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Neuroplasticity: Your Brain and Your Trading – #AnirudhSethi

  
Analysis, Education
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Neuroplasticity – HOPES Huntington's Disease InformationIn Neuroplasticity: Your Brain and Your Trading, we will explore how Neuroplasticity can help traders create a more accurate trading system. Neuroplastic is the ability of your brain to adapt to its surroundings and change through experience. Neuroplasticity is an exciting new area of research in which scientists are studying the ways that our brains change over time with various types of input.

Mental training has been shown to be a powerful tool in improving performance on tasks from memory recall, math calculations, motor skills, creativity, decision-making, and many others. Neuroscientists have found that mental training increases gray matter volume in specific areas of the brain responsible for those skills.

 

##What is neuroplasticity and how does it affect trading?:

 

In the world of neuroscience, babies are like sponges. They process data twice as fast and their brain is still developing due to new neural connections that form in response to stimuli. The thing about brains—they can adapt! Imagine what it would be like if your left speech center was damaged after an accident or stroke; you could learn how to use your right side instead because they’re always adapting with time (talk about a tough feat).

Your brain is more awesome than we even thought: not only does it have all this processing power but also some cells called “mirror neurons” which help us understand other people’s actions by simulating them ourselves–in short, mirror neurons make imitation easy for our children while giving adults empathy skill.

The conventional wisdom once said that we could never recover from the loss of brain cells, but now research has shown that you can grow new ones. For instance, if a senior is injured or ill they will experience significant changes to their neural pathways in response and this makes up for lost neurons by creating more connections between healthy neurons so everything can be sorted out again! (more…)

The emotions in markets are off-the-charts

  
Analysis, Education
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Do you feel it?

comic about warnings
Fear is the strongest emotion but greed isn’t far behind.
What we’re seeing in the markets and in the world right now is extreme emotion. Collectively, I believe that COVID-19 has left everyone an emotional wreck.
We all agree that the fears from the virus have diminished but what has replaced that is a mess. It’s all anecdotal but I’ve come to believe the series of events around the coronavirus has elevated individual and collective emotions — like every day is a full moon.
The fear around the virus has left some kind vacuum and people are trying to fill it.
You see it in people’s lives, in protests, in anger but you’re also seeing it in markets. There has never been a market like this. People are throwing away their hard-earned savings on idiotic gambles on bankrupt companies.
But it’s not just the stupidest of the stupid. The uncertainty in the world is extreme and there’s no reflection of that in risk assets. The transition from fear to greed to euphoria is nonsense.

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Emotions In Trading -Anirudh Sethi

  
Analysis, Education
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For many traders emotional trading is a problem and it stops them from being consistent in the market. We see what causes emotional trading in this article and I share six steps to greatly help reduce it, or stop it entirely.

Emotions in trading have always been one of the main causes of losses, and at the same time − the main driving force for all types of money. Remember the classic idea: buyers push the price up because of greed, and sellers sell because of fear of losses?

It still works perfectly in any market.

Popular training materials on market trading almost do not pay attention to managing emotions. This is understandable: any broker is the first participant in the trading process, which is vitally interested in having you leave your deposit to the market.

That is why most newcomers, especially those who passed the super-fast and super effective training in various brokerage kitchens, remain psychologically unprepared for trading. And even good technical training will not help such players save their money.

Assessing and reacting to market risk is one of the most important things you’ll have to do as a trader. Sadly, human being as a whole are so mediocre at this task, investors and traders reliably make decisions that economists consider “irrational.”

So obviously these are commonly more referred to as emotional trading.

 

Six Steps to Help You Stop Emotional Trading

Financial markets are a by-product of modern era and, in the grand scheme of things, our brains have evolved over millions of years for survival out in the open. They haven’t had the time to get good at making sound and perfectly rational financial decisions.

We have brain processes; an emotional one and a logical one that are constantly competing against one another for our future expression in the market. And normally, for the trader that has little to no market experience, who trades money they can’t afford to lose, or who has a short fuse overall, the stage is set for an incident.

But also more seasoned traders tend to make emotional trading decisions that they consider stupid in hindsight. Perhaps less often than inexperienced traders do, and with minor consequences, but those errors do happen.

Many a times, although we know with the logical part of our brain that we will get better results if we follow our trading rules, so many of us do exactly the opposite, despite clear knowledge of what we should do.

We remove stops, we cut winners short, we go in with too big of a size… I mean, we’re clearly

not purely rational beings ― and we can’t be because that would make us robots, not humans.

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Trading obstacles

  
  Education
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Trading obstacles

Have you ever been to a situation when you moved the stop because you couldn’t accept the lose, but ended up losing big chunk. Or you were too sure about the direction of the trade, you didn’t even put a stop loss but trade went opposite your way and ended up losing ten times more then what you suppose to lose. What about this scenario, you were sitting on big profit; you didn’t partial because of greed or overconfidence and ended up giving every thing to the market. Never been to this kind of situation, that’s great, but if been through this kind of horrible situation and still having this problem then you are not alone. We human naturally like that, can’t accept loses or in other word we like to win. In the trading word it is impossible to win 100% of the time, trading is game of probability .Very simple concept which part of the probability we don’t understand. Probably we understand probability but when we involve in a trade our ego overleaps the logical part of our brain.
What should we do, we will let our ego to ruin our trading career or we will say good bye to our ego.

1.Be honest to your self
2.Admit you mistake
3.Overconfidence is you enemy
4.Think logically
5.Try to keep record of every trade
6.Never revenge trade
7.Market is always right not you.

7 dirty words you can’t say while trading

  
  Education
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Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a dark background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.

Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks. (more…)

4 Dirty Words of Trading

  
  Education
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Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

Positive Affirmations

  
  Education
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affirmationsRepeat the words yourself to ingrain them in your brain.
Repeat the words yourself to ingrain them in your brain.

  • –I am a consistent trader.
  • –I have complete confidence in my abilities.
  • – I follow my trading plan.
  • –I know the markets today are capable of doing anything.
  • –I am prepared to trade what I see.
  • –I will have winning and losing trades today.
  • –I set stops immediately after I enter a trade.
  • –I will never add to a losing position.
  • –I have complete confidence in my abilities.
  • –I have supreme concentration.
  • –I will immerse myself into the market flow.
  • –I will take what the market offers up to me.
  • –I know what my trading edge looks like.
  • –I will not hesitate when my system gives me a signal.
  • –I have complete trust in probabilities.
  • –I will buy when my system signals me to buy.
  • –I will sell when my system tells me to sell.
  • –I will trade responsible size, never risking too much.
  • –I am moving closer to my goals everyday.
  • –I am a skillful trader but always striving to do better.
  • –I learn from my mistakes so I do not repeat them.
  • –I have complete confidence in my abilities.
  • –I am an excellent trader.

Solution if you are in Stress while Trading

  
  Education
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1. Think positively. Being optimistic helps in stressful situations. Do not let stress affect your mind and keep focusing on the positive side of your trading. What we think may result in decisions that can lead to better or worst situations. Thinking positively helps in making good decisions.
2. Change your response to stress. Being able to manage stress means developing strategies to deal with stress. Think of stress as a reaction rather than an event. It makes it easier to identify healthier ways to manage stress. Learn to Reframe Your Brain when adrenaline kicks in as the result of a win or a loss.
3. Task division. No man is an island. As a human being, we cannot survive being on our own. Having a trading mentor or trading buddy can provide both a sounding board and a support system. 
4. Manage your time. Time is such that once you lost it, you can never get it back. Managing and limiting your trading time will help to keep your emotions and trading on track. 
5. Learn your priorities. Our behavior towards ourselves and others may also contribute towards stress. Sometimes it is important to say no towards requests that you find it hard to meet. Keep in mind that by saying ‘yes’ to everything may please everyone but you may add on more stress and cause disappointment if the target is not meet. (more…)

Traders -Remember These Two Words-Won't & Can't

  
  Education
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Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

The Power of Elimination

  
  Education
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One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.” – Bruce lee

So what do Bruce Lee and Leonardo Da Vinci have in common?  They both understood, as any good trader should, the essentials of making an impact…the power of subtracting noise.

As a trader you should do the same:

1) Subtract your emotional baggage

In close to twenty years of trading, I have yet to meet ONE successful trader that is emotionally unbalanced. Bring your emotional baggage, your demons, your insecurities to your trading terminal, and you likely to make wrong decisions.

2) Subtract financial entertainment

Blue Channels  and other financial media are a great source of info-tainment and you can surely learn a lot. But if you sit in front of the TV all day without having a solid plan thinking that’s what professional traders suppose to do, you virtually guarantee to trade yourself out of capital very shortly. Understand that the delivery of TV news is designed to hit the emotional part of your brain. You might benefit from shutting it off in the short run.

3) Subtract noise

Good trading is not about having 8 screens, 1500 indicators, live steaming news, Twitter feeds, and a phone line with direct connection to god. Clean up your charts to the essence, price, volume and maybe one or two indicators. Clean up your screens and eliminate as much noise as possible, go over your trading diary and identify which inputs produced the most output, then go back and close the applications that add nothing but flicking lights and funny sounds, subtract until you are left with the essence of your system. (more…)

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