Wednesday, April 30, 2008

Too much energy in trading gains to sustain it

I have one interesting psychological thought on my mind lately. I watch my trading and I just realize sometimes that there is more to gain from the trade than I do. But somehow when I shot for more it's wrong move and when I don't go for it there is ten times more profit left on the table. I have theory about it all. I believe that I can't stand too much energy. Big profits are too big energy for me. I somehow can conduct certain amount of energy and more is bad for me. It's like electrical energy and carrying capacity of conductor.
If I'm in the trade that later on will go big in my way I always find the way to talk myself out of it and took smaller profit even when there is no strong reason. Maybe it's just the human nature, but maybe as my theory goes it's just too big energy to handle it out. I'm not talking about financial amount, it's just some kind of energy that is conducted or not.

I don't know much about this. Maybe it's just rambling. I think it's like the thing that many lottery winners in few years become bankrupt. Maybe it's lack of financial knowledge what to do with the winnings, maybe because it's just to much of some kind of energy for them to sustain it.
So I chose to trade small and take small winners and don't dwell about what's left on the table. If I go through my trading for last month and put t/p of let's say 100 pips on all my trades and keep the s/l level and bring it to b/e if trade worked in the beginning I would have few big runs that combined surpass my monthly winning in big way. I don't know maybe I'm just imagining things in hindsight. But I do have that feeling that too much of energy for me is just too much. So I got to work with my capacity with the knowledge that even trying to overshot it can be bad for me. So I rather add small gains one by one, day by day.

Does any one have some idea or similar experience or this is just gibberish?


Chrisnyork said...

Yeah I can relate to this. If you read some Mark Douglas he talks about this, sort of. The energy I think is too much thought about gains in general, like when trading seems like a true game to me, maybe I don't even think about profits, and then I perform better. You are right I think about that lottery analogy, if in their minds they never deserved these gains (and so never got the money before) they will lose the money they win. Or, they could be too ignorant to realize they should get professional guidance with all that money. You can not know something, see some problems, then decide to get some advice. Or be stubborn and blow out.

This is similar to me on the psychology front to a phenomenon my trading buddy and I noticed. We can make huge gains in battling back from being down for the day a lot, but, if we are starting from scratch we never make these large gains. So we can see that a certain type of performance is only unleashed under some circumstances, yet this potential is always there.

I think a part of this is the fiendish nature of trading, that everything against your instinct is what makes money, because no one is in this "zone" trading, they are in the instinct zone giving the money up to the ones on the right side.

Also, I find I trade a certain reckless way when I am in the "hole" and I sort of say "f it I don't care". This way of trading AT TIMES can be good. So basically, unfortunately, I have a tendency to over trade when I am performing badly, but when things are going my way I will be extra cautious. This is the reverse of what I should do. At least this is clear, and I can try to deal with this.

Also, all this doesn't happen to you trading until you actually have some stuff that can give some consistent gains, that's the good news.

FX said...

Thanks on comment and on reading my blog :)

That thing with trading a lot better when you are down is totally crazy and true. Sometimes in those moments it's all clear to me. I feel like in the zone and can do what ever I want. It's not some extra courage but how things should naturally be. On the other hand in everyday trading there isn't that feeling any more.
Trading is 100% psychology when you pass the basic level of market understanding and language.


I agree with Chrisnyork, its is remarkable that when I have a down day I also can make it up, but rarely have a day where I am great out of the box... perhaps our brains are not warmed up when we first start out the day and they gradually get more in tune with the market? And I totally agree, trading is 100% mental once you get past the rest.