Tick-itis is a frustratingly painful dis-ease uniquely associated with short-term trading. And the interesting thing is that it even affects people who think they are immune to such things. Indeed, it’s a very insidious dis-ease.
It’s a very easy problem to diagnose. You know you have this dis-ease when after a trade entry each and every tick that moves away from your target feels like a personal assault or attack, and each tick in the direction of your target feels like a bit of hope or relief. Tick-itis.
This dis-ease is an epidemic among traders, especially newer traders and is also seen with traders trying to climb up out of a hole.
At some point in my coaching work I usually have a conversation with a client that goes something like this:
Client: “I know you keep telling me to focus on the trading process and not be attached to the individual outcomes, but I’m having a really hard time trying to not be emotionally attached to the trade”
Andrew: “Although we’ve talked about not being attached to outcomes and not looking at your P&L while trading, the reality is that when you enter a trade you think you are making a statement that you hope your judgment will be correct. And if you spend most of your trading time existing in that mental space, hoping that you will be right, it will be very difficult to succeed.”
Client: “Yeah, I know I shouldn’t think that way, the need to be right is not a good thing, but I can’t help it. In fact, it seems that this need to be right has sort of defined me as a trader”
Andrew: “You said it defines you as a trader…..that’s very illuminating, isn’t it? When you began trading, you were like most newbies, you wanted to feel fairly certain up front that a trade was going to work or you wouldn’t even want to take the trade in the first place. Remember those days? But as you gained experience and learned to think in probabilities (each unique occurrence or data point even in a skewed distribution represents a 50/50 or random outcome) you began to realize that any one trade has only a 50/50 chance of working”
Client: “Yeah, I understand that now, but why am I still struggling with it, I mean I know it, I understand it, but I can’t actually do it or perform that way, or as you say, ‘embrace it’. Why?”
Andrew: “You may think you understand it, but you don’t truly‘ get it’, at least not yet. You’re not embracing it, which is more then intellectual understanding. I think you’re suffering from a dis-ease I call tick-itis, it comes in various forms depending on the person. I have a question for you, has it been difficult for you to not look at your P&L when you’re in a trade?”
Client: “Well, after you told me to remove that column from my trading platform I don’t look at it.”
Andrew: “How has that been for you?”
Client: “Well, I don’t look at my P&L because I can’t see it anymore, but I have to admit that I still think about whether I’m making or losing money and how much.”
Andrew: “Okay. Do you realize what you just said? You’re cheating, still peeking at your P&L through mental accounting. And by doing so you’ve found a way to remain emotionally attached to the outcome”
At that point the client often has one of those ‘a-ha’ experiences and then the conversation can go in many different directions depending on their other ‘issues’.
One direction the conversation sometimes takes is the client asks me to describe my own internal experience of not being emotionally attached to a trade. So, I want to share with you, my readers, how I sometimes describe the feeling of being in a trade without being attached to the outcome. I feel engaged but a bit aloof……engaged so I can pay attention, but aloof (not emotionally attached) about what happens. Another way I describe it is that when I enter a trade I’ve taken on the role of an anthropologist who is embedded into another culture to observe and study, “I’m curious and vigilant but very much a dis-passionate observer”…..where I’m highly aware of what is happening but I’m not emotionally invested in what is happening, whether it is good or bad….it just, “is”. Some clients who’ve heard me will say that it sounds, ‘zen-like’. One of my clients recently described her first personal experience of this, “it felt robtatic’. Use whatever metaphor or analogy that works for you. But please, find a way to not be emotionally invested in the outcome. Otherwise you will continue to suffer from tick-itis.
Why is tick-itis so bad? Besides the stress (sustained stress is associated with excessively high cortisol levels and a variety of health concerns) the other reason is that tick-itis is an emotional dis-ease, and when emotions are heightened, our perception narrows. Emotions act as a filter on our perception of the market (and of reality); essentially, our emotional-perceptual filter projects a structure onto price action and that in turn influences how we manage a trade.
this is excellent. my biggest weakness is not so much an emotional attachment to the trade, but a “need to know”-itis that has me constantly looking for new information. this applies to checking email, games scores, market updates…whether I have an interest or not. I do my best to restrict analysis to the info that I know actually matters, but it still takes a lot of structure to keep me from tuning into every meaningless tick.
@derek
Derek,
Thanks for your comment.
I know exactly what you mean, I also suffer a bit from ‘need to know’ itis. Sometimes I will (and suggest to others) creating a structure with pre-determined break times to check non-market things like email.
With some clients who are not overly emotionally attached to a trade but still have trouble focusing or possibly have ADD (attention deficit disorder), I have them switch to a standing desk; when standing in front of the computer some people tend to be more ‘efficient’ and able to stay on task better.
Andrew
Excellent post Andrew.
I’ve had a very profitable week and last night my wife asked me if I was really pleased with the profits and I told her; “I’m pleased that I’ve traded as I want to trade in terms of the process, but the actual profits have not excited me”.
I remember the days when I would either be in complete despair or jumping with joy at the end of a day or week. It took a lot of work to move beyond both of those states and it’s writers like you, Steenbarger & Douglas that have helped me on the journey.
Rob
@Rob
Rob,
Thank you for your kind words.
Andrew
hi
i understand intellectually that i need to focus on the trading proces and not on the p&l but how can i do it mentally?
that will be my big solution
@uri
Uri,
Consider using process goals as a way to reduce your focus on outcomes like P&L. You can develop goals that have to do with the execution of your plan. It’s best if you create goals that make sense to you, are meaningful, and that are attainable. Shifting your focus to process goals will help you to focus on doing what is in your best interest and will give a focal point so you don’t get pulled into focusing on P&L.
Andrew
Andrew
A good trade has risk management already built in. You must have prepared the factors that would invalidate your trade setup BEFORE you are in the trade.
If you have that, who cares what the ticks are doing.
@@flowtastical
Good for you, sounds like you don’t suffer from tick-itis becuase you fully accept your pre-defined risk.
Keep up the good work.
Andrew
While I would agree that; “A good trade has risk management already built in.” intraday trading is a dynamic process. The factors that would invalidate your trade do change on a tick-by-tick basis. Therefore, it is incumbent on the intraday player to maintain cognizance on where this new invalidation point is, with regard to the new tick information that has just presented itself. This is not a “set it and forget it” proposition, unless you are willing to let what you would have considered to be a good profit, turn into a preplanned loss. There is a big difference between “tick management” and “tick watching”. As the trade structure evolves, so should its invalidation point.
@K
K,
We may be talking about different things. Tick-its refers to the internal emotional experience of managing a trade, not the trade management strategy itself.
It’s my assertion that trade management, at least for many traders, is mostly governed by emotion and not by strategy or trade methodology. Most traders will say that their approach to managing a trade is based on a strategy or method, but for many traders, it’s more a case of managing emotions in regard to P&L and not truly managing the trade in regard to the market.
Of course, any trade has it’s ‘invalidation point’, and I agree that this invalidation point could change as market conditions evolve. But many people are not simply responding to market conditions as much as they are responding to their own feelings. There is a subtle but critical difference (and it is often mis-understood) between simply responding to market conditions and responding to one’s emotions. In the second case, the trader will often use the rationale that they are responding to the market as justification for for tinkering.
Hope that makes sense.
Andrew
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Hi.
I love this topic cause its at the heart of what trading is. I find the whole subject of trading psychology much more interesting and mentally engaging than trading methodology, strategy, risk management, and other assorted trading pot potpourri. In fact, once you’ve got your trading method down pat, your risk management under control, and your plan mapped out, well, all that is left to focus on are your actions. The other parts of trading are rather mundane and become habitual after many years. But the psychology of the trade is dynamic and seems to be ever changing. The way your mind wraps around the trading process is always in need of tweaking and is never complete unlike the more “hard” processes.
OK, here is what I do to manage my “trading mind.”
I am a great believer in preparing my mind state prior to a performance. I actually practice the many emotions I will go through during the trading day before the open. I visualize and feel the fear, worry, anxiety, joy, excitement and boredom. I force myself to feel these emotions. I visualize opening my account prior to the open and all my open positions are down 20% (don’t laugh, its happened). I see the red ink, I feel my heart sink into my stomach. My throat tightens. Then, I practice what I will do. I will get into what I call “go time” mode. I very methodically and without hesitation sell everything at the market. I breathe deeply and turn off the computer for a few hours to digest my loss. I then repeat my mantra: “In a hundred years from now all this won’t matter.” My new focus now is on relaxing and finding out if what just happened is due to my error in analysis or bad luck/black swan event. By the way, I believe keeping my position size smaller than I “want to” is the best way remedy for worry. Keep the size so small that if the worst happens, I can shrug your shoulders and get back in the saddle fairly soon.
I also have a resiliency plan mapped out in advance on how I will bounce back from frustration and/or disappointment. In addition, when things go better than expected, I allow myself to gloat and feel highly competent. Good times. I have a beer and take the day off. I am my best boss. Nothing wrong with doing the jig in your underwear.
90% of successful trading (for me) has been in preparing my mind for whatever might happen before it happens. And when bad things happen…, I’ve seen it before, been there, done that, its no big deal.
Jake,
Sounds like you have developed a nice psychology process for yourself. I especially like the part where you focus on resiliency, and being prepared to deal with whatever comes your way.
Andrew