What can happen playing the HIGH RISK game of foreign currency futures....!

Hi,

I agree, when you're paper trading and you paper trade three losses in a row you don't then do what you'd do if you'd taken three real-money losses in a row. The paper trader just keeps paper trading his system, and eventually the wins outweigh the losses. The real trader (in some cases) gets emotionally mind-blown and stops taking signals right before the wins start happening.

Another trader and I invented and described a concept called "Trader's Syndrome" that relates to this. I wrote an hilarious piece about Trader's Syndrome on Gordon's ABC board some years ago, which Amber and others may remember.

Here's Trader's Syndrome (this has happened to me more times than I care to remember). The real trader (and this may only apply to daytraders) sits down at her/his desk, turns on all the data feeds, readies the phone, and starts looking for setups. A signal happens, but the trader emotionally and psychologically is unable to phone in the trading order; remember, taking a trade may mean taking an extraordinarily painful real-money loss. She/he misses the trade. Then another signal happens. Again the trader for whatever reason is blocked from calling in the order. By this time the trader is mad at herself/himself for missing the two signals, which, if she/he'd taken them, would have been big wins. Another signal happens, and this time the trader says "I will take this signal!" She/he phones in the order, and "Oh crud!" this particular trade turns into a big loss. Plus, the trader realizes, too late, that the signal she/he took was really just a marginal one, and that she/he took it primarily to offset her/his failure to take the two earlier excellent signals. At this point, the trader is in a bad way: she/he's taken a big real-money loss, and emotionally and psychologically she/he's a wreck. She/he doesn't have the Mr. Spock-like stance that a trader needs. In this state of mind, can she/he be expected to see and feel the almost three-dimensional price action for what it's telling her?

Contrast this real trader, who is suffering from a typical case of Trader's Syndrome, to the paper trader. The paper trader, with his Mr. Spock-like paper-trading attitude, took all three signals, and with two wins and one loss is doing fine.

To succeed as a trader, and especially to succeed as a daytrader, you have to make real trading just like paper trading.

And that's the truth.

Best,

-Boyd

> Boyd, those are interesting thoughts
> regarding paper-trading....

> For the record, I've never done "paper
> trading" (only trading for real)....
> But I'm not a day-trader really, I'm more of
> a growth investor....

> Anyhow, why would something work with
> paper-trading, but not with real money?
> Here's my guess -- EMOTION.

> With paper-trading, there's no emotion
> there.... What you do won't affect your life
> positively or negatively....

> But with real money, suddenly it's
> emotional. You're talking about what you're
> doing affecting your life.... Possibly big
> gains or losses.... Greed and fear come much
> more into play, and these emotions can
> affect our decisions and clarity of
> thought....

> I think it's important to be unemotional,
> and completely logical, when it comes to
> stock market investment. At least that's my
> approach.... :)

> When you can make it less emotional, and
> more logical, I think your chance of
> succeeding in the stock market is much
> better....

> Well, that's my guess at an answer, for what
> it's worth!

> Dien Rice