- Nothing is stressful unless it is perceived as being a thread (losing money)
- Worry has a great effect on human performance, because it represents conscious mental activity. Since it is conscious, it takes up processing capacity.
- Often, the trader is too preoccupied with the potential results of what he id doing, rather than the process of being a trader.
- Losses scare me. The model calms me. Trade your plan.
- Concerned about losses. Preoccupation. Tunnel vision
- View losses as negative because fear of not having money. A loss is a character building exercise that is needed to go through to obtain positive expectancy.
- Low Volatility/High Volatility Multiple Intra-weekly signals
- Close at a profit/Close at stop
- Nightly distractions (Family, Businesses, Work, Vacation, Lack of Internet)
- Greed leads to confirmation bias, other bias in holding position
- Money motivated, need results for success, freedom for family
- Need to evaluate relationships with parents/money deeper to get to depths of self-esteem
- Tasks
- Daily Self-Analysis
- Daily Mental Rehearsal
- Focus and Intention
- Developing a Low-Risk Idea
- Stalking
- Action
- Monitoring
- Take Profits/Abort
- Daily Debriefing
- Be Grateful for What Went Right
- Periodic Review
Archives of “The Trader” tag
rssTHE 3 PHASES OF A TRADE
The ANTICIPATION Phase: this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present. Technical analysis is nothing more than finding previous price patterns matched with current market conditions. Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.
The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process. Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target , fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.
The REINFORCEMENT phase occurs after the trade is closed. Whether or not the trade is a win, lose, or draw, the self-talk immediately following trade closure is vitally important for the next trade, and even the next series of trades, as future trades can be negatively or positively affected by building pathways to future success. These pathways are neurologically based and can make or break a successful trading career. While it is important to ANTICIPATE right side chart OUTCOMES, what is more important is DEVELOPING right side brain reinforcement.
The Market As Uncertain Possibility — an Ocean of Possibility
Imagine the market as the totality of possibility. Unlimited in potential in any direction at any time. Potential for profit. Potential for loss. Potential beyond your capacity to ever comprehend. What you know is that the market goes up and down. Rarely does it stay unchanged for any length of time. Then imagine you as an observer watching the market. The market is an ocean of possibility, while you, the observer, represent someone in a small boat navigating in this infinite sea of possibility. What do you, as a buyer or seller, see? The tide goes in, the tide goes out. Storms come and go. There is no telling what this ocean of possibility is really going to do at any given time.
Yet, depending on the skill of the navigator of the boat in this ocean of infinite possibility, he either harvests what the ocean is willing to give him or he keeps looking for what he wants from the ocean. If his vision is locked on finding what he is looking for, he becomes blind to other possibility that the ocean presents. The ocean, as well as the market, does not know the fisherman is there. It is incapable of wanting to help or hurt the fisherman. Possibility opens and possibility closes irrelevant to the fisherman. The ocean simply is.
Opportunity and disaster both exist as possibility to the navigator of the boat in the sea of possibility. It is the discernment of the navigator, beyond fear, that opens or closes possibility in the market. Until fear is taken off-line, the fisherman of possibility sees through the eyes of fear and can not see the potential of a long term beneficial relationship with the ocean of possibility called the market.
How Stress Produces Trading Losses
- Nothing is stressful unless it is perceived as being a thread (losing money)
- Worry has a great effect on human performance, because it represents conscious mental activity. Since it is conscious, it takes up processing capacity.
- Often, the trader is too preoccupied with the potential results of what he id doing, rather than the process of being a trader.
- Losses scare me. The model calms me. Trade your plan.
- Concerned about losses. Preoccupation. Tunnel vision
- View losses as negative because fear of not having money. A loss is a character building exercise that is needed to go through to obtain positive expectancy.
- Low Volatility/High Volatility Multiple Intra-weekly signals
- Close at a profit/Close at stop
- Nightly distractions (Family, Businesses, Work, Vacation, Lack of Internet)
- Greed leads to confirmation bias, other bias in holding position
- Money motivated, need results for success, freedom for family
- Need to evaluate relationships with parents/money deeper to get to depths of self-esteem
- Tasks
- Daily Self-Analysis
- Daily Mental Rehearsal
- Focus and Intention
- Developing a Low-Risk Idea
- Stalking
- Action
- Monitoring
- Take Profits/Abort
- Daily Debriefing
- Be Grateful for What Went Right
- Periodic Review
Sun Tzu and Trading -Anirudh Sethi
The money market is a considered to be a wrangle amongst purchasers and vendors on the estimations of organizations. That is the pleasant clarification. To outline it in another light – the share trading system is a war amongst purchasers and vendors, who each need to take the others cash. Money markets are harsh, and in the event that you don’t approach it with the manner of a disturbed general, you will lose. In the share trading system, pleasant folks complete last. Sun Tzu’s, The Art of War serves to highlight numerous parts of trading since trading the market is much similar to fighting. Sun Tzu’s Art of War is an exemplary bit of work that is broadly perused and connected to many fields, because of its major nature that is exceptionally versatile to numerous parts of our lives. In this post, I separated parts of the work and connected to trading and in doing as such plan to acquaint the critical trading ideas with you. I have likewise assembled and classified them for simple comprehension.
War as Art and So as Trade
The first Art of War is an assemblage of lessons composed and instructed by Sun Tzu, a 6th century B.C. Chinese General/Philosopher. Its insight is immortal and has developed in prominence. It is, truth be told, required perusing at each military foundation on the planet and can be found in most corporate meeting rooms. In this adjustment of the ace’s work of art, super trader Dean Lundell applies Sun Tzu’s lessons to the specialty of contributing – from outlining an individual trading plan to timing market moves, to gathering information from a worldwide data organize. Each wonderfully composed spread opens with a section from Sun Tzu and is then translated and clarified for its vital pertinence to trading stocks, bonds, fates, and items. Guided by Sun Tzu’s old shrewdness, tenderfoot, and expert traders can utilize these great military methodologies to overcome the market! Understudies of the market are continually fighting the feelings of dread and avarice. The Art of War can enable you to cut a way between these two feelings and lead you to a mental place that will always enable you to put your best foot forward. In this arrangement, I will address different poor trading propensities by excerpting and deciphering different sections. While my understandings are not intended to be authoritative by any extent of the creative energy I will likely make them think. They say the round of golf is not played on the green. It’s played between your two ears. Trading fates, Forex, alternatives, or stocks are similarly. Your psychological distraction must be adequate. If not, disappointment is unavoidable. At last, I trust you observe the teaching to be a theorist and not only your standard speculator.
Great Quotes by Market Wizards -Collection
The quotes listed below come from interviews Jack Schwager conducted with top Traders in his best seller Market Wizards.
Jack D Schwager
Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few ways in which an individual can start with a relatively small bankroll and actually become a multimillionaire.
Of course, only a handful of individuals succeed in turning this feat, but at least the opportunity exists.
A rigid stop-loss rule is an essential ingredient to the trading approach of many successful traders.
Winning streaks lead to complacency, and complacency leads to sloppy trading.
As I use the term, a ‘trader’ would be primarily concerned with which direction the stock market was heading, while an ‘investor’ would concentrate on selecting stocks with the best chance of outperforming the market overall.
Joseph Marshall Wade
If I wanted to become a tramp, I would seek information and advice from the most successful tramp I could find. If I wanted to become a failure, I would seek advice from men who had never succeeded. If I wanted to succeed in all things, I would look around me for those who are succeeding and do as they have done.
Michael Marcus
Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers.
In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.
Bruce Kovner
Ed Seykota Quotes Collection
Markets
The markets are the same now as they were five or ten years ago because they keep changing-just like they did then.
Short-Term Trading
The elements of good trading are cutting losses, cutting losses, and cutting losses.
Outcomes
Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.
I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.
Market Trends
The trend is your friend except at the end where it bends.
Charles Faulkner tells a story about Seykota’s finely honed intuition when it comes to trading: I am reminded of an experience that Ed Seykota shared with a group. He said that when he looks at a market, that everyone else thinks has exhausted its up trend, that is often when he likes to get in. When I asked him how he made this determination, he said he just puts the chart on the other side of the room and if it looked like it was going up, then he would buy it… Of course this trade was seen through the eyes of someone with deep insight into the market behavior.
Predicting the Future (more…)