Our Unconscious Motivators V

BarroMetrics Views: Our Unconscious Motivators V

An example

The last trades I took in the DX (US Dollar Index Futures) and the ES (e-mini S&P Index Futures) highlight the importance of being aware of our unconscious motivators.

Regular readers of this blog know that I started 2009 trading results with a  whimper. I failed to recognize that my trading was in an Ebb state and as a result suffered the largest monthly loss since I started managing my private, closed fund in 1990. Since then I have been struggling to make a significant dent in the losses.

I had great expectations for the two trades, DX and ES.  I’ll focus on the DX here because the ES trade is well documented on the Video/Forum/Twitter free service.

Everything had lined up perfectly and I was very confident that my favoured scenarios would unfold. I entered my first positions at 79.67 and a second set at 80.49 After both entries, the market immediately went my way.

But then the DX stalled.

I had been looking for a simple correction but instead we saw a small trading range develop (see Figure 1).  The second set of positions I had added to the DX 80.49 proved to be around the middle of a congestion zone bounded by 81.97 and 79.62.

On Thursday June 25, the DX went to the Death Zone of the congestion zone mentioned above and sold off. I was faced with the prospect that:

  • The DX would at least break 79.62 and if it did that, a breach of 78.83 was likely. A breach of 78.83 probably would resume the US Dollar bear market. If I did not exit and the market broked as expected, I’d be faced with a loss or breakeven trade after the market had moved  in my favour.
  • Or would the DeathZone sell signal play false? If exited the positions, would the DX go up rather than down and I would exit my positions prematurely? What if I exited and did not see another setup and trigger to re-enter the trade? I’d lose the one chance I had to make substantial inroad into my losses.

I have reproduced some of journal entry to give you an insight into my state of mind. I am comfortable losing up to 20% of my capital – I don’t like it but accept it as part of the trading game. When I lose more than 20%, my anxiety levels rise. I respond by cutting position size and making it a priority to bring the losses down under the 20%.

Unconsciously I had placed great faith that these two trades would not only bring me under 20% but would also substantially reduce the losses. ‘Then the blinking market  had do this……!!’ (quote).

Whenever I feel great stress, I find it useful to rant in my journal – it blows up steam and it allows me to safely fully experience what I am feeling. Once I have calmed down, I return to myself and then the markets. I realized that the loss and market information I had received on Thursday had triggered my unconscious motivator. Hence the emotional response. That awareness allowed me to deal with the market information more centered than I would otherwise would have.

Having made a decision, I implemented it and felt better for the way I had gone about it. If I had acted when my unconscious motivator had hijacked my emotions and reason, whatever decision I would have made would have been wrong for me.

2009-06-29-dx.jpg

Figure 1 DX September

4 thoughts on “Our Unconscious Motivators V”

  1. Hi Ray ,

    Don’t you feel posting your trades over the net , can cuase the trades damage?

    It sounds as consipracy but as you know many techincal indicators which went to public , started to lose their edge.
    Well that not the perfect example but the concept is similar.

  2. Hi G

    Thanks for the post. I appreciate the sentiment.

    I did think of the point you raised here.

    I will keep on eye on the expectancy return for the ES trades. If that shows an above normal diminution, I’ll of course stop the current service.

    On the other hand, my decision proceed to post the ES trades was based on the fact that my following is very small. So, it’s unlikely my trades will suffer.

    Should it ever get to the stage, say of Dr. Brett Steenbarger’s over 5000 twitter followers, then that we may have a different story.

    But in the final analysis the key is not the number of followers; it is ensuring that but that the expectancy return keeps within normal bounds.

  3. Great post. Its only human that we can be biased by our emotions but its inspiring to hear how seasoned traders have experienced such problems and overcome them. Thanks.

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