Archives of “February 2019” month

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10 Lessons for Traders & Life

  
Education, Life
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1) Have a firm stop-loss point for all activities: jobs, relationships, and personal involvements. Successful people are successful because they cut their losing experiences short and ride winning experiences.
2) Diversification works well in life and markets. Multiple, non-correlated sources of fulfillment make it easier to take risks in any one facet of life.
3) In life as in markets, chance truly favors those who are prepared to benefit. Failing to plan truly is planning to fail.
4) Success in trading and life comes from knowing your edge, pressing it when you have the opportunity, and sitting back when that edge is no longer present.
5) Risks and rewards are always proportional. The latter, in life as in markets, requires prudent management of the former. (more…)

The Difference Between a Speculator and a Gambler

  
Analysis, Education
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A speculator strives to be professional, honorable, intellectual, serious, analytical, calm, selective and focused.
Whereas the gambler is corrupt, distracted, moody, impulsive, excitable, desperate and superstitious.
It’s not the market that defines whether a participant is a Gambler or a Speculator, it’s his behavior.
 

Minimize The Impact Of A Setback!

  
  Education
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First, minimize its symbolic importance. Many people over interpret setbacks by imbuing them with more emotions than are warranted. They view setbacks as a form of punishment, as if a teacher or parent is punishing them for doing something wrong. Take the setback in stride and move on to the next winning trade.

Second, don’t confuse trading outcomes with personal significance. If you lose big, for example, the loss may have great financial significance but it doesn’t need to have great personal significance. You can wipe out your entire account, but that doesn’t mean you are diminished in the eyes of friends and family. You don’t need to let a loss or setback make you feel less worthy as a person.

Ironically, when you psychologically minimize the impact of a setback, and treat it as if it isn’t important, you’ll stay calm, free, and objective. And when you feel this way, you’ll trade profitably.

Motion Affect

  
  Education
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When the zebra herd panics, the lion may not get a proper bite down due to visual confusion of the target’s shape. Remember that for the future when price screens are flick flashing oddly or excitedly.

Motion Dazzle:

An animal that is commonly thought to be dazzle-patterned is the zebra. The bold stripes of the zebra have been claimed to be disruptive camouflage, background-blending and countershading. After many years in which the purpose of the coloration was disputed, an experimental study by Tim Caro suggested in 2012 that the pattern reduces the attractiveness of stationary models to biting flies such as horseflies and tsetse flies.

However, a simulation study by Martin How and Johannes Zanker in 2014 suggests that when moving, the stripes may confuse observers, such as mammalian predators and biting insects, by two visual illusions: the wagon-wheel effect, where the perceived motion is inverted, and the barberpole illusion, where the perceived motion is in a wrong direction.

Expectancy

  
  Education
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If you perform an internet search on how to calculate expectancy as it relates to trading systems, you will most often see the following:

Expectancy = (probability of win x average win) + (probability of loss x average loss)

The average win and average loss can be either percent gain or loss or it can be dollar values. For example, following are the performance statistics for one of my trading strategies:

  • Probability of win = 71.7%
  • Average win = 2.72%
  • Probability of loss = 28.3%
  • Average loss = -3.59%

I can calculate the expectancy in percentage terms as follows:
Expectancy = (0.717 x 0.0272) + (0.283 x -0.0359) = 0.93% (more…)

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