Trading Psychology Plan - Trading Panic

There are several primary symptoms associated with the panic attacks.  For example, those who have experienced them generally state that there is a brief onset of trembling, followed by a shortness of breath.  Some experience more pronounced symptoms ranging from heart palpitations to hyperventilation to choking or smothering.

The general consensus that panic attacks stem from other phobias, or fears, which in turn triggers a panic attack upon exposure to these fears.  If a person suffers from acrophobia, or fear of heights, for instance, upon flying in an airplane, this phobia may be triggered, causing the person to enter a panicked state and, hence, have a panic attack.  During a panic attack, the "flight vs. fight" reaction comes into play and the person experiencing the attack suddenly has an overwhelming desire to leave the situation they are currently in.  

AND Who Is More Likely To Suffer From A Panic Attack?

Most of those who are chronic sufferers have jobs that are either very physically or mentally challenging, leading to a great deal of stress.  When stress levels are high, and one does not have the ability to simply pull away from the situation and relax, the body often times goes into overdrive, a condition that, if occurring to often, can lead an individual to overheat, much like a car would do.  In an individual, however, this overheating takes its form in a panic attack.  The heart will being to race, palms will grow sweaty, and a general feeling of gloom will preside, forcing the individual to step back from whatever he or she was doing, take a breather, and relax. 

There are also several personality traits that doctors believe can contribute to a person experiencing a panic attack.  People who are extremely analytical, are obsessive, emotionally sensitive, or need to be in control at all times are also more likely to experience a panic attack.  The primary reason people with these personality traits are more likely to experience a panic attack is because these people are likely to focus all of their attention on a single issue, and when this issue is no longer under their control, they are likely to 'freak out', thereby resulting in a panic attack.  There is an obsessive or compulsive aspect to all of these personality traits, and it is those kinds of qualities that are most prone to trigger a panic attack.

Consider Day Trading In The Context Of Trading Psychology And Trading Panic

It is important to note that panic attacks are not usually indicative of some underlying medical disorder or psychological problem.  Most of the time, normal people, ones who are completely healthy, are those who experience panic attacks. 

When you consider the characteristics of day trading, and all the associated fears and doubts, both for the outcome of the trade itself, as well as the related self-esteem of the trader receiving that outcome - certainly day trading is a stressful undertaking done in a stressful environment - the potential for this to manifest into what becomes a panic reaction is greatly expanded.  Again, this should not be viewed as something inherently wrong with the individual, this is the normal reaction - this can be controlled.

Consider Stress-Panic Escalation In The Context Of Accurate Evaluations

There are a number of ways that your thoughts can become distorted - recognizing and refuting these distorted thoughts are necessary as part of the plan to control the emotion.

Consider the following cognitive distortions that are common to your thinking in general AND then how they show up in your trading in specific.  For instance HOW many times have you lost 3-4 ticks on a russell trade AND said that you got killed?

• All or nothing thinking:  No shades of gray exist so IF your performance is not perfect - you view yourself as a complete failure.
• Overgeneralization:  One single negative event is viewed as an endless pattern of defeat.
• Disqualifying the positive:  You discount all positive experiences.
• Magnification or minimization:  You may exaggerate the importance of an error or someone else's achievements.  You may underrate your own strengths or someone else's weaknesses.
• Should Statements:  You motivate yourself with shoulds-oughts-musts which leads to guilt.  When you direct these statements inwardly you experience exaggerated feelings of anger-frustration-resentment.
• Labeling and mislabeling:  You label yourself inappropriately - I am a loser - I am a stupid idiot.  You are NOT your trading.  When you do this it makes it difficult, if not impossible, for you to continue constructively.

Consider Trading Psychology And Trading Panic In The Context Of Day Trading Method

How do you cure panic attacks, which is to say, how do you keep from letting the inherent stress involved with day trading escalate to the point where it becomes atypical and a panic attack becomes the outcome - an outcome that replaces method trading with non-method trading? 

Are any of the following points consistently characteristic of your trading:

• Do you feel prepared when you take a trade OR do you constantly feel that each trade is a 'rush' to get in before you 'miss' the trade?
• How many entries, that really are base setups, do you then miss AND follow that with a non-setup trade chase or 'early' trade in the opposite direction?
• How many trades do you take OR not take based on your opinion or bias with regards to the outcome of the trade - I can't go long because the market has gone too high, I can't go short because I have missed the initial entry AND if I enter now it is going to reverse?
• How many trades do you take OR not take, where the decision is based on a prior trade - either missing a trade OR losing on a trade?

Part of the reason a panic attack can escalate from mild to intense is because the sufferer becomes fixated on what is happening and, consequently, whether real or imaginary, the symptoms seem to get much worse.  Putting oneself in a relaxing environment will help lower an individual's stress levels which can help lessen any potential symptoms that may arise.  Although this may be practical in the typical panic situation, it becomes more difficult in the day trading environment which is continual real time information processing.

When I think about how I initially became able to control the stress involved with day trading, to the extent that I could execute method and progress through learning to trade, trading method selectivity and increasing trading preparation time were critical.  This became the development of the left side-right side concept of our trading method, it allowed for increase preparation time, additional setup components for selectivity AND with this a diminishing of that 'rushed' real time stress involved with the immediate right side decision.  Over time I have come to add setups that don't have this selectivity, for instance the pivot trades for partial profits and congestion break positioning done sometimes when things are slow-sideways - BUT this was absolutely not the approach at the beginning. 

Is Trading Psychology Stress-Panic Self-Induced?

Psychology - absolutely no. 

We all bring core personality traits into trading, traits which may have never been an issue in other situations BUT now are very problematic for trading.

Trading Psychology - yes. 

I will suggest that the outcome stemming from something that is knowingly done is self-induced:  Why did you take that trade - I don't know.  Was it a base setup - no.

I have always understood trade avoidance as result of the psychology that the trader brings with them to trading, traits for instance that make them risk adverse to the point where they are afraid to trade.  This is a different situation that will have to be dealt with IF the trader will eventually be able to trade, but I view that as psychology and not trading psychology. 

However, what I don't understand, is when a trader continually trades without having defined the base setups that they are going to trade BUT trades anyway, and of course there results are going to be very inconsistent to the extent of being random, for instance the trader will lose more money on a 'bad' trading day then they are able to make on a 'terrific' trading day.  This is what I regard as trading psychology, and in this context the escalation of stress which turns into panic directed trading decisions is self-induced. 

We have the option of taking a trade or doing nothing, and granted there will always be an amount of mistakes or setup misreads.  BUT to continually AND knowingly trade non-setup trades, is a conscious decision AND from that standpoint is controllable.  Again, do nothing BUT IF you are going to trade, selectively trade defined base setups with the intentions of adding to your setups/trade quantity after you have been able to consistently traded them - this is the process involved with not letting the basic stress involved with trading that can be controlled - turn into panic directed trading with circumvents all your efforts AND can't be controlled.

Step Away From The Panic Or It Will Control Your Next Move

Sometimes You Just Have To Laugh

 

"Laughter is an instant vacation." - Milton Berle

"Laughter gives us distance.  It allows us to step back from an event, deal with it, and then move on." - Bob Newhart

"With the fearful strain that is on me night and day, if I did not laugh I should die." - Abraham Lincoln

One day instead of my typical screaming and cussing, I found myself laughing at what I had just done, laughing at what was really a 'stupid' trade that shouldn't have been done - this may have been the most important day in my trading career.  I immediately forgot about the trade, and took the next base trade that 'should' be done instead of steaming over the 'stupid' trade.  Whether the trade was a winner wasn't an issue; I controlled stress instead of letting it control me AND by doing so I was able to continue to method trade, instead of beginning to have a session of panic trading.

WHY did this happen - WHY was this so important to me - I am sure it wasn't a conscious event or action? 

I had finally progressed to the point where I was method evaluating my trading, and when I took the non-method trade, I immediately realized it AND as it turned out - I laughed at myself.  As I went forward I became very cognizant about method evaluation in my study AND the more I did this the better my trading became.  I remember the days where I would sit in front of the screen the entire day and only trade 1 setup AND IF it didn't occur THEN I didn't trade.  I remember the hours that I would review charts studying the same pattern OR learning how left side price becomes right side price action.  I remember the 100s of screen prints AND notes of individual occurrences.  AND I clearly remember the very selective trading where 5-8 trades in a day was a lot of trades.

I became a student of method.  I learned selectivity - I developed discipline.  AND I learned that ultimately - it was method that enables the trader to control psychology.  Now, whenever I consider trading, and especially when I work with other traders, I try very hard to extend the concepts of method and method evaluation - taking the attitude that the relevant discussion should be:  is it a base setup AND WHAT are the setup components.

Base Method Wins BUT The Trader Loses

Consider the chart/trades below in the following context:  (1) base trade winner -vs- non-base trade loser (2) were the non-base trade losers mistakes/misreads OR were they a panic response to a missed winning trade (3) is possibly the biggest problem with the panic response not the trade loss BUT the lasting effect and what happens going forward.

green dot1 - yellow dot1:  you do not buy green dot1 AND have no subsequent setup to enter the swing - so you do nothing until yellow dot1 which is a swing high breakout into a pmd which you (1) didn't see (2) saw and didn't care - AND you end up with a losing trade. 

yellow dot2:  price congests between the pmd high and the blue line as support, then after a lower high you sell yellow dot2 which is a non-setup 1 line breakout into the floor pivot which you (1) didn't see (2) saw and didn't care - after missing the green dot buy you aren't going to miss a similar size sell - AND you end up with a losing trade.

green dot2:  price breaks through the floor pivot but can't shift it resistance AND the indicators reverse back 'into buy' AND through the yellow line where you get the sell loss discussed above.  there is no setup to trade at this time AND regardless, after your buy-sell losers on the previous 2 trades - you aren't going to reverse to long even IF it was a base setup.  the yellow line breaks AND shifts to support WITH mex continuing to flow up - green dot2 is a base resumption setup of the left side swing BUT you didn't take the trade because you (1) didn't see it (2) saw it and didn't care - AND you end up missing another winning trade. 

think about the considerations above AND especially the lasting effect to a non-base/panic trade - is this the 'real' reason that the green dot2 buy isn't done AND IF yes - isn't this controllable simply by having the discipline to miss a potential winning trade IF there isn't a base setup for entry? 

Method Evaluation - Non-Setup Trade Wins

IF I ask a trader to show me a base setup, more often then not I will get a hindsight chart that shows a 'large' winning trade AND I will be shown that where the trade initially starts OR the break of the first pause - is the base setup WITH very little discussion of the setup components themselves - certainly not in the context that 'properly' method evaluates the trade AND allows it to be seen and executed real time. 

This becomes even more problematic for 2 reasons:  (1) possibly the setup that is shown is not a base setup - meaning that if the trader continued to take the same trade they would have a very different outcome (2) the trader doesn't see the 'real' base setup AND any additional components like breakout potential - the actual 'reason' the trade continued.

yellow dot1 - yellow dot2:  a trader could call yellow dot1 a pmd-swing reverse as the 'winning' trade setup as this is the location of where the winning swing began.  except this is not correct - this is a pmd-initial reverse which is right into left side resistance at the blue line.  no trade should be done AND that includes break2 of the blue line which triggers with a ticki high.  a trader could also call yellow dot2 a shift-reject of the blue line with a ttmf hook - except this would be a trade against mex flow.

however any of these trades IF done are winning trades - regardless that they are not base setups.  what is the message to the trader - especially when they continually do the same trades 'missing' the reasons why they are said to be non-base setups AND receive the 'larger number' result which very likely will be a loss BUT certainly in no way a winning trade like their example.

green dot:  blue line shift-reject WITH the mex rollback WITH the right side triple diagonal break INTO the across the chart triple top break.  this is the base setup - those are the components to the trade setup AND the critical break-failure points to allow this chart to continue are 'known' since the purple rectangle. 

this is what i would refer to as trade evaluation based on trade method - where we can define specific setup components AND watch for them to occur - trade them when we see them.  it may be more important to understand that a non-setup winning trade wasn't base - as it is to understand that a non-setup losing trade wasn't base - because chances are they are largely the identical setups.

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