How To Think Correctly

[CYOF]

Very good points, and worth noting.

Why does one trade?

Is it a pastime or hobby, a means to supplement income from a normal job, a curious and interesting subject, or is it an obsession!

As with everything in life, the output we achieve (end results) will be in direct proportion to the input (amount of work).

IMHO, one really needs to know where they are in relation to their level of interest.

In my case, it is an obsession. I am obsessed with trading, mainly because I know what it is like to make big money money for someone else, but not for myself.

Having tried various "enterprises" over the years, I have found none that offer such great personal rewards as is possible with trading.

So, I do not mind putting all my time and effort into developing the required skills, as I am fully aware of the potential end results.

In other words, I truly believe that I can become a consistent profitable trader, but I am also very much aware that it is not an easy thing to do.

Will I ber able to do it?

Yes, I am certain that I will, but what I am not certain of is at what stage I will be able to do it.

This is why one must set simple Goals and Objectives - for if not, one may always be resigned to be part of the so called 95%.

Anything in life is achievable once one has 100% commitment to what it is they are trying to achieve, realise that in order to achieve one has to acquire certain skills pertaining to the subject matter, and last but not least, must be prepared to change the way one thinks.

As Mark Douglas and many others point out - and I really do hate quoting authors, vendors, experts, etc.etc, but in some cases it is very true what they say - anyone who is trying to master trading has to realise that the way we think is primarily a function of the society in which we were brought up. It is plain to see, even from the way we treat our own children, that from the onset of our ability to learn, we are constantly bombarded with negativity - stop doing that, don't do that or don't do this, you can't do that or you can't do this, that is not the way you should it, etc, etc, etc.

It is no wonder that we find it very hard to trust our intuition - and our intuition is the only real aspect of ourselves that can not be influenced by anyone else. It is our individuality as human beings. However, as that way we think determins what we do, then this will override our natural instinct to be creative and be intuitive.

So, how do we learn "How To Think Correctly".

Maybe the first place to start is to look at how do we actually think, and what is the process of thought. To me, this sounds very logical, but then again, as I mentioned previously, I have an open mind and am totally committed to what I am trying to achieve.

Regards,

 

[CJIA]

re

Just thought i should add this to a very interesting thread.

He who reigns within himself and rules his passions, desires, and
fears is more than a king.

-- John Milton (1608-1674) Poet

 

[Splitlink]

Very good points, and worth noting.

Why does one trade?

Is it a pastime or hobby, a means to supplement income from a normal job, a curious and interesting subject, or is it an obsession!

As with everything in life, the output we achieve (end results) will be in direct proportion to the input (amount of work).

IMHO, one really needs to know where they are in relation to their level of interest.

In my case, it is an obsession. I am obsessed with trading, mainly because I know what it is like to make big money money for someone else, but not for myself.

Having tried various "enterprises" over the years, I have found none that offer such great personal rewards as is possible with trading.

So, I do not mind putting all my time and effort into developing the required skills, as I am fully aware of the potential end results.

In other words, I truly believe that I can become a consistent profitable trader, but I am also very much aware that it is not an easy thing to do.

Will I ber able to do it?

Yes, I am certain that I will, but what I am not certain of is at what stage I will be able to do it.

This is why one must set simple Goals and Objectives - for if not, one may always be resigned to be part of the so called 95%.

Anything in life is achievable once one has 100% commitment to what it is they are trying to achieve, realise that in order to achieve one has to acquire certain skills pertaining to the subject matter, and last but not least, must be prepared to change the way one thinks.

As Mark Douglas and many others point out - and I really do hate quoting authors, vendors, experts, etc.etc, but in some cases it is very true what they say - anyone who is trying to master trading has to realise that the way we think is primarily a function of the society in which we were brought up. It is plain to see, even from the way we treat our own children, that from the onset of our ability to learn, we are constantly bombarded with negativity - stop doing that, don't do that or don't do this, you can't do that or you can't do this, that is not the way you should it, etc, etc, etc.

It is no wonder that we find it very hard to trust our intuition - and our intuition is the only real aspect of ourselves that can not be influenced by anyone else. It is our individuality as human beings. However, as that way we think determins what we do, then this will override our natural instinct to be creative and be intuitive.

So, how do we learn "How To Think Correctly".

Maybe the first place to start is to look at how do we actually think, and what is the process of thought. To me, this sounds very logical, but then again, as I mentioned previously, I have an open mind and am totally committed to what I am trying to achieve.

Regards,

What is the correct way to think, anyway? If we don't know that then we won't be able to do it.. I saw a film last night in which someone said " To do the correct thing is easy.. It is knowing what the correct thing is that is the problem."

I would disagree with the first sentence. Doing the correct thing is, also, very much, a problem, But the second sentence is very true and not all of us have the same opinion about what the correct thing is.

Split

 

[CYOF]

What is the correct way to think, anyway? If we don't know that then we won't be able to do it.. I saw a film last night in which someone said " To do the correct thing is easy.. It is knowing what the correct thing is that is the problem."

I would disagree with the first sentence. Doing the correct thing is, also, very much, a problem, But the second sentence is very true and not all of us have the same opinion about what the correct thing is.

Split

This is exactly why one must keep an open mind.

Remember, readers will be saying "what is in this for me", in other words what "value", if any, is there in this information.

When we talk about thinking correctly, what exactly are we talking about?

Are we talking about philosophical thinking, or thinking from a scientific viewpoint?

For me, it is very simple. If I read something, and I think that the information that I am reading is worth more investigation, then I will commit to further research.

Actually, this is how I am earning my living at the moment. When I find information that I consider to be of value, I will spend many hours researching this information in great detail until I understand the information to the best of my ability. I will then present a simplified version of what value this information can bring to the company I am working for.

Example, I read an article on Benchmarking and think, hey, this has merit and according to my understanding of the concepts this can greatly assist the company I am currently working for. I will then research the topic in great detail, buy some books on the subject, carry out numerous advanced searches on the Web, and finally produce as simple document that I can present to my customer for consideration.

The next step, following approval to proceed, will be to develop a plan.

S.M.A.R.T objectives will be used to produce a Plan.

The plan is the means by which we reach our desired objectives. It can be as complicated, or as simple, as we want to make it.

Plans can, and do, change, and I will go as far as saying that these changes are an absolute requirement in order to achieve the end results. Many things will have not been foreseen, as none of us posses all the knowledge that is available on any particular subject. We must be aware of the associated issues, risks and assumptions.

So, if you compare my real life experiences to that of trading, you will see that there are many similarities, In fact, I believe that everything we do in life is replicated in one form or another, over and over, and once we recognises this fact, it then becomes easier to learn How To Think Correctly!

Is anyone getting any value from my posts – or not?

Be honest, as honestly is always the best policy.

If not, or if you are not sure, then why not ASK questions as some do. You will find it very hard to acquire new knowledge unless you start asking questions.

I may not have the answer, and may actually not be able to answer any questions that I am asked, but if I consider the question to be relevant to what I am trying to achieve, then I will commit to do further research in relation to the question asked. I will always tell the truth in relation to the subject matter in question – for to not recognise the truth is only to fool oneself, and this results in nothing but time wasting – which is a major problem in this day and age, especially with the use of the WWW.

Remember the approach that Socrates took – his greatest realisation was that he actually knew nothing. Of course he knew something, something that the majority had not discovered, but he was wise enough to know that been humble is one of the greatest virtues that man can possess. We are fortunate that mankind has advanced to the stage that we shall probably not be executed for expressing our opinions – well, for the most part that is, so we really do not have anything to fear, but ourselves!

By the way – I think that all people who contribute to the posts are well on their way to learning what is required in order to achieve consistent profits in the markets. The degree to which the posting will benefit the end result, will be in direct proportion to the effort expended in relation to the subject matter in question. I do not expect, and nor should anyone else for that matter, expect to get all the answers from the posts. But it is the act of doing that produces results – no gain without the pain, so as to speak.

Regards,

 

[Atilla]

Very good points, and worth noting.

Why does one trade?

Is it a pastime or hobby, a means to supplement income from a normal job, a curious and interesting subject, or is it an obsession!

As with everything in life, the output we achieve (end results) will be in direct proportion to the input (amount of work).

IMHO, one really needs to know where they are in relation to their level of interest.

In my case, it is an obsession. I am obsessed with trading, mainly because I know what it is like to make big money money for someone else, but not for myself.

Having tried various "enterprises" over the years, I have found none that offer such great personal rewards as is possible with trading.

So, I do not mind putting all my time and effort into developing the required skills, as I am fully aware of the potential end results.

In other words, I truly believe that I can become a consistent profitable trader, but I am also very much aware that it is not an easy thing to do.

Will I ber able to do it?

Yes, I am certain that I will, but what I am not certain of is at what stage I will be able to do it.

This is why one must set simple Goals and Objectives - for if not, one may always be resigned to be part of the so called 95%.

Anything in life is achievable once one has 100% commitment to what it is they are trying to achieve, realise that in order to achieve one has to acquire certain skills pertaining to the subject matter, and last but not least, must be prepared to change the way one thinks.

As Mark Douglas and many others point out - and I really do hate quoting authors, vendors, experts, etc.etc, but in some cases it is very true what they say - anyone who is trying to master trading has to realise that the way we think is primarily a function of the society in which we were brought up. It is plain to see, even from the way we treat our own children, that from the onset of our ability to learn, we are constantly bombarded with negativity - stop doing that, don't do that or don't do this, you can't do that or you can't do this, that is not the way you should it, etc, etc, etc.

It is no wonder that we find it very hard to trust our intuition - and our intuition is the only real aspect of ourselves that can not be influenced by anyone else. It is our individuality as human beings. However, as that way we think determins what we do, then this will override our natural instinct to be creative and be intuitive.

So, how do we learn "How To Think Correctly".

Maybe the first place to start is to look at how do we actually think, and what is the process of thought. To me, this sounds very logical, but then again, as I mentioned previously, I have an open mind and am totally committed to what I am trying to achieve.

Regards,

Very interesting and I relate to what is said very closely. More recently I have been monitoring my trading wins and losses very closely on an Excel spreadsheet obtaining stats on a daily basis. Two really useful ones consider are;

Average Number of trades ( can be in days )

Number of Wins Number of Loses
£Amount of win £Amount of loss.

Basically, the average number of trades have increased.

For Example:
First year 75 days traded.
Second year 125 days traded.

First year Average Win = 45%, Average Loss = 55% ( of total Wins & Losses )
Second year Average Win = 47%, Average Loss = 53% ( of total Wins & Losses )

This tells one that the winning streaks are smaller and fewer. Also means trader is holding losses longer and closing wins sooner. However, the stats are showing an improvement. Indicating the trader is learning / adapting to close losing positions as well as increasing

I would strongly recommend this approach for beginners to monitor their progress. Obviously the same stats could be obtained monthly showing to the trader strong and weak months.

Obviously if over the two year or more period the stats are diverging then the trader is not learning but has a problem.

I'd be interested if there are other performance observations that traders use personally to monitor their trading. Other than the net profit loss balance which is the ultimate target goal.

 

[CYOF]

I'd be interested if there are other performance observations that traders use personally to monitor their trading. Other than the net profit loss balance which is the ultimate target goal.
]

Correct.

Yes expectancy is the key and not belief.

The accuracy of this expectancy increases with knowledge and practice.

Therefore to expect with an overwhelming degree of certainty is the ideal, and to have it verified consistently is the proof you need.

Now, this is exactly what I mean when I say that ASKING a question can lead to information of some REAL value!

It is up to the individual to interpret the information for what it is worth - if you see no value in the information, then ask yourself, why?

What are others seeing that I am not seeing?

There is only one way to find out, and that is to do some work. Start searching the WWW - a tip for searching to save some time - use the "Advanced Search" facility in Google, and only search for files that are File Types with "type pdf". When you find a site that has a good article, the limit your search further to only search this website for additional material. This will help you avoid the many "sellers" who push out rubbish information that is only compiled for one purpose, to make money. Try other things as you learn to search mor selectively, and you will be surprised at what you might discover :idea:

Atilla, take note of Socrates post above where he mentions the word "Expectancy".

At first, this word may not seem that important, and the context in which Socrates uses it may not be the same as I am going to use, but watch what is going to happen now.

It just so happens, that I consider a full understanding of "System Expectancy" to be the one of the main contributors to consistent profitable trading.

Why is that so?

Well, in the first instance you must know where you are in relation to your development as a consistent profitable trader. How do you go about this?

The most logical way, is to look at your results, as your results are who you are, and who you are is what you really need to know.

It just so happens that I raised this point in another thread recently as follows:

http://www.trade2win.com/boards/showthread.php?p=293498#post293498

As a follow up to this, because I think that this subject is so important, I suggested that we start a new thread just to discuss this topic. When I done a search, prior to starting the new thread, I discovered that there was already one started some years ago.

http://www.trade2win.com/boards/showthread.php?t=6103&highlight=Expectancy

I noted that I will ask the moderator to copy the relevant post over to the existing thread to continue the discussion, and I will now do this today.

So, do you think that by asking a question you have now gained a new insight into how to develop your trading skills - I think so anyway, but it it is entirely up to you, and your way of thinking, that will determine how much value is in the information.

Regards,

 

[Atilla]

Now, this is exactly what I mean when I say that ASKING a question can lead to information of some REAL value!

It is up to the individual to interpret the information for what it is worth - if you see no value in the information, then ask yourself, why?

What are others seeing that I am not seeing?

Many thanks CYOF. I will print the links and your comments and digest it this evening.

Much obliged.

 

[CYOF]

Many thanks CYOF. I will print the links and your comments and digest it this evening.

Much obliged.

No problem Atilla.

Just remember, I am in the same boat as the majority.

I am not an expert at trading, but then again, there appears that they are few and far between, so I don't feel too much out of place

When I do my Expectancy sheet this week - probably near the end of the week as it is fairly busy at the moment, you will see that my current attempts at trading are not so good.

But, with the help of evaluating my of live trades, and with the introduction of One Time Framing technique, I do expect to see some improvement in my results.

At least I will now have a framework for evaluating where I am in relation to my development as a trader, along with a tried and tested technique that is used by many seasoned floor traders on the CME.

Remember, we do not have to re-invent the wheel, we just need to make sure that we fully understand why the wheel turns.

Regards,

PS: If you never heard of One Time Framing - then you know what to do - start searching!

 

[CYOF]

Oh, and just in case someone thinks that the topic is diverging - it really doesn't matter.

All that matters is results - how, and where, one obtains information that will help to improve on the results is immaterial.

But as I noted, there are other threads set up for specific topics, and after some divergence it is better to shift any discussions to the relevant threads - this will keep everyone happy :cheesy:

 

[darkwanderer]

will any of this carry on improve anyones trading?

i doubt it.

Mr. Charles Chan, (The Doubter). Striving for a beautiful trading mind can start anytime or anywhere. Why not here?

 

[Atilla]

Mr. Charles Chan, (The Doubter). Striving for a beautiful trading mind can start anytime or anywhere. Why not here?

CharlieChans - probably not :!:

Others - maybe :?:

All knowledge is good knowledge. Depends on what one understands from that knowledge and how one applies it...

 

[darkwanderer]

'Do as i say, not as i do'. Can this apply to the markets? Why can some people think correctly, but not do as they think? It's as if actual trading spoils a good think for some people.

 

[Splitlink]

The only time you know that you have thought correctly in the market is when you have made a profitable trade.. Before that, you only think you have thought correctly but it is unconfirmed, in which case learning how to think correctly really is very important, whether Charlie thinks so, or not.

I think I'm getting a bit mixed up here . I'm off to bed!

Split

 

[wasp]

Can you think too much?

Before I click the mouse button I have prepped out every factor of my expectation and covered all factors if the trade goes wrong. I know I have a statistical edge and that if 'x' happens, I've no reason to be in anymore and I'm better of out and awaiting the next setup matching my criteria. Its a well planned and thought out strategy for setups and therefore, from a 'thinking' point of view, my bst option is to not think.

IMO before a trade is taken, all factors have to be considered (money management, risk factor, stoploss, taget (if applicable)) or your leaning too close to gambling and therefore, once you have pressed that button, thats it!

If 'X' happens you do one thing, if 'Y' the other.

Maybe not the best comparison ever but, take pulling a pint............. If the glass gets filled up, you stop job done and accomplished, but if half of it turns to froth and spills over the glass, you stop and check the barrel to see what the problem is so you stop wasting it..... Whilst your pulling that pint, you don't go through some pyschological mind****, you just pour the beer into the glass till one of 2 things happen.....

 

[Atilla]

http://www.trade2win.com/boards/showthread.php?t=6103&highlight=Expectancy

Well this exercise was very interesting. Fortunately I had the stats already in my spreadsheet. Minor calculations and a summarisation produced the embarrasing result of T= -294.

Tells me for every £1 placed on a bet leads to an expected loss of £294 per year.

Will re-jig the spread sheet to provide weekly monthly and annual stats of average and T figure.

Once again many thanks.

 

[CYOF]

Well this exercise was very interesting. Fortunately I had the stats already in my spreadsheet. Minor calculations and a summarisation produced the embarrasing result of T= -294.

Tells me for every £1 placed on a bet leads to an expected loss of £294 per year.

Will re-jig the spread sheet to provide weekly monthly and annual stats of average and T figure.

Once again many thanks.

Atilla, I do not think that this is the best way to compute the System Expectancy - but we can look at the comparative results when I have the spreadsheet prepared - it might be next week at this stage, as this week is very busy.

 

[CYOF]

Before I click the mouse button I have prepped out every factor of my expectation and covered all factors if the trade goes wrong. I know I have a statistical edge and that if 'x' happens, I've no reason to be in anymore and I'm better of out and awaiting the next setup matching my criteria. Its a well planned and thought out strategy for setups and therefore, from a 'thinking' point of view, my bst option is to not think.

IMO before a trade is taken, all factors have to be considered (money management, risk factor, stoploss, taget (if applicable)) or your leaning too close to gambling and therefore, once you have pressed that button, thats it!

If 'X' happens you do one thing, if 'Y' the other.

Maybe not the best comparison ever but, take pulling a pint............. If the glass gets filled up, you stop job done and accomplished, but if half of it turns to froth and spills over the glass, you stop and check the barrel to see what the problem is so you stop wasting it..... Whilst your pulling that pint, you don't go through some pyschological mind****, you just pour the beer into the glass till one of 2 things happen.....

Hi Wasp,

To clarify, as it may be confusing to a lot of readers, many of my statements have been in relation to developing ones ability to trade correctly - in that context, it may be wise to learn How To Think Correctly.

The statement is not specifically targeted at individual trades, and as you very rightly say, it can be more beneficial to let the system run its course and actually refrain from thinking about the current trade that you have on.

But, to get to that stage in ones development as a consistent profitable trader, it may well require some very serious thinking!

Regards,

 

[SOCRATES]

Before I click the mouse button I have prepped out every factor of my expectation and covered all factors if the trade goes wrong. I know I have a statistical edge and that if 'x' happens, I've no reason to be in anymore and I'm better of out and awaiting the next setup matching my criteria. Its a well planned and thought out strategy for setups and therefore, from a 'thinking' point of view, my bst option is to not think.

IMO before a trade is taken, all factors have to be considered (money management, risk factor, stoploss, taget (if applicable)) or your leaning too close to gambling and therefore, once you have pressed that button, thats it!

If 'X' happens you do one thing, if 'Y' the other.

Maybe not the best comparison ever but, take pulling a pint............. If the glass gets filled up, you stop job done and accomplished, but if half of it turns to froth and spills over the glass, you stop and check the barrel to see what the problem is so you stop wasting it..... Whilst your pulling that pint, you don't go through some pyschological mind****, you just pour the beer into the glass till one of 2 things happen.....

What a ridiculous analogy, I am sorry to tell you.

You know that pulling a pint and just making froth or whatever is not important, you know this...., you....have decided this in advance.....therefore the analogy is artificial.

You cannot cheat yourself, because you know it has no importance.

So for you to approach an explanation from this angle does not do the selective process of trading any justice, and if anything just serves to mislead nearly everyone.

A better analogy is for you, in your case, to imagine ( and to imagine only but not try to do it) leaving your physical body and sitting beside yourself or standing behind yourself and directing you pressing the buttons as to what is right and what is wrong and why and how do deal with it.......much better.

 

[new_trader]

Very good points, and worth noting.

Why does one trade?

Is it a pastime or hobby, a means to supplement income from a normal job, a curious and interesting subject, or is it an obsession!

As with everything in life, the output we achieve (end results) will be in direct proportion to the input (amount of work).

IMHO, one really needs to know where they are in relation to their level of interest.

In my case, it is an obsession. I am obsessed with trading, mainly because I know what it is like to make big money money for someone else, but not for myself.

Having tried various "enterprises" over the years, I have found none that offer such great personal rewards as is possible with trading.

So, I do not mind putting all my time and effort into developing the required skills, as I am fully aware of the potential end results.

In other words, I truly believe that I can become a consistent profitable trader, but I am also very much aware that it is not an easy thing to do.

Will I ber able to do it?

Yes, I am certain that I will, but what I am not certain of is at what stage I will be able to do it.

This is why one must set simple Goals and Objectives - for if not, one may always be resigned to be part of the so called 95%.

Anything in life is achievable once one has 100% commitment to what it is they are trying to achieve, realise that in order to achieve one has to acquire certain skills pertaining to the subject matter, and last but not least, must be prepared to change the way one thinks.

As Mark Douglas and many others point out - and I really do hate quoting authors, vendors, experts, etc.etc, but in some cases it is very true what they say - anyone who is trying to master trading has to realise that the way we think is primarily a function of the society in which we were brought up. It is plain to see, even from the way we treat our own children, that from the onset of our ability to learn, we are constantly bombarded with negativity - stop doing that, don't do that or don't do this, you can't do that or you can't do this, that is not the way you should it, etc, etc, etc.

It is no wonder that we find it very hard to trust our intuition - and our intuition is the only real aspect of ourselves that can not be influenced by anyone else. It is our individuality as human beings. However, as that way we think determins what we do, then this will override our natural instinct to be creative and be intuitive.

So, how do we learn "How To Think Correctly".

Maybe the first place to start is to look at how do we actually think, and what is the process of thought. To me, this sounds very logical, but then again, as I mentioned previously, I have an open mind and am totally committed to what I am trying to achieve.

Regards,

I completely agree. There aren’t many careers or vocations in which you receive direct reward for your efforts and skill. You could be the greatest artist in the world but if nobody buys your artwork, you get no reward. You could have the greatest voice in the world but if you remain undiscovered, or if nobody likes your music, you get no reward. But, if you are the greatest trader (even not so great) the market doesn’t care if you are fat, thin, tall, short, funny or morose, nor does it require anyone to employ or discover you and sign you up for a contract.

I am obsessed with trading too. Not solely for the financial rewards but because it is a trait of my personality. I like challenges and trading is one of the toughest I have ever encountered. My aim is to be financially independent.

 

[datav]

Expectancy

Seriously important topic this. The expectancy of your system is your edge, and your edge is what makes trading profitable or otherwise. There is a great deal of material about this on Van Tharp's website, including a free simulator game that you can download, which allows you to modify expectancy and money management parameters to see the effect ithas on your performance over time. Understanding this part of the equation, and implemeting it is essential to improving our performance as traders