Option Addict
302 Comments
If you find this post offensive, relax. This post is not intended to offend, only to discuss more trading psychology. I pass no judgments on this topic because I have lived through this subject in different aspects myself. I came across an article that correlates destructive trading to destructive alcohol consumption. Take a quick look at this questionnaire that professionals use to determine the severity of alcohol abuse...1) Have you found that your drinking is bringing unwanted, negative consequences?
2) Have you recently felt guilty over the way you have been drinking?
3) Do you find you need to drink more just to get the good feeling?
4) Do you find that your personality changes when you drink excessively?
5) Do you find it difficult to take a break from drinking, even when part of you knows that this would be best for you?
6) Do you find yourself drinking to feel good about yourself?
7) Do you sometimes feel that you cannot control how much you drink?
8) Do you find yourself getting angry when someone close to you questions your drinking?
9) Do you find yourself vowing to limit your drinking, only to slip back into overdrinking?
10) Do you find it difficult to not drink given the opportunity, even when the occasion is not really appropriate?
Like I mentioned, these were questions that are typically asked by a psychologist when confronting someone struggling with alcohol consumption. You can apply this to any substance abuse, addiction, or whatever struggles you cope with. The question is "What about trading?" Take a look at the modified questionnaire...
1) Have you found that your trading is bringing unwanted, negative consequences?
2) Have you recently felt guilty over the way you have been trading?
3) Do you find you need to trade more just to get the good feeling?
4) Do you find that your personality changes when you trade excessively?
5) Do you find it difficult to take a break from trading, even when part of you knows that this would be best for you?
6) Do you find yourself trading to feel good about yourself?
7) Do you sometimes feel that you cannot control how much you trade?
8) Do you find yourself getting angry when someone close to you questions your trading?
9) Do you find yourself vowing to limit your trading, only to slip back into overtrading?
10) Do you find it difficult to not trade given the opportunity, even when the occasion is not really appropriate?
Brett Steenbarger wrote about this topic, and here were a few comments he made that I found intriguing...Fear and greed are potent influences on trading, but the greatest trading problems, I find, are addictive in nature. Successful traders really want to trade; they have a passion for trading. Addictive traders need to trade; they have a passion for action and excitement.
An addictive trader will not manage his risk. That is because risk is part of the high.
An addictive trader will not stop trading, even when losing money. That is because action, not profit, is the goal.
An addictive trader will cycle between periods of guilt and responsibility and periods of excess and irresponsibility.
Good traders trade actively. Addictive traders overtrade.
If you see yourself in this profile, do the right thing, before your patterns ruin your career and harm those who depend on you. Get help. You can change. Your trading and your happiness lie in the balance.
Perhaps the content here is a little severe. I'm not sure that all of us have reached a point that is remotely close to this. I do feel that emotion creates instability in this complex and irrational world we participate in. I met with a trading psychologist this year for this same reason. Even though me know emotion is our enemy in this business, even for someone who knows and understands the importance of this, even I can't help but react emotionally sometimes. Such is life. I noticed that as I went through a rough spot this year, I responded "yes" to many of these questions. What is important is being able to recognize this problem quickly and turn it off. The quicker you can identify this destructive pattern, the easier it is to close up shop and walk away. This is what I did and it gave me time to re-think what I was doing, and to get help through it.
Always be focused on why you trade. What are you goals? Why do you trade? Is trading a hobby, or is it a business? Be mechanical, and as we always discuss...try to stay un-emotional.
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Reader Comments (302)
I see a bull market for Apr and May then all heck to break loose. I find it much more accomodating trading in this type of market. Anyway check the monthly chart on SPY or $SPX and you may see what I am looking at...hammer run, loose a little, hammer run, loose a little then see if thee agree.
God Bless, Steve
Jeff, great post.
What do you think of SAM boson beer as a flag! Enjoy your vacation.
Berk, up $6,726.80
Goog & TSO my downers.
EWH - my grandkids accts have been in cash since Dec 31st. I'm getting close to do some longer term low dollar calls, maybe the EWH. The reason I don't trade these accts as much, like I've posted before, I have 11 TOS accts and it gets difficuilt to watch all. What do you think of EWH Sept calls?
Lastly, Be mechanical ...try to stay un-emotional. Isn't that the method that is prescribed by successful game players. I stick to my conviction - this is a game!
raimo-
What's your target on GOOG for the next few months?
Thanks,
MrVikes
SLB looks like it wants to break resistance here, although volume is not great. I think I might wait for it to retest 89 and then hop in.
Steve,
I see what you are saying, and I think the market should advance for a few months. The problem is getting what should happen to happen.
It seems that every hammer on the bottom eventually leads to a star towards the top. Look at the 3/24 high, we had a hammer the next day, and we fell more. Granted no new low either.
While the $VIX did not issue a sell signal, it only missed by .16. And the past 2 days have done everything needed to confirm it, if it was given. It did close below a 1.95 (instead of 2.0) bollinger band. And the time between the swings has decreased by 30%.
Interesting stuff.
Berkshire
GOOG will have a hard time getting up over $485....not that it cant, but that is gonna take some strong moves. I can't predict GOOG that far out..I am way much shorter on my time frame.
I vote for drinking while trading!
Just kidding.
Really!
Dave
Raimo is happy now. Jeff, buy me a drink....!!
bouth 300 DIA contracts off the $125.70 bounce today......SEE YA!
AAPL getting FAT now...my APPL is a granny smith, (isn't that the GREEN one)!!!!!!!
raimo,
Please smack me for going short CF yesterday.
If the good folks at Penthouse ever decide to stop making porn, I can always just go and look at my profits on AAPL. YEAH BABY!!
Raimo,
So did I. My chart reading must be improving! I only bought 1 contract though! Wish me luck.
Dave
ZMH and TOL..CMON BABY!!!! I know some of you addicts are enjoying this ride!!!!!
Hey, I got OUT of CF right after I got in yesterday, thems the break. Set your stop, your line of death, get out if you get there Jym...
Berk, you are not listening to me, AAPL to $200..yes, faster than GOOG. LOve GOOG, but lets be realistic, AAPL will run better than GOOG right now..
Yup Raimo,
There also the sour ones. What is your time frame on AAPL then, if getting GOOG to go up 30 points is going to take longer than AAPL getting up 50...
8% vs. 30%, and you think the 30% is going to happen quicker.
I love you man. It's great.
Berkshire
Any takers on the DOW over 12700 today?
raimo,
CF is one I cut intra day today.
Thanks raimo :)
Anyone listening to Bernanke now?
His voice is quivering, and he looks genuinely shakey!
The subject? His reasoning and evaluation of the worth of BSC when they did the deal.
Again Raimo,
Let's fricking Hope so...If we can't muster up enough bullishness for 50 more points, we are hurting. I'd really like to see a nice rejection from the 12767 level.
Berkshire
I'm up 220% on my AAPL calls...
disclaimer: I buy far OTM calls / puts, but still work to manage the risk. I do not risk too much, but the reward is definitely nice. I've learned very valuable lessons from Jeff.
Raimo,
Still trying to figure out how you came about your entry on DIA at 125.70. Were you using the intraday resistance between about 10:30 and 12? I see some churning around 125.70 from yesterday's action as well but I think that 10:30-12 time block would be more of a tip off. Let me know if I'm seeing things that I want to see or if I'm close to your reasoning. Thanks.
I almost have to take you up on that. AAPL $200 before GOOG $485. (Not that I think GOOG will really get to the $485 mark, but it could).
AAPL looks a lot like it did in 2006.
Berkshire
Nice MrVikes,
Selling into this strength?
Berkshire
I usually sell off a couple contracts at a time. Yesterday I was wishing I had done that with my AMZN calls... :( That's when the liquidate all button would have been nice before Bernanke opened his mouth :)
We really need to hit up TOS for that button.
Berkshire
10 point Inverse H&S on BIDU (Intraday chart) - anyone see the same?
Thanks
Raimo
I think DOW at 13000 by end of day tomorrow.
DIA
I got in at the green circle, the break above 125.70ish...
http://screencast.com/t/2N3wliNScx
Grasshopper-
I was listening to Bernanke on my Sirius and I was wondering if it was my satellite connection or if he was nervous. He sounded very nervous; shaky; and stressed.
As Jack Welch says "the best way to control stress...is to get rid of that damn guilt" Wonder what Bernanke is guilty of?
Raimo,
That's what I figured. I think that's where experience kicks in. Thanks!
nice raimo
Raimo,
On DIA, what is your target?
Dave
For anyone out there having a bad day,
Yesterday at the close I was too delta positive so I bought 3 puts to bring my delta down: FXI, CF, and NOV.
Have a nice day.
berk-
About the only worthwhile thing I learned from Cramer was "Hogs get slaughtered" :)
-MrVikes
MrVikes,
Volumes of truth in that statement...Except I learned a little about valuation. PE and such...
Aside from that...humor.
Berkshire
From Jeff's List,
ANR breaking resistance!
Dave
Raimo
Do you mind sharing the strike price on your DIA calls? Do you do the next strike out on that type of trade or further OTM? Just curious.
Step,
If you've hit enough golf balls now, SINA is just about ready.
Berkshire
Jym,
Sorry to hear that man.
Berkshire
JYM-
I was/ am in the same boat, so I bought some DXD and SKF to balance things out this am. Not too concerned about either at this point, but know the feeling of failure to launch.
Thanks to Jeff's list for HAS. My first 100% gain since XL. Why don't I buy calls on POT? I've been in the stock since 1886.
If anyone's convinced that tech is going to turn the corner SNDK would be a nice early entry that should do really well. We now have 4 laptops at home... we are memory hogs.
Looks like GOOG should have a near term target of about $375. That would put it in the middle of the triangle that it broke from in 06. Simple bear flag target puts it right in that area too.
The last time GOOG made this action was about a day before the top of 2/27. It hasn't broken the flag yet, but talk about relative weakness.
Berkshire
Sell 35 puts on MFC. Resistance is futile.
GOOG - sitting on the 10 dma, the $450 & the MFC fast line is almost at a bottom. The perfect entry for bear traders
Berk, how about buying some of my April $450 puts for $18.50
Chris
What is the ticker to buy Canadian Pot? I hear it's better up here,,,,
GOOG - bought May $460 calls for $22.40
Earnings Apr 17th and a 15 min bottoming tail.
F2T,
If only I had that kind of cash...Loving the entry, IF it can break out. But that's about 3.5 times the amount I usually pay for options.
Sorry...Maybe you can get a few of us to pool together and take some off your hands.
Berkshire
Breadth has turned negative...
Raimo, could this be day 2 that we can't seem to get any higher?
Berkshire
DRC Horizontal resistance plus 30 and 50 day ma overhead. Ride down to $28 before Apr expiration will yield nice r/r.