How do you control your emotion high and low during trading.

[andycan]

firewalker99

there is never a simple solution to a complex question
the only way one can approach to fixing issues related to trading is to view each situation separately
all problems are never solved with one solution
the only people i have ever come across that are emotion less about trading
are trader that are employed and get payed a salary (though they suffer from stress)
paper trade and never had money on the line
or are so rich due to family wealth
that is what i have come across some may agree others dont its irrelevant
thats what i have observed
every trader i know successful or not deal in one form or other with emotions

 

[firewalker99]

I didn't say that genius was required, nor did I say that intelligence alone was sufficient.

Db

I didn't say you did.

One question though:

"Most of us end up stumbling along through a trial and error exploration of various systems, methods, techniques, and whatnot. Some of us find something that works. A great many do not, and quit in frustration, or broke."

Why? What separates those who do succeed and those who don't in the above statement? Both appear to have done the work. Why do some find something and others don't? If not logical intelligence, I think creativity might help (I'm not a very creative person myself).

 

[firewalker99]

firewalker99

there is never a simple solution to a complex question
the only way one can approach to fixing issues related to trading is to view each situation separately
all problems are never solved with one solution
the only people i have ever come across that are emotion less about trading
are trader that are employed and get payed a salary (though they suffer from stress)
paper trade and never had money on the line
or are so rich due to family wealth
that is what i have come across some may agree others dont its irrelevant
thats what i have observed
every trader i know successful or not deal in one form or other with emotions

That's true, each problem is unique and can only be solved if we know what is causing it to be a problem. And as it is with developing a strategy or developing the discipline, there's no holy grail in neither.

 

[bizmanny]

Another great way of controlling emotions is to expect them and allow for them in your trading plan. What do I mean by this?

1./ When in a long trade - expect greed to surface somewhere along the line. This may be in the form of not closing out your position and waiting for that extra pip. Allow for this to happen and when it does just become aware of it and execute your exit strategy without fail.

2./ When the market is plunging expect fear to be present before taking on a long, know beforehand that this emotion here could prevent you from entering the trade and be on the lookout for signals that the market is about to turn.


Similarly in all other situations where you are likely to experience any emotion, a well thought out plan of how to deal with a situation and what may arise will help you tremendously.

Also remember to follow this rule for successful trades. It is during your moments of elation that complacency will set because your mind has temporarily gone into relax mode. I would think that it is here that the most control is required as this will invoke ego, which will be like the pied piper bringing all others that follow.

These are just comments from my own experience and hope they help someone.

MW

Well written, very important to remember the above comments when it matter most. (during the time when you need to use them).

 

[bizmanny]

The other 'technique' that is often recommended is to focus only on points/pips - never on the money. Take money out of the equation and in one fell swoop you eliminate many of the emotions that accompany it!
Tim.

This is interesting technique.

 

[bizmanny]

I can only agree with all the above, all great information.

I don't think you can nor need to surpress emotion, just make it irrelevant.

Personally the clincher for me was proof. Even after the years of backtests and then demo trading, I was still messing up constantly. I would take my profits earlier than my plan suggested and not cut my losses till the last second and hesitate taking trades or over leveraging.

As said before, trading is a business and after some serious weekend debate with myself and Mr Artois I settled on 2 options. Give it up or just do it. Correctly, properly and like the business it is.

Once I started my journal and traded the plan; to a tee, no questions asked, no second thoughts, no care nor attention paid to anything but the plan, it all came through. Another problem I always had was thinking too much! Despite all that happened and despite what the backtests showed I didn't have control before. As soon as I finished that month I had proof, in black and white and in my bank account that 1) I could do it, and more importantly 2) the plan I had devised, worked.

Since that point I have not had a problem. Nowadays to me, every trade now is akin to pulling a pint in a pub or answering the phone in a call centre because I know it works, and that proof was all I needed. I know the plan works in real time and backtests show my maximum drawdown expected so now I really don't care. Some lose, some win, sometimes I'll have a good run and sometimes a bad one but I know it always works out in the end. Now I just turn on, press the buttons when applicable and then turn off again, that simple. Only If I doubled my max consecutive loss run would I even slightly consider looking at my trading plan in more detail again.

I strongly agree with what timsk said; devise a plan, test the plan and then, IMHO all you need is to prove the plan. Once you can do all that, as long as its proven succesful, there is no need for emotion, you just get up and go to work and spend your days surfing the net in boredom like any other job.....

Just my 2 cents

Excellent post of what needed to be done in a nutshell.

 

[bizmanny]

Pretty much the same as you control your emotions in any other aspect of your life. Life is a continual series of successes and failures based on correct and incorrect decisions. Yet most of us don't suffer a roller-coaster of emotion everyday. Why? Because we don't exaggerate the importance of each of these situations.

Usually not, though you read about it from time to time. Simple fact is we don't sabotage ourselves by exaggerating the importance of the event so it's not that big a disaster.

So apply the same logic to trading, don't sabotage yourself. Lose the cliches, 'win big' 'lose big' they elevate the competitive sense and focus emotion on the activity. Besides if you are 'winning big' or 'losing big' you are probably trading far too much size for your account and have exaggerated the importance of your trade in real terms. No trade should be so big as to illicit a dramatic emotional response regardless of how it goes.
Stop watching P&L figures during trading, they are of no importance, watching the amount of money you have made or lost rise and fall exaggerates the emotional response, money is a very emotive thing to most.

Trading like many other aspects of life is about making correct and incorrect decisions (hopefully more of the former, and less of the latter) there will always be an element of emotion involved since we are emotional creatures, but how much and what effect it has is within our control.

Excellent suggestions.

 

[TWI]

I often speak to investors who like to split up "discretionary" and so called "black box" trading methodologies.
I used to be fully "discretionary" and by its nature this, more than anything else, tempts the emotional response after losses so further compounding bad situations. An example would be getting stopped out of a long at a low and then emotionally being unable to pull the trigger to get back long as the market proceeds to roof later in the session. It was clear to me that my methodology was not flawed but my execution was and this was ultimately costing me considerable alpha.
The solution for me was to define trading methodologies first in text via a number of bullet points printed out and stuck to my desk in front of me as "THE RULES" . It ended up as quite a list as I encountered on the job issues with myself. Later I improved this greatly by coding these discretionary rules directly onto a trading platform.
I would now be classified as a "black box" trader where as, in reality, all I have done is taken a set of rules that I used to follow in a discertionary fashion and placed them in code so that I have a visual and audible signal instructing me what to do across many different markets and in some cases also executing directly. It has been of great benefit to my trading to move to this approach and now I would find it exceedingly difficult to move back to being purely discretionary . I am still by no means perfect in my execution and the biggest challenge is still definitely the manual execution. Now however rather than wondering if i should take the next trade or not I will at worst undersize myself. Overall it has made my job far easier emotionally and removed a lot of the stress, it has also lead to significant improvements in my trading results as the use of such platforms allows the type of analysis and refinement that was impossible in the past. I think I now actually lose more money in the chop on an individual market but I now cover far more products and whenever anything makes any sort of directional move I am always, always on it so overall results in all respects are far better. It is a comfort to know this and it always allows me to be optimistic about the future whenever the drawdowns come along.
I think that few people are able to stay so emotionally detached that they do not need something to help them out. Even with a high degree of confidence in your system there will always be doubts during drawdowns about how bad it will be or how long it may go on or whether this time the rules have changed. It is essential to find a way to stick with the program and assess the problems only in terms of statistics and not in terms of bank balance.

 

[Greed Is Good]

To all traders who trade for living and those who trade in a big way.

1. How do you control your emotions. If your win big or lose big. How do you control your emotion.

2.If you had say 5 consecutive losing days. Does it affect your confidence at all so that next trade you lower your stakes than normal or you keep it the same. Also when you had 5 consecutive winning days, Does your confidence increase and your play with a little more stakes than normal or your keep it same.

Your contribution is much appreciated.

Bizmanny as you took the trouble to PM me I will respond but I do not have much to add as it has already been well said in this thread.

1: Very badly!! If I win big I expect it & become overconfident as I rarely enter a trade I have not convinced myself just cannot lose. If I do lose anything then I can get very upset with myself and depending on the size of the loss can sometimes not trade for several days or even weeks until I am able to mind manage my emotions.

2: If I ever have more than 2 losing days or trades in a row then I stop immediately and re-evaluate my trading strategy. I then question whether or not I could have forseen the loss. Did I trade on emotion to enter a risky trade or was it a market condition which I could not have anticipated like a negative piece of financial news being viewed as a reverse positive because it would mean interest rates would most likely be frozen etc etc. I also feel great physical pain when its a large loss so this helps in some ways as I try to avoid risky trades as I know the resulting internal pressure I put myself under will not be pleasant.

I never trade unless I am very confident. If I do not like the look of the market action I just observe until or if one of my regular setups becomes apparent. Otherwise I stay away.

The most frustrating aspect of trading for me is that the vast majority of my £75K losses have been because I refused to close the trade early to limit the damage. Like a complete fool I let the losses steepen as I have seen many reversals when it looks very unlikely. Getting this balance of when to cut your losses is really hard for me to do as I have a winners mindset.

My advice to you or anyone thinking of trading on a regular basis is that if you cannot handle the emotional side of things then it is a good sign that your mindset is not going to be able to handle the mind games trading plays on you so it would be best to stop sooner rather than later and perhaps choose a less volatile or risky trading instrument as I am assuming you are talking about binaries which is probably the most extreme form of trading there is.

 

[charliechan]

What I find interesting is this:

Floor trading success was the ultimate for 'feel of the market' in terms of 'being in the thick of it', and knowing people who had the order flow.

now, these same people who have successfully made the transition upstairs are now looking to develop auto systems to take the emotion and thought out of the process. they are neglecting the very things that made them money (intuition)! I cant help but think they are just jumping on the fear band wagon?

Everyone talks of the 'machines' (read 'decisions') dropping massive size in the market making poor cal spreader realising spreads arent necessarily so safe!! Thing is, these 'algo-decisions' were still being made and sent to the pits back when by the buy side just as they are now.

all this stuff is starting to affect even the best intuitive traders because that 'intuitive' element (ie your mates with paper) just isnt there anymore. thats why moves intradat dont happen like they used to cos info isnt known. kills vol just like monetary policy.

emotion is being extracted from the market. are markets becoming more efficient or random walk etc due to this abstraction?

 

[SOCRATES]

What I find interesting is this:

Floor trading success was the ultimate for 'feel of the market' in terms of 'being in the thick of it', and knowing people who had the order flow.

now, these same people who have successfully made the transition upstairs are now looking to develop auto systems to take the emotion and thought out of the process. they are neglecting the very things that made them money (intuition)! I cant help but think they are just jumping on the fear band wagon?

Everyone talks of the 'machines' (read 'decisions') dropping massive size in the market making poor cal spreader realising spreads arent necessarily so safe!! Thing is, these 'algo-decisions' were still being made and sent to the pits back when by the buy side just as they are now.

all this stuff is starting to affect even the best intuitive traders because that 'intuitive' element (ie your mates with paper) just isnt there anymore. thats why moves intradat dont happen like they used to cos info isnt known. kills vol just like monetary policy.

emotion is being extracted from the market. are markets becoming more efficient or random walk etc due to this abstraction?

Well Charlie, in a word "uncertain". But uncertain does not mean unpredictable or unreadable, but just the unwelcome introduction of extra difficulty, further complexity by virtue of absence.

Therefore you have to be very fast, very aware, very decisive and very much in control of yourself.

The machines do not solve the problem because ultimately all of it is not machine decided, it is humanistically orientated, I am sure you understand what I mean. I agree with you that the trail not being as clearly laid as in the past serves to test traders to the limit. It causes the intuitive element to be even more important than it was heretofore with much finer "tuning" a must. I would venture to say that the days of black and white are over or nearly over.

The result is unprepared participants entering an arena whose climate is a kaliedoscope of moods, that to the untrained eye is unreadable, perverse by comparison to what preceeded it.

It is the new age of test and vaporise, survival of the fittest as never before.

I know exactly what you mean, when I was on the floor you could tell just by the noise...but of course if you take people out of that environment and replant them in a sterile one by sitting them in front of screens it is no wonder many cannot follow the flow. The presence of machines do not help either with the massive dumpings they engender intermittently.

These massive dumpings create problems of their own in the flow of volume. It is just a new age with new ways of working round the problems, requiring new frontline skills that in large measure have to be a product of self development, I am sure you agree.

 

[newstart]

When I first traded I lost £2000 but I learned a lot from that loss I won't make the same mistakes twice