Archives of “objectivity” tag

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Vision

  
  Education
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Vision – Although an expectation of total clairvoyance as to future price movement is unrealistic, it is my goal as a trader to assimilate as much information as possible with the goal of playing out scenarios that tie in with each other.

This is not always easy to do. Yet, understanding trading does not occur in a vacuum, and markets do exhibit oddities. You can get yourself mentally prepared to deal with these outlier events. Those who can think for themselves and need not rely on templatized news releases for their ideas usually put themselves in a position to benefit from their forward thinking.

We have heard many times about leaders who saw an industry trend before it happened. This was no accident. It came as a result of their understanding of their field and what could change it for the better. Traders who gain an understanding of how things can potentially play out and factor that into their trading strategy go a long way toward keeping their objectivity when things unfold in a fast and volatile market.

Trading To Win – The Psychology of Mastering the Markets

  
  Education
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The Ten Cardinal Rules

1. Learn to function in a tense, unstructured, and unpredictable environment.
2. Be an independent thinker versus a conventional thinker.
3. Work out a way to handle your emotions and maintain objectivity.
4. Don’t rely on hope and fear in the conventional sense.
5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
6. Modify your normal responses to certain events.
7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
9. Understand the larger framework in which trading occurs—how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your egoand your need to have things your way.

Conviction, Anxiety and Belief

  
Analysis, Education
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In 1952 Harry Markowitz effectively founded modern finance with his seminal paper “Portfolio Selection“. The famous (or infamous) CAPM and Efficient Markets Hypothesis, for all practical purposes, evolved from the Nobel winning ideas in this paper. (Note to self: resist urge to make Nobel joke). Ironically however virtually no one knows that Markowitz himself said his paper began with step 2! Step one was deciding what you believe.

We hear a lot from the well known trading coaches about conviction and it strikes me as funny because conventional risk wisdom says “don’t get married to an idea”, “let the market tell you”, “take what the market gives” and other such axioms all based on the idea of maintaining objectivity and essentially not becoming full of conviction.

Well which is it?

I mean we also hear “believe in yourself” but where do these advisories leave you when a trading idea is going wrong? How do you handle the teeter totter that holds belief and conviction on one side and price and risk management on the other? What fulcrum can you depend on?

We of course have our answer…but before we talk any more about it, we would REALLY like hear yours!

5 Trading Pitfalls And Solution

  
  Education
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pitfallThe following are 5 common pitfalls I have seen traders experience and I have listed 5 practical solutions you can quickly implement to overcome these assassins to your performance.

Pitfalls

  1. 1. Focusing on the P & L
  2. 2. Losing objectivity while in a trade
  3. 3. Becoming emotional about a trade
  4. 4. Lacking confidence: exiting early, failing to put a trade on, not sizing up
  5. Difficulty adapting to a changing market (more…)

5 Trading Pitfalls and how to Solve Them

  
  Education
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 I have observed that Losing money doing the right thing does not destroy a traders’ mental focus. It is when they lose money doing the wrong thing…That is what truly eats at their soul and messes with their head.

With that said, the following are 5 common pitfalls I have seen traders experience and I have listed 5 practical solutions you can quickly implement to overcome these assassins to your performance.

Pitfalls
1. Focusing on the P & L

2. Losing objectivity while in a trade

3. Becoming emotional about a trade

4. Lacking confidence: exiting early, failing to put a trade on, not sizing up

5. Difficulty adapting to a changing market

Solutions
1. Quantify success base on the caliber of the trade (i.e. high quality entries/exits).

2. Continuously ask yourself, “is my original reason WHY I entered this trade still there?”

3. While you are in a trade, ask yourself, if I had no position on right now, what would I do? Buy? Sell Short? Do nothing? Then re-evaluate your trade size and direction.

4. Confidence should always come from within. Step#1: Write bullet list of data points proving WHY you are a skilled trader. Step #2: Prime yourself each morning by reading it over to yourself. Could be the most valuable 30 seconds you spend each day.

5. Flip your perspective by keeping track of what is not working (by default this tells you what IS working).

5 Trading Pitfalls And How To Solve Them

  
  Education
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pitfall-The following are 5 common pitfalls I have seen traders experience and I have listed 5 practical solutions you can quickly implement to overcome these assassins to your performance.
Pitfalls

  1. Focusing on the P & L
  2. Losing objectivity while in a trade
  3. Becoming emotional about a trade
  4. Lacking confidence: exiting early, failing to put a trade on, not sizing up
  5. Difficulty adapting to a changing market

Solutions

  1. 1.Quantify success base on the caliber of the trade (i.e. high quality entries/exits).
  2. Continuously ask yourself, “is my original reason WHY I entered this trade still there?” (more…)

These Behaviors Guarantee losses

  
  Education
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  • Lack of discipline: It takes an accumulation of knowledge and sharp focus to trade successfully. Many would rather listen to the advice of others. They just want to believe, like Fox Mulder.
  • Impatience: Some have an insatiable need for action. The day trading adrenaline rush and the gamblers high can have heroin-like addiction pull.
  • No objectivity: Some are unable to disengage emotionally from the market. They create a virtual lifelong marriage to their trades. Divorce is not an option.
  • Greed: A desire for quick profit blinds many from the diligent work needed to actually win in the long run.
  • Refusal to accept truth: Some do not want to believe that the only knowable truth is price action. They feel more secure following cult leaders serving Kool-Aid.
  • Impulsive behavior: Many jump into investments based on the morning paper or Good Morning America. Thinking that if you act quickly, somehow you will beat everybody else in the great race is a recipe for a messy failure.
  • Inability to stay in the moment of now: To be a successful trader, you cannot spend your time thinking about how you are going to spend your profits. Trading because you have to have money is not workable.
  • Stay open-minded: Come into the day knowing your future steps. Do not be stubborn when the market does not go your way. Cut your losses and follow your stinking trading plan.

How to Stay Objective in your Trades

  
  Education
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1. Acknowledge that you have lost objectivity. Now that you are aware of the problem, you can begin to deal with it.

2. Remove yourself from the day-to-day noise and write down what your original thesis was. Clearing off your mirrors will tell you what direction you are moving.

3. Begin to Think Backwards by creating three columns with the following headings (Support, Do Not Support, Undecided). This will force you to Objectively lay out and evaluate the situation.

4. Talk to yourself: “Based on the data points I wrote down in each column, if I did not have a position on, what would I do?” Asking yourself this question forces you re-evaluate the trade from an unbiased perspective.

5. Compare your response with your original position/thesis to create a WIN-WIN (more…)

Objectivity and The Fundamental Theorem of Poker

  
  Education
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 poker-

From David Sklansky’s The Theory of Poker:

Every time you play a hand differently from the way you would have played it if you could see all your opponents’ cards, you lose; and every time you play your hand the same way you would have played it if you could see their cards, they lose.

An analogy in trading can be made concerning objectivity while holding a position:

Every time you execute a trade that you would not have executed had you been flat, you lose; additionally, every time you refrain from executing a trade that you would have executed had you been flat, you lose. (more…)

Confidence

  
  Education
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When you feel confident, presuming you do sometimes feel confident, where do you feel it? Can you feel it in your brain or is it in your thorax (i.e. middle part of your body)? Better yet, why do I ask?

Well if you think about it, part of our mission here at Trader Psyches is to teach traders of all stripes how to use the message in Gladwell’s blink to assist in the d/m (that is decision making) process. The zillion copies it has sold prove the interest in it but the practical parts about what I read – sort of the “just do it” related to using your instantaneous impressions seem frankly impossible.

And I honestly still feel that most traders are for good reason, stuck in their heads. So, I ask this simple question – when you feel confident where does it hurt?

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