PTMC team 28.03 2014

Simple Manual Trading System Part 5 - Emotions in trading Vs. Trading by emotions

Ten artykuł dostępny jest także w polskiej wersji językowej w portalu Comparic.pl

Although we covered all basic technical aspects of creating a simple manual trading system, we still haven't mentioned a very important aspect of using our system. One trader told me that half of Forex trading is about observing own emotions. It is because emotional and intuitive reactions may devastate even the best system in the world. Something similar to the human being the weakest link. In this last article of the series I'd like to offer you some insights on psychology in trading.

During our evolution process, nature created a set of automated mechanisms in every living creature aimed at maximization of chances to survive.Therefore, when we are in danger we receive an adrenaline shot and our brain functions switch to reflex reaction mode. Our body prepares to physical engagement turning off unnecessary thinking. It works well when you need to fight a lion or run from burning building. But on the other hand it won’t help you when you need to solve a riddle quickly - even if it could save your life.

Obviously your life isn't in danger when trading Forex, but unfortunately your brain reacts as if it was. The same evolution process taught us that gains are very good - gains are reward for proper behavior, gains makes you able to survive. Conversely, losses are very bad; they are threat to your existence. Actually, as proven by scientists, fear of losses comes from the same part of your brain as the fear of death. So both gains and losses are tied with very strong, atavistic emotions that come from the unconscious and as long as your system won't be a '100% holy grail', you won't be able to avoid fear or greed in your trading. So let's take a closer look at what exactly to expect while using our system.

Image from: http://www.ino.com/

Fear is a required emotion in real life. Just imagine if people weren't afraid of doing dangerous things, their survival rate would be way lower than it actually is. We need fear to prevent us from doing stupid, irresponsible things, but sometimes we need to suppress it so it won't paralyze our decision process. It is normal that after some heavy loses you are afraid of entering trades and losing more, but on the other hand it won't lead you anywhere.

Greed is also good. Thanks to it you want to take efforts whenever you see possible gains. But too much greed may cause you trouble as it forces you not to think about good trading but profitable trading instead - and let's make it clear: good trading is profitable, profitable trading isn't necessarily good, and in longer run this difference becomes crucial.

Euphoria comes when your trading system has better days and you win most trades you are in a good mood most of the time. You may feel like market has no secrets for you, and you are an investment hero. Then you probably find yourself thinking about how much money will you make in close future. This can make you overconfident and inclined toward baring extra risk, but also you may downplay the market. This is when problems are about to begin.

Depression may hit when your good streak comes to an end and you didn't notice it yet, you are still in an excellent mood happy to take some extreme risk over next trades. As I mentioned before, every system has better and worse days. System with efficiency as high as 50% can have streaks of 9 or more losing trades. When you feel invincible having your account overleveraged, you will certainly feel lot of pain and fear in such nightmare streak of losers. Acting under such negative emotions result in few illogical and unreasonable mistakes, that are so often that they eventually became a rule. After first couple loses you feel anger because you've let most of your gains go. It's easy to trade with your gains and it's even easier to lose them. This anger makes people double their bets in order to regain loses quickly. This way you end up with increasing your risk at the beginning of troublesome period. You still feel like a FX hero, so what could go wrong? Such overconfidence makes traders unable to admit mistakes. People often want rather hold big losses against the market than admit that their investment decision was wrong and to take hit. Here is where hope steps in - while you read this you may think that it's all unreasonable, and in fact it is. People tend to set Stop Loss and instead of filling it when price goes against their trade, they withdraw it widening loss margin. This state of mind is similar to a charging bull - angry trader trying to offset losses in any possible way. I such cases market teach us a lesson, that there doesn't exist Stop Loss that is wide enough.

It is very difficult to handle our emotional side. Emotions are normal and needed in a real life, and it's quite hard task to get rid of them at the moment when you launch trading platform. Obviously you start trading with hope of some earnings - obviously nobody wants to lose money. Actually dealing with psychological side of trading requires lot of work and training. Professional traders who deals large amounts of cash terminates for couple of years before they are ready. But there are several ways from the system side, to make it easier to handle our emotions and to avoid tailspin within our account balance:

1) Always set Stop Loss on maximum level of 3% of your balance or less.

2) Never increase your risk over maximum level, i.e. by adding to a losing position.

3) Trade with predefined position size and increase it only after appropriate balance level is reached.

4) After few wins, take a rest for some time. Don't let euphoria to drive your trading.

5) After a few losses, take a rest till end of the day. Don't let your anger to gain control over your trading.

6) Don't stare on your equity number all the time. Excessive attention on it may cause unnecessary emotional attachment.

7) Observe your emotions and actions while being on the market. Find the point, where you have problems to emotionally withstand risk you've taken. Don't cross that boarder.

It's not that hard to notice, that most of points mentioned above require great discipline. To obey these rules you need to win with your natural reactions and force yourself to go against your strongest feelings. One trader told me, that to trade well, you need to learn to do things that are completely unintuitive. Also many traders admit, that very important moment in their trading was when they realized that the only thing they can control is maximum loss. You cannot control the market, but only your risk. You must remember that every time you enter any trade. Market does not care about you. It doesn't know where your positions are, how much money is in your account and why do you need extra money. Market will live it's own life with or without you. That's why trading the market is so much about trading yourself.

Finally, it's very important to filter the noise. If you have your system and made proper analysis with your best set of tools, don't mess it with other people's ideas or shouting press titles. It's not that you shouldn't track economic events or read market news. But you need to keep in mind that most of press' jabbering is only noise without real impact on market. On the other hand, other's people analysis may bring you some ideas, if you remember, that your system and your analysisare above all others, because your loses and gains are yours only.

Image from: http://optionalpha.com/

Have not tried PTMC yet? There is no better way to boost knowledge than to use it! Start trading with PTMC now!

DOWNLOAD PTMC

Discussion

Join PTMC community to post your comments

No comments yet. Be the first.

Referral Program Agreement

Referral Program Agreement (henceforth referred to as “the Agreement”, “Referral Agreement”) is made between PTMC (henceforth referred to as “the Company”) and Referral Partner (henceforth referred to as “Referral Partner” or “the Partner”).
Terms and conditions of the present Agreement are binding for the Company and for the Referral Partner.

The Agreement contains all the terms and conditions that shall regulate relations between the Company and the Referral Partner.

The Agreement shall enter into effect as soon as the Referral Partner registers on the PTMC official website and shall remain valid until the termination of the Agreement.

Please note that the Company reserves the right to revise, modify, change or remove clauses of the Agreement at any time at its sole discretion. Please check periodically terms and conditions of this Agreement on the Company website.

The Company reserves the right to reject the registration of any entity or person in the PTMC Referral program including the case if such entity is a person suspected of fraudulent activities фе its sole discretion.

1. General Terms

1.1. The Company and the Referral Partner agree and accept the obligations under the Agreement.

1.2. The Referral Partner undertakes rights and obligations set forth hereinafter. The Referral Partner agrees to acquire users to the Company acting in his name.

1.3. The Referral Partner acknowledges that all the users acquired to the Company are the Clients of the Company.

1.4. The Agreement is written in English language. The Company may provide the Сlient with the translation of the Agreement into the needed language on demand. English version of this Agreement is to be of prior importance. The translation may be provided only for the convenience of the Сlient.

1.5. To become an Referral Partner a user must:

1.5.1. Register on the Company website PROTRADER.ORG.

1.5.2. After the registration on the PTMC official website the Referral Partner receives an individual unique referral link which is available in user profile.

1.6. The Company has the right to request confirmation of any information provided by the Referral Partner during the registration.

1.6.1. When the information provided by the Referral Partner during the registration is changing, the Referral Partner should inform the Company about such modifications and request the Company to update the data.

1.7. After the Referral Partner accepts terms and conditions of the Agreement, he/she has the right to:

1.7.1. Conduct advertising campaigns in the interest of the Company.

1.7.2. Introduce marketing and advertising campaigns with the aim to acquire new Clients to the Company, provided that such events are legal in the country where they are conducted.

1.7.3. Provide the Clients with the necessary information about the Company, including the Company contact information, as well as general conditions of the services provided.

1.7.4. The Referral Partner has the right to use promotional materials provided by the Company representatives, they are: banners, text links, landing pages etc. The Referral Partner may use banners with the Company logo provided by PTMC and/or his personal referral link.

2. Rights and obligations of the Referral Partner

2.1. By registering on the official PTMC website the Referral Partner confirms that he/she accepts all the terms and conditions set out in the present Agreement. The Referral Partner acknowledges the fact that the Company has a right to modify the terms and conditions of the Agreement unilaterally.

2.2. The Referral Partner agrees to acquire new Clients to the Company under the present terms and conditions set by the Company.

2.3. The Referral Partner accepts terms and conditions regarding funds withdrawal and commissions charged that are specified in the Client Agreement.

2.4. It is prohibited to the Referral Partner to use any fraudulent methods, such as threatening, blackmailing etc. to attract new Clients to the Company.

2.5. The Referral Partner is obliged to get acquainted with the services provided by the Company on his own and inform the Clients he/she has acquired/is going to acquire about important changes in time.

2.6. The Referral Partner is obliged to warn the Client about the risks of currency trading on the foreign exchange market.

2.7. The Referral Partner is obliged to solve the problems the Client may face with while trading on the foreign exchange market. In case if the Referral Partner does not achieve to solve the above mentioned problems on his own, the Referral Partner is obliged to contact the Company and represent the necessary details.

2.8. The Referral Partner shall not give any recommendations or advice to the Client related to trading operations on the market. The Company shall not be responsible for the consequences of such recommendations and advice

2.9. The Referral Partner is not permitted to conduct trading operations on the account of the Client he has acquired.

2.10. It is prohibited to the Referral Partner to get referral revenue from his own accounts and those owned by his close relatives in case if the partner is an individual; as well as from private accounts of founders or accounts of their close relatives in case if the partner is a legal entity.

2.11. In case it is detected that the Referral Partner uses documents of the third parties with the aim to get referral revenue, the Company has the right to block all such accounts including personal account of this Referral Partner without any right of further renewal.

2.12. The Referral Partner shall not disclose the information received from the Company during the collaboration period and the data the containing in the Agreement to any third parties.

2.13. It is forbidden to the Referral Partner to use the following types of advertisement:

2.13.1. Advertisement on websites that contradict the laws of the country where the Referral Partner is located.

2.13.2. Advertisement on websites content of which is contrary to current legislation, morality, public order, good faith or is defamatory, aggressive, obscene, offensive, violent or incites violence, racist or xenophobic, or in general which is illegal or violates a person's rights and/or physical and/or moral integrity.

2.13.3. Spam mailing.

2.13.4. Advertisement with the false information contained.

2.13.5. Any other advertising that may affect credibility or reputation of the Company or any other dishonest marketing methods.

2.14. It is prohibited to the Referral Partner to organize monetary relations with the Clients (including receiving money, payment or banking cards, etc.).

2.15. The Referral Partner certifies and agrees that he shall act in accordance with all the applicable Anti-Money Laundering laws.

2.16. The Referral Partner is obliged to inform the Client of the need to protect security and confidentiality of account and login information and of the necessity not to disclose such information to any third parties. The Company shall not be responsible for the unauthorized use of the Client account information by any third parties.

2.17. The Referral Partner shall be responsible for the accuracy of the Client registration form and the authenticity of the data provided by the Client.

2.18. The Referral Partner allows the Company to use contact information provided during the registration, such as email address and other information specified in order to send the letters and proposals.

2.19. The Referral Partner agrees that the Company may unilaterally terminate and change terms and conditions of the Agreement without any explanations.

2.20. The Referral Partner is not entitled to: publish any negative comments (essays, letters) concerning the Company in any newspapers, magazines or other periodicals, blogs, Internet forums or other web-resources that may affect credibility or reputation of the Company. If the Referral Partner uses his own web-resource in order to attract clients to the Company, the content of the web-resource regarding the Company shall be approved by the Company.

2.21. If the Company detects that the Referral Partner has been involved in activities described in clause 2.20 of the Agreement, the Company is entitled to reject the Referral Partner request for funds withdrawal and to block his account, as well as inform the regulatory authorities of the jurisdiction of the Referral Partner.

2.22. It is prohibited to the Referral Partner to use PTMC brands in any way or manner whatsoever, including but not limited to the words “PTMC” spelled in any possible way (including with typos, spaces, signs, symbols or in any other way). Such forbidden use of the PTMC brands includes the use of such words/trademarks in the referral advertisements or in any part therewith, in the displayed URL and/or in the destination URL.

2.23. The Referral Partner shall only deal with third parties as a client of the Company. The Referral Partner shall not use the Company name, Company logo, etc. anywhere, including promotional materials, letterhead and business cards, advertisements and publications without the Company’s prior consent, with the exception of the case described in clause 1.8.4. of the Agreement.

2.24. The Referral Partner shall respect the confidentiality of the Company business and it is prohibited to him/her to disclose any confidential information or any information concerned the Company business for five years after termination or cancellation of the Agreement.

2.25. The Referral Partner guarantees the precise performance of the above mentioned obligations.

3. Rights and obligations of the acquired Clients

3.1. A user shall be considered as acquired by the Referral Partner after it is registered on the official PTMC website by following the unique link of the Referral Partner.

3.2. A client shall be considered as the acquired by the Referral Partner under the condition that the Client has not be previously registered as the client of the Company.

3.3. The Referral Partner shall not be entitled to refer his close relatives in case if the Referral Partner is an individual; or close relatives of the founders in case if the Referral Partner is a legal entity. The Referral Partner shall not be entitled to refer his own accounts.

3.4. Account owned by the Referral Partner and those owned by his close relatives if the partner is an individual, as well as private accounts of founders or accounts of their close relatives if the partner is a legal entity shall not be considered as those that the Referral Partner has acquired.

3.5. Accounts detected to be registered by the Referral Partner himself in order to get money through dishonest means shall not be considered as those that the Referral Partner has acquired. In case if such violation of the terms and conditions is detected the Company is entitled to terminate the Agreement and to block the Referral Partner account.

3.6. The Referral Partner himself, his relatives or any other affiliated parties shall not be considered as the Clients acquired by the Referral Partner. In case if any data of the Referral Partner coincides with the data provided by any acquired Client (such as ID data, address, telephone number, email address, IP address, etc.), such Client shall not be considered as the acquired one and shall be removed from the Referral Partner list. In such a case the referral revenue credited for this Client will not be paid.

3.7. Should the IP address of the Client be the same as that of the Referral Partner then they shall be considered affiliated and the referral revenue credited for this Client will not be paid.

4. Rights and obligations of the Company

4.1. In case if the Referral Partner fails to perform any obligations under the Agreement, the Company is entitled to terminate this Agreement.

4.2. The Company reserves the right to take legal actions against the Referral Partner in case the Referral Partner attempts to manipulate the Company and/or the Company proprietary trading platform and/or abuse the Referral Program. The Company reserves the right to withhold and/or deduct from any payment to the Referral Partner in the event of such manipulation and/or abuse.

4.3. The Company reserves the right under its sole discretion to reject the registration of any entity or person to the Referral Partner, including the case if such entity is involved in fraudulent activities.

4.4. If the Referral Partner appears to belong to one of the categories described in clause 4.3 the Company is entitled to terminate the Agreement and to block the Referral Partner account.

4.5. If any activity conducted by the Referral Partner is contrary to international law, morality, public order, good faith etc., the Company has a right to terminate the Agreement and to block the Referral Partner account.

4.6. The Company shall pay referral revenue to the Referral Partners after the Company receives payments for the software license paid by the acquired Clients.

4.7. The Company shall provide the software paid by the acquired user after the fact the payment has been carried out.

4.8. The Company shall enable Clients to conduct trading operations using PTMC software by providing them with logins and passwords to the trading terminal.

4.9. The Company maintains records of all trading operations made by the Clients.

4.10. In case if the Referral Partner fails to perform any obligations under the present Agreement, the Company has a right to exclude Clients from his list of the Clients acquired by him/her.

4.11. The Company is responsible for calculations of the referral revenue. In case if the Referral Partner wishes to check the calculations, the Referral Partner may request his Clients to provide the necessary statements. The Company shall not provide Referral Partners with the payment statements of the Clients.

4.12. The Company agrees to pay referral revenue to the Referral Partner in accordance with Appendix 1 of the present Agreement.

4.13. The Company determines method of the referral revenue calculation at its sole discretion.

4.14. In case if revenue is charged for the allegedly fraudulent accounts the Company reserves the right to cancel the revenues from such accounts and exclude such Referral Partners from the Referral Program.

4.15. Neither Party hereof shall be held liable for the complete or partial failure to fulfill its obligations in case if this failure results from Acts of God (including but not limited to fire, earthquake and other natural disasters, war or other military operations, blockades, government regulations and other extraordinary and unavoidable circumstances beyond either Party’s control).

4.16. Under the above mentioned circumstances the Party that fails to fulfill its obligations is obliged to inform the other Party through written notification within five business days from the moment of their onset and cessation.

Appendix 1. Referral revenue calculation

The Company shall pay the Referral Partner percentage in the amount from 10% up to 30% from the software license payments carried out by the Clients acquired by the Referral Partner.

The equivalent of the above mentioned referral revenue is calculated immediately as soon as the acquired client pays for the software and displayed in the user profile of the Client on the official PTMC website.

The Company shall pay the Referral Partner a certain percentage from 10% to 30% from the software license payments. This percentage is determined by the total number of the Clients acquired to the Company by the Referral Partner. The percentage is calculated according to the table attached below.

Crediting of the referral revenue shall be made on a monthly basis and shall be calculated within the first 10 days of each calendar month.

Any other payments are possible only in case if the Company and the Referral Partner agreed it in an amendment agreement.

Total number of the attracted users*	Referral revenue percentage
1 – 9 users	10,00%
10 – 99 users	20,00%
100 + users	30,00%