Trading in Zone -Not Trading in the Zone :Points

Trading in the ZOne

Positive and Focus

Accepting a loss positively

Confident without doubt

Trade as planned

Waiting the trade to come (setup )

Trading cold as ice

Not Trading in the Zone 

Negative feeling and not fully focus

Accepting a loss negatively

Doubt so much of his own analysis and rely on 3rd party analysis

over excited and over trading after a winning streak

Impulsive trading , jumping into the gun , chasing it

Emotionally attached trade causing the above reaction.

Patience Is the Most Valuable Trait of the Endgame Player

John Hussman writes:

I’ve long been fascinated by the parallels between Chess and finance. Years ago, I asked Tsagaan Battsetseg, a highly ranked world chess champion, what runs through her mind most frequently during matches. She answered with two questions – “What is the opportunity?” and “What is threatened?”

He adds:

The final minutes of a Chess game often go something like this – each side has exhausted most of its pieces, and many pieces that have great latitude for movement have been captured, leaving grand moves off the table. At that point, the game is often decided as a result of some seemingly small threat that was overlooked. Maybe a pawn, incorrectly dismissed as insignificant, has passed to the other side of the board, where it stands to become a Queen. Maybe one player has brought the King forward a bit earlier than seemed necessary, chipping away at the opponent’s strength and quietly shifting the balance of power. Within a few moves, one of the players discovers that one of those overlooked, easily dismissed threats creates a situation from which it is impossible to escape or recover.

Hussman lays out a great case for trend following–even though that is not his intent.

Ed Seykota’s 6 Rules from the Whipsaw Song

1. Do not be overly concerned about whipsaws a good trend pays for them all.

A whipsaw is when you enter a position but get stopped out quickly when the market reverses opposite to your position.  If you are a trend trader this may happen many times in a row in a range bound market.  This can be very frustrating to a trader and it may cause them to completely change their method.  The fact is that one really good trend will pay for all of these whipsaws as long as you keep your losses small, and if you change your system you lose the benefit of that big trend.

To avoid whipsaw losses, stop trading. -Ed Seykota

2. When you catch a Trend, ride it to the end.

Your system must be able to take a position in a trending market, but then also be able to ride that trend to the end.  Most new traders will jump out of trades before they are finished trending because they are scared the market has gone too far and will take back their paper profits.  Let a trailing stop take you out of a trade when the trend is over, and only exit once you are stopped out.

“The trend is your friend except at the end where it bends.” -Ed Seykota Continue reading »