Dealing with Disappointment

Last week a good friend of mine was really down in the dumps. Superb sportsman with great passion for any activity that involves some form of competition. But sports like so many other aspects of our lives comes with it's ups and downs and this particular moment he had experienced a down moment. He had trained hard and focused on obtaining his goal of being include in a team but was unable to make the cut.

You can imagine the level of disappointment he felt, so much so he started looking at life in a rather negative light.  There's really not much else to say to someone other than you're sorry for their let down. You can never truly appreciate what they feeling unless you are placed in the same situation. But this got me thinking about trading and the many failures we face on a daily basis dealing with so many issues which remain unresolved.

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I can recall the first trade I won and how elated I was with myself about pulling off a great feat but then came the losses and my level of morale took a dip which was inproportionational to the elated feelings of a win. Bear in mind that with absolutely no experience of trading psychology the basic functions of the brain take over. If you were observant enough you would find how the negativity begins to overshadow your sense of logic and suddenly fear creeps in making you prone to executing your plan the way it was intended. 

There was a constant need to win every trade and the second I did immediately this sense of being capable of trading overcame my rationality. Then the loss which entailed me becoming in the most foulest mood and feelings of a "third force" beating me. I couldn't stand it nor understand it which ultimately lead me into disappointment. Why was I losing? 

Trading and life are intertwined and much of what we do in our trading lives mimics real situations we deal with in our own life. Everyday is not the same as yesterday and there are absolutely no guarantees.  Hard work is rewarded sometimes not always and we have to have the drive and passion to produce a consistent approach so as to enable us to keep on track.  

Here's a few things I've noted over my journey so far and how I approach Winning and Losing:

1. The market is in charge and it decides whether the move happens or not. If you sitting at your screen and feeling frustrated about the lack of or vociferous movements its wise to remember that the market is solely responsible for these and theres nothing you can do besides trade your plan and plan your trade.  
2. You are going to lose, let me repeat that, you are going to lose. Trading is about probabilities and there are times when the conditions will not reward your strategy. This is why it is critical you have your risk management under control so that when those moments arrive you aren't scrambling around for opinions on whether to rid yourself of the position or simply hold it. 
3. Losing a trade is not always a reflection of your ability as a trader. Just because you got stopped out only to see the price recover from that level towards your target doesn't mean you are an incapable trader, it simply means this time you got it wrong and must move forward. 
4. Losses often signal change of conditions. Most often the condition which has changed is seen after the fact has happened however if you are aware of responses of your strategies to market condition you can pick up a change of condition. 
5. Social media is full of traders who consistently publish winning trades but never the losing ones. Beware of these traders. They are distorting the picture and creating a desire from new traders to match those expectations which are false. A true trader is not fearful of publishing losing trades as they are his greatest source of learning. 
6. Don't let the fact of a drawdown increase your need to find opportunity. Be patient with the market and opportunities will present themselves.  

 If you would like to contact me you can through my email atcadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR

How Do You See the Market?

How honest are you with yourself? Have you ever asked yourself the question and wondered how truthfully would you answer? My brother came to me the other day with an assignment which he had to write about the topic of bias. Before I thought about it I told him its a question of skewing the view so that it fits your likening.

He still grappled with the concept around it so I tried to explain it visually and tried to think of a way that would be easier to understand. I stood in front of an open door, no distractions in my eyes pathway, I could see the whole picture. The neighbours car, the plant pots on the side, the pavement in front of me and all the other little details. Then I told him to stand at the side of the door so that he only allowed one eye to see out the door while the other was staring at the wall inside.

"What do you see?" I asked, "I see the pavement and the plant pot" he said. But when I asked him if he could tell me that he saw the neighbours car he said he couldn't. "So if I told you that there's a car in front of me and you tell me that I'm talking rubbish what would that be?" 

Obviously he would be bias because his view is being blocked by the wall, he doesn't have complete sight of everything.

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Trading, like standing in front of a door, requires you to be unbiased even if it means being critical of your trading performance. The market is a self reflecting entity which draws you in based on your bad habits and throws you out on your flaws.  The problem with human beings is we can't face the truth when it becomes reality. We don't want to show our weaknesses to others in the fear of being tarnished as unsuitable or incapable.

The problem with this notion is that it often leads to a resistance against yourself, an inner conflict between what it happening and what you believe is factual. If we are unable to close the gap between these issues we ultimately lose sight of where it is we are going wrong and continue to commit errors without any real progression.

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Traders often fall into this trap depending on which side of the equation they stand on. Let's look at some examples:

Let's assume we have two fictional traders namely Trader A and Trader B

Trader A is a real maverick of a trader, likes to boast about his successes yet very silent in his defeats. When the market is running his in his element and every trade he touches turns to gold, however when the market starts to turn in the opposing direction his luck begins to run out and everything his made is simply given back.  When it comes to taking the responsibility for these mistakes, the market is blamed.

Trader B on the other hand is a bit more cautious in his approach, he often worries about when the market will turn in the opposing direction and constantly monitors it just for that signal. When the time does eventually come, if he is on the wrong side of the trade he often blames himself for being negligent. This dents his confidence which in turn makes him blinded to the vast opportunities presenting themselves when the time comes.

What do the above scenarios remind us about trading?

1. Both traders are consumed either by greed or fear surrounding their success. When it comes to trading we are not in control of the movements of the market we are however in control of the trade we set up.
2. Remember to keep everything relative in the sense of market depth. If the market has rallied hard in a short period of time we cannot expect that condition to prevail forever, there needs to be a degree of reasonability about the move.
3. We should also not fear a change in the direction of a move, if we are going to hang on to every inch of movement on the screen waiting for the change we might as well go insane. The market will decide when the time is right for the move to happen, being a aware of it is one of things you can do to put your mind at ease.

Having an unbaised view is a scarce commodity amongst traders and one which increases the chance of being successful. We need to be honest to a point where it does not hamper or hinder our performance and most importantly keeps our expectations realistic so as not to divert our attention on small details which only serve to distract us from our goal.

 If you would like to contact me you can through my email atcadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR

Thoughts on Boredom

Have you ever found yourself staring at your trading screen for endless hours, clicking away , searching desperately through charts and feeling depleted for trade ideas?  The most probably cause of this type of boredom is the fact the market has "turned off" or gone into "Sleep Mode".  When markets enter these conditions you may often find your trading frustrating, dull and void the energetic buzz most hear about in trading circles.

I recall my first experience with this situation and the emotional turmoil it created in my mind. The first signs were that I was no longer seeing opportunities I had previously seen. Immediately this triggered my fear of becoming complacent. There are thousands of trading adage's out there, and one in particular is "Bulls get fat, Bears get fat but Hogs get slaughtered". The meaning of what is being said is, when you think you've mastered the market and you're trading with elated spirits, chances are you've become complacent and it might mistakenly lead you into a trap of profit drop. 

However there's a difference between becoming complacent and being bored. 

Complacency in the context of trading, is when your confidence has taken a steep hike and your level of fear has drop so that you no longer feel apprehensive taking a trade, in fact you proudly enter trades with swift reason. These bouts of overconfidence usually occur after a string of good wins, thus allowing you to drop your guard, you now become susceptible to errors in your trading plan. 

Boredom on the other hand happens when you begin to lose focus, in markets specifically when your attention has been drawn attentively to daily movements only to be suddenly switched off. Your mind has gotten use to the excitement and buoyancy of the euphoria,  that when it is switched off your mind enters a state of frustration. These emotions have the ability for you to start force trading into positions which can't be efficient in the long run.

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The most striking difference I would say is the fact that one completely ignores what's happening and erroneously believes the condition will continue indefinitely while the other is being fully aware what is going on. Both have the ability to draw down your account severely so its imperative to spend time thinking how you are going to deal with these outcomes in the future. 

Due to the lack of trading experience, I would say I misinterpreted my feelings at that particular time and in doing so mistakenly held off on trading to "cool off" so as to say. But although I did call it wrong, I'll be the first to admit it, I did discovered one of the most important principles of trading. Although the markets might not travel at the same speed or even move in the same direction, the need for you to be fully aware of your emotions and what's happening in the markets is of key importance.

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By understanding these emotions you have a greater propensity to accept the prevailing conditions and in the process be better prepared when it does comes around. I want to focus specifically on boredom as it's one of the underestimated emotions dealt with on the markets. A really great exhibition of boredom in process presently is the S&P 500. The movements oscillate painstakingly at slow speeds with any whiff of volatility creating an immediate awareness from traders. However it doesn't always create the desired move that is expected.

I've found that when the market starts to slow down my attention draws to smaller time frames and that signals that things are beginning to quieten down. I start assessing my positions either to close them up or maintain awareness of the technical placements and any possibilities. Any new positions which I add are done so with strategies designed for the market condition and not the previous one.  The time drag is one aspect that does affect the most, however I try use the available time picking up on new concepts or brushing up on my trading knowledge. 

I also try engage with different activities beside trading. I know from experience when the market is going nowhere, staring at the screen can be excruciating. Changing your environment gives you a chance to step outside your trading zone into a more relaxed environment thus allowing you to refresh your thinking.  

Finally I've learnt to accept that no matter what I think or do, the market will go where it wants to go, no individual can change the course of the market. Yes, it can be frustrating when you're in these type of market conditions but there's really nothing you can do about, you not in control, the market is and when it happens it's best to let the market lead. 

 If you would like to contact me you can through my email atcadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR