Conviction implies a settled state of opinion and the inertia of a decision already made; this simply leads to a kind of prejudice towards one market direction or another. But let’s face it: assumption is always the path of least effort. And when has the market ever rewarded the followers of that path? It’s far better to strive to be continually skeptical and yet boldly decisive when the moment requires. The difference may seem limited to semantics, but I think the interaction between our perceptions and the market should be a continually active process, and that includes methodically denying ourselves the allure of false comforts that accompany an unyielding sentiment.
Archives of “interaction” tag
rssConfidence in Trading: The Approach
Have you ever seen a gorgeous goddess? A woman so magnificent you just are beeming energy inside to go talk to her? But as you walk over you start to notice how you’re walking, what facial gestures you’re making, where your hands are, confidence fading… You’re becoming self-conscious and that wonderful feeling of excitement has now turned into fear. Do you remember the last time you talked to a woman in this energy? In this self-conscious / fear mentality? Didn’t go so well did it? Why is a stock any different?
It’s all about the approach and mental confidence prior to the trade. When you approach an event with fear that energy gets transferred into it. I’ve talked about how The Energy of Fear is Consumption in this prior post. So if you’re feeling nervous before a trade take note of this. Where is this fear coming from? Is it related to money? Lack of confidence in yourself? Lack of self worth? It could be a million different things but you need to find and focus on the one that resonates with you. I’m currently working on a meditation that will assist you through the process of finding this fear and making it your ally.
Remember the emotion will come during the “approach.” Keep track of how you feel, as this will set the course of how the rest of your interaction with the trade will go. Keep in mind that magnificent woman: Do you approach her as nervous, not confident, and fearful of reject or strong, confident and full of love?
3 things that will kill your trading success.
Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.
Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.
Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.
Trading Lessons
- Most of the time, markets are very close to efficient (in the academic sense of the word.) This means that most of the time, price movement is random and we have no reason, from a technical perspective, to be involved in those markets.
- There are, however, repeatable patterns in prices. This is the good news; it means we can make money using technical tools to trade.
- The biases and statistical edges provided by these patterns are very, very small. This is the bad news; it means that it is exceedingly difficult to make money trading. We must be able to identify those points where markets are something a little “less than random” and where there might be a statistical edge present, and then put on trades in very competitive markets.
- Technical trading is nothing more than a statistical game. The parallels to gambling and other games of chance are very, very close. A technical trader simply identifies the patterns where an edge might be present, takes the correct position at the correct time, and manages the risk in the trade. This is, of course, a very simplified summary of the trading process, but it is useful to see things from this perspective. This is the essence of trading: find the pattern, put on the trade, manage the risk, and take profits.
- Because all we are doing is playing the small edges as they occur in the markets, it is important to be utterly consistent in every aspect of our trading. Many markets have gotten harder (i.e. more efficient, more of the time) over the past decade and things that once worked no longer work. Iron discipline is a key component of successful trading. If you are not disciplined every time, every moment of your interaction with the market, do not say you are disciplined.
- It is possible to trade effectively as a purely systematic trader or as a discretionary trader, but the more discretion is involved the more the trader himself is a key part of the trading process. It can be very difficult to sort out performance issues that are caused by markets, by natural statistical fluctuations, by the trading system not working, or by the trader himself. (more…)
3 Mistakes that will kill your trading success
Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember. Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next. Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest. |
Game Theory And The Markets
When you take a position in the market, you are really playing a game against the market. Profitability doesn’t lie in your actions alone, it lies in the interaction between your position and the market’s price fluctuations…The goal of the individual is obvious. It is to make money. But what is the goal of the market? Simply put, the market wants you to lose money. This may be a provocative thought, but it is quite reasonable in the context of game theory.
Important Trading Lessons
These are some of those fundamental and undeniable truths, as I have come to understand them over the course of my trading career:
- Most of the time, markets are very close to efficient (in the academic sense of the word.) This means that most of the time, price movement is random and we have no reason, from a technical perspective, to be involved in those markets.
- There are, however, repeatable patterns in prices. This is the good news; it means we can make money using technical tools to trade.
- The biases and statistical edges provided by these patterns are very, very small. This is the bad news; it means that it is exceedingly difficult to make money trading. We must be able to identify those points where markets are something a little “less than random” and where there might be a statistical edge present, and then put on trades in very competitive markets.
- Technical trading is nothing more than a statistical game. The parallels to gambling and other games of chance are very, very close. A technical trader simply identifies the patterns where an edge might be present, takes the correct position at the correct time, and manages the risk in the trade. This is, of course, a very simplified summary of the trading process, but it is useful to see things from this perspective. This is the essence of trading: find the pattern, put on the trade, manage the risk, and take profits. (more…)
Dealing with entry timing
How do you personally get around from being “too early” or “too late” on an entry?
How do you personally get around from being “too early” or “too late” on an entry?There are a few things that have helped me get over missing a trade or “being right” and not making money.
- Opportunity vs profit. I thought the market owed me profits. Now, I see the bars on the chart not as profit but an opportunity to profit. The market does not owe me anything. I owe it to myself to execute my plan to the best of my ability. Good things happen.
- Important feedback. If a trade develops in a way that I had not anticipated, it means I did not notice a change. It is now up to me to understand why or determine it was an aberration. Either way the market is giving me valuable feedback.
- Unlimited time horizon. One of the side effects of trading is missing trades. It is something that you have to get over. It is a fact of life. The next trade is always more important than the last one. You should have more experience and knowledge, right? Knowledge of yourself, the market, and the interaction between the two.
Said in one sentence. I get over missing trades because I do not have a sense of entitlement, willing to use the feedback, and know that it is just one trade in 1000′s or hopefully 10,000′s.
Three Things Will Destroy Your Trading
Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.
Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.
Not being a beginner. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.