Sunday, 30 October 2011

In Sultan I Trust

I've had a dreadful week. From Monday to Saturday, I just haven't been at the races. I probably needed a day or two off to refresh and relax but I was on a high from last week and there was no chance of that happening. I'm pleased to report that Sunday saw me back to my best and I finished the week with a good enough day to actually put me in profit for those 7 days. Which I'm quite astonished at really because almost every single game I've traded this week has fluorescent blue swiped across it, marking out the mistakes. There were even a load of notes in block capitals, which I only write when I'm seriously pissed off at my stupidity!

I'm glad that I didn't look at my P&L until after the final match again, as it made it a really nice surprise end to the week. What really pleased me most was the fact that despite 6 days riddled with daft errors, mostly due to lack of focus, I still managed to make some money. I've always maintained that if I can come out of a bad spell relatively unscathed, then I will become successful because I know I will make money in a good spell. But I really should have taken a day off on Tuesday, as soon as I realised I was struggling and it is something I won't hesitate to do in future.

Another pleasing aspect was that I have managed to sort out my strategy for the ATP. It worked beautifully in both finals on Sunday and I feel that I now have an approach for both men and women that I'm happy with and has great potential. With just a handful of WTA matches remaining this year, I will have to put all my energy into the ATP and so I'll know by the end of November just how much potential is there. I have no such worries about the WTA, which I've always been better at trading and I just wish it was January already so I could get stuck in and finally make some decent profit!

Overall, I feel I'm on the right track both psychologically and strategically. Until recently, I had often woken up in the morning and before I started trading I would think to myself 'I have no idea what I'm going to do today!'. I knew that anything could happen; from being in complete synch with the markets and winning every single trade to losing hundreds or putting my entire bank in jeopardy. I just didn't trust myself at all! Now, I honestly think that I can trust myself not to do anything that will wreck my bank. I haven't had a big loss in weeks (not since that Fernando Torres open-goal-miss game!) and have not put any sizeable chunk of my bank in danger since the Arsenal-Spurs derby at the start of October. In fact, I've not touched a football match since and my biggest tennis loss has been £50.

I think those matches really gave me a kick up the arse and forced me to do more and work harder at sorting out my mindset and a month on, I genuinely feel different; more in control. So my new goal for the forthcoming week is simply to remain focused - because I know if I am professional and at my sharpest, I trust that I will not be going backwards ever again.

Friday, 28 October 2011

So Near, Yet So Far

Well, I definitely lost the psychological battle this week. All week I have been struggling to focus. I don't know why but it's probably a combination of factors. I was drained from last week, tired generally, have let my exercise routines slip and have not re-stocked my supplements which aid my concentration. Maybe I took my eye off the ball slightly too. Whatever the reason, I found my mind wandering too often and it affected my trading. This was how I felt for 2 whole months back in the summer and I do not want a return to those days. It's been a real let-down after the highs of last week - what was I saying about false dawns?

With the WTA coming to its finale this year, I have really struggled with the ATP, as it isn't as conducive to opportunities for my strategy. It's something I was hoping to work on during the final few weeks of the season but I'll need to be in a much better state of mind in order for that to happen. I have resigned myself to the fact I'm going to need at least another month before I get my bank up to a level where I can be considered 'comfortable' and there is not enough tennis remaining for that to happen. I'm really now just hoping to get everything prepared and ready for next season, so that I start in January with no remaining question marks hanging over anything.

There's always that feeling with me that I am so near, yet so far away from making trading successful. I'm closer than I have ever been before but something always seems to crop up and set me back just as I feel as though I'm getting somewhere. Mentally, I am much stronger now and feel that I am free from all of the rash things I have done in the past. So I'm not worried about blowing my bank or going backwards for weeks on end or chasing on football or seeing red mist for several hours. Those days are gone. It's just the little errors, the brief moments of lost concentration, the tiny lapses of patience, that get the better of me every now and then. It's that consistency in all aspects of trading that I can't quite seem to pull together for more than a few days. Hopefully, another few weeks of getting used to my new approach should make the difference.

So the final month will involve ironing out any lingering issues so that I'm 100% certain of what I'm doing for a final tilt in 2012. Because if next year doesn't work out, I will definitely be quitting.

Tuesday, 25 October 2011

The Psychological Battle

With my strategy now pretty much settled, I will this week be concentrating mainly on the side of trading that has given me the biggest headache since day one - psychology. I have been guilty in the past of thinking that the changes required in my mindset would happen naturally, as I became more experienced and gained more knowledge. I'm sure that for some people, they will gain that mindset naturally with experience but for me (and I think for most traders), it will take a lot more than just blind faith. What I'm saying is, in order to attain the perfect trading mentality, most of us have to be prepared to do more to change. Reading up on trading psychology in financial trading books has given me great insight into what is required but knowing the theory is one thing, putting it into practice is another. That is why I have tried to come up with plans and practical tactics (Talking, FPD Plan, The Beach etc) to get my head sorted.

What I've found a real help over the past few weeks, is to concentrate on one specific problem and set it as a daily or weekly goal to improve. I did this when I started focusing on improving my frustration levels by 'going to the beach' and that is now steadily getting better. I also wanted to stop fixating on monetary targets, so I got rid of the option to see my balance on The Toy. I was shocked by how often my eyes kept flicking towards the section on-screen where my total bank used to be displayed! Every couple of minutes I'd be automatically looking at it, showing just how obsessed I must have been to get that figure to a certain amount. After 2 days, I stopped looking and now, I hardly even think about what my balance is. Last week, I didn't even know what my profit was until after the final game on Sunday! And it has definitely made it easier to focus on each individual match without being affected by what I feel I need to be making.

I've said it before and I'll say it again; getting the right mindset is the hardest thing about trading. Finding the right strategy and learning the sport and the markets is something that anyone can do given enough time. You can change your system and gather more information easily. But changing the way you think, usually requires a massive amount of work and I don't think most traders realise how important this is. Your mindset will not change over-night, you have to put as much effort into sorting your head out as you would do testing new strategies or sifting through statistics or analysing the market. But I know for certain that most people don't spend any time concentrating on the mind. So if you have problems with the psychology of trading, it's no good just sitting there and hoping it will magically improve of its own accord - it won't. And no amount of staring at the ladders will ever change that.

Sunday, 23 October 2011

False Dawns

No one is more guilty than me of thinking that things are finally about to turn and that I might just have cracked this trading lark. I've done it on several occasions this year: January, May, August and again this month. But now, I feel that it really is more than just another false dawn. The other 3 times, I had a totally different strategy that I struggled to make work consistently. This time, I'm a lot happier with my whole approach.

When I made the switch from my old way of trading to the new one, I underestimated how long it would take me to fully adapt to the changes. A good start can give you false impressions and I was guilty of believing that one good week and a couple of outstanding days, meant that I had finally made it. Wishful thinking. A difficult period has followed and I discovered a few cracks that needed filling in. This week, things have started to click into place. I have moulded my new approach into something that I can now say has real potential.

I have a strategy that finally suits my personality and has considerable room for growth in terms of the profit I can make in future. The new approach is much easier to implement than my old one. As a result, the old focus and patience issues that have plagued me throughout my trading life have now vanished, as I don't require the same high levels of intensity and concentration. My other major issue has always been discipline, especially when redding-up. This is now just a minor issue because my new approach does not use the large liabilities that I used to risk. My largest loss was £50 this week and every other loss was under £40. This is the first week in a long time where I have felt really in control and that I'm progressing quickly. It's only one week but the hard work I've put in sorting out my frustration levels and moulding a new strategy, is now bearing financial fruit - and I badly needed it to.

Is it just another false dawn? Too early to say but my trading has undoubtedly stepped up another level.

Monday, 17 October 2011

Wry Smiles & Mexican-Waves

It's been a tumultuous past week. I can honestly say it's been one of the most difficult I've ever had as a trader. My biggest problem has been that I have still struggled to fully commit to my new strategy. Basically, this entails trading the market and taking good prices as opposed to trading the match and trying to predict who will win the next game / set / match. I did not realise quite how ingrained it is within me, to throw down money on the favourite or the player showing the better form on-court, without really thinking much about value. It has really proved frustrating this week because almost every time I've done this, I've lost money or gotten myself into a sticky situation. To compound the misery, almost every single time I've spotted an opportunity to follow my strategy correctly, I've chickened-out! And I've missed out on some fantastic profit because of this.

Something is holding me back from completely going for it and I know what it is - anxiety. I'm worried because the season is coming to a close and my bank is really small and I just don't seem to be getting anywhere. I look at what my profit SHOULD be and it just infuriates me even more. I'd be hundreds of pounds in the green yet instead, I'm hundreds in the red. There's no worse feeling in trading than knowing you would have done far better if only you'd done what you were meant to do.

Of course, that is a also a positive. I clearly have a strategy which appears to be successful when applied correctly. I should also add that I have really started to get to grips with my frustration issues. I am now much more accepting of my mistakes and losses and am starting to trade in a much calmer manner. I haven't really done anything rash this week, which is a step in the right direction and I have always remained positive and tried to wipe the slate clean mentally, before each game. Trust me, that hasn't been easy because I've made a lot of mistakes! It's been a very draining week emotionally and I've had to fight against all my natural urges but I think that it will stand me in good stead. I think you have to put yourself through these situations to find out how you will deal with them and work out how to over-come them. It's all about whether you are able to analyse correctly and learn from the situations and I believe that it is all finally sinking-in to a level where I am close to achieving the trader's mindset that I've always longed for.

It's been a week where nothing has gone for me. One of those periods where when I've done the wrong thing, I've been punished pretty much every time and when I've done the right thing, I miss out on profit by one point or see 0-40 pulled back to deuce or players miss sitters that you and I and even Fernando Torres with a tennis racquet would put away with ease. I've flung my arms into the air so much that I could be a one-man Mexican-wave, shaken my head in disbelief more than an England fan at a world cup and flashed so many wry smiles that to the casual observer, it may have seemed as if I have been enjoying myself. I haven't. It's been hell. I don't even know how I have managed to keep it together. Maybe all my experience is finally bearing fruit. The only problem is, it may be too late.

Monday, 10 October 2011

Daily Goals

In total, I went to the beach on over 25 occasions over the past 4 days! There is no doubt whatsoever that this extra analysis of my emotions is already reaping rewards. Once I'd done it a couple of times, I noticed that I became quicker to spot that first point where frustration begins and managed to nip it in the bud before it reared its ugly head. Together with the talking technique, I can already see improvements in my emotional state. I am still making errors and it's been a disappointing week but the difference to previous disappointing weeks is that I am not losing money anymore. I have been able to pinpoint the psychological issues that are causing me to stagnate in my progress. Three major problems came to light:

1. I am still sometimes reverting to my old strategy and trying to guess who is going to win, rather than trading the market

2. I often try to trade too many games at once

3. I am placing emphasis on monetary targets

Number 1 and 2 should be easier to stop. They arise purely out of trying too hard to force a win - it's impatience. Number 3, I didn't even realise was such a big issue.
I have often stated on this blog that I don't set any monetary goals. I think any profit-related goals are a hinderance, particularly daily ones. That said, in the back of my mind, I do want to attain a certain amount of money each day and have always been affected psychologically by how big or how small my profit was when my head hit the pillow each night.

I think I have always believed that I could make a certain amount of money and would be able to get close to that amount every day, as long as I traded correctly. I now realise that this is complete foolishness. It only puts pressure on you before you've even started and that pressure and stress is only going to increase every time you have a losing trade.

Why do we put such pressure on ourselves to reach goals each day? A day is just a period of time based on the patterns of the sun. Why should it matter how well we do in a particular 24 hour period? If we have a good day followed by a bad day, it doesn't mean we are becoming a worse trader. It just means that we made more money in the first 24 hours than in the second 24 hours. In the big scheme of things, it means nothing because it only matters what we do in the long-run. Yet so many traders can't see past what they have done since they woke up and then went back to sleep. Have I made back what I lost the previous day? Have I hit my daily target? How much will I need to make tomorrow to recoup the shortfall from today? I feel great because I had a profitable trading day! I feel like shit because I had a losing trading day. None of that should matter!

It's only a short, insignificant period of time and therefore it shouldn't be labelled as good or bad, especially as it is going to affect how you approach the next day. Looking closely at my emotions has made me realise that I expend far too much energy worrying about hitting targets, feeling good when I switch off the PC and what mood I'm going to be in when I wake up next morning. I should be viewing time as one continuous period, rather than compartmentalised chunks of hours.

Each day will bring different opportunities and different ups and downs which we can't control. If you can accept the ups and downs then it genuinely won't matter what happens in any given 24 hours as long as at the end of the month or quarter or year, you are able to pay the bills. I've gotta tell you, it's a real relief to finally accept this. It's very tough mentally, to not think in terms of day to day but I know that from now on, it will help me relax much more.

Friday, 7 October 2011

Emotional Pressure

A couple of people have asked me 'How can you still make the same mistakes with all your experience?'. They don't understand how someone who has been trading as long as I have, can still lose the plot out of nowhere or can still make errors that novices make. Well I can answer that easily; human emotion. That's what makes this game so hard. We are constantly battling against our own natural emotions when we trade. With time and practice, we can learn to control those emotions better but that doesn't mean that those urges and feelings completely go away. We are always going to be frustrated when a trade doesn't go our way, it's only natural. But we have to learn to deal with it. We are always going to get anxious when our bank starts to dwindle. We are always going to get stressed during a bad run of form. Successful traders just get better at accepting these emotions and dealing with them.

When you rely on trading as a source of income, those emotions are stronger - much stronger. And that is why even experienced traders are never totally immune from doing silly things. The pressure, stress and anxiety involved with full-time trading is immense, especially when things are not going well. Some of the mistakes I've made recently as a full-timer, I would almost certainly have not made as a part-timer. Why? Because there wasn't the same amount of pressure to make money or to protect what I have. You can always reload your bank if it gets blown when you are part-time but if it's your only source of income, that bank is all you have.

The stress of knowing that can make you do stupid things in the heat of the moment, as your emotions run wild. And the more you make mistakes, the more frustrated you get and the worse your mindset becomes. Before you know it, it's too late - you've pressed the self-destruct button (otherwise known as the mouse!) in a moment of panic. All the experience in the world won't necessarily save you when you are straining under the pressure of bills to pay, a roof to keep over your head or family to sustain. The anxiety of needing money can cause you to lose patience and can make you start trying different ways to make cash, such as betting on other sports, changing strategy or forcing opportunities that don't exist. People will say 'Lower your stakes' or 'Take a break' but it's not so easy to do that if it means you might struggle to make enough to survive on.

I've said before that I should never have gone into full-time trading as soon as I did. Even if I started today, I wouldn't be ready. I worked out that this week so far, if I'd held it together and done the right things, I would be +£500 in the green. Instead, I'm £10 in the red. That's all down to pressure affecting my emotions when I trade and making me panic. Overall, it's only a handful of trades that make the difference, showing just what a fine line it can be between success and failure. And when you have such a fine line, it's so easy to end up on the wrong side of it when your emotions take over.

Other experienced traders have written about this pressure. Tradeshark mentioned once in his blog how he went through a rough period where he lost confidence. Caan Berry over on 'Trading the Exchange for 28k in 2011' is currently discovering how personal problems can ruin your trading. My pal Average Guy on 'Betfair Trading Challenge' has been struggling for years to overcome issues that affect his trading, whilst Betunfair forum legend John O'Dwyer on 'Betfair Profit and Loss' has been unable to recapture the highs he experienced as a full-timer last year, right through 2011. And these are just the select, honest few. There will be thousands more who struggle or fail to get over the emotional pressure.

And so if anyone wonders how someone can make such poor errors even after such a long period of trading, I'll just say this; you never know how you will react until you are put under extreme pressure, either financial or from your personal life. You just have to hope that you never find yourself in that position.

Wednesday, 5 October 2011

The Beach

A few years ago, just before I discovered betting exchanges, I went on a round the world trip for a year. It was the best year of my life, fulfilling a dream I'd always had to travel. During that time I backpacked through India, South East Asia, New Zealand and the Pacific. One of my most memorable days was spent on a tiny Fijian island. I spent Christmas Day relaxing on a totally secluded beach. There was no resort on that particular beach, it had been kept completely as nature intended and I was the only person who ventured onto that stretch of coastline for the entire day. It was literally just me, the sand, the sun, the rainforest and the Pacific Ocean - perfection.

Today, I will be incorporating the memory of that Christmas Day into a new strategy to enable me to overcome my issues with frustration. It is apparent that no matter how well I analyse, plan and discuss tackling this mental problem, it all tends to go out the window once I'm inside the trading bubble. So I have to find a way to stop those emotions from resurfacing before it's too late. I've used self-hypnosis, time-outs and breathing techniques in the past and whilst they all work to an extent, the effects either are too short-term or I don't stick to performing them. This new strategy will incorporate all of those three techniques.

The key to dealing with frustration is in 3 phases: Awareness, Relaxation, Reflection. Firstly, I must be aware of my emotions. From now on, whenever I feel the first flushes of frustration, I will stop my trading immediately. Relaxation will involve closing my eyes and picturing that secluded beach. Using breathing techniques I learnt from hypnosis, I will calm myself down whilst recapturing the feelings I had when I was on that beach. It was the most relaxing and peaceful moment of my life and every time I think of how I felt whilst lying in the shade of a tree or paddling across the clear turquoise lagoon, I feel fantastic. I have never felt as free. I remember watching a blue star-fish turning itself over, a large, white bird trying to catch fish on the shore, little hermit crabs crawling around my body, the untamed tropical rainforest behind me and nothing at all in the distance, just the skyline and the endless expanse of blue ocean. It was nature at its purest.

This should snap me out of the trading bubble for long enough to enable me to reflect and rationalise the situation. I have no problem seeing the error of my ways before and after trading is over for the day. But during it, I seem to get lost in the emotion because I want to succeed so badly and I want to make a better life for myself as quickly as possible. But the emotion gets in the way of the actual trading. 'Going to the beach' will be my equivalent of what tennis players do inbetween points, where they either go for the towel or face the back of the court - re-setting their mind to focus on the next point. Awareness, Relaxation, Reflection - my new mantra!

Tuesday, 4 October 2011


It's amazing how when you put a spotlight on your emotions, you notice so much more about the way that you think and act. My plan to talk to myself more has already revealed a lot about my mental state when I trade. I didn't realise quite how easily frustrated I am. I thought it only surfaced when I made a major error but in fact, frustration is always right on the brink, ready to explode with the most minor of incidents. I really had to work hard to keep a lid on my emotions on Monday and almost every game produced a moment where anger or frustration threatened to boil over. I didn't even have a bad day, in fact, I ended in profit for the 7th day running. On Tuesday, that run ended.

It's been a while since I have shown a losing day's P&L but I think this one will benefit me. I started fine and was very unlucky not to go all-green on the Pavlyuchenkova and Zvonareva games. But immediately, the fact I missed out on two wins by just a point or two, got me worked-up. Of the following 10 games, I tried to force a win on 9 of them, getting more and more frustrated as each match went by. You can see how the last 2 games have the biggest losses and that is no coincidence. By that time, I was completely pissed off. It was one of those days where opportunities were thin on the ground and when they did arise, I missed them because I was too busy getting involved in games I should have just left. No matter what I did, it wouldn't come off. Looking back on each individual game, here is what I would have made if I'd done the right things:

Pavlyuchenkova v Martinez-Sanchez -£12

Zvonareva v Zakopalova -£5

Stosur v Kirilenko +£30

Berdych v Melzer -£6

Suarrez-Navarro v Petkovic +£20

Haase v Giraldo -£4

All the other games, I should not have even placed a trade at all. So I would've been +£23 for the day - not bad considering how few opportunities arose.

So it's going to take a lot more than I first thought to sort out this deep-seated level of frustration. It all stems from that old bug-bear 'impatience' and also my own shortfall of being a perfectionist. But it can be worked on and I'll continue to better myself until the day comes when I can accept a mistake or a loss. Talking went out the window as the day went on but at the start I was fine and over the last two days, it has proved to be a very effective tool. I need to keep it up through the tough times. Most days will not be this difficult, so I have to learn that if I stay calm and do the right things, I can even make money on a bad day like today.

Monday, 3 October 2011

The First Sign of Madness

Quite frankly, yesterday scared me. I was having my all-time best week for ROI, one of the most profitable weeks of the year and had tripled my bank in just 7 days. Yet I STILL almost blew an entire bank out of nothing. Following yesterday's self-destruction, I have decided to put all my emphasis this week on sorting out my obsessive over-reaction to mistakes. Whether it be losing a green position, failing to get matched or not following my strategy properly, it seems that I cannot let it lie, no matter how small the amount.

They say that talking to yourself is the first sign of madness but in trading terms, I believe that talking to yourself can actually prevent you from going crazy! Externalising your thoughts as you trade, is a technique I've tried to use consistently for a while now. I find it helps me to focus better and rationalise the situation I'm in. The problem is, I have struggled to maintain the talking, especially during games where I'm not doing well. I have a tendency to go quiet and my internal thoughts become a jumbled whirl of confusion.

I find that having all those conflicting ideas of what to do next swimming around inside, can cause me to make irrational or incorrect choices. But when I talk out loud, I am able to guide myself sensibly through the situation and tend to choose my options better. For some reason, the evil little voice inside seems to shout louder than the sensible, good voice!

I also think it will help with my anger / frustration issues. They appear to have resurfaced in recent weeks and I have struggled to keep a lid on my temper. I think the anxiety of having a dwindling bank has made me more frustrated at even minor errors. Talking can aid in calming myself down and enabling me to rationalise the situation. What particularly helps is when I hypothetically double or triple or quadruple the profit that I make. I find that sometimes, grinding out those wins for £20 a time can feel like small reward for long hours of graft, especially when you cancel it out with an error. But if I keep reminding myself that in future, that £20 can easily be £40, £60, £80 and even higher, it does make it easier for me to see how well I'm actually doing. And I could easily up my stakes to at least 5 times the amount I use now, with scope to go far higher in future years.

So aswel as talking through my strategy, I will also be reassuring myself that I'm doing fine and that there's no need for me to get angry at mistakes. The underlying issue as to why I get so easily frustrated is just pure impatience. I want to be successful yesterday and any error becomes a setback to my progress. I just need to keep telling myself that there's no need to rush.

I may seem crazy to anyone who sees me trading this coming week, but I can assure you, it is the first step towards a far saner trading life!

Sunday, 2 October 2011

The Self-Destruct Button

Today, my trading journey almost came to an abrupt end. I'm still in a bit of shock as to what happened but I want to record it here, so that I never forget how close I came to destroying my dream. The day had gone along fine. Another 6am start but as the final game came to a close in Beijing, I was ready to end with another day of profit, despite the tiredness. Chanelle Scheepers was up against a local Chinese player ranked outside the top 300. I wasn't going to bother getting involved as she looked to be coasting to an easy victory but for some reason, I just couldn't help myself. I completely disregarded my strategy and plumped for a set bet - Scheepers to win set 2. I was so confident of the win that I lay down on my bed to rest my weary body, whilst keeping an eye on the scoreboard................45 mins later, I awoke to an all red screen. She'd given away a break lead and lost the set 7-5.

I was still half-asleep and couldn't even sum up any emotion. I didn't get outwardly angry or shout or kick anything. I just went immediately to Betdaq, opened up the football coupon and placed a straight bet on the Arsenal - Spurs game that had just kicked-off. This wasn't any old bet though. Enraged, I flung my ENTIRE BANK on over 1.5 goals. I didn't even pause to think about it. I knew I wouldn't be happy until every last penny of the full-stake I lost on Scheepers had been immediately recouped. After 10 mins or so, I started to come out of the groggy haze I was in and the severity of my actions began to register. If less than 2 goals were scored at White Hart Lane, this blog, my 20 months of hard graft, all my remaining money and my entire dream of becoming self-employed, were over in the next 90 minutes.

Did that make me come out of the trade? Did it hell!! I just lay there in nauseating silence. Visions of Fernando Torres's miss came flying back to my mind, as Gervinho and Van Der Vaart missed golden opportunities. I half expected another one of those games where it was just never going to happen. Fortunately, I was spared too many heart-palpitations, as the 2 goals were scored before the hour mark. But I barely celebrated. Nothing like I have done in the past, where I would roar the house down. That's because I realised how quick I was to push the self-destruct button over something so small. There was nothing to celebrate.

So why did I do it? The chasing was obvious (and being half-asleep didn't help) but why did I place that Scheepers bet? What forced me to veer from my strategy and place a straight bet for a measly £20 on the final game of the day when I was ready to fall asleep after a good day's trading? The answer is simple; I was still pissed off about the very first trade of the day from 10 hours earlier. I had lost £20 on the Cibulkova game, a trade where I knew that I should not have gotten involved but did so anyway. It didn't matter much in the big scheme of things but it kept nagging away at me all day, despite a glut of wins which wiped it out easily. And that is all it took to almost end my trading career.

I realise now that I have to make more changes. This is something which has plagued me throughout my trading life, the inability to let certain mistakes go. The perfectionist in me just will not allow it unless it was unavoidable. But I reached crisis point today and I need a new plan of action to conquer this obsession. I'll be back tomorrow to crack onto it - once I've got some shut-eye. Trust me, I'll be sleeping well tonight!

Saturday, 1 October 2011

Under & Over Confidence

A key factor in trading psychology is finding a balance between being over-confident and under-confident. Both are equally as dangerous, yet I think a mistake many of us make is to not worry about being over-confident. After-all, if we have a lot of confidence, it means we must be doing well. But I believe that over-confidence is possibly MORE threatening to our ability to succeed. When we are under-confident, we tend to play it safer. This can mean missed opportunities, exiting trades too early and becoming fearful of the market. But it doesn't often to lead to large losses. When we become over-confident, certainly in my experience, it can lead to loss of focus, corner-cutting and experimenting due to a feeling of 'invincibility'.

If we take our eye off the ball and start thinking we have 'made it' or that this game is easy, it has a nasty habit of kicking you in the teeth. All of my worst periods as a trader have been preceded by a period where I slacked off a little because I had been doing really well. Every time I start making big plans for the future, getting butterflies in the stomach, going into each trade as if I am unlikely to lose, it usually isn't long before I get caught out with a bad error. Then begins the frustration and the chasing and the downward spiral of mental madness.

I notice that some people think these things happen just because they made one error that won't happen again or because they were unlucky. But they don't look at the root cause of that error and the psychology behind it. What really made them commit that mistake? Often, it's easy to tell when it was related to a negative emotion such as fear, anxiety, stress or anger. But when it happens due to confidence? I don't think most people register that emotion as the source of a trading error.

Monday - Thursday this week, I was struggling with under-confidence due to a dwindling bank. Now, after two fantastic days, I know that over-confidence is an issue. You'd think I would have learnt from the past and that I would be able to control myself but these things can just creep up on you in a split-second during a match. One moment you are feeling fine, waiting patiently for an opening and all of a sudden - BANG! Out of nowhere you've clicked on the ladder and submitted a bet that isn't part of your strategy, just because you felt 'It's only once, it'll be fine!'

I have to admit that today, I already acted with a little over-confidence. I went in early and too aggressively on the Baghdatis and Radwanska games. I was supremely confident that both those players would win and that there was immense value on Agnieszka as she was priced as clear under-dog, when I made her favourite. I was correct on both counts but Troicki and Zvonareva both started better and forced me to sweat on nasty red positions for a few games. If I'd been more patient, I would've followed my strategy and gotten better prices and even bigger wins with less stress.

So even though I'm ecstatic with today's results, I know that my main goal for the next week is simply to keep my emotions under-wraps and not get over-confident. Because I believe it is the biggest factor that can trip me up on the journey to success now.