Monday, February 13, 2012


This topic came to mind after I watched another chapter in what has to be the biggest sports tragedy of all time. There was never an athlete who dominated his sport like Tiger did golf in his day. When the story broke about what he was really up to in his life off the course, I told people I thought he would never make it back. The reason I felt that way was not that he could never get the physical part of his golf swing fixed. I thought he would be able to do that and he has for the most part. He does drift back into the old dropping of his head and getting stuck position now when the pressure is on, and hits bad shots. I think he will eventually get out of that also, but only if he mentally gets back. This is where I don't think he will be able to pull it off.

You hear people talk about "the zone." That is that magical spot that people get in where they have every single thing in their body completely in harmony and performing perfectly, mental and physical. It is impossible to maintain it and there has been much study about how to get there. You really can't "get there." It is a confluence of events that if any of us are lucky enough, we get a period here or there of it. The best you can do to get there is to work hard at your craft whatever it might be, and through repetitions you will have periods where you obtain this magical zen moment.

If I had to choose a mental edge or a physical edge in anything, I would always choose the mental. Tiger had a mental edge like no athlete ever had and he cannot simply will that back. When I watched him putt yesterday you could just see he has no confidence in his putting at all. He seems to do things well now until it really matters, that is when it all falls apart, Sunday's. Ironically, that is when in his prime he just ran everybody over. I used to be a big fan of his, and I have become less of one because of his insolent attitudes in interviews, and his general lack of even attempting to conceal that he is a jerk. It is like watching an episode of House and hoping that one "human" moment comes out of him, but it never does. I still find myself somewhat rooting for him, because I think it makes golf more interesting to watch when he is in contention. Ironically my friends in the golf business all tell me Mickelson is a complete phony and one of the biggest jerks out there. You would never know that from watching him and how he conducts himself.

My friends work for the club making companies, so they are in the right place to know who is really a good guy and who is not. Where am I going with all of this? It is a lead in to talking about psychology and how it plays into trading. The one thing that is a complete waste of money is buying a book on the psychology of trading. The one exception would be if there were a new one written by an actual trader who has made consistent money trading. In that case it would be a must buy. However, most of the books are written by people who don't trade. This is what I refer to as someone who has never hit a ball out of the infield. In other words, don't let someone who has never done something teach you how to do it. Why in the world would you listen to them? Studying how to do something and actually doing it are completely different.

How would someone who does not trade know what it really feels like to have recovered from a 20% draw down in their account. Chances if they are writing about it they had a 20% draw down that turned to 40, 60, 80, then a 100%. That is why they are writing about it and not doing it. Most traders lose because their techniques are lousy. I am sure there are some that lose with good techniques and bad emotions. Do you really need a book to tell you not to make decisions based on emotions when you trade? Do you really need someone like me telling you the same thing? If you do then seek out something else to do with your money. We all fall victim to the same pressures at one time or another. It is those that handle them the best over time that come out ahead.

The two best traders I know Kevin Haggerty and Larry Williams both feel the same way about these books, they are hogwash. Kevin is an ex-marine so I am sure you can imagine how he feels about mamby pamby things like this. He says "take the trade." It really is that simple. If you have a valid setup and by your rules a trade is indicated, TAKE THE DAMN TRADE. It does not matter if you have been winning or losing, the markets don't know or care about our individual situations. Do not listen to CNBC, do not listen to me, do not listen to anyone else. Why would you spend days, weeks, months, years, developing something, and then not follow what it told you to do? What is the point?

I know it is hard at times and it is for me also after a bad trade streak has hit. As long as you are using sound money management techniques, no individual trade should cost you more than at the very most, 5% of your account. What is the big deal with that? When you buy a car the minute you drive it off the lot you are down more than 5%.

Here is what I am doing now in my trading and I hope this will benefit those who read here. I have identified specific conditions by which I will take a trade. When those conditions arise the mouse gets clicked. It is really that simple. I know when I agonize over a setup or a chart pattern for too long, I make a bad decision. It might be that I take one I should not or I pass on one that I should not have. Here is an example of a trade in the EURO I agonized over recently, that turned out lousy and I did take it.

You can see there was a break of a trend line and my COT stuff was telling me to look to the short side, so I took the trade. These quickies where I could not have been more wrong always piss me off. However, this is a legitimate trade by the way I go about this, so it is what it is. For every 10 of these I do, 7 will work, but there are 3 that don't. I cannot be shocked when one does not work.

Moral of the story today is suck it up, you don't need complex psychology books to trade and over analyze every waking thought and emotion you have. This is about grinding it out. If anyone tells you otherwise, short them.

As reader Don calls me, "Curmudgeon" out!


Anonymous said...

Tomorrow I am going to finally pull the trigger. Thanks.

badsal said...

I know all about "the zone". I get into it once in a while and start doing really good at whatever it is that I am doing, and then women start noticing me a lot. And that's exactly the point in time where everything goes to hell... ah... women.

Regarding trading psychology books, have you ever read "come into my trading room" by Alexander Elder? It's not a psychology book per se, but it does touch on some trading psychology issues. I enjoyed that book, and as far as I know the guy (who is a psychiatrist) does trade (at least he says he does, and shows his trading journal).

Poor Tiger Woods, it is as if he made a deal with the devil and passed his due date.

The Sound Center said...

More compassion than curmudgeon, Chris.