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ARE YOU PREPARED FOR BATTLE?

  
Analysis, Education
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PREDICTING WHO WILL WIN OR LOSE

Sun Tzu wrote the book on battle preparations, claiming that battles are won and lost BEFORE swords are drawn.  Why? Because preparation is key to success.  Knowing when, where, why, and how to fight is more important than the weapons used to fight. Too many traders search for success while in the heat of battle, trusting that their instinct or higher education or technical knowledge of this indicator or that price pattern will guarantee victory. However, seasoned, successful traders have discovered that the battles in the market begin and end in the mind.

Those traders who suffer defeat in one too many battles, never to fight again, do so because they refuse to prepare for the uncertainty inherent in the markets. They choose instead to “shoot from the hip” with a gunslinger mentality.  Battlefields change.  The stock market is in a constant state of change.  Those who win are prepared for these changes knowing that no two battlefields are alike.  They are prepared with a plan of attack for any market condition.  They prepare to win battles and they prepare to lose battles, knowing that defeat in battle does not mean ultimate defeat in the war.

Who will win and who will lose?  It’s fairly simple isn’t it?

Fed’s Beige Book: Economy expanded at slight-to-modest pace

  
  Analysis
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Highlights of the Fed’s anecdotal economic summary:

That’s a downgrade from modest previously.
Highlights:
  • Businesses see expansion continuing, many have cut outlook
  • Business activity varied across the country
  • Districts in south and west were more upbeat that midwest and great plains
  • Spending was solid on balance, housing market conditions changed little
  • Some districts suggested persistent trade tensions and slower global growth weighed on activity; early impact of GM strike was limited
  • Most expect economic expansion to continue; however many lowered their outlooks for growth in coming 6-12 months
  • A number of manufacturers reduced headcount because orders were soft, some cut hours rather than reduce staff
  • Wages rose moderately in most districts, with upwards pressure noted for lower-skill workers
  • Employers continued to use bonuses and benefits to attract and retain talent
  • Most districts characterized the recent pace of prices increases as modest
  • Retailers and manufacturers noted rising input costs
  • Shipping rates remained lower than they were earlier in the year because of excess capacity

What Happens in Your Brain When Your Market View Is Completely Wrong

  
  Education
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Eric Barker has a new article (link here) on how to win every argument. The article had a point which made me think whether the same situation happens in trading.

So it quoted an experiment by psychologist Drew Westen, which showed to supporters, footage of their favorite candidates completely contradicting himself. The experiment found that as soon as the people realized that the information contradicted their world view, the parts of the brain that handle reason and logic went dormant, while the parts of the brain that handle hostile attacks – the fight-or-flight response – lit up. Essentially logic gets thrown out the window, and it just becomes a fight where you do anything to win.

A similar situation occurs in trading, when you have a certain expectation of how the market should behave. E.g. you might for various reasons, think that the market will go up. So when the market does not follow what you expect, you might initially make up excuses for it. However when the market continues to go completely in the opposite direction of what you expect, your logic and reasoning centers would shut down, your fight-or-flight response kicks in, you treat it like a hostile attack on you, and you would do anything to win (or not lose), e.g. keep averaging down. I’m sure this sequence of events led to many traders blowing up their accounts. It is pretty interesting that the experiment showed this as a ‘natural expected’ behavior.

As always, trade what you see, not what you think.

Intuition

  
  Education
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A hunch can be trusted if it can be explained.

Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism. 
If you are hit by strong hunch – put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen. 
Be wary of any intuition that seems to promise some outcome you want badly.

Ultimate Goal For All Traders

  
  Education
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In my opinion, this is the ultimate goal for all traders: Get to the point where you can make confident decisions on your own and trade with complete independence. While I tremendously respect the opinion of my colleagues, I DO NOT rely on them. I can turn off Blue Channels, and all communication to the outside world…and still be fine with making my own decisions and letting THE MARKET tell me if I’m right or wrong. I apologize if this sounds cocky, but it’s simply the truth.

How do you get to this point? Make decisions and learn from them! I openly admit that I have made TONS of mistakes in the market, and I still make mistakes EVERY DAY. The key is I’ve learned from them and now try my best to minimize those mistakes. As Tony Robbins says: “Good decisions come from experience, and experience comes from bad decisions.” The key is to MAKE a decision without worrying that you might be wrong. As long as you learn from it, you can correct it the next time. Again, just make the decision! Who knows, it might end up being a good one 

Defination -RUMOR

  
  Education
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Rumors have always been the fuel of financial markets. The modern Wall Street saying “Buy on the rumor, sell on the news” would not have been surprising to any Dutch trader in the 17th century. As Joseph de la Vega wrote in Confusion de Confusiones, his book about the Amsterdam Stock Exchange, in 1688:

The expectation of an event creates a much deeper impression upon the exchange than the event itself. When large dividends or rich imports are expected, shares will rise in price; but if the expectation becomes a reality, the shares often fall; for the joy over the favorable development and the jubilation over a lucky chance have abated in the meantime.

The figures shown at the right in this painting of the Amsterdam exchange, painted around the time of de la Vega’s book, appear to trading the latest hot rumor:

The Courtyard of the Stock Exchange, by Job Andriaenszoon Berckheyde (ca. 1670-1690), http://www.amsterdammuseum.nl/

 Deliberately spreading false rumors was one of the most effective tactics for profiting on stocks in the 18th century. In his pamphlet “The anatomy of Exchange-Alley,” published in 1719, Daniel Defoe wrote: (more…)

4 Words For Traders :Hear ,Receive ,Believe & Apply

  
  Education
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HEAR

To HEAR you have to listen and listen intentionally. You will not HEAR properly if you are focused on other things. This situation is especially true on a webinar or during the trading day when the markets are open. It is essential to set distractions aside and HEAR what is being stated.

RECEIVE

To RECEIVE something you have to HEAR it and come into agreement with it.  To RECEIVE is to take it unto yourself and personally grab hold of what you have heard and make it your own.

BELIEVE

To be successful you have to believe that what you HEAR and RECEIVE can add value to your current situation. You have to BELIEVE that a specific strategy repeated and correctly  executed, regards of any specific outcome, will provide successful results over time. You will act on what you believe In all areas of life.  Please make sure you really do BELIEVE it and are not allowing any contradictory mindset to compete with your belief because it is possible to hold two opposing beliefs at once. This is being double minded and leads to instability.  Being firm and unswayed in what you BELIEVE can lead to becoming a successful trader. (more…)

What Happens in Your Brain When Your Market View Is Completely Wrong

  
  Education
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Eric Barker has a new article (link here) on how to win every argument. The article had a point which made me think whether the same situation happens in trading.

So it quoted an experiment by psychologist Drew Westen, which showed to supporters, footage of their favorite candidates completely contradicting himself. The experiment found that as soon as the people realized that the information contradicted their world view, the parts of the brain that handle reason and logic went dormant, while the parts of the brain that handle hostile attacks – the fight-or-flight response – lit up. Essentially logic gets thrown out the window, and it just becomes a fight where you do anything to win.

A similar situation occurs in trading, when you have a certain expectation of how the market should behave. E.g. you might for various reasons, think that the market will go up. So when the market does not follow what you expect, you might initially make up excuses for it. However when the market continues to go completely in the opposite direction of what you expect, your logic and reasoning centers would shut down, your fight-or-flight response kicks in, you treat it like a hostile attack on you, and you would do anything to win (or not lose), e.g. keep averaging down. I’m sure this sequence of events led to many traders blowing up their accounts. It is pretty interesting that the experiment showed this as a ‘natural expected’ behavior.

As always, trade what you see, not what you think.

Examine Your Beliefs

  
  Education
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There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.
If you want to increase your muscles you go and lift weight
If you want to improve your stamina, you go and run daily
If you want to reduce weight you eat less and exercise more
What exactly do you need to do to improve your psychology.
First starting point if you want to improve your psychology is by examining your beliefs
You can only trade what you believe in.
Your beliefs drive your behavior. (more…)

What Happens in Your Brain When Your Market View Is Completely Wrong

  
  Education
#  #  #  #  #  #  #  #

Eric Barker has a new article (link here) on how to win every argument. The article had a point which made me think whether the same situation happens in trading.

So it quoted an experiment by psychologist Drew Westen, which showed to supporters, footage of their favorite candidates completely contradicting himself. The experiment found that as soon as the people realized that the information contradicted their world view, the parts of the brain that handle reason and logic went dormant, while the parts of the brain that handle hostile attacks – the fight-or-flight response – lit up. Essentially logic gets thrown out the window, and it just becomes a fight where you do anything to win.

A similar situation occurs in trading, when you have a certain expectation of how the market should behave. E.g. you might for various reasons, think that the market will go up. So when the market does not follow what you expect, you might initially make up excuses for it. However when the market continues to go completely in the opposite direction of what you expect, your logic and reasoning centers would shut down, your fight-or-flight response kicks in, you treat it like a hostile attack on you, and you would do anything to win (or not lose), e.g. keep averaging down. I’m sure this sequence of events led to many traders blowing up their accounts. It is pretty interesting that the experiment showed this as a ‘natural expected’ behavior.

As always, trade what you see, not what you think.

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