Archives of “perception” tag

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Willingness to Make Mistakes

  
  Education
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“[Michael Marcus] also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Three Blind Men And The Markets

  
  Education
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elephant-3

A Hindu folktale tells of three blind men encountering an elephant. “It’s a tree,” says one, stroking a leg. “No, no, it’s a snake,” says  another, feeling the trunk. “No, this must be a house,” insists a third, spreading his arms against the bulk of the elephant’s body.
 All three had a different perception of the elephant based on the part they examined, and all three conclusions were wrong. The elephant was larger and more complex than any of the men realized.
 A similar tale is told everyday in the market. Each market participant has different needs, agendas, histories, perceptions, and sees the market completely differently. As with the three blind men examining the elephant: (more…)

Courage and Trading

  
  Education
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According to Plutarch, “Courage stands halfway between cowardice and rashness…” Clearly, we don’t want to be reckless; and clearly, we don’t want to be hesitant and timid. What we need is a balance. As we go about our trading moderating our greed and our fear to a combination of healthy desire and clear minded caution, we use courage to go forward.

Courage doesn’t mean closing your eyes, holding your nose, and jumping into the deep end. It does mean moving forward with clean and clear perception as well as steadfastness of purpose.

You don’t need courage if you’re totally confident and unafraid. Courage, according to John Wayne, is being scared to death and saddling up anyway. Because people tend to fear the unknown, and the unknown is all that is certain about any given trade, we need to employ courage. Since trading is always new, since anything can happen and it often does, since the wildness lies in wait, we need to overcome uncertainty and fear so that we can appropriately enter, exit, and remain in trades.

When asked what he meant by “guts”, Ernest Hemingway told Dorothy Parker in an interview “grace under pressure”. Trading is all about grace and gracefulness under pressure.

The good news is that courage is like any muscle. It grows and becomes stronger the more you use it. Often as I trade I’m unaware of utilizing courage. I know I’m extremely alert. I may even be excited. I’m not aware of any fear until something starts to go wrong. However, that alertness and excitement is a product of adrenalin running. Excitement or fear comes from the interpretation you give to the adrenalin high. The more you act as if you’re unafraid, the less afraid you become. It all gets easier. Act the part and become the part. Make it your goal to trade with increasing grace under pressure.

The difference between excitement and fear depends of what you are imagining.

Are you imagining loss or are you imagining profit? Of course, you always have to keep the alternative in mind as trading is all about balancing the alternatives, profit with loss. But you don’t have to put loss into the foreground of your mind, because you never would put on a trade unless profit was the probable outcome. Direct your imagination towards profit, and suspend all thoughts of loss–once you’ve put your stops in.

“Don’t cry before you’re hurt.” says a proverb. I would add, don’t mourn a loss before you experience it. Don’t even mourn it after you take it, get on with the next trade, and the next, and the next. Anticipate profit. That’s what you’re there to experience. Ah yes, and as another proverb states: “Fortune favors the brave.”

A Cognitive Self-Appraisal for Traders

  
  Education
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PATIENT . . . . . . . . . . IMPATIENT
FOCUSED . . . . . . . . . . DISTRACTED
OPEN-MINDED . . . . . . . . . . CLOSED-MINDED
PREPARED . . . . . . . . . . UNDER PREPARED
CLEAR HEADED . . . . . . . . . . CONFUSED
ALERT . . . . . . . . . . FATIGUED

Your mind, not your hardware or software, is your ultimate trading tool. The quality of your thought and perception will be reflected in the quality of the actions you take. 
And those are likely to affect the trades you take, how you take them, and whether you take them.

Four Fears

  
  Education
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Most often, traders have four fears. There’s the fear of being wrong, the fear of losing money, the fear of missing out and the fear of leaving money on the table. I found that basically, those four fears accounted for probably 90% to 95% of the trading errors that we make. Let’s put it this way: If you can recognize opportunity, what’s going to prevent you from executing your trades properly? Your fear. Your fears immobilize you. Your fears distort your perception of market information in ways that don’t allow you to utilize what you know.”

9 Skills to be Acquired by Traders

  
  Education
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1)Learning the dynamics of goal achievement so you can stay positively focused on what u want-not what u fear.

2)Learning how to recognize the skills you need to progress as a trader and then stay focused on the development of those skills,instead of the money ,which is merely a by product of your skills.

3)Learning how to adapt yourself to respond to fundamental changes in market condtions more readily.

4)Identifying the amount of risk you are comfortable with -your “risk comfort level”-and the learn how to expand is in a way that is consistent with your ability to maintain an objective perspective of market activity.

5)Learning how to execte your trades immediately upon your perception of an opportunity.

6)Learning how to let the market tell you how much s enough instead of assessing the potential from your personal value system of how much is enough.

7)Learning how to structure your belieds to control your perception of market movement.

8)Learning how to achieve and maintain a state of objectivity.

9)Learning how to recognie “true ” intutive information and then learning how to act on it consistenly.

10 Top Trading Commandments

  
  Education
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  • Discipline trumps conviction. Don’t let your bad trades turn into investments.

  • Perception is reality in the market. Adapt your style to the market, and learn to accept the market as it is, not how you wish it was.

  • Play great defense, not great offense. Opportunities are made up easier than losses.

  • Don’t confine your thinking in terms of boundaries. Expect the extreme, and don’t miss major profit opportunities.

  • Know your companies. Hold your stock as long as it is performing properly, cut your losses fast, and don’t “hope” for a rebound.

  • Risk control is important. Always quantify your risk going into a trade.

  • Be diligent and thorough in your research. Do your homework, recap each day, and learn from your mistakes.

  • Don’t get caught in a situation in which you could lose a great deal of money for reasons you don’t understand.

  • Respect the price action, but never defer to it. When unsure, trade “in between.”

  • Emotion is the enemy when trading. Be greedy when others are fearful, and fearful when others are greedy.

    • Market Metaphors and Perception

      
      Education
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    Day Trading* A trader views the market as an enemy to be conquered;

    * A trader approaches the market as a puzzle to be solved;

    * A trader sees the market as a paradise of potential riches;

    * A trader regards the market as a mistress to be wooed;

    * A trader views the market as a dangerous minefield;

    * A trader looks at the market as a video game.

    How do these metaphors affect our trading? Our emotional responses to trading?
    How would being aware of our metaphors–and shifting them–change how we trade
    and how we experience our trading?

    This story is my favorite metaphor for the Stock Market.

    monkey-with-glasses

    I wonder what it says about my perception? Personally, I favor the puzzle to be  solved approach.

    “Once upon a time, in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.

    The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20 for a monkey.

    This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each, and the supply of monkeys became so small that it was an effort to even find a monkey, let alone catch it!

    The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

    In the absence of the man, the assistant told the villagers. ‘Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35, and when the man returns from the city, you can sell them to him for $50 each.’

    The villagers rounded up all their savings and bought all the monkeys. They never saw the man nor his assistant again, only monkeys everywhere!

    Now you have a better understanding of how Stock Market works!

    10 trading commandments

      
      Education
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    1.) Respect the price action but never defer to it.

    Our eyes are valuable tools when trading, but if we deferred to the flickering ticks, stocks would be “better” up and “worse” down. That’s backward logic.

    2.) Discipline trumps conviction.

    No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and never believe you’re smarter than the market.

    3.) Opportunities are made up easier than losses.

    It’s not necessary to play every day; it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

    4.) Emotion is the enemy when trading.

    Emotional decisions have a way of coming back to haunt you. If you’re personally attached to a position, your decision-making process will be flawed. Take a deep breath before risking your hard-earned coin. See related link.

    5.) Zig when others zag.

    Sell hope, buy despair and take the other side of emotional disconnects. If you can’t find the sheep in the herd, chances are you’re it. (more…)

    12 Habits of Highly Successful Traders

      
      Education
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    Successful Trader– Preparedness
    – Detachment
    – Willingness to Accept Loss
    – Taking Controlled Risk
    – Thinking in Probabilities
    – Being Comfortable with Uncertainty
    – Consciousness of Abundance
    – Optimism
    – Open Mindedness and larity of Thought and Perception
    – Courage
    – Discipline

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