Archives of “window of opportunity” tag

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Are Great Traders Born or Bred?

  
  Education
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In a recent speech to a class at Harvard Business School Mark Sellers, founder of Chicago-based hedge fund Sellers Capital, argues that great traders are born and not bred. He believes that there are seven “structural assets” that cannot be taught, adding, ” They have to do with psychology. You can’t do much about that.”

The traits:

1) The ability to buy when others are panicking, and vice versa

2) An obsession with the trading game

3) A willingness to learn from past mistakes

4) An inherent sense of risk based on common sense

5) A confidence in your convictions and a willingness to stick with them

6) An ability to have “both sides of your brain working” (i.e. to go beyond the math)

7) The ability to live through volatility without changing your investment thought process

I  think that some of the concepts discussed here are spot on (and I spend a great deal of time hammering home the importance of #7) , but I disagree with the overall idea that great traders are born, not made. I believe success in trading is not about a specific style, but rather about understanding your personality traits and then developing a trading style (and which product – i.e. stocks, commodities, fx) that fits you best.

We are who we are. That does not change throughout our life, but we can learn to wait for times when the market is paying our personality type and then generate successful returns when that window of opportunity appears.

Uncertainty in Trading

  
  Education
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You just have to deal with it. But there are times where your conviction levels go through the roof. You know damned well that should should be trading. You are comfortable with what you see. Are you taking action?
 
There are other times where your
conviction level is low, or not there at all. There is a split second cue in the back of your brain that says “I don’t know what is going on here”. Are you listening to it and backing off? Or are you letting your conscious mind, emotions/greed etc. take over?
The probability for a successful outcome shares a positive correlation with what level your ‘conviction meter’ is. If its high, your chances of a successful outcome increase. If low, you can imagine just as poor of a result.
Listen to your level of conviction. If it is strong, act upon it. If weak or in question, don’t do anything at all. Typically, you have a short window of opportunity to decide where you stand. Take advantage of it.
 
 

The reason 95% traders lose: Humans 'have six-hour window' to erase memories of fear

  
Analysis, Education, Life
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Researchers have found that humans have a six-hour window of opportunity when fearful memories can potentially be erased, a study says.

Reliving a harrowing memory opens what experts call a “reconsolidation window” – a time-limited period when it can be changed from bad to good.

This is probably why 95% of traders lose – because mistakes or traps in trading are easy to come by, but erasing those bad memories is not easy after the six-hour window. This also suggests that you would need to go over the same trade within six-hours and somehow neutralize the bad memories (tequila or vicodin?).

six-hour

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