Only the pockets change. Greed, fear, & ego create the same patterns. + Algos now.
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rssThe Opposite of Fear
5 Stages of a successful trader
Traders often pass through a series of 5 stages before becoming successful. In order, these are:
- Unconscious Incompetence – Brand new traders enter at this stage, full of excitement and overconfidence that they will amass riches overnight. “How hard could it be? Price either goes up or down, right?” one may ask. The trader funds his account and starts quickly, taking lots of trades and unknowingly take on lots of risk. After a few initial successes, he is disappointed that price somehow turns on him every time he enters and he subsequently takes revenge by doubling up on new trades.
- Conscious Incompetence – After realizing how out of touch with the reality and danger of the market he was, the trader progresses to the next stage and sets out to educate himself by buying loads of books, attend seminars and signed up for courses, searching for the “holy grail.” The trader seeks advice and entry signals from other traders in forums who brag about their earnings and wonders why it is not him.
Inspirational…
Hypothesis of the day
Hypothesis I thought of the other day daydreaming:
A test of lows or highs is similar to how when you break up with a lover you always go back for a second try to probe to see if you made the right decision. Both parties are usually willing (bulls/bears and man/woman or etc/etc. If test falls short, low/high rejection a new trend is formed or new high/low is formed and trend is resumed. If two partners give it a second try either their relationship moves to new deeper levels of intimacy or they split up and look for new partners.
Of course break out failures and failed failures happen, but at least the scenarios can be confined to a limited set of outcomes.
Jesse Livermore-How to Trade in Stocks (1940 Original) E-Book
Pepsi To Cease Advertising
‘We Know It’s Good, And That’s Enough’ Says CEO
PURCHASE, NY—PepsiCo sent shockwaves through the carbonated beverage industry Monday when the multibillion dollar corporation announced that it would cease all advertising of its popular soda product, effective immediately.
“We know it’s good, and everyone’s pretty happy with the overall taste, so why spend all our time worrying about what other people think?” PepsiCo CEO Indra K. Nooyi told reporters during a press conference at the company’s corporate headquarters. “Frankly, it just feels sort of weird and desperate to put all this energy into telling people what to drink. If they don’t like it, then they don’t like it.”
Added Nooyi, “That’s not really any of our business anyway.”
According to Nooyi, top PepsiCo brass held a series of meetings over the past several months before unanimously agreeing Monday that they all enjoyed Pepsi, and that the company’s century-old history of massive, high-budget ad campaigns, cross-promotional tie-ins, merchandising, and Super Bowl halftime extravaganzas had been “a big mistake.” (more…)
The Top 5%
The largest academic study ever conducted on day trading shows that most traders lose money …. even during a bull market. Only 5% of active traders were able to earn significant profits two years in a row.
Are 95% of traders dumb? Hardly. As a trading coach for more than a decade, I believe traders are among the intelligent and motivated individuals.
Even so, most traders get fooled by news or price action and behave in ways that limit or erase profits.
Is this self-sabotage? Fear of success? A hidden wish to fail? I don’t think so. The struggles of most traders arise for a different reason: the trading environment turns our own reward-seeking and self-protective instincts against us.
Trading for a living is harder than it seems at first. You were probably not mentally or emotionally prepared for the randomness in the market you trade.
There is a saying that goes: “Doing the same thing over and over and expecting different results is the definition of insanity.” In trading, however, it’s the very definition of normal. Let me explain.
We constantly get tricked and trapped due to random price action. Our job as traders is to behave consistently and predictably in the face of very different results than we expect. This is a skill few have practiced in daily life, where results are more directly linked to action.
Thought For A Day
Mix It Up A Little
Does boredom cause you to do silly things? If so, you’re certainly not alone.
More and more I see traders make simple mistakes primarily because they are bored with what they are doing NOT because they don’t know what they’re doing.
Contrary to popular opinion, traders and investors often do get bored. I know I certainly have. After all, if you’re doing it correctly, good trading and investing should be both boring and routine. If that’s not the case for you, it probably is because you’re either trading far too aggressively (i.e. the gambler) and/or you have no risk management skills whatsoever.
In my experience, most humans and including those of us who are very disciplined and focused, will from time to time seriously crave to change things up a little. No one, including me, likes to do exactly what they need and should do every day. Most of you are no different than me. The problem is that when we both get bored, very bad things tend to happen if we don’t first realize that our trading and investing is being negatively impacted by boredom and do something about it.
For example, in my experience traders tend to either disconnect from the market entirely (which can be dangerous with positions open or lost opportunity) or they do the exact opposite by increasing their overall risk to “make it more interesting.” Likewise, investors tend to become far more active (i.e. they turn into traders and churn positions) just to do something to keep themselves preoccupied or they buy and sell stocks that normally they wouldn’t even consider. In either case, neither one tends to work very well.
When you start to see the signs that you are becoming bored and have the urge to do something “different,” I recommend mixing things up a little. For example, when I become bored with my trading and daily routine I often do the following which seems to help:
Head to the gym (intense and exhausting exercise is the best cure for boredom I know)
Mix up the daily routine (I like to flip my day around and do things I usually do at the end of the day first)
Try to learn something new (I often try to study a different sector/different market now, but in previous years I would enjoy playing around with a new indicator or two)
Read about something you know nothing about (if you do this, you’ll be amazed by how much it will stimulate your brain)
Take some time off and do something else (while I always have a long “honey-do” list to keep me busy, that’s also why there are golf courses!)
Now, for those of you who make a living trading and who feel they cannot leave the game for an hour, much less an entire trading day, I have some suggestions for you as well: (more…)