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Rationalism vs. Spiritualism


Lately, I've been pondering whether a trader who believes is in Darwin (evolution theory) is more or less successful than one who is religious (loves God and his fellow man), all other things being equal.

Since most trading coaches agree that self beliefs and psychology are more important than trading skills, I was interested in hearing what others think and why.
Well you first of all have to question if belief in Darwinian style evolution excludes the belief in a God or higher force?

Then you have to question if trading coaches make that statement about psychology because it is (1) what they teach you to manage and (2) an easy scapegoat...

If I was you I would be focusing the Darwin/Religion question and successful traders and not the coaches.

I do remember reading in one of Jack Schwager's Market Wizards books about a successful trader who attributed her success to cutting her losses short very quickly and keeping them small because she felt that God would disapprove if she lost a lot of money.
In either belief system, faith is the basis, as neither can be proved objectively.

Faith being the act of placing our trust in someone or something.

In trading, faith is also the basis of our actions. To take a trade, putting our money at risk of immediate loss, we must have enough trust in the system to act and place the trade into the live market. Without sufficient trust in the trading method and signal to act, we will never put our money at risk. The key to understanding faith in trading is to recognize we have no objective way to know in advance how any individual trade will turn out (profit or loss). Thus the act of placing a trade using a system we trust, is an act of faith in the system and market.

One of my mantra's is: Trust the Market.

I believe strongly that until we can genuinely let go of each trade and trust the market, our faith is not sufficient to be consistently successful. Stating this another way, our level of success (or failure) is a direct reflection of our level of trust in ourselves, our method and ulitmately in the market.

In trading, the more of this we try to control the less successful we will be. For example, have you ever tried to second guess your trading signals, what I refer to as cherry picking signals. Rather than taking every signal, we tend to interprete the signal quality on the fly, taking some signals and letting others go based on how it looks or feels at that moment of decision. This behavior, or habit, is a direct result of not trusting every signal equally. Mathematically, objectively, every signal has the exact same probability of success or failure, and we have no way of knowing in advance which signal will succeed, thus the habit of selective cherry picking signals has no objective basis. This is an example of our futile attempt to control the future outcome of a trade. We cannot control the market or know the future outcome in advance, thus our trades are initiated based on the level of trust we have in ourselves, our method, and the market.

In trading the more fear you experience, the less faith you have, the less you trust yourself, your method, and the market. Fear is a lack of faith. For example, have you ever placed a trade based on a signal your method generates, then for one reason or another short-circuited that signal exiting the trade prematurely before the trade has had time to run it's natural course to completion...to the profit target or natural exit signal ? So you end up with a couple of ticks and watch as the trade runs in your favor without you to the full profit target several points away. You have second guessed the initial trade signal, and managed to leave a nice profit on the table. The initial trust in the method and market needed to enter the trade was quickly overwhelmed by the fear of loss causing you to react emotionally and exit the trade before it can hurt you. To consistently allow each trade to run to completion naturally, we must have enough faith to let the trade go and allow the market to control the outcome.
I understand trust in ourselves and our system, but not the market. Please explain how you trust the market. (Or is this just another way of saying you trust your system)?
quote:
Originally posted by pt_emini

In either belief system, faith is the basis, as neither can be proved objectively.

Faith being the act of placing our trust in someone or something.

In trading, faith is also the basis of our actions. To take a trade, putting our money at risk of immediate loss, we must have enough trust in the system to act and place the trade into the live market. Without sufficient trust in the trading method and signal to act, we will never put our money at risk. The key to understanding faith in trading is to recognize we have no objective way to know in advance how any individual trade will turn out (profit or loss). Thus the act of placing a trade using a system we trust, is an act of faith in the system and market.

One of my mantra's is: Trust the Market.

I believe strongly that until we can genuinely let go of each trade and trust the market, our faith is not sufficient to be consistently successful. Stating this another way, our level of success (or failure) is a direct reflection of our level of trust in ourselves, our method and ulitmately in the market.

In trading, the more of this we try to control the less successful we will be. For example, have you ever tried to second guess your trading signals, what I refer to as cherry picking signals. Rather than taking every signal, we tend to interprete the signal quality on the fly, taking some signals and letting others go based on how it looks or feels at that moment of decision. This behavior, or habit, is a direct result of not trusting every signal equally. Mathematically, objectively, every signal has the exact same probability of success or failure, and we have no way of knowing in advance which signal will succeed, thus the habit of selective cherry picking signals has no objective basis. This is an example of our futile attempt to control the future outcome of a trade. We cannot control the market or know the future outcome in advance, thus our trades are initiated based on the level of trust we have in ourselves, our method, and the market.

In trading the more fear you experience, the less faith you have, the less you trust yourself, your method, and the market. Fear is a lack of faith. For example, have you ever placed a trade based on a signal your method generates, then for one reason or another short-circuited that signal exiting the trade prematurely before the trade has had time to run it's natural course to completion...to the profit target or natural exit signal ? So you end up with a couple of ticks and watch as the trade runs in your favor without you to the full profit target several points away. You have second guessed the initial trade signal, and managed to leave a nice profit on the table. The initial trust in the method and market needed to enter the trade was quickly overwhelmed by the fear of loss causing you to react emotionally and exit the trade before it can hurt you. To consistently allow each trade to run to completion naturally, we must have enough faith to let the trade go and allow the market to control the outcome.

This post can not be further from closer to the truth and is exactly how I traded today and lost my a......s. (BTW is not the first time)I got in on several good trades and got out with small profit and watch it go the distance with out me in it well you can guess what happens next?
The same thing on the day the Dow drop 200 points in 1 min well! I was short 5 contracts one minute before and just as I take my 1 point a min later it fell of the cliff with out me. That day was a good profit day but I will never forge it as long as I live.
So many times I have a good position on my hand, more wining hands than lousing ones and all ways in a harry to get the small profit and living the big money, I still haven't Figured out Y I do that.

~Mike
Did you mean to say it could not be CLOSER to, not further from, the truth. Still time to edit your post.


The real sad part is days like that are a rare event post 9/11. Don't you just love those huge swings?
quote:
Originally posted by undecidedtrader

Did you mean to say it could not be CLOSER to, not further from, the truth. Still time to edit your post.


The real sad part is days like that are a rare event post 9/11. Don't you just love those huge swings?

you are correct undecidedtrader CLOSER it is my grammar is as bad as my trading oh well.......thanks >>>>>> Maibe the mod can change it
quote:
Originally posted by undecidedtrader

I understand trust in ourselves and our system, but not the market. Please explain how you trust the market. (Or is this just another way of saying you trust your system)?



I am saying trust the market to give you the profit you desire.

Fear is the opposite of trust. The more you trust the market to give you the profit you desire, the less you fear it. The objective is to trade with no fear, zero, thus 100% trust is the desired state of mind.

To the degree you are afraid of the market, what it might do next or could do to you to harm you (inflict the pain of loss), you will be trading with some level of fear. Fear leads directly to making many common trading mistakes. Our goal is to execute the trading method and plan without making any mistakes.

Trusting the market involves letting go of the trade your in, and allowing the market the freedom it needs to give you the profit you desire.

Now I need to make an important distinction, there is a difference between fearing the market and respecting it. Fear is an emotion usually based in a past painful experience, respect is an objective understanding of the nature of the market. Fear is reactive, respect is proactive. Respect of the market's potential to move against any trade is expressed in our trading plan in the form of stop loss orders used to rationally manage our trades. We must always respect the power of the market. We can however respect the power of the market without fearing it. The market can anything at any time, as we saw last Tuesday when the Dow dropped over 400 points in one trading session. In order to protect ourselves from real harm, we must respect this potential the market holds.
quote:
originally posted by inventor

This post can not be closer to the truth and is exactly how I traded today and lost my a......s. (BTW is not the first time)I got in on several good trades and got out with small profit and watch it go the distance with out me in it well you can guess what happens next?
The same thing on the day the Dow drop 200 points in 1 min well! I was short 5 contracts one minute before and just as I take my 1 point a min later it fell of the cliff with out me. That day was a good profit day but I will never forge it as long as I live.
So many times I have a good position on my hand, more wining hands than lousing ones and all ways in a harry to get the small profit and living the big money, I still haven't Figured out Y I do that.

~Mike


This is one of the most common problems traders face, in fact some of the most successful traders I have been privileged to work with struggle with this problem in or form or another.

In most cases, the root cause of this problem is the fear of giving back the small profit you see on the screen along with the fear of it turning into a loss. In this case the market has pre-conditioned the undesired emotional (reactive) response in you. A contributing influence also comes in the form of your indicator or price action flashing an opposing signal before the profit target is reached, in which case this conflicting signal magnifies or triggers the emotional response to short-circuit the trade.

It is really important to recognize how the market pre-conditions your sub-conscious responses. Through a slow process of reward and punishment, the market teaches us to react emotionally, rather than to rationally follow our objective trading plan / method.
quote:
Originally posted by pt_emini

quote:
Originally posted by undecidedtrader

I understand trust in ourselves and our system, but not the market. Please explain how you trust the market. (Or is this just another way of saying you trust your system)?



I am saying trust the market to give you the profit you desire.

Fear is the opposite of trust. The more you trust the market to give you the profit you desire, the less you fear it. The objective is to trade with no fear, zero, thus 100% trust is the desired state of mind.

To the degree you are afraid of the market, what it might do next or could do to you to harm you (inflict the pain of loss), you will be trading with some level of fear. Fear leads directly to making many common trading mistakes. Our goal is to execute the trading method and plan without making any mistakes.

Trusting the market involves letting go of the trade your in, and allowing the market the freedom it needs to give you the profit you desire.

Now I need to make an important distinction, there is a difference between fearing the market and respecting it. Fear is an emotion usually based in a past painful experience, respect is an objective understanding of the nature of the market. Fear is reactive, respect is proactive. Respect of the market's potential to move against any trade is expressed in our trading plan in the form of stop loss orders used to rationally manage our trades. We must always respect the power of the market. We can however respect the power of the market without fearing it. The market can anything at any time, as we saw last Tuesday when the Dow dropped over 400 points in one trading session. In order to protect ourselves from real harm, we must respect this potential the market holds.



If you've devised a trading methodology that consistently puts the probabilities in your favor, you could avoid all of the psychological/emotional hurdles by creating a black box with autotrade that took all the setups and prevents you from overiding it. This would give optimal results as long as the methodology performed as backtested.
quote:

If you've devised a trading methodology that consistently puts the probabilities in your favor, you could avoid all of the psychological/emotional hurdles by creating a black box with autotrade that took all the setups and prevents you from overiding it. This would give optimal results as long as the methodology performed as backtested.



very true !

Just be advised, developing an industrial strength automated trading system is a learning curve unto itself. Beyond this level, given the resources one can then implement multiple systems designed to further smooth a composite equity curve.

The industry does seem to be moving in this direction, get the human trader out of the equation at the time of order placement/execution as a means of minimizing system variance. As a side benefit, this is a way to increase productivity by reducing labor costs (lower employee head count)....bringing the conversation full circle back to evolution theory
The Wall St. superpowers have resources beyond our imagination and implement automated trading systems daily that often times mow down any individual trader standing in their way. As individual traders, we are up against some stiff competition in that respect because we don't have those resources as you stated.

That's what seperates the smart/big money, and the rest of the traders. Those of us who can grind out a living in that environment should feel very good about themselves.