Here is a link to my interview in the August Issue of Stocks and Commodities Magazine.
Read it and learn why H + W + P = E will change the entire way you trade and think about risk.
Trade well, Dr. Doug
Posts Tagged ‘dr.doug’
Stocks and Commodities Magazine Interview with Dr. Doug
Saturday, August 14th, 2010False Beliefs About Trading the Markets
Saturday, August 14th, 2010Choppy markets can cause investors to bleed out profits. To stay ahead in the trading game, you have to avoid buying into these five common false beliefs about Trading the Markets:
1) What goes up must come down and vice versa.
That’s Newton’s law, not the law of trading. And even if the market does eventully self-correct, you have no idea when it will happen. In short, there’s no point blowing up your account fighthing the tape.
2) You have to be smart to make money.
No, what you have to be is disciplined. If you want to be smart, write a book or teach at a university. If you want to make money, listen to what the market is telling you and trade to make money — not to be “right.”
3) Making money is hard.
Nope. Sorry. Making money is actually easy. Statistically, you’re going to do it about half the time. Keeping it, now that’s the hard part.
4) I have to have a high winning percentage to be profitable.
Not true. How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula:
Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability
5) To be successful, I have to trade without emotions.
That is both wrong and impossible. You are human so you have emotions. Emotions can be a powerful motivator to your trading.
When you feel angry or scared in trading, take that emotion and translate it into something more productive. For example, if you’re feeling angry because you just got run over by the market, view that anger as a reason to be more focused and disciplined in your entry and exit levels on the next trade.
Trade Well,
Dr. Doug
Wall Street’s Premier Trading Coach
Sunday, July 18th, 2010Optimistic data doesn’t always mean it is time to invest. Here is why investors are still jittery.
Volatility creates Opportunity for Traders Who Can Look Past the Noise
Friday, May 7th, 2010ProfitPhobia
Monday, April 26th, 2010“ProfitPhobia”
The Fear of Giving Back Money
You know why many traders fail to make more money? The answer is oddly enough because they are too worried about giving back money. This overwhelming fear, which I call ProfitPhobia is what transforms the talented elite to disappointing underperformers. By the way, for athletes, it is much the same. As soon as an athlete starts to focus on “not losing” rather than “winning” the game is over, many times before it has even started.
How many times have you been up in a trade and started to think about the money. Your head tells you to bank it quick and then play it safe. Don’t want to run the risk of giving it back. After all, you made your mark for the day or even week so your job is over. Bad thinking, buddy as that mentality is not being a trader that is being an accountant. You have just allowed yourself to shift from a printing press to a savings account. I have worked with elite traders for close to a decade now and I can clearly say that trading is an occupation based on fleeting moments of opportunity. Here one second, gone the next and totally out of anyone’s control. And the best traders love it and even crave it. When the action is there, they are prepared and trained to strike and strike hard as they have no idea when the next great trade will appear. It’s like fishing. You can be out there all day and not get a bite, but then when you hit a school of tuna, you better have your rods ready and baited to maximize this brief window of opportunity. After all, at the end of the day, all that really matters is how many pounds of fish you caught not how long it took to catch them.
Gary is a private client of mine who suffered from a bad case of ProfitPhobia. He does all the right things as a trader. He sets goals, he takes losses, he makes only high quality trades but what he fails to do is to get big when he needs to really hit it. The reasons behind his fear are very reasonable. He has a conservative personality, likes the comfort of stability and consistent income, has a family to support and a lifestyle to maintain. He consistently makes low seven figures a year and by all accounts, Gary should be satisfied as a trader and with his career but, unfortunately, he was not. After years of sitting by and watching less talented traders make exponentially more money than he did, he finally concluded that he wanted more not because of greed so much as because he just knew he was capable of doing more and taking his game to the next level. Enter Dr. Doug.
After working with Gary to isolate not only the issue but his core motivation for wanting to change, I was able to implement a structured behavior modification program for him. You see, it wasn’t that Gary didn’t want to change, it was that he was so afraid of changing and how it would impact his comfort and stability, that it prevented him from actually ever changing. The key to this program was to literally force Gary to step outside of his comfort zones. We developed guidelines that he was to follow to force him to increase his position size. If he did not follow his rules, then we agreed to impose severe consequences. The purpose was to get him to be more afraid of the consequences if he failed to move outside of his comfort zone then of his ProfitPhobia.
It took a few months and Gary was able to achieve a 250% increase in his position sizing and become more profitable. The goal of our work together was not to change his personality and eliminate his fear of giving back money. After all, we are who we are and Gary is Gary. He will always be the conservative, stability-liking and comfort-seeking kind of guy. Instead our work was designed to give him strategies to make sure he was trading to win rather than not to lose.
Trade Well,
Dr. Doug Hirschhorn
