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Emotions and Behaviors in Trading

  
  Education
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Successful trading requires the individual to have more than a certain amount of control over emotions and behaviors.
Emotions may include, but not be limited to, the following items:
1. Anger, anxiety, confusion, depression, disappointment, exhilaration, frustration, insecurity, passion, satisfaction, etc.
Behaviors may include, but not be limited to, the following items:
2. Arrogant, consistent, controlling, denial, following through, [im]patient, [ir]rational, letting go, perseverance, stubbornness, tenacity, etc.
Having control over these and other emotions and behaviors will allow for the trader to execute trades objectively, and more importantly, according to a strategic plan.

Sounds easy enough, does it not? “Execute trades objectively, and more importantly, according to a strategic plan.” Being that traders are human, it is not such an easy task to accomplish. It is not easy to be objective and diligent about sticking to a strategic plan day after day after day – especially with the constant volatility and erratic dynamics of the market tempting and enticing you at every turn to take actions that are NOT necessarily objective and NOT necessarily part of the strategic plan.

Re-Evaluate

  
  Education
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Re-EvaluateBe willing to stop trading and re-evaluate the markets and your methodology when you encounter a string of losses. The markets will always be there. Gann said it best in his book, How to Make Profits in Commodities, published over 50 years ago: “When you make one to three trades that show losses, whether they be large or small, something is wrong with you and not the market. Your trend may have changed. My rule is to get out and wait. Study the reason for your losses. Remember, you will never lose any money by being out of the market.”

6 Mistakes

  
  Education
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Mistake number one: not having any knowledge of the simple visual indications for when to enter a trade based on market behavior and common sense.
Mistake number two: not being on the right time frame at the right time for the current trading opportunity.
Mistake number three: entering trades long AFTER the real entry occurred and exiting way BEFORE the exit occurs.
Mistake number four: no trading plan or direction for a consistent entry and exit strategy.
Mistake number five: following some scam Forex system they recently bought on the internet and using dozens of “proprietary” indicators.
Mistake number six: entering and exiting trades for reasons other than their own trading method. (fear, greed, etc)

Once Kissed, Twice Shy

  
  Education
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The markets have a plethora of different structures and associations with numbers. Some examples are:

1. Round numbers

2. Opening & closing times

3. Limits

4. Constantly changing magnitudes and significance placed thereupon (for example there were extended periods last summer when the SPU futures had daily ranges in the mid single digits and now it’s a score (20) per day).

Much work is done splicing and dicing numbers and looking for statistically significant positive expectations based on various past conditionality.

As another part of that, I wonder whether or not the first, or second or third instance of some stimuli is more or less predictive than the other or others.

This has been brought up in my mind by the recent dance of the seven veils of many markets with many round numbers.

As a start, how about this:

1. Is the first break of a round more or less predictive than the second (assuming the market has reversed intermediately)?

2. Are moves of the same magnitude in the same or opposite directions of interest within a given timeframe?

3. More qualitatively, when a market breaks some predefined barrier (a round, a magnitude, a correlation coefficient et al) and subsequently does so again later, is this last move more likely to have the same sign/ opposite sign and will the magnitude be greater or lesser?

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