Alistair Schultz, Chief Market Analyst, takes a look at the Psychology of Trading and some techniques for psychological self-management for traders.
Now, tonight is all about the psychology of trading. And there were a few other little pages of clinical psychology in here as well. The co-author of my book happens to be a forensic psychiatrist for more, most of his career. So I have a pretty couple of really good experts for you tonight that will reflect quite well on how you think about your own trading from home. Now, those of you here tonight, that might be new. My name is Alistair Schultz, and I am the chief market analyst for ACY securities. And I've had more than 15 years of trading experience under my wings so far, including some time working on the pits in New York of wall street. Sorry to get on the way. The first things we always have to go through unfortunately, is a risk warning about how trading can be risky.
And you need to be aware of what your risk tolerances are, what your level of your training experiences. And I sort of consider all of those things in comparison to your investment objectives and what you might need to do about your trading and your financial position. Now, if you have already considered all of those things, then you are most welcome to stay in the line. And even if you haven't feel free to stay on this webinar because it may give you a little bit more time to think about what's going on. So to get started, I'm going to talk about the psychological explanations of group behaviour and how the relevance of fear and grade play out. So fear in great are often put forward as the main emotions affecting the markets participants and sort of the reaction to the unpredictability or the volatility that we see in the market.
There are quite a number of different examples in the market where fear and greed can be used to explain market behaviour, but the effect of grade will be demonstrated wherever price continues to rise in the phase of either neutral or negative fundamentals. One example of this is the behaviour of the market during the.com bubble. And another is a continuing rise of prices in the days before the start of the GFC, examples of fear are also evident and can be seen on the other side of the two of the same of the previous two examples, fear happens more quickly once the truth of the greatest expose. And these are kinds of things that, you know, do get played out in the mindsets of people that are sort of new to trading, but there is some level of psychology involved. If you do have that exposure, then the market price offs prices fall off rapidly, and a market crash is almost always the product of a fear response.
And the easiest way to look at that is quite honestly, what's happening now with COVID-19 or even as close as a couple of weeks ago, or even yesterday, where we saw the S and P 500 tank by about 4.4%. So there is little doubt that these sort of emotions can play a role, especially when trying to describe group behaviours. But in my point of view, the importance of fearing grade Dick autonomy is overstated and other more general dynamics can be used to describe that psychology of market forces much more easily. And this has probably got a little bit to do with, you know, my prior experience with a, you know, my co-author being a psychiatrist and his explanations and understandings and teachings, which I have taken on board quite a lot of the way. And most importantly, the concepts of those fear and greed provides a limited utility for explaining the emotional life of an individual trader.
So we can't really just use those two as an example. Now, one of the next sort of psychological concepts I want you to sort of think about is actually mass hysteria. And I've got a few interesting examples for you tonight that you might think, wow, that's a little bit different, but just bear with me and I'll get to the point at the end of this. And you might have a little bit of a resounding light bulb pop up around you. So when we talk about mass hysteria as a psychological concept, it's, it's used to describe the collective or shared abnormal behaviour of groups of people. The behaviours described by my sister usually relate to the transmission of inappropriate emotions, illusions, and even psychotic reactions and their related behaviours to groups or populations. So typically the process begins with one individual then spreads to another individuals around them.
And in some cases, the population might be limited to a few people, but in others, it might extend to a very large number of people over a very wide geographical area. The concept has been observed and described for more than 500 years in different cultures in situations that are quite a number of different examples, but I'm just going to use a couple here. Now, if we a group of nuns in the middle ages who all began meowing phenomenon started with a single Nannette. It extended to all the inhabitants of a covenant. Eventually it was stopped when local authorities threatened to punish the effected individuals. Now, obviously that is quite bizarre and it was, you know, several many, many years ago, but we then have another one that's related to nuns, another nun who began biting her companions in the 14 hundreds, this behaviour then extended to other members of her cabinet and then to other covenants in nearby countries extending his effect over a hundred of miles.
And now, whilst it sounds just absolutely insane. These are actual events that have occurred and it sort of helps bring the idea of what mass hysteria is. The next one is the dancing plague in 1518 in which people began to dance in a manic way until they became exhausted. And some who became so exhausted. They actually, again, it all started with a single person and then extended to an ever increasing number of people. The next one is probably pretty well known, and that is the Salem witch trials in the USA during 1692, it's a well-known example of mass hysteria. Few adolescent girls were identified by a minister and they sort of went that this community of young women were having fits so effectively. They were epileptics, but they hadn't had the diagnosis sport. And so because of this, his assortation was this, this minister hesitation was that this meant that they were witches, which led to the wider population, developing the same sort of views.
And then the girls were executed. The process continued over and over and over the year more and more women were identified as which is by people who now adopted the ideas and behaviors and all these women were executed. So to put it in a more practical sense, I want you to think about a bank run. So back in 2007, 2008, when we had the GFC, there was a run on the bank that kind of started the whole thing. And I believe the bank was called BlackRock from memory. And so what effectively happened was, and I'm just going to list it out to you in, in a sort of easy way to think about things. It goes a small group of people go to a bank and all at the same time, and they draw out on their funds that doesn't need to be a reason for it, for the withdrawals, but what happens next sort of starts to define that hysteria site, other people in the bank seal, this happened, they then become fearful and decide to also withdraw all their funds.
These same people, leave the bank and begin to report their experiences to others. And this is important because it starts spreading through the population much like COVID-19, but this time it's a little bit more psychological. Although we are seeing great psychological effects from COVID-19 as well the new people then share their fear and take the action on their fear by withdrawing the funds from the bank as well. Then these people tell other people that I know. And then that cycle just continuously repeats and repeats and repeats. At some point, the situation captures the attention of the media. This amplifies the process. And in the end, if enough people become fearful and withdraw their funds, the banks can't actually continue. So when my sister happens in populations, which develop a strong emotion without reason, it can also be used to describe the behavior of market participant.
It also provides an alternative explanation to the fear greed, Dick geometry, for example. So as prices rise, people collectively get excited and continue to buy on the strength of a rumour or even an observation on the shift or slowing of price gains. We might see that those same participants develop fear and the market pushes lower in both situations. There is little or even no significant fundamental change to alter the behaviour of the participants themselves and all the price instruments that they're actually trading. It's really just the presence of behavioural change, affecting many people at once. So now that we have a little bit of understanding about what mass hysteria is, it can easily sort of be used to explain much of the observations of fear and greed that we see that same to control the market. Now, another concept before we get into the next bits on individual traders is about self-fulfilling prophecies, and this is going to be a bit out there, but a self fulfilling prophecy is a prediction that by its very nature causes itself to become true.
So as a concept, it was not coined to describe market behaviours, but nonetheless, it's still applicable. If enough traders are observing the market and they make similar predictions about where price movers might pause, turn or run, it follows it. They're expecting the market to do the same thing. Therefore they will all begin to make the same sort of decisions about the same time or price. Then since there are many people doing the same thing at the same time, the market will start to behave in the way it was predicted to behave. So this explains the market behavior around things like support and resistance, big numbers like double zero trendlines, old swing highs and swing lows, Fibonacci, and gun retracements. These are all sort of concepts that technical traders will be more aware of and be watching for. But sometimes they don't actually realize it's the psychological impacts that they're seeing on it.
So the signs themselves can actually cause the market behaviour to change because of these expectations caused by the similarity of education within those participants. So even the educational aspects of it sort of help funnel that idea of people all operating in the same sense of things. And if we take a look at what's going on now with COVID-19 and the lockdown situations and the radically changing prices in the market, we sort of can see that exact same repetition occurring. We can see that, you know, it started with a little bit, it's spread a little bit more, the media got wind of it. People's thoughts and opinions started to change. And then all of a sudden, now we're looking at situations where a lot of people are suddenly interested in trading. We're getting a lot of people that are wanting to short take short positions or to, to try sell in the market straight away.
So it is something that's happened and then that continues to push prices down. And then we get these massive moves that, you know, we haven't seen in a very long time. So from there, we need to sort of start considering the psychological functions of an individual trader. And that's a horrible picture I chose. I'm very sorry for that. Understanding the psychology of a group and how the emotional responses of a group to the market affects the group's behaviour is important to understand don't get me wrong. However, there's understanding doesn't help the individual understand their own responses. So developing understanding of an individual's response during your trading can help the trade them sort of monitor their emotional state and perhaps alter their responses and improve their performance. You know, trading is considered to be a performance activity, similar to a sports person or an athlete in a tournament or a musician in a performance, a dancer also performing, or even a student doing an exam, the, those sort of activities or performance activities that need an individual to be well-prepared highly focused, able to perform their skills under stress.
And sometimes it's easy to consider how someone involved with a more familiar performance activity might prepare. So, so let's, let's put it into a let's use the example of someone who plays golf. Golf is a sport that involves preparation, concentration, physical exertion, and, and usually over a period of four to five hours, depending on how often you play, whether it's nine or 18 holes, perhaps it's just a driving range. The golf golfer will usually have done countless hours of practice ahead of a tournament. If he was playing independence cup or something like that. And they'd be aware of their strengths, their weaknesses. They'd usually be trying to work harder on the areas of weakness to improve performances, but sometimes you'll get people who go, well, the weaknesses aren't going to be my strong suits. Why don't I just make my strong suits even better?
Again, that is also the counter side of it. But in the days before, you know, he has that competition. You know, the research might involve walking over the course and learning all the idiosyncrasies and planning the best way to tackle each hall. Some of the mental preparation could be geared towards improving the relaxation and the focus that's occurring especially the day before. And certainly immediately before the competition starts on the day of the actual competition practice bulls, won't be hit at the range just to have a warm up. Then you might consider being as focused as possible during the tournament and put virtually everything out of your mind to get into that zone. And this zone sort of will be accentuated when preparing to play each shot. And then it's backed off a little bit when you're walking to the next ball. So if we were to consider that sort of an idea and, and, you know, compare it to the idea of a trader preparing and engaging in trading activities, then the trading is also an activity that requires preparation, concentration and exertion to trade has also done many hours of practice and is aware of their strengths and weaknesses.
And we'll have studied many ways of improving those weaknesses and improving the performance itself. So if trading is, you know, usually a daily challenge, but you know, some traders like me will take little different timeframes or whatever it may be, but regardless the trader will spend time examining the charts, the news, the relevant information, and naturally before starting to have a trading session. So many traders do have a routine. And that comes into the idea of your trading plans. It'll involve improving your focus and attention or using relaxation strategies to bring a sense of calm. Particularly before a training session. It's a good idea to have a practice session, to get one's eyes focused in the market. Once the session starts that trader might you know, w there'll be completely focused in, on the charts and on the market. And this tends to be accentuated just like the golfer was juror and his shot.
It'll be accentuated that focus during the trade. And then it will pull back a little bit in between your trades. So from there, you know, you do tend to find that a lot of traders Dukes suffer from levels of anxiety, especially when you were trading live money. And there was a very big difference between trading demo money, real money and trading someone else's money or even worse trading a fund's money, which, you know, I can tell you, I've had a lot of excitement doing over the years, but anxiety is one of the things that does keep you awake at night with it. So anxiety in a word is it gets thrown around a lot and different people using it will mean different things. In this context, you know, I'm discussing it from anxiety, from a medical perspective. So anxiety is the body's response to danger, whether it's real, it's saved.
And it involves a series of physical and psychological responses that are mediated by the body's hormones. So, you know, from this point, you end up with the psychological response to anxiety to try and help you prepare the body for a fight or flight mechanism in the presence of danger. That's what it was, that's what it is. But when you get that sort of happening, you might even notice it when you're trading and you have that little anxiety, you know, you'll have increased breathing, right? So because of that is increase in the amount of oxygen for your body to use your heart rate will increase to increase the amount of blood flow and the ability to carry that oxygen to muscles, muscles, and others are the systems, the increase muscle tension sort of prepares the body to be able to run or fight as a part of that fight or flight response.
The brain also changes the way it functions. It tends to only focus for short periods or scanning everything else to look for danger. So this response works well when we begin to run a fight, but if we're instead sitting still that anxiety cycle leads to symptoms as side effects and the symptoms can include tingling lips, fingers, light headedness as a result of foster breathing palpitations because of increased heart rate, obviously muscle aches, headaches, tremors because if you've got increased muscle tension and, and importantly, the brain changes to defect detect further risk of danger and what is found developing secondary symptoms, which can create an increased tendency for anxiety in extreme cases, it can lead to a panic attack. So none of us ever want to have that happen, especially if you're trading or you're on the job. So anxiety has a potential to create a range of symptoms and anyone engage in performance activities will be familiar with that feeling of anxiety, whether it's a musician, the sportsman, or the golfer, a dancer, most report a sense of anxiety before a and this anxiety can be mauled, but it can include some other symptoms above traders can get anxious as they prepare for a trading session or before placing a trade.
And it can be normal. But if the anxiety increases the trader's ability to analyse multiple factors and act on them will severely be impaired. So traders may notice that at the point of making a trading decision, they make errors. These errors usually seem obvious after the trade is over, and then they might re-examine the results. But it's a clear example of anxiety interfering with the cognitive process and causing the trader to lose that clarity. And not usually in, in, in ways that you might want to have it happen. And it may not always seem obvious. So a conscientious trader will include anxiety management as a part of their education and trading preparations. Several techniques exist and can be used to help control anxiety, including relaxation therapies, and the form of relaxation, audio sessions, hypnotherapy to some and you know, there are other things such as tachy.
If, if it try to does experience significant anxiety, it's obviously gotta be important to, to do something about it. If this is becomes a full-time gig for you. And, you know, if you need to get some help from a professional to ensure that it's controlled, then you should certainly seek it out. Now, the other aspects to sort of consider when it comes to trading is you can get things called trading trauma and it, you know, it's not PTSD, but it is to a certain degree. Traders often use language suggestive of violence and aggression phrases, like the fight between the bulls and the bears. The market gave me a flogging today pretty common. And I even know of a trader that refers to his office as the war room. So in, in a similar vein institutions, hiring traders observed that their trade as a young and burnt out at a relatively young age, this is suggestive of a stressful environment that takes its toll on all the participants.
So trading is a high risk enterprise and high risk can mean that when things go wrong, real problems develop and they usually do it quickly, but these events can be experienced as a trauma and different people will experience events differently. But the final common pathway will be similar. The individual have had a traumatic experience. There is a psychological cost to that, and many things can go wrong and these events can affect anyone who's been trading when it goes wrong. It can have an impact on the trader who may not have experienced a significant or even a total loss of the trading account. The trade is family, especially if the trader success was pivotal to the family's financial wellbeing and the investors holding the account, being traded, they sort of events can be caused by the trader making questionable trading positions, perhaps trading too heavily or missing some key information that could have changed the outcome.
And the anxiety associated with trading can be dealt with some extent by improving the training, reducing the risk, ensuring a better focus. In other words, the more prepared you are as a trader, the less chance of disasters occurring. Other events can be completely out of a trader's control. They might include technological failures, such as losing a connection with the internet or a broker at a critical time, or some other sort of areas where there's no sort of care or responsibility that might be coming from an exchange. Other unexpected market change can be that they might just destroy your trading account because it was not a scheduled news release or something along those lines. And everyone reacted to it super quickly. In any of these cases, you know, the trade is life, the lives of those dependent on the income and the assets tied up with trading can be less than tablets.
So many traders will give up at this point. And I quite frankly, don't know of a single trader who has not had a significant loss, at least one stage in their life. Usually in the very first sort of three to five years of their trading history. And it's not until these sort of times, or at least in my instance, I've been trading for near and nearly 15 years now, where, and back then you didn't have educational setups to be able to give you this sort of info. So, you know, were a lot of us talking from experience when you hear this sort of stuff coming from me and, you know, often with a sense of after you've had this sort of stuff, you have a sense of failure or guilt or shame, and having lost the account, there'll be no choice, but to find another source of income and in someone's just trading con continue.
If they cause it, you know, if you've got zero balance, then you can't really go further. So those who did not lose their whole account, or even restore their account from the outside sources to me to go through a recovery process and you know, it, this will be likely to sort of include looking at the event in detail, deciding what went wrong with the position, developing a strategy to detect and defeat that problem in the future. Should it ever happen again? And you do tend to get a little bit of feeling of depression or anxiety and frustrated and even angry. It's literally a full grieving process that you go through. So this process will rarely be enough to allow the trader to move on without any impact in the future, especially for a trader working from home and not in an institutional setting. It's unlikely that the analysis of what went wrong is totally complete and going to alert them to all the other potential dry dangers, because you've lacked these shared wisdom that comes from working with others.
So if the trauma has been severe enough, you can develop other symptoms to that. A very similar to post-traumatic stress disorder, which is a well-known psychiatric condition, and it follows traumatic events. So it is normally seen after individual being exposed to cause a significant significant dangerous event in which they, or someone nearby has been harmed maimed or potentially killed. So you can't really compare the two, but some of those symptoms do cross over the trauma in, in trading may not have caused that immediate threat to life, but it can feel like at times, and there have been cases where you know, traders have not been able to deal with that and they have taken their own lives. And, you know, looking back in 1932 at the great depression, that's exactly what happened. And part of the reason why many of the high-rise buildings in trading floors in the U S have their windows permanently closed so that people can actually climb outside of them.
And so there should be no doubt that it can have serious impact and be very traumatic. The trauma that affects the triadic and can, you know, the experience problems when it is involved in trading can include general anxiety or disability, depression, withdrawal loss of self-confidence increase of doubt, a tendency to constantly think about the event and its implication, increasing patterns of substance abuse, such as alcohol and or drugs, but when sort of faced with trading, you know, some of the additional problems that you might have is the avoidance of working excessive tendency to analyse and not act. So you sort of get this fear factor where you just don't pull the trigger. And it can either be as a response to looking for additional safety or just as a method of avoidance, you get the inability to sort of feel like you can pull that trigger because the anxiety climbs exponentially in the moments before a trade is treated, and then you get a rapid reduction of the anxiety.
Once it becomes too late to enter the trade missed opportunities, become a focus of self-loathing and to trades are closely followed micromanaged, and often in such a way that the clothes are trays without any real reasons. And there's trading statistics become unfavourable for long-term profits. So recognizing that problems exist, the trader develops and traders tend to develop an increase interest in an algorithmic trading after something like this happens because they want to try and remove themselves from the trading process, as opposed to them having to click the bottom. Okay, well, if I take myself out of the process and make it an automated strategy, then it might mean that, you know, we get more trades in and it can be more controllable, but this is rarely, you know, one that works very well. So it really does still come down to the trader's ability to interpret the market.
Even if it is an automated strategy, you need to know when to put it on and when not to be using it. And those same anxiety issues will still exist. The next sort of thing to think about when it comes to trading is and the psychological functions of it is the personality style of an individual. It's, it's a pretty large topic. And quite honestly, you could fill a book just on that sort of stuff. And I'm really just going to introduce some of the more important aspects of it that relate to trading, but, you know, personality or I personally style can really be described as a collection of feelings, thoughts, and behaviours that create a unique characteristics of an individual. So an individual's personality evolves starting with genetic predispositions and is then sort of modified with exposure to a variety of different life experiences.
Exposure to trauma is a particularly potent influence on personality development and people who have been exposed to trauma in the past more likely to be sensitive to trauma in the future. And another way of studying that sort of personality style is to consider the different characteristics or traits that people tend to exhibit. Most people have a mix of traits, and it can be helpful to explore your own personality traits. So you can understand how you might react in different situations. For example, if someone has a tendency to be obsessional and focused on detail, algorithmic trading and algorithmic development might be good because it requires an ability to be engaged by the data. But if a person has trouble making quick decisions based on limited information, then scalping would become a very difficult thing for them to do. And naturally the education experience side of things will help reduce that anxiety.
So having limited knowledge and experience will naturally increase your anxiety. And if you were to consider that that someone asks you how to do something that you're not particularly knowledgeable or experienced in when you put yourself in a position to do it, it would be normal to feel a little bit anxious. If you then add to that scenario and imagine that someone including yourself could be hurt in some way by your activity. It would again be normal to feel anxious, but by comparison, someone with a lot of experience and knowledge would be able to stand in, do the job easily and likely without much stress, if any, the same situation sort of occurs in training. Yep. Many people embark on it on a career in trading with relatedly little education and experience and without the supervision or the mentoring. And when this happens, that may well be a level of excitement as it starts, but situations will arise.
Anxiety will rise and mistakes unfortunately will be made now. So a couple of little things on that, you know, there, there are some sort of ideas behind that education and, and how often you should be doing it and getting it in my mind, you know, and from our own experiences in teaching, you know, I tend to find that if someone is trying to learn to trade, then two hours of talking seriously about economic principles and all those sorts of things, maybe a week is really the limit because you need time to digest that information you need to, if it is a practical side of things, then you need to give it a go on the charts and then sort of be reviewing them as well for your own own understanding. And I've taught a number of people over the years about how to trade and quite a few of them these days are trading full time.
And that is what, what has worked for the majority of them now, not everyone's going to be in that same thing because naturally everyone has a different personality and it's always going to be different. But you know, I have always tried to give a broad range of experiences so that they might find something that works for them. Now, moving on a little bit, we're gonna, I'm going to give you some guidelines for what you can do during your trading day for psychological self-management. So we all now have a bit of an understanding of what some of the psychological issues are that affect traders. Not all of these issues are going to be relevant for all traders, but many for many, it will be. And it's important to have some understanding of the issues that might be faced because the more you have now in knowledge, it will give you a more ability to prepare or to identify when it might happen to you.
So in this little break or section I'm going to be doing now, I'm going to be taking more of a practical approach to the psychological management. And I'm aiming to sort of give you some guidance to set up and manage those psychological issues for trading. So having a think about your general preparation it means nothing more than looking after your general psychological health and the environment that you live in because trading is a performance orientated activity. The background environment makes a huge difference. Trading needs your full attention and external stresses will divide your attention. So many traders won't consider these to be issues and different types of trading may have different demands of the intensity of concentration and focus that's inquired, but it is important to make a deliberate attempt to sort of think about about what you know now and what life issues are affecting you at any given time.
It's unrealistic to expect that you you'll be able to live your life without any stresses. However, once you have awareness, you can begin to make judgment and how that could affect you. One approach is to give yourself a daily rating, you know how stressed am I today and as a score. So for example, you might go zero to one completely. Stress-Free two to four normal day today stress levels, no particular problems. And most things in life are in control. Five to six would be sort of higher stress levels, but perhaps still within the normal expectations of daily life. And my, it can include minor family related strains or time pressures, seven to eight assigns get to a most severe, and it can be related to anything, but it could include more severe family related pressures, financial issues. It's possible to be distracting from the stresses, and then not think about it for periods of time.
Nine to 10 is where you at absolute severe stress levels. It can be caused by any number of events and situations. I imagine there are a lot of people on the planet right now that are incredibly stressed and the stress will be hard to get out of your mind. And it will subjectively be felt as tension. You might be irritable, get anger or even increase anxiety. The writing level is somewhat arbitrary and subjective, but if you carry it out daily, it provides you with a means to track that stress level or time, and importantly, and more importantly, it forces some reflection on that current state of mind that you have, and with these sort of levels, it starts to become possible to make some trading decisions based on your state of mind. So for example, if the daily level is between zero and six, then trading can go on as usual, including intraday trading, which perhaps requires a higher level of focus and concentration.
However, it's between seven and eight intraday trading should probably not occur. Although strategic thinking about positions involving longer timeframes is probably still okay to do. If they're at that nine 10 mark, then you really shouldn't be trading at all because you not going to have the attentional focus to sit down and put in the effort that you actually require to make some money out of your trading. So some of you know, more, more, and that is we can talk about some of the pre anxiety management sort of things. So for intraday traders, seasonal sessional anxiety for an intraday trader can be a significant problem in the same way as it can be for other people that perform. So intraday traders have to sort of focus their skills to make those quick decisions that can have a large impact on your trading account.
It is natural that a type of nervous apprehension can set in before the session starts. However, we've learned a little bit about that anxiety cycle and if anxiety levels increase too much, then the individual's ability to concentrate and focus can be diminished. In this case, it's helpful to have a routine that helps you sort of settle that anxiety. Everyone has different strategies that help them relax. But some of the suggestions that I've found over the years, and I'm not saying I use any or all of these, but I do know a variety of people that do put in place a lot of these things. And for me, it's actually the first one, which is quiet time. So for a period of time before a trading session, even before these webinars, I actually take some time to be able to just sit quietly and relax.
And usually for me, it's outside, but it can be inside. It might be whilst I'm having a drink. And usually I put some music on that's quite chilled out. And in this sort of moment, I sort of allow my thoughts to be sort of just clear of everything. And if it's not possible to clear mine, then I find often it usually suggests that you're probably not in the right frame of mind to be doing some really intense focusing on your trade, especially if you are sort of on that scalping will foster timeframe sort of things. Now are the ones that work that I know of people that do are sort of directed relaxation hypnosis and of course, meditation, which, you know, there are plenty of traders who do incorporate that into their lifestyle. Now, when we think about daily traders and other longer term traders, which show what I, I tend to be, you know, we work a little bit differently, the emphasis is not on spade.
And so instead, you know, our analysis will include a wider range of factors, perhaps, including, you know, a fundamental backstory related to the charts and a shorter term sort of sentiment for that trading. Now, trading decisions will not be as time sensitive. The seconds don't count and most trades will be placed on the basis of pre-answered orders. However, I sometimes use printed orders, but not all that often. So for these sorts of reasons you know, precession services is not as large and it's not usually as much of a factor. However, having your mind clear enough to make clear decisions and complex sets of sort of being able to deal with complex sets of information is still critically important. So for those sorts of reasons, the same techniques for relaxing and clearing our thoughts I tend to use and, and many others I'm sure do as well.
And I know quite a few that have, but really all we're looking for is anything that improves your concentration, your focus, and that ability to sort of interpret really complex pools of information are going to be helpful. Now, if that was going on and you were to decide, okay, well we're thinking a little bit more about intra sort of session anxiety management, and what goes on whilst you're doing it, like all the performance activities, being able to sort of manage that anxiety during the performances is essential. Although trading has a little bit of its own challenge that you can't just jump up and run around all the time, or you can't put some of that energy into the swing of your golf club. So trading usually involves a lot of waiting as well. You know, you're waiting for more, you know, in some instance, you're waiting for more than 90% of your time just spent waiting and watching.
And it creates a couple of challenges from that perspective. You know the trading session can potentially be filled with lots amount, large amounts of boredom, and it's easy to lose concentration or get distracted. I know I'm guilty of doing that in my young gays myself. You know, I used to start there. I started out doing some very high frequency trading, very short timeframes, scalping, all those sorts of things. And I have migrated over the entire sort of journey. But, you know, in those sort of instance, you might be looking for a trade for so long that you just, all of a sudden get distracted. You're like, oh, YouTube, let's go have a look. Or in my instance, oh, something shiny. I'm going to walk over there. So when that trade opportunity does finally present itself, you know, it requires you to have that quick decisive action with no hesitation.
And quite frankly, it wouldn't be the first time I've missed a trade or the opportunity to get in one. So if that opportunity is missed it tends to develop into frustration. And then if the trades entered out of that frustration, some traders sort of noticed that immediate rise in your anxiety levels. So managing the session itself requires different approaches. Boredom is a factor and failing to address it can lead to miss trade opportunities. And this is part of the reason why I trade on much longer term basises because if I am sitting in front of the charts or, you know, I find that I can really only sit and concentrate on what's going on in the chart for maybe two hours before I'm, my mind is wandering elsewhere. So I tend to look, it also gives me that time to look at the positions and strategically think about them before I enter them.
And so I'm not so much worried about taking a trade right then and there, I'm more about looking for the broad range of things, picking the right things, listening to the fundamentals and thinking about them before I execute on any trades that I do know there's no one size fits all prescription that you can use. Just like you're trading, you're going to need to work out what works best for you. And that said, you know, traders that I know have used a selection of a few different things. So playing simple music that won't tempt you to get too involved in, you know, you don't want to be playing sort of AC DC while you're trying to sort of keep your mind focused because you'll tend to want to try and sing the song or, or bus out a a guitar solo, perhaps an air guitar solo.
But you know, doing that sort of works as well. I mean, but perhaps if you're into the idea of you know, you meditation, so things you might favour relaxing, natural sounds instead you can use regular reminders like computer chimes to sort of remind you to bring your attention back to the charts. If you find yourself getting distracted and using a trading approach that, you know that, that requires you to assess the trading decisions at the beginning of each new candle can sort of keep you in it. But, you know this is something that will take some time sort of develop and discover. Now, the next one I'm moving on to is probably a term you've heard of before it's called the yips. I have chosen this picture because apparently these things in the background from Sesame street and they are called the Martians.
But that's not really the point of this picture. I'm just keeping them medicate you sort of looking at something at least. So it's moving and you can bring your attention back just like the trading. So when we think of yips it's term, that's usually applied to sports and it usually means the loss of fine motor skills. And it usually applies particularly to a couple of different sports. Golf is a big one golf with the yips. We usually have trouble putting, and it can be experienced as like twitches, GTAs, maybe jokes. The condition can affect the Playa at any time in their career, including experience senior and professional players. So the term generally gets applied to traders who experienced similar problems. Traders with the yips will typically experience trouble pulling the trigger. So they see the trade set up. They, for whatever reason, can't enter the trade or nervously follow the trade, as it progresses an exit at the first sign, it starts to go backwards.
So this occurs despite their knowledge, that trading is a probability game. They have all the stuff in their head that they know a certain C's never expected, but they also report that when a trade is running, they feel uncomfortably anxious until the trade is closed. Usually it's inappropriately early. And after the GFC, when I was, I did happen to actually be working on the floor in the U S during the GFC, and I know a number of traders post GFC the big, big moves that happened were very much struggling like this to get their game back, so to speak. So it's like it's application sports. It's not really clear what causes it to occur. And also like sports that can affect, you know, the trader anytime in their career. There's no obvious reason for some people developing these problems.
And the psychological experience of the trader with the ups has elements of anxiety and dysfunction. Some thoughts about what might be related would being would, would include like a response to the inherent stresses that are associated with performance activities our response to a traumatic trade or a series of trades and a product of the individual's psychological function. So, you know, having an existence of premorbid factors within the individual themselves getting over the yips is really not easy. And some people don't actually ever recover from the experience, which means their sport or in this case, trading becomes almost impossible. And there are many, many a person out there who have had that happen that I have met everyone at times. There are a few things that can help with that though. The first thing is changed. The trading, you know, sports people with the apps will often try and change something about their sport.
Perhaps it's the grip of the club, which can sometimes be enough to settle the symptoms. Traders can do the same sort of thing. So for example, an intraday trader can sometimes reduce the impact of by slowing their trading down and moving to a different timeframes allowing trades to answer on planned orders instead, or perhaps even using that algorithmic approach. However they're still prone to sort of closing those trades earlier than usual, which still makes it difficult to be consistently profitable. The relaxation, meditation hypnosis, that sort of stuff can help ease the symptoms a little bit. But you know, there are some, it is, does become suggestive of a type of anxiety disorder. So some traders will be assisted by reducing those anxiety levels and using perhaps one or a couple of those different techniques, like the relaxation, the meditation, or the hypnosis might help it.
Another one that is a theory of sort of causation is that the trader begins to overthink over analyse their trades and trading methods. It sort of diminishes the confidence and it becomes vicious with a vicious cycle, each trading session leads to more trading failures. One moment revival one eye is your question in just a few minutes. I've just got a train of thought, like to get out before, before I lose it. So it, when it comes, so that rehearsal side, it can D you know it diminishes sort of confidence if you like, the trader will overthink, maybe overanalyse the trades and the trading methods and it can diminish confidence. It becomes a vicious cycle. So each, each trading session might lead to more failures. It can, can be caused by the yips and more analysis or in the next session and more experience with the ups.
And so on even worse, it can sort of impact the traders broader life with a loss of confidence affecting other things you wouldn't expect them to. So using the idea that a trader is over-analysing the aim is to try and sort of quieten the trader's mind to work in a more instinctive basis again. So if you start rehearsing and spend more time in simulation using perhaps demo money or monopoly money as I call it, you know, you can use those simulation platforms and practice regaining the skills without the Andrew thinking and without the danger of loss. And then once that starts working, it may take some serious amount of time. The trader can move to sort of real-time demo again and do it really slowly building back up to those live accounts again. So, you know, the live accounts we'll start small and then build back up when real time and live trading restarts, you know, so you want to implement a period of rehearsal before each trading session, much like the sportsman would do, and that can help with that recovery of the years.
So, in regards to your question, you've got, I'm just going to read it out for everyone who hasn't heard it before. So the question is in regards to try to yips how much of it is risk management related as well? Well, look, I think there's a great deal of risk management relationship, the relationship between the yips and, and risk management and just general anxiety and trading is intensely and very closely related to the money management side of things. So, you know, if you think about it, if you've taken a trade and you feel that it is you know, you are constantly watching it, you can feel that anxiety side of yourself watching what's going on, then it is likely that the position size you have taken is too large. And I actually had one of my one of the guys that I have mentored over the years, getting contact with him, not even three or four days ago.
And he was saying that, you know, he's gotten into a position is sent me all the pictures for it and said, what do you think of this? And I've gone, well, I think that's not a bad trait. And then he's going to I'm. So, you know, and then about half an hour later, I pulled out of it and I was like, oh, why, why did you do that? There was no reason to so get out of what I can say. And, and he was saying that he was just feeling anxious from it. And I started talking to him about the, the lot size that he was using. And in his instance, he was trading about five lots at once. And you know, I know what his account size is. I'm not going to say exactly what it is, but he was overtrading. And I said, you know, how often is this happening when it comes to that anxiety stuff?
He said, oh, it's pretty regularly. Okay, well, so in my mind, I sort of talked and talked through the process a bit and we narrowed it down to you know, it really was a part of, he was developing symptoms and general anxiety issues with his trading, mostly because he should have been trading perhaps a one-month position at most, but was severely over leveraged. And so he was seeing the, whenever it would go against him, it moved very, very quickly when it was up, it was up, but then he started noticing that it would not end up in the position that he'd want, cause he'd pull out early or whatever it may be. So trading too heavy and having, you know using too much of your account balance is certainly something that is going to give you a large amount of it towards your risk management side of things and it's relationship.
So those risk management or the money management principles are incredibly important not just from, you know, the profitability of your account perspective, but also your anxiety perspectives. And if you are trading too heavy, then you will end up with some severe anxiety and vice versa. I mean, realistically, you want it to be as relaxing, as calm as possible. So if you are taking sizes of trades too big, then it's going to affect the outcome for you. I'm hoping that's answered your question a little bit. Of course, if you have any more questions, revival one then feel free to put it in. So from there, I'm going to sort of talk about a few other little things. I do have a couple of other suggestions to sort of help with some of the psychological aspects of it. You know, obviously if there's issues, you know, professional sports people routinely use sports psychologists and things like that, to help them with issues, including the hips.
So trade-ins traders tend to be a little bit more reluctant to consider that sort of thing. And there are far fewer psychologists or psychologists, psychiatrists who have experienced in managing these sort of problems for traders, but I'm sure a sports one would be able to relate it quite well. Nonetheless, if you do develop some problems like this, you know, it's important to sort of get some professional help sooner rather than later, or you can risk an early end to create. The other part of it is becoming emotional while trading is a constant risk. And when money gets involved, it is all too easy to become emotionally invested. So if you take a number of losses or even a single large loss frustration, and anger can develop, if you take a series of winners and particularly Goodwin, elation, and excitement can develop on the whole, this is not really a desirable response and increases the risk that your trading process will be negatively affected by emotional decisions.
So instead of an emotional response, it's perhaps better to try and treat everything as nothing more than just doing business. So personal, it's not emotional. This is only possible if you know what to expect. So this means that you'll have an understanding of probability. You understand that wins and losses can occur in runs understanding the extent of these wins and losses. You might use trade sizes that are small enough that no single trade carries a large risk. And that is one that you might want to take to have a think about as well, considering your question revive one. So understanding, you know, your own trading methods as well, and having a good understanding of what those outcomes are expected to be. So this means that dealing with success or failure should be neutral. A winning trade is no reason for a relation any more, a losing trade is a reason for depression.
They both the same with winning and losing trades, both representing a normal part of the trading process. So it is mathematically a mix of wins and losses with the risks and rewards that is important. Another aspect you can consider is journaling keeping an emotional trade journal is often used by some guys that I know in the sort of in the, a very high up trade flow rooms, where they have emotions running high all the time. And it's helpful to them to sort of manage and manage that trading anxiety. So the rationale is behind it that by journaling and, and in addition to basic cognitive process related to trading, you'll, you'll also be noting your emotional state and reflecting on it. In my experience, it does help, but it is not the journaling itself that helps it is the reflection that goes with it.
It helps to sort of reflect on your emotional state and, and consider what you were feeling whilst you were trading. And then this sort of helps you control your emotions on the next occasion occasionally as, as a, as a type of negative feedback loop. So from there, I've, you know, this is really sort of moving into the end of the webinars and nine, I'm not actually sure how all I've gone over time. I'm sorry. But after you've done this chapter or, or you've spent this webinar with me, I suppose you would say you should sort of understand that you've got fear and grade as being a popular concept. The discussions of psychological functions of traders is, is sort of overstated and that other psychological factors really play a more important role than what those fear and greed principals do.
The massive Steria side of things is a powerful drive that can really influence the behaviour of populations and it's been described for centuries. So from that, it has played roles in bankrupts and the Salem witch trials. And of course in market prices, especially when we get a sudden change in price or during the market crash like we're seeing now. So, you know, keep those in mind the self fulfilling prophecy I spoke about at the beginning as well, you know, that concept sort of helps explain why groups or trade as tend to do similar things at similar times, if, if you have a large group understand something that is likely to happen at the same time, such as resistance, that a big number, or then you will find that, that that group will tend to behave in the same way.
And, and this creates the price reaction and naturally trading is a performance activity, just like golf and professional athletes. You need you trade as a prone to working in higher stress environment. So every action can count towards that overall performance. And the more we sort of try and control the anxiety, which is a normal part of our day to day life. But, you know, when it becomes excessive it can cause symptoms that will disrupt those normal functions, including poor concentration and memory with increased tension. And those increased levels of anxiety are not going to be conducive to good trading. And in some situations to try to may become traumatized. So if you're having those sort of experiences, they might, you may end up with the hips as well, and it can be all of them together can really be crippling and they can bounce out of the trading side of things and into your day to day life.
So it is very important to monitor how these things happen. So the homework that I have for all of you tonight you don't have to do it. I'm not going to mock it, but it is something for you to further explore if you decide to do so. I want you to consider how you've experienced stress and anxiety in the past and reflect how it affected on your function and then consider what method you currently use for management or stress and anxiety. And then perhaps do some research into other anxiety, stress related management tools and strategies. And that might include some of the ones I've mentioned that I like relaxation therapies or simple breathing exercises, even. And if any of the discovered techniques that I've explained to you tonight, or some of the stuff that you find appeals, you try and practice them and try and begin to integrate them into your sort of day-to-day life.
Even if it's just to start off with try practicing it before you trading but the more you do it and the more you practice it, the better it will involve. Now, that's really the end of the webinar. If you have any questions, feel free to put them in the chat box. I have run over time by a couple of minutes, but I will go through and I am, I've added a new component to my slides tonight, just to make people a little bit more aware of some of the other services that I offer. So if you are trading with ACY, then you may know about fin logics, which is their trading platform that they use. And it is a little bit social. So I actually post trades on here every now and again when I have a a couple of trading ideas, mine tend to be slower, but there are a few other analysts in there who put their trading ideas in there as well.
So, you know, that is something to definitely have a look for, especially if it's a night where you are not having any of the anxiety, anxiety related issues or anything like that, but you are considering placing a train and just a little bit uncertain. There are some opportunities in there that sometimes it happened. So you can have a look, check them out and have a think about whether that fits into, you know, your trading environment and your risk tolerance levels. And of course, if it agrees with how your trading goes for you and what your personality suggests or what you may like in your trading. Now, the next one to consider is I've, I've been doing blogs and video posts for quite some time for ACY securities. So they have a YouTube channel and the web page that you S webpage that you sort of the HDP link, whatever you call it nowadays shows where my blogs are.
And that's a picture of me on the bottom left. If you wondering what I look like, and you haven't seen them but I post these on a pretty much daily basis. We have video ones and if I find something interesting I don't really like writing, even though I've written a book I don't like writing logs. I like to write about things that interest me. So whenever I find something that I think is interesting, or I think people should know about that, I tend to write about it and I tend to talk about it. So feel free to check that out. Sometimes I have trade ideas and the videos sometimes it's more about the fundamental side of, or thinking about things and how we might be able to consider them moving forward for some of our own trading. And the next one is obviously if you have you I'm assuming most of you have seen this page, which is the webinars page.
And these are all my webinars that I do. So Tuesdays are always a live trading analysis. So bring your charts down. I will quite happily mark them up and talk about the fundamentals and see if I can find the patterns. Sometimes we take a trade. Sometimes we don't, I never know what's going to happen on the day. It does get exciting. Sometimes it's just the webinar. It's nothing, nothing special. I made myself laugh. I have no idea if he thought that was funny, but, you know, I did. And then the final one. Now, if you haven't seen some of my videos, I have this surface here. So if anyone ever sort of has a question if I get a number of questions about the same topic I will generally make a video about it. But if you have a general question or perhaps it's something to do with the webinar, what Jay, maybe, maybe you just want a, an opinion on something about, you know, the psychological matters or perhaps some education sort of techniques or whatever.
It may be a way you should go next. Then feel free to send me an email. Now I haven't seen anyone else putting any questions in. So I made a fantastic at my job and everyone understood absolutely everything I said with crystal clarity, or you might still be thinking about them. So if you are feel free to send them to that email address, that's on your screen right now, I am going to sign out right about now. And I thank you all very much for attending tonight, and I hope that you will get some benefit out of these videos moving forward and all these webinars moving forward. So I hope you all have had fun and I will see you all next Tuesday for the live analysis video. Alright, have a good evening.
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