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TRADING PSYCHOSIS


Trading Psychosis – The Vendors Dream

I have wanted to address this subject, and after a few beers this Memorial Day weekend, sat down and banged it out. It should resonate with most folks, even traders that have eventually enjoyed success. But I’m simply trying to lay out the mental/emotional workings that surround the difficult process of finding a way to trade successfully. And it includes the role that almost all vendors play in that discovery as they prey upon the relief of pain that’s encountered by those who diligently attempt to master the market.

So, here’s a skeletal breakdown of what typically takes place … 1-16 of what steps the trader experiences as he or she enters the arena of the market.


1. I see how basic the market moves, either up or down, and how easy money can be made.
2. I open an account and trade with an initial strategy and lose money again and again and again.
3. I begin feeling frustrated and feel the PAIN of losing.
4. I don’t question my capability. I know it’s because I don’t have a successful method/strategery.
5. Someone has to be making money and so will I, but I need help.
6. The search: reading trading books and hunting down a good course that promises to teach me how I can make my fortune, or at least a living, for a fee.
7. That nominal multi-grand fee is reasonable since I’ve lost that much in my trading. Whew, thank god I’ve got support now. My PAIN is gone, replaced by relief and excitement.
8. The course marketers/vendors will teach me to make money.
9. But it’s not working, and I’m still trading like a retarded monkey.
10. IT MUST BE MY FAULT because I am obviously not trading the paid-for strategy correctly. They’re doing great, and I hear about it. But I’m still losing.

Reality Check:

It is our nature to accept the FAULT for not using the education we paid for in the right way. We’re too “invested” in it. This is how and why trading education marketers make so much money. They are simply offering to relieve your mental anguish – your PAIN. And any time you don’t achieve success, it’s your fault, not theirs or their method. This is human nature! This cycle of thought is reinforced by the promotional success stories, testimonials and apparent legitimacy of the training or the company.

11. Eventually I finally realize something is rotten in Denmark and not with me.
12. I look for the “real thing” training company/person/mentor/method/chatroom etc.
13. I pay for more education … but that doesn’t work either.
14. At this point I’m even more frustrated, angry and still suffering PAIN!
15. I’ve questioned myself and now question all courses and if anyone really does make money trading.
16. WTF do I do?!?!?!?

I don’t have “the answer,” but I believe that I can offer some useful and real insight into how to maximize your potential success to trade for a living. And let me assure you, I’m very, very qualified to address this subject for numerous reasons. I’ll follow up within the week.

Any and all comments and feedback are welcome here on this thread in the interim. Seriously! They can only help add to the follow up blather that I write, making sure I cover every element of importance and with substance that will hopefully help or assist those who’ve found themselves in the “trading psychosis” loop … as I’ve been there myself a couple of times early on during the past two decades of my own experience in this crazy, challenging and potentially rewarding endeavor.

I've included my regular chart analysis with just a few of the indicators I use to discern market behavior.



Click image for original size
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Above chart is a joke ... my bad! And I had so many more indicators and lines I wanted to draw on it, ha ... but ran out of beer (and time) and have to go to bed. Looking forward to following up on this topic and also some good trading for everyone visiting mypivots and sharing analysis and charts here!
This is certainly a dilemma, and I look forward to your solution.

I think a lot of this has to do with unrealistic expectations on the part of the new trader. First off, the failure rate of new retail level traders is nearly 100%. So the odd's of success starting from scratch with no experience and doing it yourself with no help is less than 1% of all novices that step onto the trading the field of battle.

Secondly, trading is deceptive because anyone can look at any price chart and spot all sorts of profit potential. I would liken the complexity of live trading as trying to win a game of chess against a chess master while at the same time trying to land a Boeing 777 commercial jet with 300 passengers aboard without crashing. As an airline passenger, would you get on the 777 if you knew the pilot had never flown an aircraft and "learned" how to fly by reading two books about pilots and flying, but he always wanted to be a pilot since he was a child ?

With respect to retail "vendors", it appears to me the vendor business is highly competitive. Vendor's experience a high level of customer turnover, so are always trying to find new customers. This competitive marketplace drives vendors to put their best foot forward in order to attract attention. Unfortunately this feeds into the preconceived desires (greed) of the new trader. Suppose Vendor A advertises "more than 90% wins" performance, or "300% gains", or "Get the S&P's next move in advance". But Vendor B advertises, "50% wins" performance, or "I have no idea what the market is going to do tomorrow". If after reading your two books on trading and having done your astronomical profit potential calculations, which trading service would any intelligent novice trader choose ?
I think the problem most new traders have stems from focusing all of their efforts on the wrong thing. If you breakdown trading into three categories, system,money management, psychology, with each subsequent one being 10x more important than its predecessor you will find that most new traders pay very little attention to anything other than the "system" which in my opinion is the least vital component in becoming a successful trader. This accounts for them moving from one system to the next each time hoping the next one will be the Holy Grail they so dreamed about. When in fact there may have been nothing wrong with the system if the proper money management was applied and there was no reckless or psychological self sabotaging behavior going on.

In theory any system should work to some degree for some amount of time (nothing works all the time and nothing works forever). I have proven this to myself and others with a simple exercise of giving myself just one indicator (say a moving average) and the task of finding a way to make it profitable over time. If you do this you'll find that "money management" was the deciding factor in whether you were profitable or not. But very few if any new traders take this approach to trading. They believe (or were sold) that its the "system" that decides whether you're profitable or not. I wish I had more time to explain all the complexities involved when I use the term "money management", but it's Memorial Day weekend and I'm working on a three day bender. Tuesday ought to be interesting with a hangover. The markets tanking GO LONG!!! lol

As far as what PT said about unrealistic expectations I guess I would put this in the "psychology" category. Yes new traders have very unreal views about trading the futures markets and why wouldn't they? They learned just enough to be dangerous. They bought a system, paper traded for a few weeks (profitably) and can't wait to go to real money (Death March Sound Here). So what happened? How is it they were doing so well on paper and now they have exhausted their account in a short amount of time? The answer is "Psychology". By far the hardest and most important thing to master if you want to become a successful trader. I am not qualified to advise on this subject, but to any new traders that might be reading this I implore you to read and re-read and re-read and re-read "Trading in the Zone" by Mark Douglas. !!!Hey I should get paid for this advertising!!!

Finally, it takes a lot of years (if ever) to become a successful trader. Most people I've spoken with claim anywhere between 2-4 years or longer before they were consistently profitable. The best thing you can do for yourself (IMO) is to focus your energy not on the system, but on money management and the psychology side of trading.

As an aside, I would like to thank MonkeyMeat for his contributions to this forum. I would also like to thank Ninja for taking the time to share and post.

Have a great Memorial Day!

for training purposes, your post gave me an idea .Open a sim acct and buy the opening every day , then trade out of it successfully if right,small loss if wrong.. This should force u to learn how to trade with mimimal guilt or phsyche ,one of the hardest things to learn to trade without or in spite of. The positon is forced on you and u must learn to trade or swim so as not to drown.Any system will be profitable if u know how to trade.No system will work if you don't.
Would absolutely enjoy any and all feedback ... the more, the better on this topic. Some really really good and insightful inputs so far.
That post from monkey meat on vendor's dream. Is the epitome of me. I actually just lost another bunch of money I couldn't afford to lose and here I was actually LOOKING for help here. I'm done with vendors. I keep feeling that I need someone to sit with me and help me learn and keep cool. He talked about money mangagement. I have always considered myself to be an awesome money manager. But when it comes to trading I guess I just don't know what that means. I've never been a gambler, and when I do go to vegas I take just enough money to loose. Most of the time I win in vegas but I never count on it. It's there for fun. I'm trying to get this trading thing off the ground and do it for a living. So far the only person I'm providing for is my brokerage.

I keep thinking if I just had a little help, I could get my trading account back up to where it belongs and with all I've learned I could start over with more confidence. But alas here I am endlessly clicking around like monkey meat describes, looking and looking for FREE help. I listen to shadow trader he's great, but it's not enough.
TraderMom - in the disclaimer on this site it says Don't trade with money you can't afford to lose. This is really important because it changes your entire psychological outlook on each trade. You are much less likely to succeed if you can't afford to lose the money that you're trading with. If that's the situation then paper trade until you've proven to yourself that you can trade profitably and then trade real money only if you can follow and adhere to the same strategy and rules as when you were paper trading.

I know that this advice is a bit late but I hope that it gets you back on track.
HI Monkey Meat...
Well here's the deal. I have an inheritance. I took a small amount of it to learn this. I paper traded for 2 years. I broke even for a very long time.. Which was just at frustrating as losing but at least there wasn't this pit in my stomach. I've only lost 1/5 of the money I started with but the money came from my mother's life work so I dunno. I'm super frugal anyway, so losing any money to me is losing money I can't afford to lose.

So I guess I could tell you right now that might be part of the problem or a psycological part of it at least.

I keep getting stopped out.. I've decdied that I would just trade the e-mini's and I had 8 good trades in a row before I went live. After I went live I had 8 good trades in a row,
then took a big hit and haven't gotten my mojo back since. It's like I completely forgot what I was doing that was making me money.
I wanna hang my hat and go "back to the books" but what books? I can't even remember what books are good anymore. I'm like a deer in headlights. Now I'm re-evaluating all my set-ups and indicators and it scares me cause now I'm going to change everything, and I know that it once worked. I don't know what's wrong with my moneymangement. I can't figure it out. How many times do you let a trade go against you before you hang it up for the day. I keep a journal and it's really helping me, but I can see how my disipline is lacking. I have several entries where I was ahead, and told myself to walk away, and didn't and lost all that I made. So I guess I will buy the trading in the zone book and see what happens. Thanks for listening. All advice is appreciated.
Always remember that strongest market magnet is the 9:30 est open as it has the maximum volume. This Opening price will always be tested today, tomorrow or somewhere in the near future.
Hey TraderMom!

Actually I believe it was one of your posts that led me to start this TRADING PSYCHOSIS thread. Don't get me wrong, it's not like I think you're trading from a round rubber room wearing one of those funny jackets. I had recently been visiting with a trading buddy of mine and we ended up bandying around the issue of Trading Vendors and how they make thier money. Obviously, it's for a lot of reasons. But he and I both felt that it really boiled down primarily to relieving frustration and PAIN. They're in the business of relieving pain for a fee. But here's the deal, in the trading arena,"Those who can't do, teach." I'd adjust it a tad and say, "Those who can't trade, teach how to trade, for a fee." So, I wanted to address education (books, vendors, chatrooms etc.) and to hopefully provide at least some insight into what a trader can focus on (and what to avoid) to maximize the chance for success over time.

I wanted to offer a handful of real-world, to-the-point places to begin focusing on, and it starts with yourself. Btw, pt emini, myptofvu, iowa and day trading have all offered some great, great stuff in their posts here. Also, lordalfa posted Evolution of a Trader here http://www.mypivots.com/forum/topic.asp?TOPIC_ID=4460 , which has been floating around for a while as the "38 Steps to Becoming a Trader." I think I've seen it in hard copy but don't know who originally scribbled it down. It maps out a "process" as does another writing, "The 5 Steps to Becoming a Trader" that can be googled and is worth reading. And, as pt emini mentioned, if you don't own it, definitely nab and immerse yourself in a copy of "Trading in the Zone" by Mark Douglas. In your above post it sounds like you already know your core issue(s) hindrance(s). That's usually the easy part. The hard part is addressing them and knowing how to do it effectively.

I plan on following up with some potential answers and approaches and ideas to follow on with my initial post when I started this thread. I'm still struggling through some mental gymnastics trying to distill down what I want to share. I'm not interested in penning a thousand page tome covering too much BS and impossible to use. In fact, I want it to be a simple, to-the-point, specific,real-world, and SHORT as possible (wish me luck on that score, right?). And understand that this is just my 2 cents on TRADING PSYCHOSIS and how to "treat" it. But my background has offered me some unique experiences and insights that I'd otherwise not have about trading, FWIW. My brain hurts now. In the meantime, all inputs are welcomed and encouraged, since it's about everyone here benefitting!

Btw ak1, is that a Zen Koan you posted? Just kidding!!
quote:
Originally posted by TraderMom

HI Monkey Meat...
Well here's the deal. I have an inheritance. I took a small amount of it to learn this. I paper traded for 2 years. I broke even for a very long time.. Which was just at frustrating as losing but at least there wasn't this pit in my stomach. I've only lost 1/5 of the money I started with but the money came from my mother's life work so I dunno. I'm super frugal anyway, so losing any money to me is losing money I can't afford to lose.

So I guess I could tell you right now that might be part of the problem or a psycological part of it at least.

I keep getting stopped out.. I've decdied that I would just trade the e-mini's and I had 8 good trades in a row before I went live. After I went live I had 8 good trades in a row,
then took a big hit and haven't gotten my mojo back since. It's like I completely forgot what I was doing that was making me money.
I wanna hang my hat and go "back to the books" but what books? I can't even remember what books are good anymore. I'm like a deer in headlights. Now I'm re-evaluating all my set-ups and indicators and it scares me cause now I'm going to change everything, and I know that it once worked. I don't know what's wrong with my moneymangement. I can't figure it out. How many times do you let a trade go against you before you hang it up for the day. I keep a journal and it's really helping me, but I can see how my disipline is lacking. I have several entries where I was ahead, and told myself to walk away, and didn't and lost all that I made. So I guess I will buy the trading in the zone book and see what happens. Thanks for listening. All advice is appreciated.





TraderMom, been there done all that. I understand what it feels like. I was getting stopped out trade after trade. And one day an old pro trader said to me...if you keep getting stopped out and then the trade goes the way you thought then why in the world are you using stops? It was my second ahhhh haaaa moment. I now will enter a trade and place a super large stop, only for emergency 9/11 type thing or power failure, or sudden fed announcement (I don't watch the news) What I do is enter when I am bullish and then exit when I am no longer bullish. Also trading the NQ for a long time instead of the ES helped me, and I still trade the NQ more than the ES. Could you walk me thru one of your normal bad days? What is making your trade setups?
This guy must have read my post on page one!

http://www.safehaven.com/article-13993.htm