To win in the markets you need an edge. |
Archives of “belief” tag
rssOscar Wilde: The Picture of Dorian Gray
“‘What of Art?’ she asked.
‘It is a malady.’
‘Love?’
‘An illusion.’
‘Religion?’
‘The fashionable substitute for Belief.’
‘You are a sceptic.’
‘Never! Scepticism is the beginning of Faith.’
‘What are you?’
‘To define is to limit.’”
10 Thoughts from Mark Douglas
1. The four trading fears
95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears
2. The proverbial empathy gap
You may already have some awareness of much of what you need to know to be a consistently successful trader. But being aware of something doesn’t automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it.
3. The market doesn’t generate happy or painful information
From the markets perspective, it’s all simply information. It may seem as if the market is causing you to feel the way you do at any given moment, but that’s not the case. It’s your own mental framework that determines how you perceive the information, how you feel, and, as a result, whether or not you are in the most conducive state of mind to spontaneously enter the flow and take advantage of whatever the market is offering. (more…)
The secret of discipline
The secret of discipline
Discipline seems to be that elusive element in trading, the thing you just can’t seem to get no matter how hard you try. Its a willo-the-wisp that we’ve only heard rumours about. Do you jump from system to system, method to method, change your chart constantly and have a favourite indicator of the month? We roughly call this poor discipline.
However I’ve discovered that there is something more fundamental underneath this behavior, which is a lack of belief in the system you are using. You have no faith in it. If you did, all such behavior and “discipline problems” would vanish in a puff of smoke.
To prove the point, consider this: imagine if I gave you a magic box, and if you put a dollar in this magic box and pulled the lever it would always dispense one dollar fifty.
What would you do? Yes thats right, you would do it over and over and over wouldn’t you? Probably for hour upon hour you would do it.
Would you at any time become bored with this magic box and go in search of a better one? Would you try to improve it or invent your own? If you had absolute faith in the fact that the box will dispense the dollar fifty I say you would have no discipline issues what so ever. You’d sit there putting in dollars and cranking the handle like maniac.
The problem is that in trading the dispensing of the dollar fifty is not so obvious but blurred under a win / loss ratio and other complications, but quite honestly the process of trading is the same.
Hence I say that if you are still jumping from system to system and have poor discipline, try reframing it as having no faith or belief in the system you are using.
Fear in the Markets
I think there is something to be said for the idea fear-based arguments standing out in people’s minds. Highly charged, emotionally relevant information is certainly processed differently from normal information, which is why advertisers will show very happy people drinking Coke, or people having car wrecks relying on their insurers. The correlations of investor margin debt and price movements of the markets might be one way to quantify how fear impacts speculative behavior …
That having been said, I do notice a kind of cultishness to the permabears… it is an ingrained belief that organizes their thinking about markets, the future, etc. The motivation, I suspect, is a desire to belong to a special group that will be spared the oncoming calamity.
Trading Wisdom – Perfectionism
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?
Why are so many traders trying to turn a game of probability into one of 100% certainty?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.
This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear— fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain.
“Life can be lived forwards, but can only be understood backwards” ~Soren Kierkegaard (more…)
Discipline
Discipline seems to be that elusive element in trading, the thing you just can’t seem to get no matter how hard you try. Its a willo-the-wisp that we’ve only heard rumours about. Do you jump from system to system, method to method, change your chart constantly and have a favourite indicator of the month? We roughly call this poor discipline.
However I’ve discovered that there is something more fundamental underneath this behavior, which is a lack of belief in the system you are using. You have no faith in it. If you did, all such behavior and “discipline problems” would vanish in a puff of smoke.
To prove the point, consider this: imagine if I gave you a magic box, and if you put a dollar in this magic box and pulled the lever it would always dispense one dollar fifty.
What would you do? Yes thats right, you would do it over and over and over wouldn’t you? Probably for hour upon hour you would do it.
Would you at any time become bored with this magic box and go in search of a better one? Would you try to improve it or invent your own? If you had absolute faith in the fact that the box will dispense the dollar fifty I say you would have no discipline issues what so ever. You’d sit there putting in dollars and cranking the handle like maniac.
The problem is that in trading the dispensing of the dollar fifty is not so obvious but blurred under a win / loss ratio and other complications, but quite honestly the process of trading is the same.
Hence I say that if you are still jumping from system to system and have poor discipline, try reframing it as having no faith or belief in the system you are using.
The Secret of Discipline
Discipline seems to be that elusive element in trading, the thing you just can’t seem to get no matter how hard you try. 
Its a willo-the-wisp that we’ve only heard rumours about. Do you jump from system to system, method to method, change your chart constantly and have a favourite indicator of the month? We roughly call this poor discipline.
However I’ve discovered that there is something more fundamental underneath this behavior, which is a lack of belief in the system you are using. You have no faith in it. If you did, all such behavior and “discipline problems” would vanish in a puff of smoke. (more…)
"TRADING WISDOM: ADDICTION TO PERFECTION"
“One of the great evils of trading is false exactness…Trading is a fuzzy process and I mean fuzzy in the best sense of the word. That is, as in fuzzy logic, as in the willingness to accept the idea that things aren’t exactly quantifiable and to forge ahead anyway” –John Bollinger (creator of the Bollinger Bands)
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.
This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear— fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain. (more…)
7 Crucial Points for Traders
- You don’t choose the stock market; it chooses you. A little bit of early trading success can have a profound effect on a person’s soul. If it does choose you, you’ll have to accept that your life and investing will become forever connected.
- Your methodology must provide an unshakeable foundation that you believe in totally, and you must have the conviction to trade based upon it. If your belief is tentative or if you don’t have complete faith in your methodology, then a few bad trades will destabilize and erode your confidence.
- A calm mindset that can focus on the execution and not on the outcome is what produces profits. It takes total emotional control. You must maintain your balance, rhythm and patience. You need all three to stay in the game.
- The markets are always conniving with ingenious techniques to get you to lose your patience, to get you frustrated or mad, to bait you to do the wrong thing when you know you shouldn’t. A champion doesn’t allow the markets to get under his skin and take him out of his game.
- Like a great painting, all good trades start with a blank canvas. Winning traders first paint the trade in their mind’s eye so that their emotional selves can reproduce it accurately with clarity and consistency, void of emotions as they play it out in the markets. (more…)