These three are mutually inclusive. Without each working together to create the whole, managing your trading success will be difficult. Simple really but difficult to manage. But once managed very difficult to complicate.
ACTION + RESPONSE = COMPLICATED AS IT CAUSES CONFUSION
PREPARATION + ACTION = COMPLICATED AS IT CAUSES DOUBT
PREPARATION + RESPONSE = NOT POSSIBLE WITHOUT TAKING ACTION
PREPARATION + ACTION + RESPONSE = MANAGEABLE SIMPLICITY
Archives of “confusion” tag
rssMetaphors and Similes
Similes and metaphors play an important role in both the internal thought-process of a day trader as well as in communication between two traders. To describe the emotional reactions coupled to the movement of a stock in likeness to a rollercoaster, or to compare averaging down in hopes of breaking even to digging one’s self out of a hole is to use simile to quickly illustrate a particular situation as clearly and succinctly as possible. Every trader uses these analogies, each having his own favorites, and they are used to add structure to an environment that often lacks useful tools for explaining particular occurrences.
Sports metaphors also play an important role in quickly passing information to another trader with a small chance for confusion. Traders use base-hit as a metaphor to describe a solid but ultimately small-scale win in the market, and home run for when a trade is “out of the park”.
Ultimately, metaphors and similes can be used by a trader to keep his mind in the right place, and maintain emotional control. By metaphorically comparing trading to baseball or basketball, the Michael Jordan truism about never missing a shot he didn’t take or Babe Ruth’s statistical record for strikeouts helps the trader keep in the back of his mind the inalienable reality that he won’t get a hit every time he swings the bat.
Some traders choose to relate trading to fighting a war, conducting scientific research, or any number of analogous endeavors. The best metaphors and similes are those with which the trader can most easily identify. These easily identified intellectual aids, when utilized to enhance trading and the trader’s sense of control, in the end, will increasable productivity, and most importantly, profitability.
Trading Psychology
ACTION + RESPONSE = COMPLICATED AS IT CAUSES CONFUSION
PREPARATION + ACTION = COMPLICATED AS IT CAUSES DOUBT
PREPARATION + RESPONSE = NOT POSSIBLE WITHOUT TAKING ACTION
PREPARATION + ACTION + RESPONSE = MANAGEABLE SIMPLICITY
These three are mutually inclusive. Without each working together to create the whole, managing your trading success will be difficult. Simple really but difficult to manage. But once managed very difficult to complicate.
The Inanity Of Asking Questions On Blue Channels
Last week I was watching a investor query an analyst on a television show , the analyst in his most humble opinion on a particular stock said “Fundamentally it is good , technically it is not looking so good ” . What should I do asked the investor ? , the analyst replied ” I think you should hold on ” . the investor prompted “can I buy more , should I sell some ” . up came the analyst in his humble opinion ” buy on a fall , and sell on a rise ” and in wisdom he added “it is a volatile stock anything can happen “.. I failed to understand what the investor achieved of this conversation . the conversation had incorporated everything viz. . buy ,sell , hold and the standard disclaimer , “anything can happen ” . Investors are bombarded with packets of irreconcilable data which cause their little hard drives to collapse under pressure and confusion . Partly to blame for this are investors themselves , who ,in the quest for more information buy themselves a box of contradictions . !What an investor needs is a modicum of authenticated information and to be phlegmatic .. however most investors these days are contrarian’s and hence , they follow up with every pink paper , and investment magazine , add to it the daily dose of ‘analysis’ on television … Those Score’s of analyst reciting their pedantic verses and the numerous phone calls by altruists souls that ring in to tell you ‘what’s hot on the street’ .! What do we have at the end of all this ? Ans.: An agglomeration of profligate et irreconcilable information and a confused individual — who can barely find his way in the heap of ‘ information ‘.
- Serpents In the financial Eden :
- All the information an investor has access to is at most sciolism , what lies beneath is above the reach of the common man on dalal street .Distortion and dilution are the two most plaintive facets of information today . Mostly intentional , distortion and dilution is carried out by interested quarters and the fodder is fed to the people , the public domain as we are all aware has the ability to Xerox information at the speed of light , and before you know it a distorted Piece of information has taken the shape of a ‘hot news’ on the street. (more…)
Day Trading Terms
Advisor – the one who charges money for a piece of stock advice to cover his/her losses on the market.
Advisory Service – an advisor who lost a considerable amount of money and started new business.
Afternoon – a daily chance to give back the money you made that morning (see Friday).
Apprentice – anyone who peers at your screen shortly after you closed a profitable deal.
Average Down – what you have to do if you opened a long position and had to go to the bathroom.
Average Up – what you have to do if you opened a short position and had to go to the bathroom.
Bad Trade/Stupid Trade – an unprofitable deal that someone else carries out which does not fit your trading strategy.
Bottom – (when you have an open long position) the spot where you give up averaging down and sell; (when you have an open short position) the spot where the book recommends you to open a short position.
Break – a pause you take when you have either 2 profitable or 5 unprofitable deals in a row. (more…)
Confusion
No greater confusion than assuming an assumption
No greater confusion than being attached to an attachment
No greater confusion than adding more clouds to a cloudy mind
No greater confusion than blaming blame (more…)
How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?
Replace fear with faith—faith in your trading model and trading plan
Replace confusion with the attitude of being comfortable with uncertainty
Replace hesitation with decisive action
Replace surprise with taking nothing for granted and preparing yourself for anything.
Ed Seykota-Quotes
If you can’t take a small loss, sooner or later you will take the mother of all losses.
There are old traders and there are bold traders, but there are very few old, bold traders.
Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.
I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities.
The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance.
Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.
I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. (more…)
Why do we as traders hold on to our losses?
Hope,
Fear,
Anger,
Apathy,
Confusion,
When we see ourselves on the wrong side of a trade, we hold on with the thought that the market will soon come back in our favor, because most of the time it does. Hope, one of the greatest gift’s GOD has given us, can get you killed in the market.
The fear that when we let go of that loss, price is going to come back in our favor and we would have taken that hit for nothing.
The thought that we can’t take this loss, because we don’t want to give back some of our profits. Then the loss becomes so large that we really can’t afford to take it, so we leave it in the hands on the market hoping for mercy. In that situation, believe me the market is going to run over You every chance it gets, and will wipe You out as many times as possible. As generous as it is on the right side of the trade, it is a ravenous beast with no mercy on the other.
You have done all of Your analysis right, You have waited for a proper trade set-up and everything says that You have the advantage, You get in the market and the trade goes against you, and You are madder than hell because You were right, so You refuse to cut the loss. Let me say that the market loves that, because Your anger is only giving them more of your hard earned money. Your analysis can be 100% perfect and the market can still go against You, because the market will do as it pleases. It leads and You follow, but make no mistake, the same market that lines your pockets so fully can also turn on you like a mad dog.
Another thing that happens when a loss becomes too large is that thought that “I should have cut it at Rs1000.00, now it is Rs1,0000”. Then the apathy sets in and You just don’t care what happens any more. ‘If it comes around fine’, or ‘if I get wiped out so what’, ‘whatever’, then You turn off your screen and You do something else, but You can’t stop worrying about that loss that is looming over You larger than life. It is so much better for you to cut a loss than to have the market cut it for You.
The other thing is the confusion about when to cut a loss, it can get to be hard, but having a predefined stop before your entry or soon after or a physical SL, will make taking a hit much easier. I never like to try to define people’s SL’s because it is a matter of risk tolerance. You know how much You can afford to loss, and Zero is not an option, while none of us want to lose anything, it is just not realistic in this game. There are people who were prosperous for years in the market and got wiped out in single day or week because they could not stand to take a loss. As long as You have money, you have money to make more money, but when your money is gone, you have to get up from the table.
These things are easy to say in theory but hard to do practically, it is I think the hardest discipline that a trader learns, but we must learn to cut losses quickly. The heartache and money I could have saved by cutting my losses quickly and going in the direction that price was moving would be enough for that new Camaro that I love.
That is the great thing about the market, if You survive to play another day, You eventually get it.
CUT YOUR LOSSES QUICKLY (^_^)!!!!!!!!!!!
A failed long usually makes a good short, and a failed short usually means a good long (^_^). There is always good money to be made in the market, just don’t be the one because of your false hope, or stubbornness, that the market is making money off of. Don’t allow the market to feed on your families hard earned money cut losses quickly!!!!!!!!!!
17th Century Rules of Speculation
While much of these thoughts are outdated, it’s always a good idea to have a foundation of the first rules of speculation. Number 4 is dead on that you need to trade with money you don’t need and the patience to allow the trade to work out or not work.
What is a goblin treasure btw?
Rules of Speculation
- Never advise anyone to buy/sell shares. Where guessing correctly is a form of witchcraft, council cannot be put on airs.
- Accept both your profits and regrets. It is best to seize what comes to hand when it comes, and not expect that your good fortune and the favorable circumstances will last.
- Profit in the share market is goblin treasure: at one moment it is carbuncles, the next it is coal, one moment diamonds, and the next pebbles. Sometimes, they are the tears that Aurora leaves on the sweet morning’s grass, at other times, they are just tears.
- He who wishes to become rich from this game much have both money and patience.
Note: these rules are from “Confusion of Confusions” by Jose de la Vega in the year 1688. Vega was a successful merchant, poet, and philanthropist residing in the 17th century Amsterdam. This book represents the oldest known hints of technical analysis and his accounts of the Dutch markets in the 17th century.