Useful things I've found on the Net.

This is a discussion on Useful things I've found on the Net. within the General Trading Chat forums, part of the Reception category; Originally Posted by grantx CB, "I find that by moving up the t/frames it can cost you a lot more ...

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Old Mar 11, 2008, 1:18pm   #61
Joined Nov 2001
Quote:
Originally Posted by grantx View Post
CB,

"I find that by moving up the t/frames it can cost you a lot more to find out you're wrong."

This is a good point. I have a similar attitude which I apply to any time frame: how far does the price need to go to prove you are wrong?

In my post above I refer to stops being around the high/low (of the previous bar). For me, this is only relevant if I can open near that point. In practise, this is rarely the case. So I will close immediately if I sense a change in direction as shown by the rapidity of order flows (on the DOM)in the opposite direction. Of course, on occasions you will close prematurely but I justify this approach in the knowledge that I can always re-enter at the original opening point (sometimes better).

I have a quote written on a scrap of paper (forgot the origin):"Get to the point where you don't lose money then profit will take care of itself". For me this also implies maintaining your trading capital.

As regards fewer signals I think this depends on the instrument and volatility, eg equities, index or bond futures. In my experience there is indeed sufficient volatility to scalp over very short periods, eg on a one-minute time frame. Perhaps an immediate reaction would be, 'not enough points to be made in one-minute'. But this misses the point (no pun intended) - the signals generated provide you with early entries (and exits) which could put in a long and sustained movement.

"NO THINKING ALLOWED". Absolutely, but difficult (I'm still fighting this)

Good Trading,

Grant.
I've always been a believer in close stops but there is a convincing argument for bigger ones. Still trying to figure out who the hell is right.

daCharts.com Articles - The Myth of Tight Stops

I'll repeat the link posted in #2 by BSD.

Very convincing argument. I got closed out of SP yesterday, when I wasn't around to get back in, because of a close stop. The damned index fell for the rest of the day!

Split
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Old Mar 11, 2008, 1:55pm   #62
Joined Jan 2007
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Originally Posted by Splitlink View Post
I've always been a believer in close stops but there is a convincing argument for bigger ones. Still trying to figure out who the hell is right.

daCharts.com Articles - The Myth of Tight Stops

I'll repeat the link posted in #2 by BSD.

Very convincing argument. I got closed out of SP yesterday, when I wasn't around to get back in, because of a close stop. The damned index fell for the rest of the day!

Split
Hi Split

hope your on a good week Split

Its back to the Stops again

All I want to say regards the taboooooooooo subject is.........

since I moved to real market I can get away with much closer ones and have the confidence to re-enter if required to do so by my method later on in what is essentially the same move.

I used much wider stops but with smaller stakes when in the sb world and it worked out fine, my rules for entry exit were very clear in my mind and on paper so ....
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Old Mar 11, 2008, 2:18pm   #63
Joined Jun 2006
Nine,

Thanks for the Mind Hacks ref’s; will certainly check them out (my survival may depend on it).

Split,

Bigger stops, bigger losses. Of course, the price may then resume its anticipated course, but did the original anticipation include a reversal? Yes? Then why not wait to enter at a more favourable price?


Pink,

“much wider stops but with smaller stakes”. That’s sounds reasonable. Conversely, bigger positions with tighter stops.

Grant.
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Old Mar 11, 2008, 2:20pm   #64
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Originally Posted by PinkPig View Post
Hi Split

hope your on a good week Split

Its back to the Stops again

All I want to say regards the taboooooooooo subject is.........

since I moved to real market I can get away with much closer ones and have the confidence to re-enter if required to do so by my method later on in what is essentially the same move.

I used much wider stops but with smaller stakes when in the sb world and it worked out fine, my rules for entry exit were very clear in my mind and on paper so ....
No, this is not a good week for me, Andy. Flat yesterday and everything has shot up this lunchtime. Today the stop was further, so I lost more.......

Glad that you are happy with your broker. I'm not blaming my SB co, I get closed out on the button and the fills are ok. I suppose that must mean that it is my fault, since the market is never wrong.
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Old Mar 11, 2008, 2:23pm   #65
Joined Jan 2007
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Originally Posted by Splitlink View Post
No, this is not a good week for me, Andy. Flat yesterday and everything has shot up this lunchtime. Today the stop was further, so I lost more.......

Glad that you are happy with your broker. I'm not blaming my SB co, I get closed out on the button and the fills are ok. I suppose that must mean that it is my fault, since the market is never wrong.

Split

week not over yet

good luck
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Old Mar 11, 2008, 3:30pm   #66
 
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Great thread Guys, I have enjoyed the reading, everybody appears to have a different viewpoint, I'll add another.

I agree, discipline and a robustly backtracked trading plan is key to becoming a succesful trader, imo. I learnt the hard the way, "its can't go any lower - BUY" and "it can't go any higher - SELL", believe me and you already know it can.

I have traded full time now for 8 years, in that time, a few key points have emerged, "don't try and guess the top/bottom, don't try and anticipate the way the MM's want to take the market, KISS, it works.

I do not do pre-emptive trading as there is a chance you will get whipsawed (not always though)," I like to let the train start to leave the station, and when I know its under way, jump on board it leaves the station".

"I know where this train is heading, but I want to get off before it arrives", so as it slows down I jump off.

Looking at it another way, a sparrow looks upon a garden full of hundreds of seed on the grass, in the bushes is the cat, waiting to pounce, I know a window of opportunity will appear, when I can go in , eat a small amount of seed and get away before the cat jumps out.

In trading terms, I don't want to pre-emt an entry, I want to see the direction confirmed, I want to get in early, collect my 10 points, and get out allowing the train to continue its path, I will look to rejoin when its reached its destination and set off back on its return journey.

Identifying a range of Price movement is key for me, within that movement, I know I can get in, get my points and get out safely, I don't want to ride to the end.

By increasing the stake, applying KISS, when the set-up appears, trade it without emotion, in, wait and out, go away, money banked and await the next opportunity whilst everybody else trys to bleed it dry.

By identifying high probabiltiy trades, it is possible to get a high win ratio, with rigid stops in place, if I get caught out, I accept the loss, take this hit, learn a lesson, review why it went wrong and try to ensure I don't make the same mistake again.

Each to their own, but I still see people, constantly chopping and changing systems, tweaking here and there (i admit I have done that as well) but it didn't improve my performance, find your system, familiarise yourself with it, don't change it because somebody appears to be doing better with "another" indy you don't use, and stick to it. When you realise it delivers the rewards, why in the hell change it, doesn't make sense, "plan it, trade it, bank it" and move on.

There you go, my 2 pennenth, happy trading all
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Old Mar 11, 2008, 4:11pm   #67
Joined Jan 2007
Kiss

Quote:
Originally Posted by Dinos View Post
Great thread Guys, I have enjoyed the reading, everybody appears to have a different viewpoint, I'll add another.

I agree, discipline and a robustly backtracked trading plan is key to becoming a succesful trader, imo. I learnt the hard the way, "its can't go any lower - BUY" and "it can't go any higher - SELL", believe me and you already know it can.

I have traded full time now for 8 years, in that time, a few key points have emerged, "don't try and guess the top/bottom, don't try and anticipate the way the MM's want to take the market, KISS, it works.

I do not do pre-emptive trading as there is a chance you will get whipsawed (not always though)," I like to let the train start to leave the station, and when I know its under way, jump on board it leaves the station".

"I know where this train is heading, but I want to get off before it arrives", so as it slows down I jump off.

Looking at it another way, a sparrow looks upon a garden full of hundreds of seed on the grass, in the bushes is the cat, waiting to pounce, I know a window of opportunity will appear, when I can go in , eat a small amount of seed and get away before the cat jumps out.

In trading terms, I don't want to pre-emt an entry, I want to see the direction confirmed, I want to get in early, collect my 10 points, and get out allowing the train to continue its path, I will look to rejoin when its reached its destination and set off back on its return journey.

Identifying a range of Price movement is key for me, within that movement, I know I can get in, get my points and get out safely, I don't want to ride to the end.

By increasing the stake, applying KISS, when the set-up appears, trade it without emotion, in, wait and out, go away, money banked and await the next opportunity whilst everybody else trys to bleed it dry.

By identifying high probabiltiy trades, it is possible to get a high win ratio, with rigid stops in place, if I get caught out, I accept the loss, take this hit, learn a lesson, review why it went wrong and try to ensure I don't make the same mistake again.

Each to their own, but I still see people, constantly chopping and changing systems, tweaking here and there (i admit I have done that as well) but it didn't improve my performance, find your system, familiarise yourself with it, don't change it because somebody appears to be doing better with "another" indy you don't use, and stick to it. When you realise it delivers the rewards, why in the hell change it, doesn't make sense, "plan it, trade it, bank it" and move on.

There you go, my 2 pennenth, happy trading all
Good post Dinos

KISS I usually reserve those for Mrs Pinkpig do you mean I can trade with them to


found this on the net (db threads) and it complements your advice perfect imho.....

The spider does not need to "feed" everyday. He is content to wait until a morsel comes his way, patient and secure in the knowledge that he has taken the steps necessary for his survival. His carefully crafted web transmits to him all sorts of information. But he knows how to identify the false signals~ the wind vibrating his web, a drop of rain~ from the real thing enmeshed in it. Why does he know it so intimately? Because he has carefully constructed his web himself. No one else can build it for him. As a result, the configuration of his web is as uniquely his as his fingerprints. Most important, the spider is patient. He waits until he sees a convergence of most all of his indicators before he acts; but when he does, he pounces aggressively and without hesitation.


be like the 3rd little Pig and build your house out of bricks otherwise ...

trade well all
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Last edited by black bear; Mar 11, 2008 at 4:19pm. Reason: good by all and good luck with everything :-)
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Old Mar 11, 2008, 10:09pm   #68
 
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nine started this thread It should come through by my choice of posts but in case it doesn't I believe that patience, waiting for a good example of your set-up is very important (I even went through and classified the best so that I halved my number of potential trades).

I disagree with wide or tight stops. You come up with a theory on the "right stops" for what you are doing. You test it and see what happens. You test it live and see if it continues as you expect ... maybe you can't stand occasional big losses, maybe there's more slippage, maybe tight stops work well with your management of money. In the end you need the right stops for your set-up and yours and your market's personalities.
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Old Mar 11, 2008, 11:23pm   #69
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Originally Posted by nine View Post
It should come through by my choice of posts but in case it doesn't I believe that patience, waiting for a good example of your set-up is very important (I even went through and classified the best so that I halved my number of potential trades).

I disagree with wide or tight stops. You come up with a theory on the "right stops" for what you are doing. You test it and see what happens. You test it live and see if it continues as you expect ... maybe you can't stand occasional big losses, maybe there's more slippage, maybe tight stops work well with your management of money. In the end you need the right stops for your set-up and yours and your market's personalities.
totally agree. and then to study and look at those set ups, save the charts and annotate them until they are part of you so that they are instantly recognizable and you are able to act on them without hesitation or fear. (still working on this!....probably always will be!)

thanks for all your effort here nine.
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Old Mar 12, 2008, 9:12am   #70
Joined Jun 2006
Andy,

Thank you for the Reputation, mate.

Good Trading,

Grant.
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Old Mar 12, 2008, 4:36pm   #71
Joined Feb 2007
[QUOTE=nine;404271]It seems that not following the plan is a frequent problem. I've always said that day trading is harder than swing trading because the time to make decisions is shorter ... but I wonder if I'm wrong. It could be impulse control fatigue.

So how do you fix this? One way is a bunch of psychological tricks and some procedural ones ....

Another way is: have a chocolate bar (or just a bit every 15-20 minutes during the trading session.




Like music to my ears!
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Old Mar 14, 2008, 12:49pm   #72
 
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nine started this thread The question was raised in Spanish89's thread about why I asserted: "Do not "trade" because what you are doing is building conditioned responses that will be almost impossible to overcome." I also said: "The heart beating means you are having intense experiences which will be forming links in your brain and will reinforce any bad behaviours ... YOU DO NOT WANT TO DO THIS!"

So why should I think that doing the wrong thing while in a state of high excitement would create a habit that was unusually hard to break? For that I will have to borrow from Dr Bruce Hong (who's blog, referenced below, I heartily recommend.)


Well, in the brain, there are certain types of receptors and neurotransmitters that are associated with forming Long Term Potentials or LTP's for short. This special neurotransmitter is a common and easily synthesized molecule - Glutamate. Each time an action potential comes across and releases a Glutamate molecule, the Glutamate receptor binds to it but it does not fire. Instead, it requires many glutamate molecules to bind to it; perhaps as many as several hundreds or thousands repetitive transmissions of a signal before its threshold is reached - and then it fires. But when it fires it's like the Big Bang of action potentials. And it causes not only a massive discharge of excitatory energy, but it causes a permanent change in that synapse. And that is what we call a Long Term Potential (LTP).

I won't go into too much detail ( believe me, it's complicated), but that neuron is now permanently 'primed and ready to fire.' Any time the conditions are right and a new signal comes on down the pike, it doesn't require a lot of signal repetitions anymore. Instead, ONE signal may be all that's required for it to fire. We have now formed a permanent neurological pathway. If that pathway is associated with a fact, we call it learning. And if that pathway is associated with a behavior, we call it a habit. And the neuron doesn't know whether it's a good or bad fact or habit, only that when it receives its signal, it has to fire.

We are now starting to see how we learn both good and bad habits. And once we learn them, they're in there for a very long time. How long? Well, I'll give you a few examples. we all know older people who complain that they can't remember recent events, like where they put their glasses. But they can recall with crystal clarity incidents that happened in their childhood. Here's another example. Go to a nursing home and visit the severely demented. Start singing "a, b, c, d..."
and many of these elderly, demented patients will chime in "e, f, g..."
Many of these patients will be so demented that they can't remember their children's names - or even their own! But they can still sing the ABCD song!

Now here's the take-home message. As you can see, it requires many repetitions to form an LTP. Like a kid in Little League, you have to take many turns at bat before you learn to hit a thrown ball. And you have to shag a lot of grounders and fly balls before you learn to catch. But once you've learned, it's in there forever. Have you ever said anything like, " once you learn to ride a bike, you never forget"? Good habits and skills take a lot of time, effort and repetition to acquire. But so do bad habits! They don't happen overnight - you have to really do a lot of work or repetitions in order to acquire bad habits! And once formed, they're in there forever!

So, if you are a new trader, you must accept the fact that you won't know what to do at first. If you rush in to trading and repeat the typical mistakes that all new traders seem to make, you will learn nothing but bad trading habits. That is why >90% of new traders fail. Before you begin to trade, you must be willing to put in the time an effort to educate yourself. Perhaps you can ask an experienced trader to mentor you. Read a lot of books on trading. Learn the principles of money management and position sizing. And perhaps you can avail yourselves of the FEW FREE resources out there to help you begin and learn.




Last week, we explored the role that repetition played in learning. Good, old fashioned, rote learning. There is a tendency to say that this is "bad" and that students should be taught in such a way that learning is "fun." There may be some truth to that, but it still takes repetition and drill. Even the most unmotivated and bored student can learn if the lesson is repeated often enough. After all, how much fun is there is saying, "2 times 2 is 4, 2 times 3 is 6...etc"

But now, let's look at some of the ways that emotions can modify the learning (or LTP) process. Let's say that you're a proto-human, walking down a jungle path. Suddenly, a tiger jumps out at you - a really BIG tiger! Instantly, you perceive a threat. Adrenaline is released from your Adrenal Gland and it causes you to increase you heart rate, blood pressure and redistribute blood flow away from your digestive system (no need to worry about digestion now) and skin (don't want to bleed too much). Instead, blood flows to the muscles and the brain. Your pupils dilate so that you can see so much more and you are primed for "fight or flight."

This is what, in biological terms, is called an acute, MILD stress. Mild, in biological terms means that you have not had a limb torn off or that you are not exsanguinating. Acute means less than 5 minutes, or so. That is how long adrenaline typically lasts - unless it is continually stimulated. Once again, in our hypothetical situation, you either survived - or you didn't.

So much is commonly understood by everyone. But what is not appreciated is that that blood flow, in the brain, is redistributed AWAY from the frontal cortex and TO the motor and ocular cortex. After all, you don't need to make long-term plans at this point. Either you survive - or you don't. The blood flow to the motor cortex makes you able to move fast, in a coordinated way. You even have an irresistible urge to do something, anything.

But Adrenaline does something more. It stimulates the synthesis of cortisol, also in the adrenal gland, and with the changes in blood flow, this is carried directly to the brain. There, it primes a number of critical areas of the brain that are associated with learning and memory. Now, instead of hundreds or thousands of repetitions, ONLY ONE MAY BE REQUIRED! After all, how many encounters with a tiger do you require before you learn that tigers are dangerous?

This acute stress response is one very potent way to increase LTP'ing of neurons - and you can see how it would have a biologically important role. Things that are potentially threatening MUST BE ATTENDED TO. And so, to help really nail that down, cortisol also primes a very critical area of the brain. This is the Amygdala. The amygdala is part of the limbic system and is given the task of remembering the emotional tone associated with that LTP episode. The next time that you recall that encounter with a tiger, all the fear and blind panic associated with that encounter will also be recalled. And vice versa, the next time that you have a moment of fear, that episode with the tiger will leap into your immediate consciousness. And that emotional tone acts as an amplifier to make sure that we never forget that encounter (or lesson).

Now, in our hypothetical case, we've survived and an we feel an immense sense of Joy and Relief. Another part of the brain releases Dopamine and Dopamine is the biggest reward that the brain can experience. All those drugs that you've heard about, like cocaine or crystal meth work by stimulating the release of Dopamine in the brain. And Dopamine also facilitates the LTP'ing of neurons. Perhaps even more so than cortisol.

And so now, we've had a double reinforcing of our learning experience. Both the acute stress response, followed by our relief/reward response help to nail down that learned experience. And not only that, but Dopamine can do it all by itself. Our proto-human needs to learn not only how to avoid threat, but where rewarding substances are found, and in what season. This is the response that good teachers try to evoke when they make learning pleasurable. In that way, your brain's own Dopamine reward system does all the work for them.

But, we all know other teachers who may have approached teaching from another direction! And guess what, evoking the acute stress response (through threats and intimidation) also works! It's just not very pleasant. This, incidentally, is one of the theories behind the use of punishment to try to modify a person's behavior. But while it may cause LTP'ing to occur, it has very unreliable effects on behavior. I'll have more to say about that subject in a later post.

Now, here's the take-home message. Instead of a proto-human, let's look a Joe Trader. He starts off, full of confidence and plunges into trading without really understanding what he's doing or having a trading plan. The losses start to mount and now, each time he enters a trade, he starts to feel more and more stress. Because of the Adrenaline, he has an overwhelming urge to do something; AND SO HE MAKES ABRUPT, IMPULSIVE DECISIONS. These may work out, or he may choose to exit at the very worst time, or to take profits too soon. Remember, blood flow is directed AWAY from the frontal cortex and so he's really not able to make good, reasoned, long-term decisions.

Let us further suppose that he's entered a trade and that it's gone against him. Because he's unwilling to take a loss (another good subject to explore later) and because he's making impulsive decisions. let's say he make another poor decision. Not having stops. Removing his stops or moving them further away. Scaling in more contracts in order to "average down". You know all these mistakes - right?

Now he's under a lot of stress and the cortisol is making him really attend to what is going on and remember everything. Suddenly, the market reverses, rescuing his position and giving him an even greater profit. BAM! LOTS OF DOPAMINE. And lots of LTP'ing.

Joe Trader is well on his way to permanently acquiring a really destructive trading habit. Perhaps only a few more repetitions of this behavior/stress/ big reward pattern will be necessary to make this permanent! And we now see how and why over 90% of traders fail.



If you're interested I suggest you follow the link to Bruce's blog where there are some pictures to make more sense of this and some excellent material about the impacts of our minds and bodies on trading --- and what we can do about it.


TraderPsychology
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Old Mar 14, 2008, 2:53pm   #73
Joined Jan 2007
Up there with the very best posts =time saver post nine

Quote:
Originally Posted by nine View Post
The question was raised in Spanish89's thread about why I asserted: "Do not "trade" because what you are doing is building conditioned responses that will be almost impossible to overcome." I also said: "The heart beating means you are having intense experiences which will be forming links in your brain and will reinforce any bad behaviours ... YOU DO NOT WANT TO DO THIS!"

So why should I think that doing the wrong thing while in a state of high excitement would create a habit that was unusually hard to break? For that I will have to borrow from Dr Bruce Hong (who's blog, referenced below, I heartily recommend.)


Well, in the brain, there are certain types of receptors and neurotransmitters that are associated with forming Long Term Potentials or LTP's for short. This special neurotransmitter is a common and easily synthesized molecule - Glutamate. Each time an action potential comes across and releases a Glutamate molecule, the Glutamate receptor binds to it but it does not fire. Instead, it requires many glutamate molecules to bind to it; perhaps as many as several hundreds or thousands repetitive transmissions of a signal before its threshold is reached - and then it fires. But when it fires it's like the Big Bang of action potentials. And it causes not only a massive discharge of excitatory energy, but it causes a permanent change in that synapse. And that is what we call a Long Term Potential (LTP).

I won't go into too much detail ( believe me, it's complicated), but that neuron is now permanently 'primed and ready to fire.' Any time the conditions are right and a new signal comes on down the pike, it doesn't require a lot of signal repetitions anymore. Instead, ONE signal may be all that's required for it to fire. We have now formed a permanent neurological pathway. If that pathway is associated with a fact, we call it learning. And if that pathway is associated with a behavior, we call it a habit. And the neuron doesn't know whether it's a good or bad fact or habit, only that when it receives its signal, it has to fire.

We are now starting to see how we learn both good and bad habits. And once we learn them, they're in there for a very long time. How long? Well, I'll give you a few examples. we all know older people who complain that they can't remember recent events, like where they put their glasses. But they can recall with crystal clarity incidents that happened in their childhood. Here's another example. Go to a nursing home and visit the severely demented. Start singing "a, b, c, d..."
and many of these elderly, demented patients will chime in "e, f, g..."
Many of these patients will be so demented that they can't remember their children's names - or even their own! But they can still sing the ABCD song!

Now here's the take-home message. As you can see, it requires many repetitions to form an LTP. Like a kid in Little League, you have to take many turns at bat before you learn to hit a thrown ball. And you have to shag a lot of grounders and fly balls before you learn to catch. But once you've learned, it's in there forever. Have you ever said anything like, " once you learn to ride a bike, you never forget"? Good habits and skills take a lot of time, effort and repetition to acquire. But so do bad habits! They don't happen overnight - you have to really do a lot of work or repetitions in order to acquire bad habits! And once formed, they're in there forever!

So, if you are a new trader, you must accept the fact that you won't know what to do at first. If you rush in to trading and repeat the typical mistakes that all new traders seem to make, you will learn nothing but bad trading habits. That is why >90% of new traders fail. Before you begin to trade, you must be willing to put in the time an effort to educate yourself. Perhaps you can ask an experienced trader to mentor you. Read a lot of books on trading. Learn the principles of money management and position sizing. And perhaps you can avail yourselves of the FEW FREE resources out there to help you begin and learn.




Last week, we explored the role that repetition played in learning. Good, old fashioned, rote learning. There is a tendency to say that this is "bad" and that students should be taught in such a way that learning is "fun." There may be some truth to that, but it still takes repetition and drill. Even the most unmotivated and bored student can learn if the lesson is repeated often enough. After all, how much fun is there is saying, "2 times 2 is 4, 2 times 3 is 6...etc"

But now, let's look at some of the ways that emotions can modify the learning (or LTP) process. Let's say that you're a proto-human, walking down a jungle path. Suddenly, a tiger jumps out at you - a really BIG tiger! Instantly, you perceive a threat. Adrenaline is released from your Adrenal Gland and it causes you to increase you heart rate, blood pressure and redistribute blood flow away from your digestive system (no need to worry about digestion now) and skin (don't want to bleed too much). Instead, blood flows to the muscles and the brain. Your pupils dilate so that you can see so much more and you are primed for "fight or flight."

This is what, in biological terms, is called an acute, MILD stress. Mild, in biological terms means that you have not had a limb torn off or that you are not exsanguinating. Acute means less than 5 minutes, or so. That is how long adrenaline typically lasts - unless it is continually stimulated. Once again, in our hypothetical situation, you either survived - or you didn't.

So much is commonly understood by everyone. But what is not appreciated is that that blood flow, in the brain, is redistributed AWAY from the frontal cortex and TO the motor and ocular cortex. After all, you don't need to make long-term plans at this point. Either you survive - or you don't. The blood flow to the motor cortex makes you able to move fast, in a coordinated way. You even have an irresistible urge to do something, anything.

But Adrenaline does something more. It stimulates the synthesis of cortisol, also in the adrenal gland, and with the changes in blood flow, this is carried directly to the brain. There, it primes a number of critical areas of the brain that are associated with learning and memory. Now, instead of hundreds or thousands of repetitions, ONLY ONE MAY BE REQUIRED! After all, how many encounters with a tiger do you require before you learn that tigers are dangerous?

This acute stress response is one very potent way to increase LTP'ing of neurons - and you can see how it would have a biologically important role. Things that are potentially threatening MUST BE ATTENDED TO. And so, to help really nail that down, cortisol also primes a very critical area of the brain. This is the Amygdala. The amygdala is part of the limbic system and is given the task of remembering the emotional tone associated with that LTP episode. The next time that you recall that encounter with a tiger, all the fear and blind panic associated with that encounter will also be recalled. And vice versa, the next time that you have a moment of fear, that episode with the tiger will leap into your immediate consciousness. And that emotional tone acts as an amplifier to make sure that we never forget that encounter (or lesson).

Now, in our hypothetical case, we've survived and an we feel an immense sense of Joy and Relief. Another part of the brain releases Dopamine and Dopamine is the biggest reward that the brain can experience. All those drugs that you've heard about, like cocaine or crystal meth work by stimulating the release of Dopamine in the brain. And Dopamine also facilitates the LTP'ing of neurons. Perhaps even more so than cortisol.

And so now, we've had a double reinforcing of our learning experience. Both the acute stress response, followed by our relief/reward response help to nail down that learned experience. And not only that, but Dopamine can do it all by itself. Our proto-human needs to learn not only how to avoid threat, but where rewarding substances are found, and in what season. This is the response that good teachers try to evoke when they make learning pleasurable. In that way, your brain's own Dopamine reward system does all the work for them.

But, we all know other teachers who may have approached teaching from another direction! And guess what, evoking the acute stress response (through threats and intimidation) also works! It's just not very pleasant. This, incidentally, is one of the theories behind the use of punishment to try to modify a person's behavior. But while it may cause LTP'ing to occur, it has very unreliable effects on behavior. I'll have more to say about that subject in a later post.

Now, here's the take-home message. Instead of a proto-human, let's look a Joe Trader. He starts off, full of confidence and plunges into trading without really understanding what he's doing or having a trading plan. The losses start to mount and now, each time he enters a trade, he starts to feel more and more stress. Because of the Adrenaline, he has an overwhelming urge to do something; AND SO HE MAKES ABRUPT, IMPULSIVE DECISIONS. These may work out, or he may choose to exit at the very worst time, or to take profits too soon. Remember, blood flow is directed AWAY from the frontal cortex and so he's really not able to make good, reasoned, long-term decisions.

Let us further suppose that he's entered a trade and that it's gone against him. Because he's unwilling to take a loss (another good subject to explore later) and because he's making impulsive decisions. let's say he make another poor decision. Not having stops. Removing his stops or moving them further away. Scaling in more contracts in order to "average down". You know all these mistakes - right?

Now he's under a lot of stress and the cortisol is making him really attend to what is going on and remember everything. Suddenly, the market reverses, rescuing his position and giving him an even greater profit. BAM! LOTS OF DOPAMINE. And lots of LTP'ing.

Joe Trader is well on his way to permanently acquiring a really destructive trading habit. Perhaps only a few more repetitions of this behavior/stress/ big reward pattern will be necessary to make this permanent! And we now see how and why over 90% of traders fail.



If you're interested I suggest you follow the link to Bruce's blog where there are some pictures to make more sense of this and some excellent material about the impacts of our minds and bodies on trading --- and what we can do about it.


TraderPsychology
Nine

so impressed I just have to post once more nine, think your post right up there with the very best imho its a real time saver for anybody interested in getting it right quicker than most probably manage.

I would add and without any hesitation or thought


You can train the correct response into yourself with very little effort whats so ever if.....


IF you accept the above is correct or have or are experiencing or just see some of the above give aways / tell tale signs, think we probably all see a bit even if we are profitable etc

I check my trades each and every day for drift in execution of plan as per ideal

The Five Fundamental Truths
1. Anything can happen.
2. You dont need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in [a game] is unique.
The Seven Principles of Consistency
1. I objectively identify my edges.
2. I predefine the risk of every [betting decision].
3. I completely accept the risk or I am willing to let go of the [hand].
4. I act on my edges without reservation or hesitation.
5. I pay myself as the [game] makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.


red above applies in the good times to = more so because....................

when you are doing something really well you do not pay full attention (enjoying ones self to much in the moment) and it is very hard to replicate again hence people refer to it in some vague way or term

THE ZONE

The Zone is nothing special, everybody can be in the zone and in fact most are every day of their lifes without realising it

Its just unconscious doing something, anything to a reasonable / good professional standard. It as become unconsious because you have carried out the task many times and thought at a monitored level is no longer required.

Boiling a poached egg and getting everything else ready so everythings ready at the same time (without a clock / watch for reference ) driving a car etc.

The first sign that you are not in the zone is an awakening in your mind, you become aware of the moment = BEWARE, performance is dropping off you are in fact manually controlling actions. Very often at this time a bit of your brain will sort of remind you not to do something daft, it may be quite specific, the chances of making that exact error have just reached un exceptable levels and only a very trained individual will escape from the moment and act professionally in that moment.

Trading is seen as very clever and some individuals (myself included) build up barriers in their own mind to in fact re-enforce that OPINION hence from that moment forward ~

Bingo its hard, I still find it hard to execute late in the day, late in the day means nothing its just a daft none relevent emotion

EXECUTE EACH AND EVERY TIME YOU GET YOUR TRADE SET UP AT THE MARKET

I am no brains, far from it and I learnt the hard way, not the very hard way I had a little more sense than that. It was hard enough between the ear holes to dish every pre-concieved idea I ever held regards errrrrrrrr

Just about everything really and start again from the beginning. AND MAINTAIN IT

good starting point imho

T2W Day Trading & Forex Community


1. demo platform

2. plan which includes ENTRY EXIT (known at entry) reasons for ( it does not need to be a 100 page document, timsk as one if you pm him and ask nice :-))

3. money management rules per trade and a fixed bank (realistic level)

4. TRADE IT IN THE WAY YOU WROTE IT (do not second guess it, you wrote it and I presume thought about it so F..CKIN EXECUTE IT WITHOUT ONE THOUGHT OR FEELING at this stage (demo) thats your job / goal nothing else, hell if its a s...t plan you can always write another one later.

Four above, you must believe 200% the reason why you must do it like this, so follow nines link and google everything on this one.

You have thought and done your research 4 = EXECUTE IT, after say a period of 2-3 weeks you should be totally bored stiff, the hardest part is staying awake.

After that period you have trained yourself at a superficial level only to EXECUTE on sight no ifs or buts...............


HOLD IT, its not that simple, assuming you are profitable and EXECUTED without error

Bordom period over, check everything, make adjustments to plan / rules as per observed requirements and go back and do it again, and again ..............

YES FOUR WEEKS

repeat above till your happy

OFF for live test = small stakes

EXECUTE EXECUTE EXECUTE did you

what

think, second guess it, did your heart rate increase, at that moment (stakes are small) the reason is your testing proper your method and the pressure is building, fear of failure is present = control it = work through it each and every day till it subsides.

In the trade write everything down EVERYTHING (small stakes) remind yourself your job is nothing special, all the hard works already done, you are just there to EXECUTE IT, you already no its high probability good method, you have nothing to fear other than

YOU NOT EXECUTING IT, if you do not execute your plan then you have failed a task that is as simple as ........................

putting the plug in the sink before you run the water

Famous regiments second or might even be their third motto (all top spot imho)

Train Hard ~ Fight Easy


A very high achiever, sorry can not remember who but absolute huge earner in demand by everyone ......

when asked if he had to choose between attributes answered......

Flawless execution of a poor plan in preference to an excellent plan and P..ss Poor execution any day of the week for me.

All the best nine and everyone



House of bricks .................start building
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Old Mar 14, 2008, 4:34pm   #74
 
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Crikey. Nice posts, you two.
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Old Mar 17, 2008, 10:33am   #75
 
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nine started this thread I realise that I've borrowed from Bruce material that describes the problem. In this post I will borrow parts of his description of the solution. I'm skipping a lot so I do recommend following the links below for more assistance if these problems are relevant to you. Each colour represents a day in Bruce's posts so you might want to take a break as you work your way through the material (perhaps check out the links at the bottom)

OK. Has everyone had a chance to think about this topic? Lets start off by reviewing my definitions of beliefs. I have arbitrarily divided them into Opinions, Beliefs, Convictions, and finally, Core Convictions (also known as Rules, or Deeply-held Beliefs.) Opinions are loosely held and we are not too upset when they are challenged. As we ascend into Belief and Conviction, a greater level of energy is devoted to maintaining them, and to defending them. We get increasingly irritated when beliefs are challenged, and angry when convictions are challenged. Core Convictions are what we are willing to fight and to die for.


Next, cognitive dissonance, as Mike observed, is not just a dysfunctional response to input from reality conflicting with one's beliefs. It is an integral part of our being. It can be dysfunctional when it prevents us from seeing reality or in perpetuating a prejudice. It may be protective by allowing us to view ourselves as being good people. That way, it buffers us from life's little disappointments and our short-comings, and allows us to move along. If we focus on our every fault and are overly critical, we can become depressed and disheartened. We may become discouraged from attempting to correct or improve ourselves. If, on the other hand, we go to the other extreme and we extinguish any and all perception of our faults and errors, we do not seek to improve ourselves and to make needed changes.

So cognitive dissonance is neither good nor bad. It merely is. And it is up to us to recognize the fact that it exists, and to apply it in a beneficial manner. That requires self-examination, insight, and a willingness to see and hear things that we do not necessarily enjoy seeing or hearing. It requires an openness to change.

Finally, our beliefs or even our levels of belief are not rigid and inflexible. As Mike pointed out, they can change. Sometimes they can appear to change suddenly. But by now, we are Biologists and so, like Mike, we can start to think of possible underlying processes, like LTPing a set of neurons. Looked at in this light, a belief is an LTPd neural network. It has become a preferred pathway and neural impulses have an easier time traversing this pathway.

Im going to stop now, and let you think about that. You may wish to review some of my previous posts on these subjects.




The process of behavior change is complex. First, and obviously, there must be some impetus to change. There has to be some action, observation or event that forces a change in the belief structure. When that previous belief structure or level of personality integration becomes untenable, then it is rejected and a new belief structure must be found. The process of cognitive dissonance is integral to this process.

As I explained previously, we can visualize this as a vast array of neural networks dedicated to this belief structure. Observations that confirm this belief structure slide rapidly on through it. Observations that are contrary to that belief structure dont have such an easy pathway, and so are swamped by the existing neural network. Their signal is so tiny, compared to the existing neural network, that it is lost. It is, essentially, noise.

But heres the important thing. Remember that LTP requires repetition. And if we have enough repetitions, then slowly but surely, we start LTPing a new neural network. This process can be aided by our already known processes of Stress and Reward. When this new neural network has been built up and strengthened sufficiently, it can begin to operate independently. Now we have a competing pathway.

This is what I meant when I said to Mike that beliefs and behaviors dont change suddenly. And this is what I meant when I said that something was going on in the background.

So now, if you havent already, go back and review my previous posts. I will continue this topic and start to turn its relevance back to trading.



The concept of cognitive dissonance is neither good nor bad; it is neutral. It merely exists and functions on its own. It is neither moral nor immoral. It is our beliefs that can act as a filter for the process of cognitive dissonance that are the problem when we think of the negative connotations of cognitive dissonance. We constantly make moral and ethical judgments. We make value judgments about what is Good or Bad and what is, or is not desirable. We can define desirable either in terms of possessions, behavior, or character. And, dangerously, in terms of race and religion.


A Zen Buddhist would, by defining all moral judgments as Illusion, eliminate this negative application of cognitive dissonance. If every act is viewed as neutral, neither moral nor immoral, neither good nor bad, then there is no bar to seeing things as they really are. At least, that is the Buddhist viewpoint.

So when we discuss cognitive dissonance, it must always be within the context of an existing belief structure. If you have no belief about something, then any observation about that phenomenon will be just that an observation. Unfiltered, non-judgmental, and unbiased.

Are you with me so far? OK. Now lets apply this to trading. Suppose you enter a trade. Your indicator tells you to go long, or to go short. You now have a belief about the probable outcome of that trade. But what is your level of belief about the outcome? Opinion? Belief? Conviction? Core Conviction? The intensity of your belief structure will determine how significantly cognitive dissonance will impact your trading.


The higher the level of belief, the more cognitive dissonance will act to extinguish the observations that you will need when it is time to exit the trade either with a profit or in order to minimize a loss. And, therefore, the greater the number, frequency and intensity of these signals we must receive before these observations overcome our cognitive dissonance. In trading, this is referred to as holding on to a trade until the pain (of loss) becomes too great. At this point, we can no longer hold on to our beliefs about the outcome of that trade. Cognitive dissonance has been swamped by the contrary observations (our mounting losses) and it is at that point that we surrender and abandon the trade.

This is an important concept. So Ill pause now and let you digest this.



In my last post, I discussed how the intensity of our beliefs about the outcome of a trade, coupled with cognitive dissonance, could adversely affect our trading performance. Now Im going to switch focus and look at what happens when we are forced to abandon a belief. I had used the example of abandoning a trade when the pain became too great. In that case, the observation of our mounting losses forced us to abandon our belief that the trade would result in a profit. Thats a negative example. It is made negative by context our losses. But a change in belief can have other connotations.

An epiphany is defined as:
a. A sudden manifestation of the essence or meaning of something
b. A comprehension or perception of reality by means of a sudden intuitive realization. (The Online Dictionary)

Here, we are again dealing with a change in belief. And, as I pointed out, this is neither sudden nor intuitive. There had to be something going on in the background leading up to that epiphany. A contrasting series of observations that confounded the existing belief structure and slowly LTPd its own neural network. And at some point, it became strong enough to exist independently as its own belief structure.

Now recall that the process of LTPing a nerve synapse is, to all intents and purposes, permanent. So now we have two belief structures that are contradictory. And so we abandon one belief structure in favor of the other. And slowly, that new belief structure strengthens to the point where it becomes the favored pathway. And the previous belief structure, by its disuse, atrophies.



I provided examples of changes in behavior. One was slow, the other was sudden. But as we now know, this is no such thing as a sudden change in belief or behavior. In the example of the phobic patients, they had had a prolonged period of observation that the exiting therapies werent working. And so slowly, they came to the realization that they would have to make the changes, to correct their belief structure, on their own. The correction that they made was to state that their fear or phobia, and therefore their behavior, was stupid. Now, instead of defining themselves as prisoners of their fears, they were free to re-define themselves as prisoners of their beliefs about themselves. And by rejecting their belief that they were fearful as stupid, they were able to also reject all the behaviors that had arisen from their belief that they were prisoners of their phobia.

With the addicts, the essential factor was removal from their environment, and their temptations. Again, cognitive dissonance was at work. They had defined themselves as addicted to a substance. Now, they were able to see themselves functioning without their addictive substance. They were able to build up and rehearse behaviors that were not a part of their addictive lifestyles. And so they could allow the process of cognitive dissonance to work on their behalf.
Now, lets turn and look at ourselves, as traders. Lets start with the level of our belief that we invest onto our trades. I cant say for sure, but I suspect that many novice traders, in order to reduce uncertainty, and therefore distress, invest their indicators with a higher level of belief than is actually warranted. By doing so, they can increase their level of confidence and allow themselves not to be paralyzed by uncertainty. But that certainty, while allowing them to take the trade, can work against them by preventing them from exiting the trade in a timely fashion. Obviously, we need to make a change in that level of belief, if we are to become effective traders.


Once again, we beginning traders typically require lots of contrary observations before we can decide to abandon our level of belief. Even published statistics that an indicator may only be successful 45% to 55% of the time, or that successful master traders can be profitable even with only a 35% success rate doesnt seem to have any effect on these novice traders. They have to actually experience those facts before they can come to the realization that it is not the indicator that makes the trade. Instead, its the money management that makes for a profitable trader. And ruthlessly cutting your losses and allowing profits to run is the key to money management.

and then in February and March 2008 Bruce looks at specific issues in trading:
TraderPsychology: February 2008



TraderPsychology: Belief
TraderPsychology: Cognitive Dissonance
TraderPsychology: Cognitive Dissonance, Part 2
TraderPsychology: Cognitive Dissonance, Part 3
TraderPsychology: And Still More on Cognitive Dissonance.
TraderPsychology: How to Make Use of Cognitive Dissonance
TraderPsychology: So how do Addicts Break Their Habits?
TraderPsychology: So How do Traders Break Their (Bad) Habits?

and Putting Things Together 1 through 4 on
TraderPsychology: December 2007
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