THE MISCHIEVOUS GREMLIN

This character does not exist in the real world. He is  imaginary and living in the head of a trader or bettor who is suffering the most exasperating run. It is the kind of trading streak when quite naturally there may have been a string of losers where, when they were cut for a loss, the analysis showed that  there had been no run for the money and the feeling was that one may just as well have taken a wheelbarrow full of money from  home and left it out in the street.

The mischievous gremlin gains no pleasure or satisfaction from those kind of losses …for he has had no involvement in them, which for the most part had either been badly thought out or misread signals, either suckered in by market noise or perhaps plain ole frivolity. They hurt the trader, of course, but what the gremlin has in store has far worse consequences than merely a  shrunken trading balance.

It is mental disintegration generated from a period of hope that turns to despair, or seeing the goal wide open with the goalie lying yards away face down in mud only to then miss from point blank range. Or the near perfect planning of how a trading scenario may pan out only to have a potentially fantastic day scuppered by being a  prick for a tick trying to unwind and bank profit. Or some ludicrous, unexpected and bizarre new factor coming into the market place from way deep in left field.  “That’ll be right” the trader will say to himself. At this point, the gremlin can sit back smugly and admire his work.

The salient point is, how does one disempower this unwanted and negative associate ? To cease trading may work in the short term, but he knows that cannot last and has all the time in the world as the trader will resume at some point or else find another job. That said, taking a break to recharge, refresh, rethink, is no bad idea. Rationalising to one’s self that the market is cruel, there are losing trades and it’s also impossible to win with winning trades will not help, as it reaffirms and fuels the negative mindset that the gremlin has induced.  Being dormant in the market may help short term, but the horse will need to be remounted at some point.

Thinking rationally again, it is a sure fire certainty that the run must end at some point. Adjusting or amending some tactics, techniques, selectivity and risk control are positives that may hasten the end of a bad run and disempower the gremlin.

1  Cut out the frivolous trades. Trade on your terms, not on a whim or an illusion.

2  Reduce trading size temporarily.

3 When in doubt, cut half ! Repetition, I know, but always a sound weapon to ward off demons and gremlins.

4  Do not look for perfection while trying to take profit. Book some profit/stagger profit taking levels (ie not looking to take profit at one price). Try to be quick to react if profit potential is diminishing. Perhaps even giving up a greater edge than normal to book some profit. It is so important to get some points on the board at this time.

I bolded the above, because snatching a defeat from the jaws of victory is the most debilitating aspect and what weakens you and strengthens the gremlin. BOOKING A PROFIT IN THESE TRYING TIMES STRENGTHENS YOU AND WEAKENS HIM !

He won’t go away forever …the best we can hope for is that he sleeps for a prolonged time. We have the power to make that happen.

 

 

 

© Hank Sumatra …hanksumatra@wordpress.com 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Hank Sumatra and hanksumatra@wordpress.com with appropriate and specific direction to the original content.

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WHEN IN DOUBT, CUT HALF !

It seems an obvious and rational enough philosophy to employ, yet there are often times when that thought or idea may come to mind and it is ignored, or a tenuous reason  is used to justify ignoring it. Is it the wish to make money quickly, the dangerous ego, or the gambling instinct that makes one run a position when the sensible path to take was to cut half ? Conversely, is it fear, lack of confidence due to a recent bad run, or impatience, that makes one cut all of  a position when, once again, the sensible path to take was to cut half ?

There are no hard and fast scenarios when one will encounter this kind of dilemma. One could be long or short, have had the position for a while, or not very long, may be in the money, offside, or neutral. But the fact remains – the conundrum has sprung to mind and has become something that needs addressing. Then the mind games can start while wondering what to do and distort rational thought…. “ I just know it, if I cut my longs, the market will race up straight afterwards, but if I don’t, it will plummet like a stone”. There isn’t a trader on the planet, regardless of their success or talent, who hasn’t faced this type of dilemma. You are beggared if you do and you are beggared if you don’t. Or so it seems.

The fact that the trade is in positive, negative or neutral territory, or that one’s recent trading performance had been good, bad or indifferent, should have no bearing on the path one should take, as the path of this trade, good, bad or indifferent cannot be affected by the past. However, if the wrong choice is made, the baggage of the past can a) damage the now and b) undermine the future. The simple solution is to cut half as one is in doubt.. If one had no position in the market place at that exact same moment and were in doubt, what would one do ?  Certainly not open a new position !

So what is the logical thing to do when coming across the exact same scenario whilst having an open position ? Well, doing nothing means leaving 100% exposure on the position, cutting means leaving zero exposure. There is doubt, it could go up or down, slowly or quickly, or indeed move sideways for a period. The outlook is cloudy. Cut half, bank some of a winning trade or cut some of a losing one. The market is at a crossroads in this trader’s eyes. But the picture will become clearer in time and there is always the opportunity to go in again, cut all, or indeed continue with half the position. In addition, it will be far easier to look back on the trade after it’s liquidation, having taken the simple middle ground path.

Do you cut half when you advise yourself to do so ?

 

 

 

© Hank Sumatra …hanksumatra@wordpress.com 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Hank Sumatra and hanksumatra@wordpress.com with appropriate and specific direction to the original content.

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A SOUNDING BOARD FOR THE PSYCHOLOGICAL ASPECTS OF TRADING.

Traders in all types of market places, internalise both their rational and irrational feelings with regards both their positive and negative trading experiences. The raison d’etre of this blog is to verbalise, discuss and share, while encouraging, learning and hopefully developing healthier future patterns in what can often be one of the most lonely, humbling and frustrating vocations …that of a trader, dealer, bettor. We are all of the same ilk.

The good news is …we are not alone.

 

 

© Hank Sumatra …hanksumatra@wordpress.com 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Hank Sumatra and hanksumatra@wordpress.com with appropriate and specific direction to the original content.

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