Useful things I've found on the Net.

Split

week not over yet

good luck

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

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.

Andy,

Thank you for the Reputation, mate.

Good Trading,

Grant.

[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!

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