I wrote this back in 2003 and is relevent to the "emotion" thread. I can't put the whole article within a thread so I've attached the word doc.
I wrote this back in 2003 and is relevent to the "emotion" thread. I can't put the whole article within a thread so I've attached the word doc.
Good stuff Nick
As someone with a Psych degree and a Psychologist partner I can say it is ALL about the Psychology! Forget the fundamentals, throw away the charts but keep an eye on the volumes (they let us see other people's psyche's at work)!
But dont tell everyone, sshhh it's our secret
Lucky it's just us here thenOriginally Posted by Prospector
Thanks for posting that
NIck have you played much texas hold em down? I get shot down for saying this but i swear you can learn a lot about your personal pschology playing it. I believe its helped me work on my money management particually with cutting losses quickly... A common thing In texas is that you can get sucked in on the river with a bad hand which has very poor chance of turning good.. Yet you keep matching the bets.. you didn't cut your loss early but hold in hope that things will turn around with that next magic card.. By the end you've lost so much already you can't fold now you have to hang in thier.. It triggers identical feelings to when you hold a trade that turns against you.. you don't want to take a loss and then it gets bigger and then you think well now its really bad i'll have to wait now... You spin some BS to yourself and you call it a 'bottom draw stock' which is a nice way of saying you screwed up bigtime.. A lot of the problem in texas is feeling like you have to win every hand but thiers another hand just around the corner... Thiers always another trade this one doesn't have to be the one... Another common thing in texas is being on 'tilt'.. which is where you take a nasty loss then you completely lose control taking rediculous risks on the next hand, in a desperate attempt to get it back..
Anyway well worth a bit of play for anyone interested - can play for free at poker.com with play money.. lots of fun
played self reflectively i think texas can be a very good tool at getting in touch with your pscyhological make up....
*prepares to be flamed..
Before turning full time trading I was semi pro punting on horses (being a gallops trainer )
That taught me heaps about myself.. and definately paved the way for me to be a trader.
So I'm going to go out on a limb and agree with you... with lots of qualifications attached of course
Really?.. when did you go full time this wasn't you by any chance?? 8)
http://www.news.com.au/story/0,10117...-29157,00.htmlElderly punter wins $500,000
From: By Ray Thomas
April 18, 2006
AN 83-year-old war hero stunned the Randwick betting ring yesterday when he placed a winning cash bet of $100,000 on Racing To Win in the Doncaster Handicap.
Earlier in the day Allan Inglis sidled up to a tote window using a walking frame and asked to place the mammoth cash wager.
There was a suspicion that Inglis, who is not recognised as a big punter, did not have the money to place the bet but he then produced a blue bag stuffed with cash and asked to put the lot on Racing To Win.
"He's had $100,000 cash on the tote on Racing To Win," a betting ring insider told The Daily Telegraph.
"The girls behind the (tote) window took about 15 minutes to count the cash because he had a lot of small notes."
Visually impaired Inglis, a World War II pilot, said he had never placed such a big bet in his life before.
"I've been coming to Randwick for the Doncaster for 60 years," he said.
"I've had some luck over the years but nothing like this. I would never have thought I'd be putting $100,000 on the horse."
Inglis said he could not see or hear the Doncaster being run because of the huge crowd at Randwick and was unsure he had won until some minutes after the race.
When asked why was he so confident about Racing To Win's chances, Inglis said he has been friends with the horse's part-owner, Penny Yan, for nearly 40 years and her confidence was infectious.
"Last year, Penny and her partner Trevor Stuckey put off a trip to Canada for a week so they could watch Racing To Win have his first start at Canterbury," Inglis said.
"I took the tip and backed him that day. I have backed the horse in every start he has had since."
Inglis was escorted by a security guard to the tote window more than an hour after the last race where he was given a cheque of $490,000.
He was then escorted by the security guard safely to a waiting vehicle.
Inglis' incredible punt was responsible for Racing To Win opening up a shock $4 favourite for the Doncaster on the tote and with bookmakers.
Racing To Win, ridden by Glen Boss, eventually started at $4.40 with bookmakers and won the Doncaster by a half length.
On the NSW TAB, the three-year-old paid $4.90 for a $1 win dividend. This means the elderly punter will collect $490,000 for his winning bet, a profit of $390,000 on his investment.
Bookies on-course were also stung by the sensational betting plunge on Racing To Win.
Leading bookie Con Kafataris said the Doncaster was a losing result for him after he accepted a wager of $200,000 to $55,000 on Racing To Win.
"I was surprised Racing To Win came up so short ($4) on the tote at the start of the day until I learned of the big cash bet," Kafataris said.
"At those odds, Racing To Win was a risk but the punters kept coming for him and one of my clients had $200,000 to $55,000 on the winner."
Col Tidy said the Doncaster was a great betting race as punters backed all 14 runners.
I did land a 100-1 wager on my one of my own nags once. I won't tell you how much the bet was, but in retrosect is wasn't anywhere near enough
Interesting point tarnor. my friends and I play a fair bit- it's always an interesting evening. Don't think it has helped my trading enormously but it hasn't hurt either! I actually think the reverse is true- the lessons I've learnt trading have helped my poker game. Understanding things like sizing my bets according to how much is on offer in the pot and my chances of winning that pot etc came pretty naturally to me, as I found it be similar to managing my money trading! proper poker betting is very similar to getting a positive expectancy in tradingOriginally Posted by tarnor
Never played Texas Hold'em, but I did buy my first house taking the other side of a coin tossing competition. I had the anti-martingale side of the equation and the poor sucker who took the other side - the martingale side - was the head proprietary trader at a major investment bank. Hmmm...
(PS: He eventually played the game of life too far that way as well and was found dead 30 floors below his apartment. Wayne may know of him - Mike Bastion.)
Interesting read:Originally Posted by Nick Radge
What a great post Nick! Thanks so much.
This post actually gave me MORE confidence that I am trading the right way, I make decisions quickly and I'm not afraid to cut my losses when I have them. Nor do I cringe when I see open profits disappearing. I've been very successful with my trading so far this year (although I know a monkey could actually have done as well as me in this market) and I am pleased that I am able to handle the psychology of it within myself.
Well my take on this is that not everyone is designed to succeed either psychologically,and in some cases physically in all endeavors.
It's pretty widley quoted that professional people who are analytic in approach seem to make pretty average traders.
Most people make pretty average business operators and the figures touted for success in business are similar to success as a trader.
It was one of Nicks talks in Adelaide that had the penny drop from 30 floors square on the scone.
I've never had a problem risking $$s having been in business since 21--now 52.
But the thing I learnt from Nick was that its not the analysis that makes the $$s its the "Business package" not that he put it that way but that was the way that I associated with it.
It took me till 38 to actually run a profitable expanding business and the secret to that was 3 fold.
(1) At around 40 you gain credibility---people think your old enough to be an "expert".(Not necessary in all fields--I'm in the building industry).
(2) Understanding the implementation of the "Business Numbers" and the constant challenge of being on the right side of the ledger.(More in a minute)
(3) A business can only expand at a rate at which the leader of that business's skills will allow.(More in a minute).
(2) and (3) had a big influence on both business and trading.
(2) In business I have good months and bad months but each year the taxman takes a wad so I'm net profitable.
As business grows some of those bad months can be negative $45K and sometimes a string of them,Good months can be $100s of K and strings of them.But the point is that that money is BUSINESS,I dont have an attachment to it.I sign cheques for $50K and more without a thought--its business. The company although mine is simply a vehical which I grow,work in and it pays me,Its what I choose to do during my waking hrs.
So being able to look at my trading as a business allowed me to veiw the money in it without attachment.
The developement of Techtrader also was invaluable.It packaged my trading into an item which in itself was and for me IS a BUSINESS.
It has winning and losing months but I am DETACHED to the money---its simply business--it really is.Every trade is simply a business transaction some good some not good but overall profitable.
(3) In business I think the hrdest thing for any business owner to do is grow a business.When I started $200K was a good business (remember thats 30 yrs ago). Now its 3.5 mill and opportunities to expand still exist. The skill to run a $200k business are far less than a 3.5Mill + business and as we expand the more I need to become experienced in.
Same in trading.Trading a $20k account or a $500K+ account will require far different skills---even to get to a $500k account.
So for me in both Business and trading I have no attachment to the $$s I use to do Business,and in both cases personal savings are kept very clear and seperate from business wether that be trading,or construction,or property.
(Where is it---freehold un encumbered property--& a bit of cash).
There is Business $$ with no attachment not even a thought and personal $$s which believe it or not I question when using it. (Just reciently a trip).
Wether this is good from a purist phsycological point of veiw I dnt know but thats how I have handled it and I'm getting better at it the more I learn on my business journeys.
Those without business backgrounds I feel are up against it.
Finally on Gambling. How would you describe Packers psychology when he gambled? I'll bet he treated gambling like Business he had no attachment to $$s he gambled within his means.I had the pleasure of watching him for an hr once and he had no attachment--zero. He gave croupiers $100K + often for him pleasure and no attachment.
I reckon you can argue psychology until your blue in the face,but once attachment is removed---GAME OVER.
What do you think DOC??
Today i read about the master trader - and it aint what most are.
Discussion only! Posts may be factually incorrect due to ignorance, taken out of context, misinterpreted, or just opinionated discussion.
As it happens I wrote my own paper on Psychology, also back in 2003.
Here are a few snippets:
"The decision making process
For every choice we are faced with, we evaluate both possibilities then decide to choose the one that will cause us happiness, or avoid pain. Every trade contains multiple crucial decisions, and making the wrong decision results in certain financial and mental pain. You have a choice right now. You can keep reading this course to the end, or you can put it down now. You will evaluate both choices. On the one hand, you will think that you need to keep reading this course because knowledge will lead to money, which provides happiness. On the other hand you will also think that reading is boring, and watching TV is so much easier. Now you have associated pain with the decision to keep reading, and happiness with the decision to go watch TV. Still here? You have not allowed short-term happiness to over-ride long term happiness or short-term pain. Well done. You have some discipline.
A smoker has a choice. I am going to use smoking as an example, as there are more smokers than alcoholics or gamblers. It is important you understand why we decide what we do. If you have never been a smoker, surely you know someone who has tried to quit. Do you think you would be able to quit? If you are already a trader, substitute nicotine for the trading buzz.
Nicotine stimulates the adrenal glands and results in a discharge of epinephrine (adrenaline). The rush of adrenaline stimulates the body and causes a sudden release of glucose as well as an increase in heart rate, blood pressure and breathing. Nicotine causes a release of dopamine (feel good chemical) in the brain, affecting regions that control motivation and mood. It is little wonder the addiction is so hard to kick, the short-term happiness argument has a head start and an unfair advantage. There is no opportunity for the decision process to work without bias. The brain evaluates this choice, and decides that the long-term pain from bad health and cost of cigarettes do not over-ride the short-term pain of going cold turkey.
An incredible amount of will power and discipline is required to overcome the habit. Most try the will power approach first, and most fail. Those who try the discipline method with conviction will break the habit.
Everyone has weaknesses. What are yours? Maybe you are overweight, maybe you smoke, perhaps you do not exercise enough, or maybe you gamble or drink too much. What leads you to these actions? Where does your decision process break down? What inaction’s do you take and why? Do not just read that and think, “I do not need to do that”. Show some discipline! Write the questions down on a piece of paper NOW. Then answer the questions truthfully.
So how do we overcome an addiction? We cannot avoid the decision making process, so we must use it against the habit. We must trick our mind into re-evaluating the pain and happiness components. In the smoker’s case, they need to associate pain with the decision to light up, and happiness with the decision to throw the pack out.
When you feel an urge to smoke, force yourself to think of pain associated with the cigarette, and happiness with not smoking it. Follow these steps:
Step 1, consider the short-term pain first. Think of how disgusting the smoke tastes, how it makes your breath stink which makes your partner not want to kiss you and think of the time wasted.
Step 2, consider the long term pain. Think of the damage you are doing to your health, think of all the money you wasted on cigarettes and the extra you pay for insurance. Think of how smoking has affected your partner’s view of your attractiveness, consider the health of others you smoke around, think of your teeth going yellow and think of the wrinkles around your mouth.
Step 3, associate short term happiness with the decision to not light up. Think of the time that could be spent doing something else you enjoy. Think of the money you could save. Think of how fresh your breath will smell and the smile on your partners face after they kiss you.
Step 4, long term happiness. Think of how much cheaper life and health insurance will be. Think of the money you will save on cigarettes. Invest that money! Consider how much more attractive your partner will find you. Think how much longer you will live. Think of your nice white teeth and wrinkle free mouth. Think of how many people will admire your courage and do the same."
"Gambling is an addiction, caused by a mental illness. It is not a chemical dependency issue like drugs, smoking or alcohol, but rather one we can control if we so desire. Similar to chemical addictions, certain parts of the brain are stimulated when we gamble. When we win, we begin to think of the happiness that lies ahead. These positive thoughts release dopamine in the brain and adrenaline in the body, giving us a ‘buzz’. Our heart rate, blood pressure and breathing increase. The dopamine in the brain stimulates the regions that control mood and motivation. We feel very happy and very alive. When we lose, only adrenaline is released. Since we lack the dopamine effect in the brain, but still have the increased heart rate, blood pressure and breathing, this enhances a feeling of fear. It is a primitive instinct, common during a fight for survival. Think fast, react fast, and survive. The increased heart rate, blood pressure and breathing cause a large amount of oxygen to accelerate the normal brain activity, forcing the decision making process to be sped up. Neurons do not have time to ‘consult’ parts of the brain controlling logic and reason, and bypass them. This is the early stage of panic. Placed bets during this stage are seldom logical or rational, and a self-destructive cycle emerges.
A trader may face the same problems, if they treat trading as a source of excitement. The trick for a trader is to operate void of emotion, so that the decision making process remains stable. When trading itself provides no ‘buzz’, it is less likely a trade will be entered for the wrong reasons. It is important that you do not allow yourself to celebrate a win, nor moarn a loss. It takes time to develop this emotional detachment, and it is a form of discipline in itself. Few traders I know have mastered this."
Last edited by wayneL; 28th-April-2006 at 05:26 PM.
If you want a method of controlling your emotions and responses check out David Deangelo Deep inner game DVD series... It may be focused on girls and dating but it actually teaches you stuff that's used everyday. You'll definately be a man after it
Heres a nice article for those interested in the psychology of trading.
I also note that the Dr is an active derivatives trader and is also giving seminars on the psychological aspects. Dates are in the ASF shop.
Using EFT to Trade the Market
By Dr. David Lake
Part 1 of 2
Note: The information in this series is illustrative only and should not be taken as financial advice.
Trading is the activity of speculating in the Market in order to gain an advantage financially. While there are a multitude of systems which teach successful trading, the reason the vast majority of traders lose money is because of emotional reactions while trading. Since the market as a whole is governed and run by the twin emotions of fear and greed, this is not unusual. The way that EFT can help with trading is akin to the way it helps with learning any skill, achieving any goal or harmonizing any relationship problem: it helps you to avoid taking the unavoidable upsets personally.
How easy is that? Just don’t take it personally… ! The market doesn’t know you exist, nor care. It is not out to get you. It is trying to tell you something but you are equally busy trying to impose your beliefs on the market (or your partner, or life, or your business). Markets don’t have opinions—people do! If it were so simple to trade everyone would be wealthy. But the market creeps up on you and makes you want to behave badly. Here’s how it does it.
The best—and only—way to become wealthy when trading is to cut your losses quickly and let your profits run. However, traders consistently find themselves not wanting to close out of a losing position (which then dies spectacularly), or jumping in to a winning one and taking the profit they can see on the board (after which the notional profit increases dramatically). Our greedy intuition tells us to take advantage of the money fact we see in front of us in present time, or to hope that the losing trade will correct itself (a fearful intuition) so that we remain right in our analysis. So it’s personal after all—we want to be right all the time, and know the future of the market, as well as how to predict what will happen by bending and breaking our rules. The ego becomes rampant.
Another way of thinking about profits is that we fear the loss of a profit so we rationalize our taking it too early, or we get greedy and expect the profit to increase and increase (when typically our system rules tell us to get out now). The fear of losses may make us trade “too small”, or paralyse us altogether for fear of being wrong. It’s how much money you actually make when you are right that dictates financial success or failure.
But it is personal and we are only human. I learnt more about myself in 4 years of trading than in 2 decades of personal psychological work It is a never-ending struggle to stop playing the ego game, especially when money is involved. I can’t trade when I am upset or unsettled (actually, I think I can but I always regret it).
The truth is far more prosaic. No-one knows what the market is going to do next. It often behaves irrationally and unpredictably. We can only deal with the last price we see in front of us. Either you go with the market or you go under the steamroller while predicting that it will not run you over (you lose your money again). The ultimate truth and outcome of your struggle with the market will be shown in your trading account.
Obviously, dealing with the emotional hurt of having wrong analysis, and the pain of having to behave counter-intuitively, requires iron discipline and enormous capacity in your inner world to let go of the attachment to being right. Many of the world’s best trading systems are “right” only 40%-50% of the time but those winners can be huge. You win only if your losses are very small—but there are going to be losses. Your ego will suffer.
I use EFT to remain calm when doing anything connected to trading. The twins of fear and greed are easily roused, so tapping with one hand while reading, analyzing, preparing to trade and reviewing the results automatically places me in the position to start treating those manifestations when (not “if”) they arise. It helps to foster detachment, since trading is only a game about life and money. And when those underlying beliefs about money and yourself are triggered, you are predisposed to allow them to be present since you are more relaxed (as a result of tapping) and can more easily accept their reality since they are not going away anytime soon. Slowly the tapping works on their root causes and their power. There are many other important factors in having a settled mind while trading, and these will be the subject of future articles.
David Lake, MD
Here is part 2 of 2
Note: The information in this series is illustrative only and should not be taken as financial advice.
The most important part of your trading system is you. Trading the market puts us into conflict with ourselves. Because beginning traders focus only on the profits to come, and the entry signal to their system of choice, and how they will spend those enormous profits, they have no issues at that moment because they are living the dream of denial of trading reality.
If you divide the crucial subjects within a trading system into proportions then the ones dealing with Money Management and Psychology are by far the most important. K. Van Tharp, the ‘guru’ of money management, considers money management to be some 30% of a system’s importance and psychological issues some 60%. The system itself could be one of a huge variety—read “Market Wizards (three volumes) by Jack Schwager to see this.
It is quite remarkable how few systems of trading are only successful in picking “winners” more than 50% of the time (this is the coin toss analogy) but also quite remarkable how some systems, with only 20% of “winners” generate huge profits if you let those winners run while cutting the (small) losses early. Obviously any difficulty in doing this can have profound consequences, so you could trade such a winning system the emotional way and lose your trading bank very quickly indeed.
So what can EFT do in trading? The reality is that nearly all trading mistakes—as reflected in your trading account—are due to emotional errors of judgment regardless of what you know to be correct. This is partly because of the clever trader using a brain designed to see patterns and inter-relationships, instead of following mechanical rules designed to win. It is also that traders are human and thus prone to having unresolved issues of fear and greed. The result is “predicting” the market, “picking” tops and bottoms” and going for the big win (gambling). Using your ego to trade, and impose on the market. This is a very dangerous gambit.
Every human foible that afflicts people, and every negative self-belief, manifest in the world of trading, so it is not really about the market. It is about our view of the market—our reality—and the feelings that accompany that. Then there is the reality of what is—the market will show you this at any time you wish to know it—and the frustration and confusion that accompany your lack of synchronization, lack of understanding, and lack of resonance with the market. Because the pain of losing money is far greater than the pain of not making enough of it, the fear around losing and taking losses is a giant stumbling block to trading confidence [E.Toppel’s book “Zen In The Markets” is a great resource for learning more about this self-awareness.]
EFT, especially in the form of continual tapping, is a healing balm to these hurt and negative feelings. Please note that since EFT will not take away a legitimate negative feeling (one that is meant to be there, and appropriate), it will not help you to deny reality and calm down about serious errors of not trading according to your rules. What it can do is enable you to trade in a calm state of mind (your trading preparation and execution), and to learn to accept the inevitable losses philosophically (your follow-through). It will help you to ‘listen’ to the market. Most importantly, it will allow you to cut those losses early and to let those winners run until the market or your rules say to stop (then is the only time you actually collect in dollars your paper profits).
More importantly, EFT can help you to find yourself. It is essential to know your own attributes and failings as a trader because if you do not, then the market will teach them to you for thousands of dollars in tuition fees. The purest form of self-awareness and self-knowledge (both positive and negative) arises from the moment of placing money in the market. Suddenly and repeatedly you become aware of faults you had hidden from yourself for years. It is the harshest introduction to your inner world imaginable, for the uninitiated. This is why the EFT treatment often has to be ‘personalized’ for the trader with the fault although experience shows predictable patterns of dysfunctional behavior.
My suggestion during those inevitable moments of extraordinary insight into the depth of your own stupidity? Make sure you are using EFT or actively tapping for as long as possible while you cry yourself to sleep. Seriously, these lessons from life and the market are long overdue, if, like me, you have a big ego. But imagine the horror of having the same lessons repeated, at length, for astounding costs! Ideally you have a system that suits your emotional make-up and whose rules you follow effortlessly and consistently; you also have a written trading and business plan. If not, you join the estimated 95% of traders who don’t make it long-term.
Recently I received this note from Kylie, a market trader who has been applying EFT to her trading issues. She outlines just some of the things that can be achieved when EFT is applied to the emotions behind your trading decisions.
My experiences of EFT and trading.
“I have used EFT on many occasions to assist with my trading. I have traded a variety of derivatives for around 5 years now and so my trading is often fast paced and can be stressful. In trading I’ve learnt more about myself than I ever thought possible, and unfortunately a lot of the things I learnt, I didn’t like and didn’t know how to overcome. I thought I was a conservative type of person; I discovered I had a gambling streak in me. I thought I could deal with losses; I discovered that losses affected me to the point where some days I cried from frustration. I was determined to follow the rules of my trading system, yet I rarely did and I was angry with myself for that. I have blown my trading bank a couple of times, and each time I came back to trading I came back more fearful than before that the same thing would happen. I basically had a huge emotional lake to wallow in and while I knew that the problems with my trading were psychological, I had no idea how to fix them. I heard many people talking about “clearing” the blocks, and “clearing” the emotions, yet no-one could tell me how to do that.
Eventually I stumbled across EFT and I worked with David Lake and Steve Wells specifically for trading issues, including fear of loss, fear of missing out, fear of taking profits, the ability to follow rules, and the general stress that I’d feel when trading. Initially, I felt much calmer when trading, and felt that I could make my decisions easier. I was able to follow the rules of my system without second guessing and without fear. The most amazing result though, was that I felt inspired to develop a whole new trading system, one that really suited my personality and allowed me to feel calm and confident while trading. I worked hard on testing the system and putting it all into place, and earlier this year began to trade it live. I am pleasantly surprised at the progress I’ve made with trading now. I place my trades by the rules of my system without any emotion. I exit my trades by the rules of my system, regardless of my opinion about the market at the time. I don’t feel fear about losing or missing out, and even following a string of losses I still had no hesitation in continuing to follow my system. I now feel that I am capable of trading profitably and with confidence and I feel incredibly relieved!
My new trading system is very simplistic in its approach, which is what I like about it most. Similarly, EFT is also easy to learn and understand, yet it has amazing results. Don’t be fooled by its simplicity – it is a powerful technique that really will change the way you think about trading and yourself.”
David Lake, MD
Hi Guys, Just read through this thread and thought it needs to be brought to the front again..............some seriously good stuff here............Re the phsycological aspect of trading................from my own experience and what I've read here............Understanding the "phsycology" of the market and the way most people think/react is very important to successful trading, but to be successful, we need to be able to "remove/alienate/isolate" our own decision making (free of our own personal phsycological pressure) from our own "trading decisions" .....When we can do that, we can benefit from understanding how the "masses" operate, yet still use this "phsycological understanding" to our advantage .............................When I think about it , it seems a bit "heartless/cold", but then again, I've been on the "burned/used/other" side several times, so it's nothing personal to want to succeed............Well done to previous posters.........very informative stuff........Barney.
Position sizing and Ability should be best friends