Becoming a student of the market

[LeTiss]

Psychology has been mentioned so many times with trading, that it has become a cliche - I am as guilty as anyone.

However, it is the predominant reason why so many fail at trading!

It's not a failure to read graphs, or not being able to predict which way a price will move, it's invariably down to a lack of self-control. This is why so many ruin their hard work and good progress, by not being able to control their stakes, or control their disappointment when faced with a red screen

[iambic_pentameter]

Psychology has been mentioned so many times with trading, that it has become a cliche - I am as guilty as anyone.

However, it is the predominant reason why so many fail at trading!

It's not a failure to read graphs, or not being able to predict which way a price will move, it's invariably down to a lack of self-control. This is why so many ruin their hard work and good progress, by not being able to control their stakes, or control their disappointment when faced with a red screen

In Market Wizards, Tom Baldwin states that if you watch any market for a length of time, you will begin to see patterns and understand what is happening.

But, as per LeTiss' comment above, if you don't have a handle on your psychological behaviour, you are doomed.

I also think honesty with oneself if very important as well; having gone through two full cycles in the horse racing markets, I'm not ashamed to say that any cock ups are generally down to me and not external factors like exchanges going down, prices moving against me, cats jumping on my desk etc.

[northbound]

From my experience, psychology is really important.

Without the right mindset, you'll always have wrong/unrealistic expectations.

You see professional profit/loss statements and keep expecting perfection. You keep getting emotionally involved in every single trade. You get into a trade expecting to win it. You freeze when it turns red and you don't know what to do next. Then you let it go in-play. Then you pray. A few times you get lucky. Then you blow your bank.

With the right mindset, you don't care about the single trade. You define your risk/reward. You enter a trade knowing that if it goes against you x ticks, you'll accept the loss. You trade with the same strategy 100-200 times. Then you assess what worked, what didn't. Then you tweak your strategy and repeat the process until you get to a point where you either ditch the strategy or you've found an edge: which is a strategy that wins more times than it loses. Over a series of trades.

But it all start with psychology, which means having realistic expectations.

[dt888]

In my opinion mindset is very important BUT it's no good just sitting there thinking I've got to get my mind and control right and then I will be a good trader.

You still need to know what you are doing and how the markets move and why they move that way

Then once you've got to grips with that then you can start to apply yourself to executing the trades correctly with the right timing and stakes, over and over again

I think it's probably at that stage that mindset is at its most important. If emotions and mindset is all over the place in the early days then it's probably the case that it's due to overstaking and trying to fast track the learning process

[Korattt]

Psychology is a massive component to trading, absolutely MAHOOSIVE, it's no use knowing what to do IF actually you do know what to do if your mind's not on the ball, some decisions demand split second knife edge execution, some moves will appear to play out but don't, if you're not thinking clearly you won't understand why, if you're manually trading at 20ms & you miss an entry then you've possibly missed the move, even at 200ms or a larger latency the move has possibly passed you by even by then, even Euler misses his entry sometimes..

[spreadbetting]

Thankfully excel seems to come preloaded with the winning mindset and pyschology as my bots seem to do OK day in, day out.

[ShaunWhite]

if you're manually trading at 20ms & you miss an entry then you've possibly missed the move, even at 200ms or a larger latency the move has possibly passed you by even by then

Jeez how fast are your reactions that it makes a difference to you?
viewtopic.php?f=18&t=12934&hilit=reaction+time+test
And bear in mind this test doesn't require any thinking about.

[ruthlessimon]

Fair points

If one's strategy in the market is the blade, then in my opinion psychology - a better word for this is actually mindset - is the hilt.

But one has to query the contradiction of "publicly sharing an edge". If an "edge" is lost/weakened if shared; then why is psychology advice shared so openly? Why is the creation of the blade so rare; if psychology is so important to make it work?

"Thankfully excel seems to come preloaded with the winning mindset and pyschology as my bots seem to do OK day in, day out."

This was what I meant by my post. A struggling trader would quickly be improved with one of spreadbetting's bots. Therefore, one would assume, learning how spreadbetting made the bot, would be of great use to the struggling trader. More so than spreadbetting linking them to Kahneman's latest study

"I realised that the perspective I have on the market is not sufficiently in-depth to satisfy my curiosity"

But having an 80/20 psychology split will not help with this, imo. it's a contradition Here's why. You have an edge, but it doesn't satisfy you. Learning more about psychology will tame the satisfaction. Learning more about edge, fills up the satisfaction (this is what I focus on). I see psychology as an "acceptance of mediocrity". I like being hungry, I like being unsatisfied with my progress, greed is good

Also, the idea that there is a 'right way' to learn the craft of trading seems rather reductive - you're displaying a cognitive bias here, whereby because something isn't important for you, it is dismissed as being irrelevant, when you can see from its prevalence amongst traders, in PW's case and many others, that it is very important.

Perhaps I worded it incorrectly but I personally would love to understand how the top top traders utilize their data etc. "Right way" because it fits my curiosity - becuase they are the best at their craft - those goals might not apply to others.

Performance activities are regularly touted as being 80/20 in terms of mindset/skill, and I believe trading to conform to this notion.

I was captain of my schools tennis team back in Y11. I had the option of whether I wanted to take it even further, but I had physical limitations - which I bluntly had to accept. No matter how good my mentality was, I knew I didn't have the height required to be competitive at the higher levels. I feel that trading is exactly the same; except learning more about the market is achievable - but not through reading Trading in the Zone for the umpteenth time

[ShaunWhite]

I see psychology as an "acceptance of mediocrity". I like being hungry, I like being unsatisfied with my progress, greed is good

This proof that a 'one size fits all' approach to psychology doesn't work. Like every other job, different people have different motivations and different goals. You need to find the teachings or the mentor that relate to your goals.

... that said, and here's where I disagree with myself, pursuit of excellence is equally valid if you want to make as much as possible or if you want to make enough in as short a time as possible. The only exception would be those who only want to make enough, and don't mind watching sport 247. Long hours for modest rewards.

You and I are probably exemplars of that, I want as much free time as I can get, you want as much money as you can get. Yet we both spend 100s of hours wrangling spreadsheets.

I loved that "Greed is good" guy, Gordon someone wasn't it?.

[napshnap]

Fair points

If one's strategy in the market is the blade, then in my opinion psychology - a better word for this is actually mindset - is the hilt.

But one has to query the contradiction of "publicly sharing an edge". If an "edge" is lost/weakened if shared; then why is psychology advice shared so openly? Why is the creation of the blade so rare; if psychology is so important to make it work?

"Thankfully excel seems to come preloaded with the winning mindset and pyschology as my bots seem to do OK day in, day out."

This was what I meant by my post. A struggling trader would quickly be improved with one of spreadbetting's bots. Therefore, one would assume, learning how spreadbetting made the bot, would be of great use to the struggling trader. More so than spreadbetting linking them to Kahneman's latest study

"I realised that the perspective I have on the market is not sufficiently in-depth to satisfy my curiosity"

But having an 80/20 psychology split will not help with this, imo. it's a contradition Here's why. You have an edge, but it doesn't satisfy you. Learning more about psychology will tame the satisfaction. Learning more about edge, fills up the satisfaction (this is what I focus on). I see psychology as an "acceptance of mediocrity". I like being hungry, I like being unsatisfied with my progress, greed is good

Also, the idea that there is a 'right way' to learn the craft of trading seems rather reductive - you're displaying a cognitive bias here, whereby because something isn't important for you, it is dismissed as being irrelevant, when you can see from its prevalence amongst traders, in PW's case and many others, that it is very important.

Perhaps I worded it incorrectly but I personally would love to understand how the top top traders utilize their data etc. "Right way" because it fits my curiosity - becuase they are the best at their craft - those goals might not apply to others.

Performance activities are regularly touted as being 80/20 in terms of mindset/skill, and I believe trading to conform to this notion.

I was captain of my schools tennis team back in Y11. I had the option of whether I wanted to take it even further, but I had physical limitations - which I bluntly had to accept. No matter how good my mentality was, I knew I didn't have the height required to be competitive at the higher levels. I feel that trading is exactly the same; except learning more about the market is achievable - but not through reading Trading in the Zone for the umpteenth time

Because it's polite way to say "fck off and mind your own buissnes" for ones and to sell "magic potions" for others. That's all.

A struggling trader would quickly be improved with one of spreadbetting's bots. Therefore, one would assume, learning how spreadbetting made the bot, would be of great use to the struggling trader.

Words of gold.

[arbitrage16]

Fair points

If one's strategy in the market is the blade, then in my opinion psychology - a better word for this is actually mindset - is the hilt.

But one has to query the contradiction of "publicly sharing an edge". If an "edge" is lost/weakened if shared; then why is psychology advice shared so openly? Why is the creation of the blade so rare; if psychology is so important to make it work?

So often these threads descend into a 'my way is better than yours'.

To continue with the metaphor, a hilt is just as useless without the blade as the blade without the hilt.

As I've said, your approach is reductive because you are closing yourself off to the idea that working on one's mindset is an edge, one of many edges, that can improve one's trading performance. It's so black and white for you, when improvement is so much more varied and nuanced than your discounting of psychology suggests.

My edge is built upon a fundamental understanding of how the market works. Someone figured it out, and told me. Built on top of that are a huge range of edges that are all predicated on putting myself into the best mindset to apply that understanding and derive maximum profit from it.

The difference here is that I have a growth mindset and, with respect sir, you appear to be of the fixed variety. I will explore any notion that is put to me that can possibly improve my performance. From my first moments in the market it was obvious to me that mindset was going to play a huge part because for the adage of 'simple but not easy' I think trading is the poster boy, and the reason this is so? It's all in the mind.

As I think Shaun said, finding the approach to mindset/psychology that best suits one's personality is the way to derive maximum benefit in that area. Predictive analytics, I have no idea about, but you can bet your ass that I'll be reading up on it this weekend. And where do I find out about these bots

[spreadbetting]

......................... The aim of this post is to invite members who are willing to impart pieces of knowledge, further thoughts or pose questions for other members to consider as we all seek to become students of the market.

My edge is built upon a fundamental understanding of how the market works. Someone figured it out, and told me. Built on top of that are a huge range of edges that are all predicated on putting myself into the best mindset to apply that understanding and derive maximum profit from it.

I guess someone needs to get the ball rolling

[ruthlessimon]

So often these threads descend into a 'my way is better than yours'.

I like to think that I'm one of the most open-minded people around; but I'm yet to be convinced that devoting 80% of my time to working on my psychology, will shed new knowledge about the market. Honestly, I bloody wish it was all psychology. Trading would be so fricken easy, I just turn up happy, end green, next day

As I've said, your approach is reductive because you are closing yourself off to the idea that working on one's mindset is an edge, one of many edges, that can improve one's trading performance. It's so black and white for you, when improvement is so much more varied and nuanced than your discounting of psychology suggests.

However, if the methodology doesn't match the trader's goals - then we hit a serious dilemma. Do we focus on psychology (remain stale, accept our current results), or do we focus on improving our models? And the way I read your OP, your goals don't match your trading - & I'm suggesting being devoted to psychology is the wrong focus - if you want further knowledge about the market.

My edge is built upon a fundamental understanding of how the market works. Built on top of that are a huge range of edges

Don't underestimate that. That puts you in a position to be one of most valued contributors on the forum. A thread devoted to how you came to that understanding would go a long way to helping a lot of traders.

Predictive analytics, I have no idea about, but you can bet your ass that I'll be reading up on it this weekend.

Ah now we're talking What you'll find though, is just how little information there is on the subject - in a trading context. If psychology is considered contrarian, then god knows what that makes predictive analytics!

[ruthlessimon]

it's invariably down to a lack of self-control. This is why so many ruin their hard work and good progress, by not being able to control their stakes, or control their disappointment when faced with a red screen

I've got the perfect video for this (https://www.youtube.com/watch?v=dc4q4lmGjFM)

Tiss I know deep down, you know there's more to this than psychology for a trader's failings

I started trading full time last summer and retired from trading nags at the beginning of this year. I had a few reasons for doing so but one of the major contributing factors was my belief that the markets were/would cannibalise themselves with over manipulation, something a few people have eluded to here.

I completely agree

I sometimes wonder if Betfair's Premium Charge wasn't all about the money. Perhaps they felt the markets were being ruined by big traders and this was one way to reign them in

I also agree with Andy with regards to sport betting. There's so many complicated and involved factors which determine Horse Racing prices. These prices can therefore fluctuate quickly & significantly. With sport betting the prices are more solid because the prices are pure opinions based on formguide & what the match means to each team or competitor. As a result of this, it's easier to push big money through without getting hit by ridiculous spikes.

If Andy is right and there's little activity on horses who are 4th favourite & below, this shows the traders are possibly outweighing punters now. This could explain why the turonver figures are struggling, I think there's growing number of traders like Lambretta & me who have deserted Horse Racing trading & gone to Sports instead

[LeTiss]

Wow, that was 8 years ago, where have you drummed that up from?

That's interesting, because it shows the markets have changed somewhat.

We now see big moves and spikes on football and sports that we didn't see so much in 2010.

I think this is due to a massive increase in automation, and when something starts to move, lots of bots just jump on board. Plus, I think we are seeing more distortion within markets, possibly Betfair themselves