It's been a while since I've posted. I trade faster markets these days so there's not as much time to post during the day, but it's nice to see some interesting discussions, particularly the one between StoragePro and Joelcf about psychology (also nice to see the regular three monthly "you guys suck!" interlude. Something to set your watch by... ). When I saw SP and Joel exchange their posts on psychology I was reminded of what, for me, is the essential nature of this thread. A place where traders can feel free to express differing opinions and engage in discussion without the usual flaming and name calling that happens on the net. I've always been very grateful for that and it's why I keep coming back here.

I wanted to add a little to this debate because I find it so fascinating. I find myself agreeing with you both. I do think that the literature around trading psychology is full of snake oil salesman and hucksters. I am not really a huge fan of Mark Douglas. I find his material overly simplistic (ie: You will have losers, it's not about the individual trade, it's about a series of trades...gee thanks Mark). I love Van Tharp's money management stuff (although Joel tells me this is essentially rehashed Ralph Vince) but I think his trading psychology material consists of a ton of silly tests that lead to you signing up to his expensive courses. The best material I have found is Fijitrader's in the private forum.

The problem is that it's such an ill served area that it's very easy to dismiss the entire field based on the paucity of the material. And Joel is right; anyone who places an over reliance on psychology as a substitute for solid trading methods is doomed to failure. There is no zen-like "see the ball, be the ball" state that can make up for a good solid methodology. And some people do place an over reliance on state. That somehow if you wake up feeling groovy you're just going to be able to sense the market and win all day long. That's just hogwash IMO.

But there are also those who chronically undervalue the psych aspects of the game. They think that a reliable methodology is all they need and it should be as simple as pressing the button when their methodology tells them too. Some of those have already internalised good psych principles. In fact to some of those people it may just come naturally, which is why they refuse to accept the value of trading psych. But there are a ton of problems in trading that are psych related. Not pulling the trigger, reactions to a run of losses, breaking rules etc. Those who undervalue trading psych usually have a response along the lines of "just don't do those things dummy". They usually haven't experienced a sustained run of psych related errors (and in my opinion they will. We all will). It's just not that simple. Until you uncover the mechanics of why you insist on increasing your risk when you're "sure" a trade will win, or why you bail early on winners or whatever, then you are doomed to continue doing them. A good systematic analysis of the beliefs that lead to self destructive behaviour is invaluable. I personally believe that it's really hard to get good psych material because so much of it has to be one on one work. It's the difference between reading a self help book and working with a really good therapist.

I think those who sell psych as some kind of generalised touchy feely "feel happy = trade well" theory are doing it a great disservice. As Joel said, you can meditate every day and unless you have a very good understanding of the markets it's not going to help. I once knew a trader who had a huge understanding of eastern spirituality and practised it regularly. His mind was a lot calmer than mine. He still traded a managed account to oblivion in one day by upping his risk per trade to catastrophic levels on one trade. He just blew up. He had serious weaknesses in his trading psych that had nothing to do with how much he meditated or how many eastern texts he read. This stuff can be a timebomb if we don't treat it seriously. I think some of the supposed psych material can function in the same way. You fill out a bunch of forms, take some tests, go on an expensive course, and then suddenly you think you've got your psych in order. Not even close.

I am reminded of a great post by Merlin (can't find it now, any ideas where it is Mike?) where he weighed in on one of the well rehearsed platitudes of trading. "Exits are where you really make your money, not entries. Exits are far more important than entries". It was a popular trading maxim at the time and Merlin called BS on it. He simply said that they are both equally important and skewered the whole concept in a couple of paragraphs. There are a lot of trading sacred cows that can be skewered this way. It's the same with psych vs methodology. Pay attention to both, don't allow one to do the work of the other, and don't feel you have to take sides like you're supporting a football team.

I am also reminded of 'sports psych'. The more I trade the more I think trading is more similar to pro sports than anything else. Pro sportsmen lose their form. They still have the skills, but they just go through inexplicable losses of confidence and form. And when that happens they fly the psych guys to be at their sides no matter how much it costs. Golfers call out sports psych guys in the middle of tournaments. These guys know that psych is no substitute for putting in the hard hours of practice and training. But they also don't underestimate its value. No one says "all this psych stuff is hooey, I either know how to hit a golf ball or I don't". It's also the same with the very top traders in my very limited experience. They completely understand the importance of mental game.

All of which is a very long winded way of saying that it's a balance issue, like anything else in trading. Everything is just a piece of the puzzle. Make it add up for you. Methodology, psych, money management....it's all part of the game. Balance all of those into a workable ecology for you, and you will succeed. But run around shouting YOU GUYS DON'T GET IT. IT'S ALL ABOUT PSYCH/MONEY MANAGEMENT/RISK REWARD/THE SYSTEM or whatever it is you've just discovered and you are adding to Storage Pro's by now legendary liquidity pool....

I'm a little out of practice. Next time will be shorter I promise....

Who are you calling crusty?

Good to see you Dave, how's things?

All going well thanks Dave, just trading away here. The more I do it the less there seems to talk about. Glad to see you back.

And it's like riding a bike. You never forget....