IdeaTrading Psychology [ AA for traders ]

#1
Disclaimer: I'm not a qualified psychologist, take what you are about to read with a grain of salt and verify my opinions for yourself which I herein present as factual.

A preface to this can be read here, it may clarify to you what we are going to talk about: viewtopic.php?p=1295403155#p1295403155

"know thyself"
"nosce te ipsum"


Introduction

The topic of traders psychology is a very crucial one and yet it is barely touched upon, you will hear things such as "psychology is important in trading", and that's where the topic usually stops.

This is an attempt to go in depth into the topic, how it affects our trading decisions, how we can help each other.

I believe psychology is EVERYTHING in trading. Do you use your hands to conceive a trading system ? Do you use your feet to conceive money management rules ? It all begins in your head.

I will try to lay this out concisely while omitting as much technicalities as possible.

Gray Matter: Your Brain


"The human brain has 100 billion neurons, each neuron connected to 10 thousand other neurons. Sitting on your shoulders is the most complicated object in the known universe." Michio Kaku

The superiority of our brains differentiate us from the animals, it uses 20% of all oxygen but just weighs in at 2% of your body weight, it has the capacity to generate approximately 23 watts of power.

We will only look 2 aspects of the brain and how they invoke emotional response and influence choices, the Conscious mind and the Subconscious/Unconcious mind.
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The Subconscious Mind.


You are perceiving what you're reading now using your conscious mind, filtering it, connecting dots and such, your subconscious however has already recorded what has been written without any filtering whatsoever.

As an example, it is for this reason that most "professional" advertisements(neuromarketing) you see on TV or billboards are specifically crafted to influence your subconscious mind, they are usually "anchored" to deep animalistic desires and emotions(sex,lust,anger,fear,happiness), religious or social dogmas, concepts or ideals etc. , not only is the concept of anchoring applied in advertisements but also on many website designs, known as "anchoring bias".

Anchoring is simply the process of attaching concepts or ideals, a strong emotional and psychological response to a product being advertised.

Stay with me, we are still exploring the subconscious mind. The word “subconscious” literally means below awareness.

Here are a few examples of neuromarketing, which is why I rarely watch television, save for movies and animations/cartoons ;)

Anchoring bias on websites

It's clear which one they want you to pick. You may look into color psychology for more info.
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Sexualization

A picture is worth a thousand words.
cropped-front-page1.png
We all know what this is.
skyy-red.png
That's gucci for you, "Gucci makes you a strong, masculine man and women bow down to you" is the message, in one word, "Dominance".
goffman-gender-rituatlization-of-subordination-gucci.jpg

Anchoring will provoke the emotion or concept anchored to, whenever you see or hear about the product and vice versa. When your subconscious mind is successfully influenced, it will in turn influence your purchasing decisions, subconsciously.

I hope you starting to see how your subconscious can be easily influenced ? How your beliefs can be influenced ? Now, think back to when you were a child until now, what have you been exposed to that has shaped your belief system to what it is today and to become who you are today? Without sounding philosophical, Is what you think to be the truth reality or was it simply imparted unto you as the truth ? Is the earth really round ? ;)

Your Belief System: Your Undoing or Doing

"For as he thinketh in his heart, so is he" - Proverbs 23:7

“A thing is not necessarily true because a man dies for it.”- Oscar Wilde

“A casual stroll through the lunatic asylum shows that faith does not prove anything.” - Friedrich Nietzsche


Your belief system is, in simplicity, the unconscious set of rules that guide what you should and shouldn't do, what is wrong, right,proper,improper, the kind of person you should be, the types of people you should and should not associate with. Most of the time it is this set of rules we use to pass judgement on others because they don't condone to our "rules". Sad thing is, while growing up we usually have no say what we should and shouldn't believe until we reach critical thinking age (programing).

Unfortunately, by the time we are grown up, we have already been trained to be a sheep on a farm and we lack the knowledge and tools or the drive to correct wrong programming.

What is wrong programing you may ask ? Limiting beliefs.

I will use myself as an example and give you some wrong beliefs and show you how they came about. Cause and Effect.I'm not writing the following for your sympathy but rather for educational purposes.
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Belief: I'm afraid of men because I don't trust them and I should be cautious around them, they don't mean the best for me.
Belief: I'm afraid of outsiders because I don't trust them and I should be cautious around them, they don't mean the best for me, I should stick to myself and those I know
Belief: I'm more comfortable around women, they will take care of me and I can trust them

Origin

When I was about 3 or 4 years old, (yes I still remember because it was traumatic. Subconscious mind, remember ?), I rolled out of my crib and landed on my back, I still remember the pain in the back of my head, when my caretaker came, he carried me back into the crib and I couldn't stop crying, so instead of comforting me, he decided to get hot posho (if you don't know, google it), rolled it up into balls and inserted them into both my nostrils and ears. Why ? I don't know.

This man happened to be a refugee from Rwanda(during the Rwandan genocide) whom my mum was helping and he was not family, which made him an "outsider".

Reinforcement

Case 1: This same man, when I could walk, took me for a stroll without my moms knowledge as if to show me off to his friends as his (he was light skinned and I'm hybrid Italian/Ugandan), I remember that walk however it was a few years later when my mom told me that she was scared and thought he had kidnapped me. She sent him a way after that incident.

Case 2: I remember 4 cases of bullying and unfriendly treatment by other boys while growing up. Why ? I don't know.

Case 3: My father died when I was around 8 years old, I didn't know the man, in fact when my mum told him she had conceived me, he suggested that I be terminated. Why ? I don't know. I won't go into the specifics of this case, you can find more info on the effects of a fatherless childhood.

Case 4: I was raised by my mum and sister and experiences I've had with females growing up has been the opposite of what I got from men.

And so it would seem that men are horrible and a threat to me, they need no reason to be "bad/evil", they just are.

Effects on my personality
  • I don't trust anyone. 80% for those close to me, with 20% room for doubt.
  • I'm an introvert and very quiet, my wife has to push me to talk because what she may get most of the time is "mmhhh" , "ok", "yes/no", unless its about topics we find mutually interesting(technology, forex, sciences and arts etc).
  • I spend most of my time passively observing people/situations rather than actively interacting with them and when I do, its for a brief moment. "Threat analysis"
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Belief: I shouldn't become rich.
Belief: I shouldn't have much money, just enough or less.
Belief: Money is bad and evil.
Belief: Success is bad, failure or mediocrity is good.

This one is simple, growing up, it was always the rich silver spooned kids who were the liars, most arrogant, most prideful, most greedy and selfish.
Rich adults on the other hand, their disdain of people that did not stack up to their status quo was very obvious, you were basically nothing to them, a street rat (in Aladin terms). So it always seemed that the more privilege, success and money one had, the more wicked they would become.

Effects
  • Constant self sabotage because any form of success or increase in money makes me "bad/wicked".
  • Success and wealth even if desired becomes a pipe dream because its impossible to be "good" and "successful/rich" at the same time.
  • Constantly trying to find a non existent balance between being "good" and "successful/rich".
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Yes, these beliefs are ridiculous but what do you expect from the subconscious mind ? The main purpose of your brain hence subconscious mind is to ensure your survival, it will cause you to fail if it deems it as the right course of action to protect itself and by extension you. As Mahatma Ghandi said “To believe in something, and not to live it, is dishonest.”, this seems to be the mantra of the subconscious mind.

Your past experiences have shaped your belief system. Your current experiences are continually shaping your belief system.

I have replaced the above faulty beliefs with the following;
  • Having Money, Wealth and Success don't make you wicked or bad, its how you use them that matters, not how much you have, the more the better :). Just don't let it get to your head.
  • All human beings (both men and women) have a bad and good side, it's which side(character) they chose to show and manifest that ultimately matters not what some people did to me 100 years ago. A healthy amount of caution is still needed when dealing with other people.

Consider this then, what limiting beliefs lie hidden in your mind that limit your success and keep you failing at what you want to do ?

Emotions: The drivers of beliefs

This will be short.
Emotions are helpful because if for example you had no fear of death, dying prematurely wouldn't be a problem. I would say, emotions are your beliefs manifested physically. Emotions are the triggers that influence choices(good or bad). Emotions are the signposts on the road that will alert you of limiting beliefs, we shall get into that shortly.

Trading Psychology

“The moment you doubt whether you can fly, you cease for ever to be able to do it.” - J. M. Barrie

“Be sure you put your feet in the right place, then stand firm.” - Abraham Lincoln

Like I proposed above, it's all in your head. Both your success and failure at this business or anything in life for that matter.

If it all flows from the mind then what psychological tools/skills/beliefs do you need to succeed at trading ? What dwells in the minds of the most successful traders that makes them uber successful ?

The divide between successful traders and failing traders is almost as wide as between the rich and the poor. Why ? I'll let you answer that.

I believe that with the right set of beliefs, any effective trading system is tradable profitably.

A Possible Solution: Awareness through the conscious mind

“Awareness is the enemy of sanity, for once you hear the screaming, it never stops.” - Emilie Autumn

“If, then, I were asked for the most important advice I could give, that which I considered to be the most useful to the men of our century, I should simply say: in the name of God, stop a moment, cease your work, look around you.” - Leo Tolstoy

The awareness of an event alters the pattern of behaviour. Awareness is the catalyst of change.

Awareness of what ? Your thoughts and emotions of course as they happen during vital moments, such as trading. It's laughable how ridiculous some of the beliefs hidden in your mind are. I'm not suggesting you meditate or undergo hypnosis.

A simple 3 step process;
1. Identify the emotion (effect)
2. Identify the underlying thoughts behind that emotion (cause)
3. Connect the dots of similar recurring events.

In addition, you may journal your thoughts and emotions in a notebook, you never have to read the book, you're simply training your mind to be aware, "I felt like this while doing this because of this". This is a quicker path than meditation when it comes to developing inner awareness.

This is a mental skill that is now autonomous on my side, if you haven't read the preface post above already then I urge you to read it.

The advantage of awareness, if not already evident is that you will most often than not stop yourself from making a wrong choices because you know that the emotions and beliefs behind them are bogus.

Experienced and Successful Traders

From the very beginning of my trading journey, my question has always been ," how do they do it ?" and even when I saw their strategies, they somehow didn't work for me. The answer lies in their mind, they have developed a level of patience and strategic thinking that is necessary for their success, however, they were not born with it, but it was developed, step by step.

These people can impart their psychology (belief system) unto those who are still struggling.

Moving Forward

It may feel strange at first (especially for men, we don't like sharing our feelings, do we ?), but we can use this as a space for traders to mutually fix their psychology. AA for traders.

If you choose to seek out and destroy the wrong beliefs in your mind as regards to trading then I suggest you start with the following;
  • Beliefs regarding money
  • Beliefs regarding success and failure
  • Beliefs regarding wealth and poverty

What has been written down may be really helpful to you or it could just be one big belief from the depths of my mind :).


Good luck :thumbup: .


Re: Trading Psychology [ AA for traders ]

#2
Thank you for taking the time to write this post.

I separate trading into three categories: (1) Mind, (2) Money management and (3) Method. Both (2) and (3) can be given to you by somebody else i.e trade this moving average cross system, risk 0.5%, place stop loss 2*ATR and set RR 2:1. But (1) is the only part that can not be given to you and renders parts 2-3 useless if not controlled.

I'm into psychology, philosophy and various other things that people will probably right off as metaphysical nonsense but the film the Matrix alludes to what you describe and can be thought of as a documentary on the power of belief, knowing yourself and loving what you do.

Power of belief- You need to feel as though it is possible to even have the slightest chance of succeeding. When I started trading with a few friends from my BSc Finance class a couple years ago we made crazy returns in a short period of time using a very simple strategy and although it was "beginners luck" we believed it would be possible to make a living trading full time but the drawdowns came and we started revenge trading and blew accounts. The losses took its toll and eventually they quit saying it is impossible to make money trading long term. I on the hand didn't quit even through the darkest times and saw light at the end of the tunnel and eventually met many others that use trading as their only source of income and soon it will be my main source of income. The purpose of that story is that once they entered the cave of denial they refused to leave even when evidence from trustworthy sources proved otherwise. They still no longer believed.

Knowing yourself- We need to reprogram the mind to know our true power as our whole life people impose their limitations onto us. It's like I couldn't envision myself being a professional footballer so I tell the young Messi or Ronaldo that they should be realistic and aim for a "proper job" but we know that they are two of the best in the world so the important thing is to know what you are capable of. The power of belief needs to be combined with knowing yourself so you don't end up delusional haha but You need to be able to trust your own opinion and reasoning ability as everyone with low level of self mastery just projects.

Loving what you do- Love is a universal language and a supercharged battery it will keep you up late reading articles and testing indicators and get you up early to read more articles and test more indicators. Going deep on this one will require more time but the truth is most people that start trading don't actually love all the hard work and self improvement that goes with it instead they want to get rich quickly. A major distinguishing factor between the successful traders and failures is the love of the craft. When I look hard at the work mrtools Xard777 mntiwana Mladen Jimmy put in to maintaining this beautiful forum I realise that once you start loving the actual process and apply the kaizen principle of continually improving the profits will just flow.

PART II:

Reprogramming the subconscious through hypnosis and affirmations can help traders come to turns with the fact losses will happen even up to +50% of the time but that doesn't mean that you can't end up in profit over a given time frame.

In addition the subconscious mind can be programmed through repetitions and is even stronger when theta frequency is utilised during this process. There are a number of FX simulation packages which make trading feel like a video game I don't want to shill so do your own research, The truth is you need to be confident with the system you are using which can only come 1000s of trials.

The issue with the conscious mind is we are only operating from it 5% of the time so it's easier said then done to not overtrade etc. because after a few trades your conscious brain "turns off" and the gambling subconscious habit turns on so by the time you snap back to reality your account is already blown. It's happened to me so many times it hurts to recall but for those that don't believe me let me give you an example outside of trading. When you drive and your friend is in the car and your having a deep conversation once you arrive at your destination are you able to recall every road you went down or even what you saw on the way ? The answer is NO you drove that journey using your subconscious mind, however your conscious mind was present during the conversation you had with your friend and therefore you will be able to recall everything you and your friend discussed. In the event you learned how to drive really badly it would be expected you would crash because your conscious brain is not present and your subconscious does not have good driving programmes and so you can't rely on it to make good decisions.

I totally agree with you on beliefs, when you grow up in a deprived part of a wealthy city you can either look around your immediate surroundings and say well this is it for me I guess I'm going to work a crappy job I hate and be a deadbeat dad or you can go to the affluent areas look at the 7 figure properties, 6 figure cars, 5 figure watches etc and think to yourself well it must be possible to get this because others have I just need to think of a way.

The only difference between a dream and a big goal is a plan.

The only problem with these discussions is they can quickly turn into metaphysical debates and that rabbit hole is very deep, but I'm really happy to help you with this thread and although I have no formal qualification or mandate to advise others on the topic I can provide my opinion and if people like it they can dig deeper if not just discard.

"Information is just a tool, use it if you can apply it but if not just leave it".
Free your mind.

Re: Trading Psychology [ AA for traders ]

#3
Thank you for your reply, this island was beginning to get lonely.
EducatedHustle wrote:
Fri Feb 28, 2020 7:41 pm
Reprogramming the subconscious through hypnosis and affirmations can help traders come to turns with the fact losses will happen even up to +50% of the time but that doesn't mean that you can't end up in profit over a given time frame.

In addition the subconscious mind can be programmed through repetitions and is even stronger when theta frequency is utilised during this process. There are a number of FX simulation packages which make trading feel like a video game I don't want to shill so do your own research, The truth is you need to be confident with the system you are using which can only come 1000s of trials.
The issue with the conscious mind is we are only operating from it 5% of the time so it's easier said then done to not overtrade etc. because after a few trades your conscious brain "turns off" and the gambling subconscious habit turns on so by the time you snap back to reality your account is already blown. It's happened to me so many times it hurts to recall but for those that don't believe me let me give you an example outside of trading. When you drive and your friend is in the car and your having a deep conversation once you arrive at your destination are you able to recall every road you went down or even what you saw on the way ? The answer is NO you drove that journey using your subconscious mind, however your conscious mind was present during the conversation you had with your friend and therefore you will be able to recall everything you and your friend discussed. In the event you learned how to drive really badly it would be expected you would crash because your conscious brain is not present and your subconscious does not have good driving programmes and so you can't rely on it to make good decisions.

Yes, reprogramming the subconscious mind is important. I however stopped dabbling in hypnosis, binaural beats, nlp, affirmations etc because my mind started to "break" and in addition it developed a form of resistance to suggestions since I become aware of the plethora of hypnotic, subliminal and nlp suggestions in mainstream news, movies and various upselling websites. The method of journaling I pointed out above, though rigorous produces tangible results due to the active involvement of the conscious mind in the transformation process.


The only problem with these discussions is they can quickly turn into metaphysical debates and that rabbit hole is very deep, but I'm really happy to help you with this thread and although I have no formal qualification or mandate to advise others on the topic I can provide my opinion and if people like it they can dig deeper if not just discard.

I agree, these were some of my concerns while writing the topic, which is why I attempted to eliminate as much technicalities as possible, self governance by participants will be vital to stay on point and resist the temptations to explore unhelpful rabbit holes.

It's unfortunate that many will see this topic as a waste of time because they simply won't see or refuse to investigate the correlation between "mind and matter",in any case, to each his own.


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