Archives of “self observation” tag

rss

Self Observation and feedback

  
  Education
#  #  #  #  #  #

safety6qe2Three questions to ask at the start of the trading day:

Am I bringing baggage to the day’s trade? Am I carrying over frustrations from losing money or missing opportunity? Am I feeling particular pressure to make winning trades? Am I locked into a view of markets because those views haven’t been paying me?

Am I prepared? Have I identified significant price levels for the day? Have I gained a feel for how various markets have been trading overnight? Do I know if economic reports are scheduled for the day and what the expectations are?

What am I working on? Do I have goals for the day? What have been the mistakes I’ve been making that need to be corrected? What improvements have I made that I want to cement? What kinds of trades have been working best for me, and am I prepared to actively look for those?

The idea is to become a good self-observer!

5 Ideas for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

1) You can’t take your trading to the next level if you don’t know the level you’re playing at. It’s not just P/L; it’s also knowing how you manage risk, how you take advantage of opportunities, how well you execute ideas, etc. Self-improvement starts with self observation;
2) Improving risk-adjusted returns is as important for a long-term career as improving absolute returns. If you take half the trades and make 90% of your previous income, you’ve meaningfully improved. If you take twice as many trades and make 110% of your prior income, you’ve moved backward;
3) Learning to diversify your trading (and income stream) can be as important as improving your core trading. Diversification can be by market, by strategy, by time frame, or by some combination of those;
4) Many times, the best improvements come from doing more of what you’re good at. It helps to make fewer mistakes, but doing less of what doesn’t work is not in itself going to make you a living. It’s crucial to know what you’re really good at;
5) Improving your preparation for trading can be as important as directly working on your trading results. So many outcome results follow from improvements in one’s process. 
Most of all, you elevate your trading by always working on your craft. A day without goals is a day without forward movement. And life is too precious to settle for standing still.

The Two Trading Problems

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

The old saying indicates that fear and greed are the emotions that dominate markets.

Eliminating emotion from trading is both impossible and undesirable. The “feel” for markets possessed by the best traders is a form of emotion; Antonio Damasio’s writings on this subject are must reading.

When we become very anxious or frustrated, however, our assessments of risk and reward are impaired: that is the enduring message of behavioral finance research. Regional cerebral blood flows no longer activate those executive parts of the brain responsible for planning, judgment, and decision-making. Rather, we regulate our motor activity as part of “flight or fight”. In the flight mode, we flee from risk and inhibit trading decisions. This leads to immediate safety, but also missed opportunity. In the fight mode, we confront risk and activate trading decisions. This leads to the relief of taking decisive action, but also poses increased possibilities of loss.

With market volatility at record levels, it’s not unusual to experience outsized losses when trades are wrong. These losses place a figurative magnifying glass on our flight or fight responses, activating stress modes at exactly the times we want to be most deliberate and planful. (more…)

Go to top