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Is this the next ‘edge’ for traders?

It took Peter Borden a while to come around to modafinil. He never takes prescription drugs. He doesn’t drink to excess. He’s into acupuncture and alternative medicine. But he was working two jobs—by day, he does quantitative analysis and project management for a venture-capital-backed B2B start-up; by night, he’s developing a proprietary high-­frequency trading system for a Wall Street start-up of his own—and what he needed was more time to work. 

So a few months ago, Borden ordered a three-week supply by mail. (“It was a piece of cake,” he says.) He popped his first pill—“the maximum suggested dose”—as soon as the package arrived, and within a few hours he started feeling a pleasant fuzziness. “Not fuzzy-headed,” he says, “but crisp. A crisp softness to it.” Soon he was experiencing a level of concentration he’d never imagined. “My senses sort of shifted to the visual, and my auditory sense went down. Sounds didn’t even register. It was like walking around on a winter day when it just snowed. It was very easy to stay visually focused.” 

Next came a head rush. “I sensed it was blood actually moving to the optic nerve. Your eyes start to feel very sort of engorged, and your awareness comes to the front of your face, which is kind of a freaky sensation. I would describe it as being very much like Adderall, but without the speediness.”  (more…)

6 Personality Traits and impact upon trading

Locus of control – The degree to which a trader believes that the ability to be successful is within his or her control;
Maximizing tendency – The degree to which individuals seek optimum outcomes from their decisions, not just outcomes that meet or exceed expectations;
Regret susceptibility – The tendency to look back on outcomes of decisions and focus on negative aspects, creating regret;
Self-monitoring – People’s tendency to track and control their own thoughts, feelings, and behaviors;
Sensation seeking – The degree to which people seek varied and stimulating experience;
Type A behavior – The degree to which individuals are driven to achieve.  (more…)

Two Emotions

Two emotions that plague the inexperienced trader are Anticipated Loss and Buyers Remorse.

Does your trading life go something like this? You see a trade line up, and suddenly a cramp in your solar plexus appears as you anticipate a possible loss. You put this down to simple fear and make an effort to mentally overcome this internal barricade so as to enter the trade. Acting quickly so as not to miss out, you swiftly enter the position and your trading platform indicates that you are filled. Now you are gripped by the sensation of buyers remorse – too late to back out now… A small voice in the back of your subconscious says “what have I done?”

To your great delight and surprise, the trade soon goes in your favour, and for a while you feel a warm fuzzy glow and give yourself a little compliment, but soon the old feeling returns in the form of a hot flush. Anticipated loss is back again as you worry about the market turning against you and taking away the profit you now have. You watch the current candle as it bobs up and down… You stare at it in a trance as the feeling of being gripped by a giant hand increases. You struggle for a moment against this sensation, but then it overcomes you and you exit the position. Price moves on without you, and you are filled with buyers remorse again! On and on it goes, slowly eating away at your confidence and sanity.

Here’s what it feels like once you overcome this hump :

Having been watching a dull market for several days from the sideline you suddenly see a trade shining out on your chart. You have an initial “ah ha!” sensation, but you let that go so as to think carefully and not do anything rash or impulsive. You decide to take the trade, and spend some time calculating the correct entry and stop position; you know your standard 1R risk value already. Having checked and double checked that everything is ok, you enter the orders into the market and fill out the necessaries in your trading log, including entry time, size, reason for entry etc… Then you switch off to go read your favourite novel or walk the dog.

The next day, you check the market to see that your order has been filled and the market has moved in your favour. You think “good…” and examine the chart for the correct new stop placement, and you adjust your order in the market. You switch off and go do something else.

3 more days of these quick adjustments follow, and your profit increases with each surge, but on the forth day you check to find that you have been stopped out during a sudden reversal for a profit of 2.6R… Nice trade. You fill out the rest of the entry in your log, and then assume the attitude of sitting on the sidelines again for the next trade.

Now – the thing to bare in mind in the above examples as that both people might be TRADING THE SAME MOVE…

How Trader Personality Affects Trading

A recent pilot study addresses the interesting topic of how a trader’s personality affects his or her trading performance. The researchers focused on six personality traits and their impact upon trading:
Locus of control – The degree to which a trader believes that the ability to be successful is within his or her control;
Maximizing tendency – The degree to which individuals seek optimum outcomes from their decisions, not just outcomes that meet or exceed expectations;
Regret susceptibility – The tendency to look back on outcomes of decisions and focus on negative aspects, creating regret;
Self-monitoring – People’s tendency to track and control their own thoughts, feelings, and behaviors;
Sensation seeking – The degree to which people seek varied and stimulating experience;
Type A behavior – The degree to which individuals are driven to achieve.  (more…)

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