- NQZ09 traded down to 1696, and then bounced back to 1700...
- it then started trading to 1701, 1702, 1702.75, then back down to 1702, 1701, 1700.50...
- i began to think that the low for the morning may be in, and began to get just a bit anxious that my 3rd entry order at limit 1693.50, which missed getting filled by 2.50 points, was not going to get filled this morning...
- i canceled my previous bid at 1693.50 and place a buy stop at 1703.00...
- i got filled a few minutes later...
- currently long 3 NQZ09 at an average of 1714.08...
- the last two additions (1711.75, 1703.00) occurred at higher levels than i initially planned (1708.50, 1693.50)...
- part of the change in the trading plan is related to fear of missing an opportunity to increase my size because my limit order may not get filled...part of the change is also a re-analysis of the trading environment...i am not sure how much of the change in my plan is related to emotion and how much is related to cognition...
- if the change is more related to emotion, i have to pay more attention to how my emotions factor into my decision making process...the problem is, i don't know how to determine or measure how much the emotion played into the trading plan change...
- if anyone has any suggestions on how to do this, please let me know...
- i hear and read a lot on how traders are supposed to remove as much emotion as possible from the decision making process...this is part of the reason why a large part of my overall trading plan includes systemic trading models...
- i wonder if a further goal of trading is to not remove emotion from our decision making process, but to use what we are feeling and what the market as a whole is feeling, as part of the decision making process: emotion as information...
- perhaps we are not supposed to immediately react to an emotion that happens to pass through our being on any given moment (sad, glad, mad, scared), but rather recognize what we are feeling, and then cognitively decide if this is something that we need to respond to on a trading basis...what do you think?
Disclosure: Long NQZ09.
***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...trade at your own risk***
Posts
Emotions are so interconnected with the decision making process that I’m not sure we can even separate the two. What you are describing, I experience on a daily basis, mostly on the intraday level which makes position management very difficult.
ReplyDeleteWhat I would like to do is perform my analysis beforehand and just watch for confirmation along the various stages of price movement. If it confirms, I try not to second guess my original idea and just do it knowing that I’ve accepted the risk. Of course, this is all theoretical. In live trading, I’m all over the place. I’d very much like to find a solution as well.
yeah, i am not sure if we can separate the two either...if i do make a change to a discretionary trading plan, then i want to be a bit better at determining what the driving force behind the change is: cogniton or emotion? if its cognitive, then i am more accepting of the the desire to change the plan...if its emotive, then i am a bit less accepting of changing the plan...it gets pretty tricky as things get more and more subtle...
ReplyDelete'plan the trade' and then 'trade the plan', right? i find this to be a bit easier when trading sytemic models, because the entry and exit rules are binary...however, 'trading the plan' on a discretionary basis is a bit tougher, because sometimes the plan may need to be changed because of a shift in the technicals...perhaps the potential for a shift in the technicals could be added to the original plan...however, if we keep on deviating from the original plan because of our emotions, then we need to take a look at how our emotions are affecting our trading performance...a change to the trading plan may be in order or a firmer commitment to sitting through the difficult emotions may be in order...both were the case for me from the summer of 2007-summer of 2008...fear significantly influenced how i traded and i significantly underperformed my own models! i changed my plan by: 1)reducing the position size of all my systemic models; 2) removing some models that were highly corelated with each other; 3)forcing myself to sit through the uncertainty/anxiety of each trade...i am much better at the sitting these days...i still can get quite anxious, but i take each and every signal my systemic models tell me too...i am proud of myself for being able to do this...even today it remains a challenge and i have to work at it, but the amount of effort that i need to put into it is a bit less than it was 1-2 years ago...