Bad Assed Trader: As part of my continual search for the holy grail of trading improvement I am homing in on detailed aspects of my psyche by paying great attention to what I am feeling and thinking just before I take those of my trades that do not work out well.
The Euro Yen (EUR JPY) seems to be my nemesis at the moment, or should I say my tutor. It recently gave me another learning opportunity. I had thought I had identified my fears and recognised them but I was still operating with a blind spot in relation to the fear of missing out.
A couple of weeks ago I had been watching many of the currency pairs retracing back against their trends. They were mainly in down trends due to dollar strength increasing, but they had all stretched themselves and were being pulled back to the 50 day moving average in the manner of an elastic band pinging back or, as my coach Emmanuel puts it, a lung breathing in and out.
So, as a trader, you watch the price going back up and you wait for a sign that it will turn and head back down. My rule is that I need cyclicity to be on my side, with price bouncing off a strong level of support or resistance and price action indicating that price is turning by showing a high or low test bar, a doji, train tracks or equivalent - all shown by the nature and shape of the bars on the chart.
So Euro Yen was retracing and I was watching and waiting. Patiently, or so I thought. I subsequently realised that the more time passed and the more price retraced the more I felt a building up of pressure. It was the same with many other currency pairs, they were retracing and then they were retracing more.
In fact, they started to look as though they might have actually turned and formed an uptrend as price was making a considerably higher high.
As I later realised, the pressure building up turned into a feeling that I had missed noticing the turn in the trend. Then I started to feel - in a deep down sort of way rather than a blatantly apparent way - a similar feeling to that which you get as a child at school when someone's come into the classroom with sweets to share and everyone else has spotted the goodies and got up and helped themselves and because you were concentrating so hard on your work you didn't notice until it was too late and all the sweets had gone. Awww.
With the benefit of hindsight I can see that this feeling influenced my actions. I took a long trade with EUR JPY just one step too soon because the pressure had been mounting. As a result price dropped to a dozen points below my stop loss taking me out and then chuntered its way up through my target.
Well I'm not gnashing my teeth over it as it provided me with a really helpful lesson. As it was I was having a day's training in coaching that day as part of the diploma in executive coaching I'm doing. So after losing my trade I had the benefit of some free coaching from another trainee coach and took this issue into the coaching arena.
It was fascinating to explore in detail the emotions that were involved in the run up to me taking that trade. The other trainee coach and I put a magnifying glass onto my feelings about missing out and this has helped me to recognise those feelings of pressure which are so dangerous to traders.
No-one likes to feel they are missing out on something everyone else is benefiting from. It feels painful and lonely. We all have that small child inside still pressing us to join the crowd. You can see the advantages to children to follow the herd because they haven't developed sufficient judgement to know for themselves when something beneficial or harmful has appeared so they just tag along. We are undoubtedly hard wired to do this for our whole lives.
As a trader I have to conquer that emotional pressure. I have to anticipate that it will come, spot it coming and find a way to counteract it because successful traders absolutely do not follow the herd. It's no good me denying I have that inclination to some degree: we all have it. Good traders have found ways to prevent it from influencing their trading behaviour.
Youtube has an amusing video from Candid Camera showing how powerful herd behaviour can be on unsuspecting victims:
http://www.youtube.com/watch?v=fQI8pZJiMe0
The Euro Yen (EUR JPY) seems to be my nemesis at the moment, or should I say my tutor. It recently gave me another learning opportunity. I had thought I had identified my fears and recognised them but I was still operating with a blind spot in relation to the fear of missing out.
A couple of weeks ago I had been watching many of the currency pairs retracing back against their trends. They were mainly in down trends due to dollar strength increasing, but they had all stretched themselves and were being pulled back to the 50 day moving average in the manner of an elastic band pinging back or, as my coach Emmanuel puts it, a lung breathing in and out.
So, as a trader, you watch the price going back up and you wait for a sign that it will turn and head back down. My rule is that I need cyclicity to be on my side, with price bouncing off a strong level of support or resistance and price action indicating that price is turning by showing a high or low test bar, a doji, train tracks or equivalent - all shown by the nature and shape of the bars on the chart.
So Euro Yen was retracing and I was watching and waiting. Patiently, or so I thought. I subsequently realised that the more time passed and the more price retraced the more I felt a building up of pressure. It was the same with many other currency pairs, they were retracing and then they were retracing more.
In fact, they started to look as though they might have actually turned and formed an uptrend as price was making a considerably higher high.
As I later realised, the pressure building up turned into a feeling that I had missed noticing the turn in the trend. Then I started to feel - in a deep down sort of way rather than a blatantly apparent way - a similar feeling to that which you get as a child at school when someone's come into the classroom with sweets to share and everyone else has spotted the goodies and got up and helped themselves and because you were concentrating so hard on your work you didn't notice until it was too late and all the sweets had gone. Awww.
With the benefit of hindsight I can see that this feeling influenced my actions. I took a long trade with EUR JPY just one step too soon because the pressure had been mounting. As a result price dropped to a dozen points below my stop loss taking me out and then chuntered its way up through my target.
Well I'm not gnashing my teeth over it as it provided me with a really helpful lesson. As it was I was having a day's training in coaching that day as part of the diploma in executive coaching I'm doing. So after losing my trade I had the benefit of some free coaching from another trainee coach and took this issue into the coaching arena.
It was fascinating to explore in detail the emotions that were involved in the run up to me taking that trade. The other trainee coach and I put a magnifying glass onto my feelings about missing out and this has helped me to recognise those feelings of pressure which are so dangerous to traders.
No-one likes to feel they are missing out on something everyone else is benefiting from. It feels painful and lonely. We all have that small child inside still pressing us to join the crowd. You can see the advantages to children to follow the herd because they haven't developed sufficient judgement to know for themselves when something beneficial or harmful has appeared so they just tag along. We are undoubtedly hard wired to do this for our whole lives.
As a trader I have to conquer that emotional pressure. I have to anticipate that it will come, spot it coming and find a way to counteract it because successful traders absolutely do not follow the herd. It's no good me denying I have that inclination to some degree: we all have it. Good traders have found ways to prevent it from influencing their trading behaviour.
Youtube has an amusing video from Candid Camera showing how powerful herd behaviour can be on unsuspecting victims:
http://www.youtube.com/watch?v=fQI8pZJiMe0
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| Resisting the urge for sheep like behaviour |
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