FEAR AND GREED?

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spider

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Wednesday, April 06, 2005 - 07:12 pm:

FEAR AND GREED? NO. FEAR AND FEAR.
When you have read as many trading books as I have, you don’t often get a “wow” experience when reading a new book.
But that is exactly what happened recently while reading Mark Douglas’s “The disciplined Trader”.
Like just about everyone else, I recognized the twin enemies of ‘Fear’ and ‘Greed’, and I have battled against their influence ever since I started trading.
Then along comes Mark, and he looks at it this way.
He sees them both as FEAR!
FEAR of missing out, and FEAR of loosing money!
It’s difficult to argue with that, he’s spot on.
So the devil only has one face, fear.
Anyone who has been trading for a while will understand this.

spider

dovetree

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Wednesday, April 06, 2005 - 09:07 pm:

Spider,
I suggest you read his last book "Trading in the Zone". Like the earlier "disciplined trader" it is very good and has some further good methods for tackling the most important trading indicator, ones head.

Cheers

zoso

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Thursday, April 07, 2005 - 12:28 am:

Nice to see you back on top form Spider.

I was recently re-reading a couple of pages from the abovementioned ‘Bible’ and I came across the following few paragraphs. I’ll try and summarize – don’t know much about copyright laws……………….

ALL TRADERS GIVE THEMSELVES EXACTLY WHAT THEY DESERVE!

Trading is an exercise in accumulating money. Once we’ve figured out the mechanics of trading, who else or what else could be responsible for what we end up with? If traders were to chart their equity, the chart would mirror what they think of themselves on a day-to-day, month-to-month basis. These charts would resemble the typical bar or point and figure charts of the markets that we look at every day. Complete with support and resistance levels, rallies, retracements, consolidation zones and sell-offs, these patterns would reflect the trader’s state of mind, just as the markets themselves reflect the collective state of mind of all its participants.
Some of the big brokerage firms that manage large funds maintain charts on the CTAs that they employ to trade their money under management. They will decide the amount of equity available for each CTA according to the patterns on their respective charts. In other words, once chart history has been built up it isn’t too difficult to determine when someone is about to take a big hit because of the psychological forces building inside of him/her, just as the collective forces of the market build before a big move.
As private traders if we want to give ourselves more and more money out of the markets, we have to learn how to value ourselves more and more so that we believe we deserve what we want and deserve what we get.

Interesting eh?

Happy Trading,

Paul.

chart_rider

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Thursday, April 07, 2005 - 08:51 pm:

Charting ones emotions, now there's a novel idea indeed, I think I'll give it a try. Maybe I'll publish the chart on the web - CRE IPO 'Chart Rider Emotions' - a link will enable members of the public to open a trading account via offshore banking and trade options on CRE.
Now...........where did I put that travel magazine with special deals in Spain...........

cc3

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Wednesday, April 13, 2005 - 11:19 pm:

Spider
you have challenged me to get over a fear and no longer stay in the background ( I guess it is fear of appearing stupid which i think we all are at the start of our trading career)
I appreciate hearing your (and Zoso)review of mark douglas book I have ordered both of his books and am impatiently waiting it sound really good
FEAR & FAITH, faith is the opposite to fear. So can fear destroy our faith in ourselves our faith in our trading plan?
I think I will go & try to post a chart in the short candidates (new challenge bit scary)
See you
Chris

spider

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Thursday, April 14, 2005 - 05:37 pm:

Hi Chris,
good to see you emerge.
Go directly to your dictionary and find the page with the word 'fear' on it.
Tear out that page and throw it away.
You don't need that word any more.

I'm sure you will enjoy Mark Douglas's book.
This book is about what goes on between our ears (which, btw is the same place that trading occurs).

People think that trading is them against the market, I believe that it is the trader verses himself (or herself).

I know you will have the confidence to post often.

There is no such thing as a dumb question here.
Occasionally you might cop a bit from some of our arrogant friends, but pay them no mind.
"If you don't ask you don't get".

'A little bit scary' can be good for you.

Trade well and prosper.
spider.

smallworld

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Friday, April 22, 2005 - 12:58 am:

Another way to look at fear and greed.
PRIDE and REGRETS:
I took my notebook with me to lunch today because I wanted to write down my thoughts. I discovered that I totally live inside my need to be "non-frivolous". I feel like getting every bit in a trade because I dont want to deal with the fear of being deprived. Whatever action I take, I end up with regrets because I cannot be "perfect". Regrets like I didnt cover PMP at 1.20 or sold NCM at 15.35. Isnt what I say childish? Of course it is. My pride tells me to hide it, pretending I fail, or I cant trade, rather than dealing with my fear and my ego. You see, thats my payoff. but the cost is that it inhibits my trading, I put doubts in myself and my systems, and I wear my past in front of me. And I do it so often that I'm not even aware of it.
Now that I'm aware of it, evey time when this happen again, I can make a choice either to make my emotions my master, or fulfill my promise to myself to work my plan like its meant to be done.
SW

(Message edited by smallworld on April 22, 2005)

kate

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Friday, April 22, 2005 - 09:35 am:

Hi Smallworld,
I'm new to the forum but have been trading on and off for the last 3 years. Your post struck a chord in me as I too feel like I'm never going to be a really successful trader. I make very small amounts or lose small amounts and can't seem to make any progress from there. In one of the previous posts it was mentioned that the " market gives you what you think you deserve" and in my case I think its a very valid point. I'm going back to reread the "The Disciplined trader" again and then I'm going to sit and think about it although I think it will take me more than a lunch break!!
The other thing you mentioned was your plan, I have one as well(which I follow - now) but always question its validity and wonder whether its "right". When you never see plans written down how do you know if its reasonable?

smallworld

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Friday, April 22, 2005 - 06:33 pm:

Welcome Kate and thank you for sharing your insights.
Like spider said a lot of our emotions came from our childhood and the way we were taught. Feelings serves us well often and other times they keep us company, but there are many times that we need to be couragous to go beyond our feelings. If you have the will to become a successful trader, then you will be one. Muhammad Ali once said "Champions aren't made in gyms. Champions are made from something they have deep inside them; a desire, a dream, a vision. They have to have last-minute stamina, they have to be a little faster, they have to have the skill and the will. But the will must be stronger than the skill." A will is something much stronger than our feelings. Our feelings like those you said "I cant trade". is often not there to stop us, but to inform us. In my case, my feelings inform me that I wasn't willing to acknowledge my pride and my fear. You need to look at what they are trying to tell you.
There is also something I want to say about plans. Our trading plan often talks about our setups (ie, time frame, entry signals, exit, and other market conditions and/or indicators) and our money management. If you are not sure if your setups is profitable or not, ask questions on this forum and i'm sure generous traders on this forum will be more than willing to share.
Once you're happy with this plan, then the real work (and real planning) begins. The most important element is to work you plan. What you do day in and day out to fulfill your plan and that means
1. do what is meant to be done
2. do what you say you would do
3. do what others would expect you to do if they entrust you with their money
4. do it completely
The most important part of this doing is to master one single setup, whether its fibanacci work, or RSI and MA. Many people become collectors of indicators instead of master of their own tools. Dont do that or you'll be giving your money away. Mastering your own setup is a daily/routine exercises and training like a professional boxer with his boxing - and this is where the real planning begins - in a diary - to juggle between all that is required of you in daily living and still fulfull your plan like you're meant to. There will be many a time that you feel you're not cut out for this - A big loss, distraction, other commitments. And I will tell myself this - I'm getting closer to my mastery.
good luck and be prosperous.
SW

kate

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Saturday, April 23, 2005 - 02:40 pm:

Thanks for the advice, smallworld. I have been thinking about what you said and I think my biggest problem is not having complete confidence in my plan. I keep it really simple and only buy stocks in an uptrend with good volume and that are above the 34day ema. I think I fall down when it comes to the trailing stop loss, I use 7% throughout the trade (and as an exit strategy) and I think I end up giving back too much of the profit I make. I ended up using 7% because it was less subjective than support/resistance, Weinstein stops etc etc.

I still have problems with fear, mostly, of not being successful and realise that it a continual struggle to to overcome. I wonder if any traders completely overcome it (in whatever form it takes) or do they just manage it. It's a very strong emotion, if not instinct, that has been keeping human race alive for however long we've been around!

P.S If I want to talk about plans which section do I post in?

suemac

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Saturday, April 23, 2005 - 04:22 pm:

Kate, Perhaps try "Trading - Systems", next sector down on the main board.

Good luck!

Susan

Behold the turtle; he makes no progress unless he sticks his neck out!

smallworld

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Saturday, April 23, 2005 - 05:07 pm:

Agree with Suemac, trading system is a good place to post. even though I'm no expert on MAs I'll give it a go to say something there.

Kate, What would it be like if fear isnt a struggle anymore?

david_louisson

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Saturday, April 23, 2005 - 05:43 pm:

Hi Kate

Thanks for sharing on this forum. I'm sure that many have had similar experiences.

My ideas tend to get a mixed reception here, but I will stick my neck out once again. Please feel welcome to take whatever makes some kind of sense.

I think it's important that you determine whether your uncertainty lies in any lack of soundness of your system of entries and exits, or in your ability to trade it (i.e. the courage to "pull the trigger" when necessary, and the patience to hold fire when necessary).

The more I learn, I find myself becoming more convinced that TA is an "art" rather than a "science", but I nonetheless still believe that (apart from paper trading) back-testing is the only objective way of proving the validity of an entry/exit system. All TA makes the assumption that past behavior is, in some way, more likely to repeat itself in the immediate future, than not. If that is so, then there remains merit in a mathematical approach; if not, then price action is random, in which case TA is a vain exercise.

What I suggest is that you back-test your system of entries and exits, and study not just the summarized results (win/loss ratio, profitability, etc), but the actual trades themselves. Look at the losing trades, and consider adjusting your parameters to reduce them, and then see what effect this has on the winning trades. And start asking questions: Are the losing trades of a statistically significant number that some patterns can be detected? For example, are you entering or exiting positions too early (= higher throughput, and higher return if successful, but lower probability of success), or too late (lower throughput, average return per trade; higher probability)? Missing significant trends (requiring excessive confirmation for "setup" criteria, or signals that are way too late)? Are you setting your stops too close (getting stopped out of potential winners prematurely, too often), or too distant (giving back too much of your hard-earned profit on losing trades)? Is your strategy working for some stocks, but not others? In a trending, or ranging market? Or have you just been unlucky (need a higher transaction frequency, to allow the positive expectancy to shine through)? If you assemble enough data, you should be able to discern patterns from the outcomes.

Confidence is all about getting a "feel" for what's both more likely, and more unlikely, to happen. An analysis along the lines I've described can help you gain an idea as t