February 8, 2019 - Page 17 of 19 - Financial Occultist

The ANTICIPATION Phase: this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present. Technical analysis is nothing more than finding previous price patterns matched with current market conditions. Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.

The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process. Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target , fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.

The REINFORCEMENT phase occurs after the trade is closed. Whether or not the trade is a win, lose, or draw, the self-talk immediately following trade closure is vitally important for the next trade, and even the next series of trades, as future trades can be negatively or positively affected by building pathways to future success. These pathways are neurologically based and can make or break a successful trading career. While it is important to ANTICIPATE right side chart OUTCOMES, what is more important is DEVELOPING right side brain reinforcement.

JOHN KENNETH GALBRAITH ON STOCK MARKET MEMORY LOSS

08-Feb-19 02:30 am

Education

Anirudh Sethi

Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory. In consequence, financial disaster is quickly forgotten. In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world. There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

Manage risk in the markets and in life.

08-Feb-19 02:25 am

Education

Anirudh Sethi

No question that there is volatility in the markets right now. Too much volatility can lead to an increase in stress, especially if your trading involves holding positions longer than 5 minutes. Stress is part of the business so we have to adapt to it, both physically and mentally, or fade away. For some it is easier than others to find an activity to unwind and release some stress. Hitting the batting cages, taking in a movie, attending a sporting event, going for a jog or simply reading a good book are some examples.

I’d argue that those who have a difficult time taking a break from the trading world and thus the accompanying stress are also poor managers of risk. Having risk in the market is a given. Not having discipline to manage that risk is where they fail. We’ve all had that gut feeling that X is going to happen and a loss will occur, it’s part of the business. Those that take that loss, learn from it and move on are those that are able to escape the markets when needed.

Those that choose to not manage risk in the market fail to manage risk in life. Instead of taking the edge off at the local watering hole they stay there ’til last call, neglecting other duties in life. Instead of spending the weekends with family and friends to recharge they pore over charts, financial statements and twitter looking for the next holy grail. Always chasing, never catching.