Archives of “score” tag

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Are You Happy?

  
  Education
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areuhappyTake this test to find out how happy you are. Using a scale of 0
(no relevance) to 4 (very relevant), rank each question as to how relevant it is to your trading life.

I often break my trading rules.
Each day, I do not look forward to trading.
Tension or stress hurts my trading performance.
I fear losses and lust after profits.
I do not appreciate my trading successes as much as I should.
It bothers me when my unrealistic trading expectations are unmet.
I trade for the wrong reasons which creates an emotional rollercoaster.
Trading has taken over my life.

Total your scores. The closer to 32 your score, the more unhappy you are as a trader.

 

Intentions

  
  Education
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“Intention = Result. The thing you state as your intention may not be your real intention. In that case, you intend to not manifest your statement intention as part of a larger (secret) intention. For example, you promise to show up on time and show up late. Your intention may be to gain attention by making people wait for you.“

So many people fixate on rules and techniques, but forget “intentions”. As you approach your daily life, contemplating how you will find the big score, have you thought about your true intentions? The trading psychology part of the equation is just as important as the quant side of the equation.

New Trading Rules for Traders

  
  Education
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Play to win, not for a score. Traders who desire only to make money versus simply trying to trade well and their best ability will struggle. This is a money-focused game, but trading well requires you to focus on goals beyond the money to achieve the performance you really desire.

Recognize a real gamble. When you are trading well, take the possibility of a major loss out of the equation whenever you can. It is true, when we are the most vulnerable is when everything is going right and it seems like we can do no wrong. Moreover, there are times to make the big aggressive trade, and times when doing so is foolhardy. Recognizing the difference is so very important.

Root hard for yourself. When everything goes wrong, the quickest way to turn it around is to force yourself to be optimistic and enthusiastic. Even after making the so-so trades which only pay out puny returns, you’ve got to pat yourself on the back and slowly gain your confidence back. confidence is everything in trading and you need a steady supply of reassuring confidence to trade at your very best.

Forget the holes up ahead. Focus on today’s trade, not the next one or the one you think you see is falling into place weeks from now. As Hunter recommends, “You really have to stay in the present.” Traders often let big picture themes and views prevent them from seeing setups that occur daily. This tunnel vision can really limit overall returns. Find the next trade, focus on that trade, and after that, move to the next. Don’t let issues you see so far down the road prevent you from making profits today.

The right way to play safe. If you play chicken, you’ll invite bad trades and disaster. As others have said, you’ve always got to trade to win, instead of trading not to lose. There’s a tremendous difference. I know traders who try to hedge every trade they make and ultimately don’t achieve the returns they should. If your approach is sound, hedging should only be a tool to use sparingly, not as an entire strategy substitute or for protecting your ego when you are wrong.

The harder I try, the more money I lose. What’s going on?

  
  Education
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A:  This is a fairly common phenomenon which is why we have to learn how to adapt to market conditions and be patient with our strategies. Just because you “try harder” doesn’t mean that your profits will expand equally in relation to your effort. While effort helps create and sustain an edge, at the end of the day you still need the market to cooperate with whatever you are doing.

The best analogy I can provide here is one that many golfers are familiar with. If you’ve ever golfed in high winds, you know that your score will often be higher. Some of this, obviously is due directly to the windy conditions (which you have no control over). However, studies show that the most significant reason why golfers perform poorly in windy conditions has less to do with the conditions but more about how they react to those conditions. For example, many golfers will tend to swing harder in high winds which causes them to lose both their swing tempo and balance and they make more mental mistakes because the wind distracts them. The same is true for traders whose strategies are not flowing with the market. Without realizing it, traders will modify their own approaches (often by trying harder by making trades that don’t fit their strategy) which tends to hurt performance more than it helps.

Bottom line – keep close tabs on yourself and how you’re “adjusting” to market conditions. Being aware of how the market environment is affecting you and your changes to it is an important skill every trader must possess.

The Fallacy Of Higher Effort = Higher Returns

  
Analysis, Education
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mailEvery week I will try to dedicate some time to answering questions that readers and  members send in to me.
First off, thank you again for letting me know what is on your mind and for pointing out topics I need to discuss further. While I’m not able to answer all of the questions submitted, I have read each one submitted to me and will be looking for opportunities to share information that will be helpful to you in the coming weeks.
Today just covering one question sent by one Trader.
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Q:  The harder I try, the more money I lose. What’s going on?

 

A:  This is a fairly common phenomenon which is why we have to learn how to adapt to market conditions and be patient with our strategies. Just because you “try harder” doesn’t mean that your profits will expand equally in relation to your effort. While effort helps create and sustain an edge, at the end of the day you still need the market to cooperate with whatever you are doing.

The best analogy I can provide here is one that many golfers are familiar with. If you’ve ever golfed in high winds, you know that your score will often be higher. Some of this, obviously is due directly to the windy conditions (which you have no control over). (more…)

R.W. Schabacker, the financial editor of Forbes magazine, penned the following advice (warning) in 1934

  
  Education
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No trader can ever expect to be correct in every one of his market transactions. No individual, however well he may be grounded, no matter how much experience he has had in practical market operation, can expect to be infallible. There will always be mistakes, some unwise judgments, some erroneous moves, some losses. The extent to which such losses materialize, to which they are allowed to become serious, will almost invariably determine whether the individual is to be successful in his long-range investing activities or whether such accumulated losses are finally to wreck him on the shoals of mental despair and financial tragedy.

THE TRUE TEST

It is easy enough to manage those commitments which progress smoothly and successfully to one’s anticipated goal. The true test of market success comes when the future movement is not in line with anticipated developments, when the trader is just plain wrong in his calculations, and when his investment begins to show a loss instead of a profit. If such situations are not properly handled, if one or two losing positions are allowed to get out of control, then they can wipe out a score of successful profits and leave the individual with a huge loss on balance. It is just as important-nay, even more important-to know when to dessert a bad bargain, take one’s loss and count it a day, as it is to know when to close out a successful transaction which has brought profit.

LIMITS ARE A MUST

The staggering catastrophes which ruin investors, mentally, morally, and financially, are not contingent upon the difference between a 5 percent loss limit and a 20 percent loss limit. They stem from not having established any limit at all on the possible loss. Any experienced market operator can tell you that his greatest losses have been taken by those, probably rare, instances when he substituted stubbornness for loss limitation, when he bought more of a stock which was going down, instead of selling some of it to lighten his risk, when he allowed pride of personal opinion to replace conservative faith in the cold judgment of the market place. (more…)

Conscientiousness and Trading

  
  Education
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  • Self-Efficacy. Self-Efficacy describes confidence in one’s ability to accomplish things. High scorers believe they have the intelligence (common sense), drive, and self-control necessary for achieving success in trading. Low scorers do not feel effective, and may have a sense that they are not in control of their trading. However, consideration needs to be given to motivation for success as complacency with the way things are may be the reason for a low score.
  • Orderliness. Traders with high scores on orderliness are well-organized and stick to routines and schedules. They tend to make trading plans and use them. Low scorers tend to be disorganized and scattered. Trading plans are viewed as not being important as rules are too confining.
  • Dutifulness. This scale reflects the strength of a person’s ability to stick to a trading plan. Those who score high on this scale have a strong sense of moral obligation. Low scorers find trading plans overly confining and thus less likely to follow or even create one. Perhaps trading is seen as more of a “hobby” or just for “fun.”
  • Achievement-Striving. Individuals who score high on this scale strive hard to achieve excellence. Their drive to be recognized as successful keeps them on track toward their goals. Low scorers are content to get by with a minimal amount of work, and might be seen by others as lazy.
  • Self-Discipline. One of the largest contributors to success as a trader is self-discipline. High scorers are able to strictly adhere to a trading plan and stay on track despite distractions. Low scorers procrastinate, are easily discouraged and show poor follow-through. The lack of self-discipline will make your trading career rather short lived.
  • Cautiousness. Cautiousness describes the disposition to think through possibilities before acting. High scorers on the Cautiousness scale take their time when making trading decisions and manage risk well. Low scorers often trade without deliberating alternatives and the probable consequences of those alternatives. Scoring too high on this scale can have its downside as trading opportunities may be missed for the discretionary trader. The more mechanical systems trader will account for this through their strategy.
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