If money management is an issue,and with it not knowing how much to trade and when to trade big or small, google the Kelly Criterion, providing a different insight into to how to optimise risk across a portfolio - bets, stocks etc.Ferru123 wrote:They remember and fixate on the fear they experienced when they were wrong. Unless they can shake that, they’ll never trade well again. The experience has been so painful that they will remember it for the rest of their lives.
Jeff
rg
Hi Rg
Whilst the Kelly Criterion is theoretically the fastest way to grow a bank, it's also highly risky, and I imagine very few hedge fund managers use it. There is a 1/x chance that you will lose 1/x of your bank!
Jeff
Whilst the Kelly Criterion is theoretically the fastest way to grow a bank, it's also highly risky, and I imagine very few hedge fund managers use it. There is a 1/x chance that you will lose 1/x of your bank!
Jeff
rubysglory wrote: google the Kelly Criterion, providing a different insight into to how to optimise risk across a portfolio - bets, stocks etc.
rg
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rubysglory
- Posts: 309
- Joined: Thu Nov 04, 2010 7:02 am
Hi Jeff and thanks.Ferru123 wrote:Hi Rg
Whilst the Kelly Criterion is theoretically the fastest way to grow a bank, it's also highly risky, and I imagine very few hedge fund managers use it. There is a 1/x chance that you will lose 1/x of your bank!
Jeff
Whilst the Kelly Criterion is theoretically the fastest way to grow a bank, I would say that it is statistically also the best method to optimise growth whilst avoiding bankrupting ones capital.
IMO if traders - horses, stocks etc, are to fully understand risk, they need to develop tools that will allow them to control risk. In answer to any concerns relative to risk, I believe that the Kelly Criterion addresses this in the manner by which it directly links both performance results and risk.
In addressing risk, many argue, myself included, for a application of a fractional Kelly (1/2 kelly is a favourite amongst some). Reasons include wishing to reduce volatility or protecting capital against non-determinable events.
For those not quite sure what Jeff and I are discussing, the following may provide insight.
http://en.wikipedia.org/wiki/Kelly_criterion
ING also published an interesting article on Page 4 / 100 " Wealth Maximization and the Kelly Criterion " at the following :
http://www.inginvestment.com/idc/idcplg ... &SortOrder
Appreciate the debate. Always good to stimulate the mind.
rg
Hi Rg
Let's say you were a hedge fund manager. You know from thousands of trades what your strike rate is and what your edge is.
Kelly says that, based on your edge, you should risk (say) 15% of your bank on each trade. But conventional wisdom says that your maximum risk per trade should be closer to 2%.
Personally, I'd go with conventional wisdom. OK, I might miss out on mindblowing returns. But long losing runs due to random chance are a statistical inevitability, and I'd rather not have to explain to my Mafia boss and pension fund clients that their money has disappeared...
I think it's significant that, if you do a keyword search for Kelly Criterion in the Trade2Win forum, you don't get many results.
BTW, there's a Kelly calculator at this link: http://www.albionresearch.com/kelly/
You might also be interested in looking at this bet simulator I put together (although I can't promise that the maths is 100% sound!): http://www.fileserve.com/file/GVuFxjV
Jeff
Let's say you were a hedge fund manager. You know from thousands of trades what your strike rate is and what your edge is.
Kelly says that, based on your edge, you should risk (say) 15% of your bank on each trade. But conventional wisdom says that your maximum risk per trade should be closer to 2%.
Personally, I'd go with conventional wisdom. OK, I might miss out on mindblowing returns. But long losing runs due to random chance are a statistical inevitability, and I'd rather not have to explain to my Mafia boss and pension fund clients that their money has disappeared...
I think it's significant that, if you do a keyword search for Kelly Criterion in the Trade2Win forum, you don't get many results.
BTW, there's a Kelly calculator at this link: http://www.albionresearch.com/kelly/
You might also be interested in looking at this bet simulator I put together (although I can't promise that the maths is 100% sound!): http://www.fileserve.com/file/GVuFxjV
Jeff
rubysglory wrote: Hi Jeff and thanks.
Whilst the Kelly Criterion is theoretically the fastest way to grow a bank, I would say that it is statistically also the best method to optimise growth whilst avoiding bankrupting ones capital.
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rubysglory
- Posts: 309
- Joined: Thu Nov 04, 2010 7:02 am
Hi Jeff, Perhaps I could have got a job with Barings Bank! 
rg
rg
Barings were safe as houses compared to the investment banks buying AAA rated 'investments' comprised of the mortgages of bankrupts and people on the dole! LOL!
BTW, I'm not dismissing Kelly. I just think caution needs to be exercised. I might use it if I were betting with an amount I could afford to lose, but if I were investing my life savings, I wouldn't go around risking 40% of my bank on a single trade!
Jeff
BTW, I'm not dismissing Kelly. I just think caution needs to be exercised. I might use it if I were betting with an amount I could afford to lose, but if I were investing my life savings, I wouldn't go around risking 40% of my bank on a single trade!
Jeff
rubysglory wrote:Hi Jeff, Perhaps I could have got a job with Barings Bank!
rg