Randomly blogging stuff..
Still here, Been a little busy because of work/process of moving from Japan back to the US/Illinois. I've been really reflecting hard on the main problems i've been having. Most of my losses are because of my inconsistency in being controlling my emotions and not the strategy/market.
GREED - desire to possess wealth, goods, or objects of abstract value with the intention to keep it for one's self, far beyond the dictates of basic survival and comfort. It is applied to a markedly high desire for and pursuit of wealth, status, and power.
Symptoms of Greed (credit to Matt Owens)
Greed will make you:
- Set unrealistic price targets
(Guilty- I've had alot of progress in the past few months in setting realistic targets, taking profits along the way also helps me lock in profits and not lose money because of this. This is still a prevailing problem for me that i need to work on. Mostly because my hypothesis is usually incomplete prior to entering a trade. Having a complete hypothesis with the focus of actually quantifying my risk is a step to helping me set a realistic price target)
- Not realize profits because of them
(Lock in profits along the way completely kills this adverse effect)
- Dwell on how much more you can make if you stay in a trade
(Guilty in the past- Locking in profits helps negate the bad things this can do)
- Set price targets for the trade based on how much you fantasize about making
(SUPER Guilty- this is a very big reason why I currently have a hard time in setting a realistic price target. I do find myself still thinking about wanting to make at least a thousand in a trade even though I know logically that it's pushing it and very very unlikely that the stock will reach that point. I will then start to hold on longer than I should and "Hope" that the stock reaches that point, which most likely won't and reverse in trend causing me to either lose my profits or even worse puts me into a loss.)
- Ignore rules and risk management practices
(I've been good with ignoring rules so far cept the last trade where i traded without having any sleep, but that wasn't because of greed. I technically can't ignore risk management practices if I don't have any hahaha... I need to work on really quantifying my risk prior to the trade and ways to minimize it. I've been very very good at stopping out at my mental stop though. Rule #1 Cut your losses !! thanks to Tim Sykes for always drilling... I literally think he says that more than he breathes in a day.
- Get Rich Quick Mentality-gamble
(Super guilty- This feeling is slowly dying out as I get more and more used to locking in profits along the way. It's slowly making sense to me that It's the grind that'll make me rich and not the swinging for the fences mentality.)
- Cause You To Lose All Of Your Money Int The Market
(Not there and will take all appropriate steps necessary to not reach this event)
FEAR - a distressing emotion aroused by impeding danger, evil, pain, whether the threat is real or imagined.
(My current thoughts on fear.. I shouldn't try to be fearless, Fear is a natural instinct for survival. However, realizing whether the fear is irrational or rational is crucial in trading. Having no fear in life is horrible ex: I have a fear of jumping off a ledge of a high cliff/skyscraper with no parachute/means of getting to the ground safely or without dying. Fear in this case keeps me alive duh... But in a scenario where I have a fear of dogs due to a negative past experience, but there's a cute/harmless/no history of aggression/cup poodle dog in front of me that wants to play.. The fear of dogs in this case, to others, is completely irrational and because of it will cost me the experience of having fun/positive experience with the dog that's currently in front of me.)
Symptoms of Fear - (credit to Matt Owens)
Fear will make you
- Sell in a panic regardless of price
(Not felt yet)
- Never want to take a calculated risk
(HUGE, affected me for weeks during March/April hiatus for 7-level CDCs.. Still affects me atm but having a quantified risk/complete hypothesis as well as ACCEPTING RISK/Accepting that each trade is unique is slowly easing me past this emotion).
- Paralysis of analysis
(I've felt it before but not to the point where it's affected my trading as of yet, will monitor closely for now.)
- Not enter quality setup because of former losing trades
(Felt this but have process in place to slowly put myself past this emotion/learning to accept risk and that each trade is unique)
- Chase a stock- FOMO
(This greatly affects me so much that that i've actually dedicated a section for it,.. Stupid shit...)
- Ignore rules and risk management practices
(Same as greed's comment)
FOMO - Fear Of Missing Out
I do follow the market/papertrade to keep in touch of how the overall market/strategy is doing as well as really, really killing FOMO... I've watched so many trades where I would like to play but i intentionally miss them in order to experience FOMO to get myself in a mindset/emotional state where It's OK to miss trades. FOMO still affects me where i'd consider chasing a trade even though I KNOW not to. I will continue paper trading until I am at the point where I can ignore FOMO when I do miss my entry point.
** Funny how i just ran across a slide from Matt O.- "Traders need to understand what fear is = simply a natural reaction to what they perceive as a threat (in this case perhaps to their profit or money-making potential). Quantifying the fear might help, Or that they may be able to better deal with fear by pondering what they are afraid of, and why they are afraid of it. Also, by pondering this issue ahead of time and knowing how they may instinctively react to or perceive certain things, a trader can hope to isolate and identify those feelings during a trading session and then try to focus on moving past the emotion." This is EXACTLY what i'm doing with FOMO...
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