Re-post portions of two March 2012 posts describing how comfortable it was to accept losses...

-from March 28, 2012:

"I picked the right time of the day to work with TNA considering my goal to put up losing trades in order to learn to accept losses." 

"Oddly, I felt very much at ease when my goal was not to win, but rather to lose. I can't help but wonder if that feeling is because I may have designed an exercise that really didn't test my fear because there was no expectation of winning when I placed the trade. That's how wierd it felt to have a trade on and not feel anxious about the outcome. It bears repeating: I'm not sure if the test was helpful or not because I am not sure I cared enough about trying to win! I have to continue this exercise for a number of days to see if I have found a way to trade without emotional discomfort or if I have set up a test where lack of concern about the eventual goal of winning trades has been abandoned. All I know is that it was a joy to click the mouse , stop out for small losses and react to it with the same concern as putting on a belt or walking through the frozen foods section at the supermarket."

"Takeaway:

I must continue with this expect-to-lose exercise until I can get my head around the odd (lack of) feelings it generated yesterday. I have to figure out if my lack of concern is a breakthrough as to how to mentally approach live trading or if the absence of anxiety is more about being emotionally removed from the trades I'm placing such that it is only about clicking a mouse and not placing and managing actual risk. I think time will yield the explanation."


-from March 29, 2012:

"Looking at the bright side:

1. I stopped out each trade faithfully which is the whole point of this exercise I am involved in.

2. My stop outs were in areas where my read of trend/momentum change was pretty good. It needs refinement... maybe some patience. I also MUST trade with trend as my first impulse as opposed to trading for reversals. My first two stops of the day would have been avoided had I done this. This is a perenial problem of mine.

Overall, I am happy with today. I am not joyful like yesterday, but I met my goal of exiting only by hitting stops or getting out in the last 15 mins of the session."

Re-Post of the day last year I decided to "throw caution to the wind" and trade correctly...

- from March 15, 2012:

Happy

I had a losing day today in sim-trading. Down $-241 on twelve trades. Only had 4 winners. The reason I'm happy is that all 8 losing trades were stop-outs. I didn't let a single one exceed the stop. In fact, between 2:30 and 4:00 pm, I had six out of eight practice trades end with stop losses. I closed the day with 4 straight losses.
In most of the losing trades, I had opportunities to scalp gains, one of them for 20 cents. But I am trying to hang in on my trades for bigger gains. Next to me on the wall is taped a sign that says, "Focus on Process, Not Results." I posted a photo of it on the blog not long ago. What doesn't show in the photo is what is written below it... "Exit only on Stop Outs, Volume spikes in winning trades, or at the Market Close." And that has been where I am trying to put my efforts. For now, I am trying to avoid using my intuition for exiting a stock. This has frequently been at my own peril, as it was today. Many times I had a feeling that I was on the wrong path... but I held firm and didn't exit. I'm focusing on process, not wins and losses. It's training to combat anxieties associated with Relief-Exiting and avoiding stop losses. And it's working to some degree... as the number of stop out losses mounted, I was silently coaching myself to relax, focus on process, stay in the moment; no worries about what came before and don't anticipate the future. Only think about my stop line, the one thing I can control. And it was working... In the 3 years I've been messing with the market, I've never taken more than 3 stops in a row before my resolve weakened. Before last week, I had only done two in a row before folding up and letting my stops lapse. I am getting stronger through my losses. I am always in danger of relapse, that's my personality. For now, I just get in the trade and say, "One Trade at a Time."

Where else do I need improvement based on today and virtually every other day I've done this? 11 of the 12 trades I attempted were counter-trend trades (reversal trades). This has been my bias since I began trying to learn this craft. The one trade I attempted in the direction of the overall upward trend of the day was a winner. On range days, I am in my comfort zone and my momentum reads are highly accurate. On trend days, I get slammed; punished by the uni-directional market. When reversal trades don't materialize for me, I cannot seem to surrender to the market, exit, and re-enter in the direction of the momentum. I am stubborn in my intent to be correct and it shows on days like today. It is just another way for my personality to not accept losing, just like my difficulties with taking stop losses.

I have a long way to go before I am ready to trade my live account again. But for today, I am happy with my discipline; the focus on process instead of results. Tomorrow is a new day. One trade at a time. One day at a time.

A re-post from Feb 1, 2012

Trading is mental

Having read and re-read Michael Martin's "The Inner Voice of Trading" over the past month, I am finding some relief when it comes to the self awareness necessary to be a successful trader.
I have taken to spending quiet time reflecting on the WHY that compels me to make bad trading decisions and where they truly originate. I reinstituted exercise into my day by walking about two to two and a half miles per day back in early November and moved to the treadmill in the cellar after the Maine winter arrived. With bad knees, I can no longer run, so I stick to walking and it gives me time to relax and think about the WHY. I've thrown in some strength training over the past two weeks and I feel better for it. Mostly, I am in this for mental dialysis and exercise second. Thirdly, my ability to stick to the regimen will reflect whether or not I have achieved the same discipline necessary to stick to proper trading fundamentals. Mrs. Bluecollar bought me two relaxation CD's that encorporate breathing exercises, muscle relaxation, positive affirmations, and calming music. I play them while I use the treadmill and am now in my second day of it. It is true that anxiety, stress, and fear are near the top of the list of reasons for trader failure.
As part of this whole thing, I am digging deep into my past and evaluating my life and the influence of those with whom I've encountered and the impressions that were left on me as a result.
I have also picked out some articles from Dr Andrew Menaker's blog at his website as part of my quest to become a trader: http://www.andrewmenaker.com/

I hope you get something from this one from March 29, 2011 entitled "Handling Uncertainty."

Handling Uncertainty 

March 29th, 2011 
Everyone talks about uncertainty, and many of you realize that the only thing that is certain in trading is uncertainty. The problem is that most people understand it on an intellectual level (“yeah, I think in probabilities”), but in reality, where the rubber meets the road, most traders don’t really accept uncertainty.

How do you know when you’ve truly accepted uncertainty? You’ll know, when you’ve embraced the randomness of probability (each trade or individual data point is a unique occurrence with a 50/50 chance, even in a skewed probability distribution). When you begin to truly embrace uncertainty you’ll notice one of or more of the following also occur; you won’t be thinking or worrying about it as much, you won’t be doing as much ‘mental P&L accounting’; and the symptoms of tick-itis will also remit.

I coach clients to not be attached to the outcome as one particular strategy to deal with uncertainty. And the good news is that when you begin to truly embrace uncertainty you also begin to create a positive feedback loop where realizing that its not worth being emotionally attached to any one trade, or even a series of trades; making it even easier to embrace the uncertainty. Non-attachment to outcomes helps one deal with uncertainty, and embracing uncertainty reinforces non-attachment to outcomes. That’s how it works, folks.

Think about this question for a moment:

When you put money in a slot machine and you lose, how do you feel? Most people don’t feel that bad. But when you bet your money on a trade and you lose, how do you feel? Most traders say they feel upset, angry, frustrated, ripped-off, even betrayed (betrayed by the market, betrayed by their method, or betrayed by the person who taught them the method).

So, what’s the difference between the slot machine and trading? In slots, there is no judgment or ego involved (the need to be right is greatly diminished). However, in trading it is 100% judgment (you might be ‘wrong’). In a trade, our ego, our judgment, our sense of self-worth and even our personal status in the eyes of others (e.g. trading partners, family, etc.) is susceptible to feeling assaulted for each tick away from our intended target. But in slots we become a robot. Go to a casino and walk by the slot machines; everyone is glazed over, practically in a hypnotic state as they automatically (brainlessly as my wife puts it) dump more coins into the machine, pressing the lever and not getting very upset for lack of a pay-out. No judgment is on the line, there is no possibility of being wrong….the slot player recognizes the situation for what it is, pure unadulterated randomness.

Trading is not random, but you must fully accept, beyond intellectual understanding, the randomness of probability.