What’s Your Problem?
June 26, 2006 by Trader Rich
Brett Steenbarger, author of "The Psychology of Trading" has a new post on his blog today titled, "Why Your Trading Isn't Working Out."
He identifies 4 possible reasons why your trading may be unprofitable from a market knowledge and psychological perspective.
- Problems of training and experience or lack there of
- Problems with changing markets or the identification of change
- Situational emotional problems or immediate psychological issues such as the stress of successive losses
- Ongoing emotional problems such as depression or substance abuse
I've gone through #1, #2, and #3 and probably will continue to intermittently do so as I'm sure a lot of traders have. The important thing is to identify this and then try to overcome it.
Check out the entire post at http://traderfeed.blogspot.com/
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I’m starting to think all the Psychology stuff people talk about with trading is BS, your system either gives you an edge or it doesn’t, being in a bad mood should have nothing to do with how effective your system is.
If you keep losing it’s because you have a s**t system, not because it’s a certain time of the month. Part of having a good system is having a simple system that is easy to execute, trades are clear cut, no doubts. If you lose, it’s not because your ‘head is not in the right place’, it’s because your system was wrong.
Or am I missing something??…
I think in the short term, you may be right but if your head isn’t on straight, I don’t think you can be profitable in the long term. I know that when I had a really bad losing streak, I started making stupid trades, desperate to get back to even. I’m not a successful trader yet though so beats me. I think if anything is most important it is risk management…
You are correct about risk management, but it does not help that we swtich systems every other week
As far as the stupid desperation trades are concearned, this is where automating your system comes in again.
Ever read “Bringing Down the House”. These guys/girls made millions playing blackjack. How? The same way the market makers do in forex…sufficient capitalization and strict risk management. They were bankrolled for millions. They knew that they could win 51% of the time, blackjack being the only beatable game in Vegas. Perfected, a system to maximize their risk to reward ratio for every given situation and they maintained strict discipline when engaging.
Yes Psychology is important but I think only in the sense that you can’t “freak” every time you lose because you’re gonna lose alot.
There is a tendancy to think that trading is somehow noble or a “real” profession. I’ve got an economics degree (seriously) so I’ve got an edge right? Well you know as well as I do that this is crap. I bet you take any really good poker/blackjack player and put him in front of this stuff and he would make money.
Anyway if you haven’t read “Bringing Down the House” definately pick it up. It’s a great read, a page turner, and I think pretty relevant.