Bad Assed Trader: I'm still on the pain theme today but promise things will get more upbeat by the end of my blog this time.
I've been reading a fascinating book recommended to me by more experienced traders and yet again lessons from reading/listening to professional traders coupled with my own trading efforts, have combined to point the way forward for me.
The book is "Market Wizards" by Jack D Schwager and is a set of interviews with renowned traders. It is unfortunately comforting to read of the pain that successful traders went through in their journey to finding and keeping their edge. I'm ashamed to say that I was particularly pleased to read about an experience one trader, Michael Marcus, suffered. He describes what he considered one of his worst mistakes:
"During the great soybean bull market, the one that went from $3.25 to nearly $12, I impulsively took my profits and got out of everything. I was trying to be fancy instead of staying with the trend. Ed Seykota (his colleague and role model) never would get out of anything unless the trend changed. So Ed was in, while I was out, and I watched in agony as soybeans went limit-up (maximum rise possible in a semi managed market) for twelve consecutive days. I was real competitive, and every day I would come into the office knowing he was in and I was out. I dreaded going to work, because I knew soybeans would be bid limit (highest price possible) again and I couldn't get in."
Jack then asks him "Was this experience of not being in a runaway market as aggravating as actually losing money?" and his reply resonated for me given my recent pain on missing the Euro shooting up:
"Yes, more so. It was so aggravating that one day I felt I couldn't take it anymore and I tried tranquilizers to dull the mental anguish...that was the low point in my trading career."
So it seems I'm completely normal then - the pain of missing out is commonly felt. Having read a few of the interviews it appears that when learning to trade we have to go through these various painful experiences and get over them a few times before we become, as Emmanuel tells me, "numb to it". Many people quit when feeling such anguish, a natural reaction to pain aversion, but not one that helps you to learn and improve your trading and develop your resilience as a trader.
Emmanuel urges me to feel pain when I don't follow my rules rather than when I lose a trade or miss out. He is right and I am trying to teach myself to do this but it is simply very hard. I have not done well on sticking to my rules and have now managed to work my way through the entire alphabet in attempts to take the string of 20 perfect trades which is my goal. I'm now on AA, and that was with (a) and (b) versions of V as I lost track a little at that point. W and Z were whisked through with unseemly haste on my part - I managed only one trade in each of those attempts, failing to stick to my rules both times.
I was embarrassed to report to Emmanuel at our coaching session on Wednesday that I was still failing to follow my rules and he challenged me to think of a decent punishment I must take when I break them. One that will really put me off breaking the rules.
Having relayed my failings to my younger daughter Ruby she has now taken me in hand. She has shown amazing discipline in getting on with her GCSE revision, in developing and sustaining her blog http://rubyccino.blogspot.com and in pursuing her goals and I am put to shame that I can't follow my own rules to succeed at trading. Between us we have devised a cunning plan designed to keep me on the straight and narrow. She will require reports of my adherence to the rules every evening and if I have failed then I am denied any wine with dinner that night.
This may seem a bit pathetic but is a big deal to me - I love my glass or two of wine every night. It was actually the first punishment I thought of when I started trading and knew I would have to find a way to make myself follow the rules. But I was too weak willed to inflict it on myself. Now Ruby will be monitoring me (the humiliation! Get over it girl - it's your own fault) and we both know that I can't lie, it's just not me.
It is already starting to work. We agreed it yesterday morning and although I have put on three trades since they have all followed my rules. The first one, on Euro yesterday, gave me 3%, the next two have lost me 1.65% in total.
Following your rules is essential to developing the confidence you need to make it in trading and to help overcome those awful feelings of pain when we lose or miss out. As Richard Dennis, another trader in the book says,
"It is totally counterproductive to get wrapped up in the results...being emotionally deflated would mean lacking confidence in what I am doing."
The interesting thing with trading is that although you need to develop that confidence it is even more important not to become over confident, which I think deep down is my own problem - my first mentor in the health service once commented that I wanted to run before I could walk (he later denied saying it when I reminded him but it hit the spot for me at the time - and I still remember it 20 years on). Running before you can walk in trading leads to inevitable, inescapable falls. As Paul Tudor-Jones, another trader in the book says:
"Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead."
A tricky business indeed, but fascinating. Gradually I feel I am unpeeling my own psychology and spearing each wayward habit, defense mechanism and inclination. Once I have spotted those gremlins and identified them it is more difficult for them to subconsciously control me. Last time I realised I was not working through my pain but either masking it or planning my way out of it. This time it's a different gremlin....
I've been reading a fascinating book recommended to me by more experienced traders and yet again lessons from reading/listening to professional traders coupled with my own trading efforts, have combined to point the way forward for me.
The book is "Market Wizards" by Jack D Schwager and is a set of interviews with renowned traders. It is unfortunately comforting to read of the pain that successful traders went through in their journey to finding and keeping their edge. I'm ashamed to say that I was particularly pleased to read about an experience one trader, Michael Marcus, suffered. He describes what he considered one of his worst mistakes:
"During the great soybean bull market, the one that went from $3.25 to nearly $12, I impulsively took my profits and got out of everything. I was trying to be fancy instead of staying with the trend. Ed Seykota (his colleague and role model) never would get out of anything unless the trend changed. So Ed was in, while I was out, and I watched in agony as soybeans went limit-up (maximum rise possible in a semi managed market) for twelve consecutive days. I was real competitive, and every day I would come into the office knowing he was in and I was out. I dreaded going to work, because I knew soybeans would be bid limit (highest price possible) again and I couldn't get in."
Jack then asks him "Was this experience of not being in a runaway market as aggravating as actually losing money?" and his reply resonated for me given my recent pain on missing the Euro shooting up:
"Yes, more so. It was so aggravating that one day I felt I couldn't take it anymore and I tried tranquilizers to dull the mental anguish...that was the low point in my trading career."
So it seems I'm completely normal then - the pain of missing out is commonly felt. Having read a few of the interviews it appears that when learning to trade we have to go through these various painful experiences and get over them a few times before we become, as Emmanuel tells me, "numb to it". Many people quit when feeling such anguish, a natural reaction to pain aversion, but not one that helps you to learn and improve your trading and develop your resilience as a trader.
Emmanuel urges me to feel pain when I don't follow my rules rather than when I lose a trade or miss out. He is right and I am trying to teach myself to do this but it is simply very hard. I have not done well on sticking to my rules and have now managed to work my way through the entire alphabet in attempts to take the string of 20 perfect trades which is my goal. I'm now on AA, and that was with (a) and (b) versions of V as I lost track a little at that point. W and Z were whisked through with unseemly haste on my part - I managed only one trade in each of those attempts, failing to stick to my rules both times.
I was embarrassed to report to Emmanuel at our coaching session on Wednesday that I was still failing to follow my rules and he challenged me to think of a decent punishment I must take when I break them. One that will really put me off breaking the rules.
Having relayed my failings to my younger daughter Ruby she has now taken me in hand. She has shown amazing discipline in getting on with her GCSE revision, in developing and sustaining her blog http://rubyccino.blogspot.com and in pursuing her goals and I am put to shame that I can't follow my own rules to succeed at trading. Between us we have devised a cunning plan designed to keep me on the straight and narrow. She will require reports of my adherence to the rules every evening and if I have failed then I am denied any wine with dinner that night.
This may seem a bit pathetic but is a big deal to me - I love my glass or two of wine every night. It was actually the first punishment I thought of when I started trading and knew I would have to find a way to make myself follow the rules. But I was too weak willed to inflict it on myself. Now Ruby will be monitoring me (the humiliation! Get over it girl - it's your own fault) and we both know that I can't lie, it's just not me.
It is already starting to work. We agreed it yesterday morning and although I have put on three trades since they have all followed my rules. The first one, on Euro yesterday, gave me 3%, the next two have lost me 1.65% in total.
Following your rules is essential to developing the confidence you need to make it in trading and to help overcome those awful feelings of pain when we lose or miss out. As Richard Dennis, another trader in the book says,
"It is totally counterproductive to get wrapped up in the results...being emotionally deflated would mean lacking confidence in what I am doing."
The interesting thing with trading is that although you need to develop that confidence it is even more important not to become over confident, which I think deep down is my own problem - my first mentor in the health service once commented that I wanted to run before I could walk (he later denied saying it when I reminded him but it hit the spot for me at the time - and I still remember it 20 years on). Running before you can walk in trading leads to inevitable, inescapable falls. As Paul Tudor-Jones, another trader in the book says:
"Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead."
A tricky business indeed, but fascinating. Gradually I feel I am unpeeling my own psychology and spearing each wayward habit, defense mechanism and inclination. Once I have spotted those gremlins and identified them it is more difficult for them to subconsciously control me. Last time I realised I was not working through my pain but either masking it or planning my way out of it. This time it's a different gremlin....
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| Latest gremlin identified: The urge to run before I can walk - which leads to overconfidence and breaking my rules |
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