Psychology... the poll

I am interested to see how many of you (particularly the successful traders: those who are consistent in their profit) actually believe that psychology (issues such as discipline, greed, fear, excitement, etc) can affect whether you succeed or fail in this game.

I've made it list who chose which option; please add your thoughts below.

NOTE: The first question is really asking: Does psychology have a strong influence on your success or failure in trading?

I voted for doomed but I believe that if everything went well and one experienced no issues, conflicts, or bad habit developments the it might not be an issue.

The problem is that I don't know of anyone who I've met who had such a smooth path from conception, through research and planning, to execution that they didn't have some problems. I think that with really good training and support it could be avoided by many.

Psychology and Discipline are THE most important things in trading - !!

without those two - you are DOOMED.........!!


The markets ARE, HAVE ALWAYS BEEN and ALWAYS WILL be about - upside POTENTIAL - V - downside RISK - !!

or most commonly called GREED - V - FEAR - !!

I think without discipline you are doomed.

But without psychology ???????

What is that supposed to mean anyway ?

Everyone has psychology in one form or another so the question is somewhat ambiguous.

the MOST COMMON mistakes traders make - taking profits too early and letting loosing trades RUN - can both be pinned down to either your psychology or bad discipline..!!

" I must take this profit before the market takes it back " (FEAR)..? - (if you get on a bus and the destination is 20 miles away - (a trend) - why do people get off at the 1st stop)..?
The reason your making money is because you got on the CORRECT BUS... !!


ADMITTING YOUR WRONG - can be VERY hard to do ... !! When you get out of a trade - NEVER LOOK BACK...... !! - when you do - THAT is how a bad habit always forms !! - you look at the trade you just got out of for a small loss (the first loss is usually the smallest), and see had you actually stuck with it for another couple of days you would have made money .. !!
You get frustrated and this gives you ammunition to stick with the next LOOSING TRADE LONGER - but that one - DOESNT COME BACK... !! - Now youve lost MORE money on that trade than you would have BEEN UP if the trade had been in profit in the first place... !!
Now you need a few winning trades to make up for that ONE LOOSER...... !! - viscious circle... !!

and that stems from GREED....... !! - ALL PSYCHOLOGY....... !!

Every financial disaster in history, (1929 crash, Black Wednesday /Thursday, Dot Com boom/bust/ the run on Northern Rock etc - all have had " some element " of human psychology contributing do it.. !!

yacarob1 said:

But without psychology ???????

What is that supposed to mean anyway ?

Everyone has psychology in one form or another so the question is somewhat ambiguous.

Click to expand...

Yes, I spent some time trying to reword it. It is vague even if I put a "good psychological make-up". Care to suggest a rephrase?

That said, it could mean, "Does it have a strong influence on your success?"

Psychology Definition Altered
Let's return now to the dictionary definitions of "psychology".

From the Oxford American Dictionary:

1. the study of the mind and how it works.
2. mental characteristics, can you understand his psychology?

That's fine.

From the Concise Oxford Dictionary:

1. the scientific study of the human mind and its functions, esp. those affecting behavior in a given context.
2. a treatise on or theory of this.
3.a. the mental characteristics or attitude of a person or group
3.b. the mental factors governing a situation or activity (the psychology of crime)

Definition 1 has slyly added the idea of "affecting behavior". The original definition had nothing to do with this. The wish to control the minds and actions of others has entered into the equation.

From the American Heritage Dictionary:

1. The science that deals with mental processes and behavior.
2. The emotional and behavioral characteristics of an individual or group.

These definitions have further altered the true meaning. In actual practice, modern psychology deals almost exclusively with physiology (brain chemistry, neurology, genetics) and the behavior of the biological organism (stimulus-response), completely disregarding and ignoring the mind (man's inner self, and more to the point, man's true and vital self). The dictionaries will sooner or later remove the concept of "mind" completely from the definition following the lead of "official" psychology as taught in western universities and colleges.

Members of the educational establishment write the dictionaries, and the educational establishment is entrenched in modern psychological theories. Let's return to the correct definition of the word.

Adhering to the strict definition of the word, psychology would involve the study of man's invisible world as described above, and nothing else. By definition this is what the study would deal with. This is not an opinion or bias. This is according to exactly what the word means and nothing else. Of course, relations to behavior could be studied, and relations to brain activity could be studied, but the subject in itself, by definition is or should be the study of the mind or soul. A more correct name for the modern subjects of psychology and psychiatry would be "people control" because that's what they actually are. They are subjects involving how to alter thoughts, attitudes and behavior. The intention is to control people. That in a nutshell is the purpose of behaviorism. Naturally governments and totalitarians love the subject. They also fund it in large way.

Psychology - It's Definition and Actual Meaning

Shadow,

From my own experience, I have a good trading method but the psychological shortfalls (why do hold losers?) totally undermine it.

This is reflected in the idea that two people using an identical system will produce different results.

Grant.

shadowninja said:

Yes, I spent some time trying to reword it. It is vague even if I put a "good psychological make-up". Care to suggest a rephrase?

That said, it could mean, "Does it have a strong influence on your success?"

Click to expand...

Im not sure if its a question of " rephrasing " as such - and as i can only say for myself,i personally have always been most interested in the psychology side of all this than the " technology side " of things - (not being of the computer age as such - didnt see a pc in school until i was about 16) - (and that about 20 years before the internet existed),so please bare with me -

Take all the " old time " BIG traders out there - and even some of the BIGGEST trades in history -
Soros for example - (Black Wed) and Stanley Druckenmiller -(who has a few quid) - (who he sacked for taking losses on tech stocks in the dot com bubble) - )see, even the pros get it wrong) , (he did most of the research and Soros pulled the trigger).. !!
That must have been like a $10 BILLION short - (i would have like to have been a fly on the wall during his breakfast when he was contemplating that one) - its just interesting to think about how his psychology/mental state would have been like at that time..?
- (I suppose a chap called Norman lamont learned the hard way not to take on currency traders) - (especially ones called Soros) -

I just find it interesting that him, and traders like say Monroe trout, Michael Marcus,Kovner etc etc, all VASTLY wealthy people are all into their institutes and foundations and philosophies and are all disciples of this person and that person - Ayn Rand etc etc - they get to some kind of " higher plane " - where its actually nothing to do with money AT ALL - and maybe thats the psychological bit too ? (sorry i know that sounds crazy)

Indeed, some people say it's a load of bull****. I was just interested to see the various opinions.

shadowninja said:

Indeed, some people say it's a load of bull****. I was just interested to see the various opinions.

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Yea,your totally right on that - a great majority seem to overlook it for some reason - like its all just common sense, without looking deeper at it - or some kind of " pseudo " philosophy clap trap etc etc -
But i think its interesting how ALL traders at " some point" in their trading lives/career - have all made the SAME mistakes - (if they say they havent, well thats not true im sure) -
Ive always compared learning to trade - a bit like learning to drive - you have the theory bit and then you have the actual practical skill and after that youve got to learn to " read the road " so to speak ..

It just seems like all in the books/expensive training courses in the world, cant prepare you for the " psychological " hits/battles that will be with YOURSELF..... !!

bump

I think maintenance of discipline is the key to successful trading.

But psychological factors do affect one's ability to be disciplined.

So if you have a problem with maintaining discipline, you need to look inside your head and figure out a way that you can maintain control of your natural impulses.

So, I would say that without addressing the psychological factors that sometimes cause indiscipline, one might be doomed to failure in the long term.

its not just success in trading where psychology is important, its all aspects of life.

if you dont have the necessary attitude and approach, could you be successful at anything?

Charliechan,

I think success and compotence need to be differentiated. Someone can perform there job at the required level (or above) but still hate it. I reckon that would cover the majority of the working population be they they manual of professional.

Further, there may be external contributory factors to "success" beyond our control.

Grant.

Since psychologically inspired discipline is so fundamental to trading success I am not surprised to hear that most aspiring traders actually end up as failures.

A lack of obvious discipline is evident across every thread on the T2W website in the writings and uneducated ramblings of a very large proportion of contributors.

If such indiscipline were to be translated to the trading arena, as I am sure it is on a daily basis, then these undisciplined people are certain to end up as miserable LOOSERS.

:clap:

Witch of coarse, is guud four mee, innit mate, cos I aint no LOOSER.

shadowninja said:

Indeed, some people say it's a load of bull****. I was just interested to see the various opinions.

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It isn't a lot of bull but, unless the trader is a cold fish, I don't think that there is much that can be done to make it work in one's favour, unless the person has that trading character inbred into him, in the first place. The more at risk, the more one's emotions will influence a decision. Do you believe that I, a person who started trading (as opposed to portfolio investment) at about 45 years old, can change habits of a lifetime? It's very difficult to do that because each of us has had the influence of our parents values, teachers and workmates imposed upon us for all of our most formative years.

I believe that the newcomer trader, and I am talking about people like me who started later in life, should confine themselves to one or two trades per day. Those who have started their working life in a trading atmosphere, with good teachers, may be able to manage lots more, but our psychological makeup is too biased in set ways to change easily. We may manage to be disciplined much of the time but, sooner or later, something , perhaps an unexpected news item, will make us change our minds and the decision that we take will be pure reflex, taken in a nanosecond. Afterwords, we will ask ourselves why we did that. The reason that we did it is based on the work that we have been doing in our working life.

Split

Splitlink said:

It isn't a lot of bull but, unless the trader is a cold fish, I don't think that there is much that can be done to make it work in one's favour, unless the person has that trading character inbred into him, in the first place. The more at risk, the more one's emotions will influence a decision. Do you believe that I, a person who started trading (as opposed to portfolio investment) at about 45 years old, can change habits of a lifetime? It's very difficult to do that because each of us has had the influence of our parents values, teachers and workmates imposed upon us for all of our most formative years.

I believe that the newcomer trader, and I am talking about people like me who started later in life, should confine themselves to one or two trades per day. Those who have started their working life in a trading atmosphere, with good teachers, may be able to manage lots more, but our psychological makeup is too biased in set ways to change easily. We may manage to be disciplined much of the time but, sooner or later, something , perhaps an unexpected news item, will make us change our minds and the decision that we take will be pure reflex, taken in a nanosecond. Afterwords, we will ask ourselves why we did that. The reason that we did it is based on the work that we have been doing in our working life.

Split

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I sympathise with Split's view. I do think it is possible to change previously ingrained values but it takes a lot of work & determination. In times of stress (like your trade is going down the tubes) the ever-present danger is that you will revert to type. On a parallel theme, in aviation it has been shown that training reinforces behaviour so that in the emergency or high-stress situation, the correct ie trained reaction will occur. However, as Split mentions, a lifetime's inappropriate conditioning can make it very difficult to change one's ingrained and almost reflex reaction. (This has had on occasion, disastrous results in the flying environment where a pilot has applied inappropriate procedures from a previous long-flown aircraft).

This is why it is so important to have defined your rules, practise them always and ensure you take corrective action when deviation occurs. Psychology IS important and discipline is vital. Like other people, I've learned the hard way through wallet-pain.

Splitlink said:

.........I believe that the newcomer trader, and I am talking about people like me who started later in life, should confine themselves to one or two trades per day. ........

Split

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On a slightly different tack, I like the above comment. If your style of trading is compatible then it makes for a very easy, stress-free existence. Perhaps you won't make Soros's millions but it does ok for my pocket money.

On a personal level i couldn't stick in front of a screen all day long day trading. There's more to life and lots of other nice things to do - although I enjoy trading and am fascinated by it, I still see it as a means to an end - ie it gives me freedom.

I sometimes think, as an amateur trader i may not have the expertise, experience or profit potential of the professional but i have my freedom. Trade what i like, when I like, how i like. And if I don't want to go to work today, I don't. Now that's what i call freedom!

0007 said:

On a slightly different tack, I like the above comment. If your style of trading is compatible then it makes for a very easy, stress-free existence. Perhaps you won't make Soros's millions but it does ok for my pocket money.

On a personal level i couldn't stick in front of a screen all day long day trading. There's more to life and lots of other nice things to do - although I enjoy trading and am fascinated by it, I still see it as a means to an end - ie it gives me freedom.

I sometimes think, as an amateur trader i may not have the expertise, experience or profit potential of the professional but i have my freedom. Trade what i like, when I like, how i like. And if I don't want to go to work today, I don't. Now that's what i call freedom!

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I feel the same as you but, perhaps, that is partly from where our lack of discipline stems. We are not taking trading as seriously as we should and it suffers as a consequence.

We have a family business. The wedding of a much loved relative is taking place in June but no one, including a son and daughter, is prepared to leave the others and go to it. If trading was in question there would be no doubt. We would all have planned to go and we'd, probably, have taken several days off.

I think that that is the attitude of many traders. It is not taken as seriously as it should be, even though quite a lot of money is involved.

Split