Useful things I've found on the Net.

[black bear]

FAO SPLIT...... please make Split aware of this post nine

A simple experiment might help me make my point. Next time anyone gets the ‘urge’ to take a position in the market just stop for a moment. Bring up a chart or two of the relevant instrument. Now place yourself in two scenarios and answer the following two questions;
1 ) Imagine that you have recently gone long in this instrument – where would you place your stop?
And...
2 ) Imagine that you have recently gone short in this instrument – where would you place your stop?
Once you have identified the two stop areas you have identified an area where taking a trade is of much lower risk. It is of lower risk because you have found an area where temporary price deflection is likely to occur. In those areas the 95% are flushed out of their positions purely due to price – this is where you can step in. Obviously, if you have supporting volume as well then you are more than likely onto a good thing.

Right – I need some sleep!

Steve.

Hi nine

Hell that was late in the day, I had given up

Make sure Split sees this post please, thanks do not no how I missed it.

Good spot and by far the most useful and correct post / posts I have read in some time for actually making any money imho

Split that is correct imho = as good as your simple trendline post that day to me, that post made an impact on me because you made me re-examine everything again which did me the world of good.

We are quits Split its been a real pleasure posting with you and around you

thanks and adios amego, all the best :clover:

Off to the cavern to watch my ladddy boy play his Sax, then off on holidays for the next few weeks

Great posts Steve

Andy

 

[stevespray]

Thanks for reposting those. When I first posted them I hoped that it would open up a fruitful debate. Let's see if that occurs here. Once a few more comment then I can add more. I find these matters to be very interesting indeed.

Take care,

Steve.

 

[Mathemagician]

Very interesting, indeed.

jj

 

[nine]

A little song to help you on your way:

Trade Like the Pros

 

[black bear]

just seen this

A little song to help you on your way:

Trade Like the Pros

top post nine

 

[rags2riches]

A little song to help you on your way:

lol he might as well be singing about me

 

[black bear]

sweet music for your ears

A little song to help you on your way:

lol he might as well be singing about me

I will 2nd that Lol

lol lol

Could have Serenaded me on April Fools day for sure

 

[black bear]

Ordered the book, just got to read it after finding this on the net.....

found this when trying to get my hands on this much talked about book

you no ....................THE ZONE one

extract from interview

What about the third stage?
That’s the intuitive stage. My belief
is intuition comes from the creative part
of our brain. Creativity, by definition,
brings forth something that didn’t previously
exist. On the other hand, the
rational part of our brain contains everything
we’ve already learned, which
means, by definition, it already exists.
So the creative part that generates the
intuitive hunch or gut feeling can and
often is in direct conflict with the rational
part of our thinking process, simply
because creativity exists outside the rational
framework. The hunch or gut
feeling was perfectly correct, but because
it can’t be justified rationally, it
isn’t acted on. To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain.

I do that about once a year, maybe a bit more but usually manage to seperate the two brains and carry on as per usual

April Fools day = I did not and damaged a number of claws on the paw of one of my hands

Have put up the cash and bought the book, and I do not or have not bought many, always prefered to re-invent things for myself after loads of thought and a couple of mi-grains usually

To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain

Above is the offending brain fart area that needs sorting imho being a discretionary trader 100% of the time.

Work in method/system like way but with discretion

see how it goes and report back later

 

[brutusdog]

found this when trying to get my hands on this much talked about book

you no ....................THE ZONE one

extract from interview

What about the third stage?
That’s the intuitive stage. My belief
is intuition comes from the creative part
of our brain. Creativity, by definition,
brings forth something that didn’t previously
exist. On the other hand, the
rational part of our brain contains everything
we’ve already learned, which
means, by definition, it already exists.
So the creative part that generates the
intuitive hunch or gut feeling can and
often is in direct conflict with the rational
part of our thinking process, simply
because creativity exists outside the rational
framework. The hunch or gut
feeling was perfectly correct, but because
it can’t be justified rationally, it
isn’t acted on. To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain.

I do that about once a year, maybe a bit more but usually manage to seperate the two brains and carry on as per usual

April Fools day = I did not and damaged a number of claws on the paw of one of my hands

Have put up the cash and bought the book, and I do not or have not bought many, always prefered to re-invent things for myself after loads of thought and a couple of mi-grains usually

To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain

Above is the offending brain fart area that needs sorting imho being a discretionary trader 100% of the time.

Work in method/system like way but with discretion

see how it goes and report back later

thanks for that Andy,

not sure why people are having trouble getting hold of the book got mine from amazon a very good price and here 3 days later

also your above quote illustrates why it is so important that our trading system / methods fit with our beliefs about how markets work.

cheers bd.

 

[black bear]

Wow it really is like playing Snooker

found this when trying to get my hands on this much talked about book

you no ....................THE ZONE one

extract from interview

What about the third stage?
That’s the intuitive stage. My belief
is intuition comes from the creative part
of our brain. Creativity, by definition,
brings forth something that didn’t previously
exist. On the other hand, the
rational part of our brain contains everything
we’ve already learned, which
means, by definition, it already exists.
So the creative part that generates the
intuitive hunch or gut feeling can and
often is in direct conflict with the rational
part of our thinking process, simply
because creativity exists outside the rational
framework. The hunch or gut
feeling was perfectly correct, but because
it can’t be justified rationally, it
isn’t acted on. To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain.

I do that about once a year, maybe a bit more but usually manage to seperate the two brains and carry on as per usual

April Fools day = I did not and damaged a number of claws on the paw of one of my hands

Have put up the cash and bought the book, and I do not or have not bought many, always prefered to re-invent things for myself after loads of thought and a couple of mi-grains usually

To trade intuitively on a
consistent basis, you have to learn how
to properly integrate the rational and
creative parts of your brain

Above is the offending brain fart area that needs sorting imho being a discretionary trader 100% of the time.

Work in method/system like way but with discretion

see how it goes and report back later

Hi all

Read the Book

Why did no one post me and tell me to get this book :?: to busy watching me re-invent It I guess using scrap loads of information

It is very good imho that good I am Scared, read it twice in the last 3 days because I could not believe I read it right the 1st time wrote and marked it all over and it looks like I have owned it years.

Trading is the same as playing snooker, the exact same problems and reading it explains..............................

To much

The guy is a the genuine article imho, a really great book in fact the best book I have ever read by a mile

Jimmy White would have been World Champion with no problem at all if he had met this guy in is mid twenties,

What a bl....dy shame

Latter all :clover:

 

[nine]

This was posted on another site I haunt by a guy who's posts I respect, Pa(b)st Prime, and there are enough truths in it to justify a slow read


Few other fields have more published rules and guidelines than trading. After all, there's no Idiots Guide To Trial Defense. We've been inundated for decades with the old saws about cutting losses quickly and letting winners run. Still we see little improvement in the trading performance of most participants. Futures trading is truly a zero sum game.

Each night the Clearing House pays out the same amount of money it collects. Toss in commissions, charts, research and the endeavor quickly reaches negative expectancy. Since I began trading on the CBOT floor in 1982 much has changed. Electronic access, FIFO and lower commissions have vastly leveled the playing field between professionals and the rest of us. While technological advancements have made trading short term more appealing than a generation ago, in my view retail traders should consider trading less. In fact rather than enhancing returns and cutting risk most short term strategies only accentuate the losses associated with futures trading. Allow me to share with you some cautionary aspects and a bit of advice that could help you clear some preliminary hurdles.

Commissions:

One of the least talked about advantages of being an Exchange member are ultra low commissions. I'll let you in on a dirty secret. The most legendary floor traders would have been net losers if they'd been paying the same commission schedule as you. In the larger financial products it was very typical for a floor trader to trade 1000 contracts a day in hopes of making just $1000 a day in profits. Superstar traders like Tom Baldwin would trade 20,000 lots on a busy day. I'd wager that many of you who've suffered grave drawdowns in your futures account are gross positive! Think about the paradox. Profitable trading yet net losses.

If your trading style is of a scalping nature I have a couple of suggestions. If you're trading more than several hundred contracts a day then lease an exchange membership. I won't go into the details here but for larger traders a seat will cut your costs dramatically. If you choose to remain at the retail level then try trading an exchange or product with low fees. Eurex charges far less than U.S. Exchanges. If you must scalp in America then look at low fee products like Treasuries. Or if you want to scalp a non-fixed income product choose a market with a larger minimum tick size. Paying $4-5 a r/t to scalp markets with $5 tick size is nonsensical. Cutting transaction costs is one of your most viable edges.

Short Term Technical Trading: I'm going to be both emphatic and controversial. There's is no system based on short term indicators generating anything other than real time random performance. It's utterly naive to believe the next few ticks can be handicapped by a stale set of variable equations. Now I know some of you are thinking I'm out of touch. That's because you've just successfully back tested some esoteric system with divergences, crossovers and filters.

You're sure this new optimized system is gold.

Think again. First the obvious. The Goldman's, Morgan's and big bucks CTA's with their vast computing power and impeccable tick data have already tested every conceivable indicator under the sun. Even if you're onto something remotely consistent you'll be subject to all the problems of high frequency short term trading such as commission costs, unable price orders and slippage. Now here's the rub. There's many signals derived from longer term strategies that will produce quality short term trades. Which signal has a more reliable chance of generating short term follow through? A new 5 minute high or a new monthly high? As a technician doesn't it make better sense to monitor a wider array of markets and spot higher percentage opportunities then to "specialize" in a single market and take a series of weak signals derived from noise?

Trade The News:

One of the pretexts of technical analysis is the theory that news is already reflected in price. Nonsense. Markets are organic. Market moving institutional participants are constantly reevaluating their positions based on evolving perceptions of fundamental information. Think of the market as a basketball game. We're watching a half court offense methodically passing the ball around the perimeter in search of a high percentage shot. Suddenly an athletic defender intercepts the pass and runs down the court uncontested for a slam dunk. That defender's name is News and he can spoil even your most conservative plans. News often comes unannounced. News can be as subtle as a dry Sunday in July when perceptive traders figure out there's a potential drought and push futures to an up limit open on Monday. No matter how mechanical and detached your approach you'll be frequently confronted by decidingly anti-technical factors.

Position Sizing:

It only matters how much you bet. Too many times we've all made historic market calls only to take a small profit much too soon and then watch the market explode for weeks on end in the direction we anticipated Then the next time we try to milk a winning trade for a bit more and see our open profit evaporate. It seems that picking the markets direction is seemingly easier than extracting consistent profits. I preach two approaches. For folks who're reasonably well off and seeking more modest returns I suggest you vastly under trade. Practice with scaling out of winners along with a hard protective stops. Larger accounts should risk no more than 1-2% their equity on each trade. One can always save up an additional $5000 in trading capital but refunding an account with an extra million isn't as simple as moonlighting at your day job.

For smaller accounts I advocate a more wide open strategy. You're probably not going to double your account 12 consecutive times trading for 1 tick at a time. None of us are that good. What you can do however is hit an occasional home run. I'm not saying just let it rip without an uncle point but you must intelligently look for opportunities that'll give you a quantum leap in return. Unless you're still a teenager, compounding $5000 by 20% a year isn't going to be a life changing experience.

Learn About Options: Like futures themselves, options are increasingly traded electronically and have enjoyed tremendous surges in volume and liquidity. For small traders the ability to over leverage with a defined stop loss on equity is a boon to your big play potential. I'll give you a pertinent example. This past December I had strong resistance on the March e-mini S&P at 1511. I decided I wanted to risk $10,000 on a short position. Index futures margins would have allowed me to short just 2 futures.

A 100 point down move would in turn have resulted in a $10,000 profit ($50 per point x 2 contracts). Instead I bought $10,000 worth of put spreads with an expected 8-1 payoff if futures closed below 1400 at January expiration. Fortunately the trade worked and my 10k turned into a minor windfall of $80,000. Another advantage to long premium options trades is the ability to trade futures contrary to your options position. If you're long calls you can then be a natural seller of futures.

Often if you're in a rhythm you'll quickly pay the cost of your options with the proceeds from your gamma hedging. Accept Your Psychological Shortcomings: We're all flawed in one way or another. Discretionary traders in particular are subject to the pitfalls of poor trade selection, over trading, undefined risk tolerance and revenge trading. A movie actor can vacillate between bi-polar feelings of arrogance and guilt but what makes his foibles different than a traders is the simple fact that he gets paid no matter what. We will never trade perfectly but must attempt to at least minimize our natural self destructive impulses. Keep a journal of your trades.

Don't just mimic the information contained in your brokerage statement. Instead keep a log of you felt emotionally about each trade. Like me you'll find there's commonalities with many of your losses. For instance if I fail to take a signal that would've resulted in a big winner I'll invariably next act on a weak signal and often over trade it to boot. Doing nothing more than eliminating your "trouble spots" will save you money that can be dedicated to the next good setup you perceive.

Hopefully I'll have an opportunity to expand on these points in subsequent articles. Till then, best of trading and good health to all.


Pa(b)st Prime aka Kurt J. Eckhardt has been trading since 1982 when he began his career as an active floor trader in the CBOT Treasury Bond pit. Kurt is President of Eckhardt Research and Trading and its subsidiary Agility Trading. Agility offers both individuals and funds cutting edge technical strategies along with high performance instruction. You can find the original article at this link

 

[nine]

Mike (MP6140) mentioned the Muddy Method so I googled it and found the Yahoo group. I'm working through their files now and found a nice explanation of why "protecting your capital is so important."


First and foremost TA is good for controlling risk.

The most important thing TA does is to provide you with a discipline for getting out when you're on the wrong side of a trade. The easiest thing in the world to do is to get on the wrong side of a trade and to get stubborn. That is also potentially the worst thing you can do. Believe me. I have made this mistake (and more often than I should have I have to admit embarrassingly). You think that if you ride it out you'll be OK. And the most seductive thing is that often times you WILL be OK. Than you may be suduced into thinking that you have that special “skill” of trading when – in reality – it was only luck. However, there will also be those occasions when you WON'T be OK. The stock will move against you in ways and to an extent that you previously had found virtually unimaginable.

Now, the next part, consists of 3 very important statements. Read theam aloud and then read them again and again and again…. Don't skip over the second and third iterations.

IT IS MORE IMPORTANT TO CONTROL RISK THAN TO MAXIMIZE PROFITS!
IT IS MORE IMPORTANT TO CONTROL RISK THAN TO MAXIMIZE PROFITS!
IT IS MORE IMPORTANT TO CONTROL RISK THAN TO MAXIMIZE PROFITS!

OK, but WHY is it so?

This questions can be answered several ways but in the broadest sense because of the asymmetry between zero and infinity.

What does that mean? Unless you are someone with unlimited capital (then in all likelihood you would not be here) you have finite capital. Maybe you haven even VERY finite capital. But with a market of thousands of stocks you have a functional infinity of opportunities.

If you lose an opportunity, you have lost only that opportunity but you will have potentially thousands more tomorrow. But:
IF YOU LOSE YOUR CAPITAL, YOU HAVE ALSO LOST ALL YOUR OPPORTUNITIES. Your capital is worth more than your opportunities because you must have capital in order to be in a position to take advantage of your opportunities.

Your capital IS your opportunities.

That is why: IT IS MORE IMPORTANT TO CONTROL RISK THAN TO MAXIMIZE PROFITS!

This comes from Werner Krag's document "What is TA" (technical analysis).

 

[mp6140]

ah nine --- your latest posts renew memories of my callous youth, when all of this was so important and i lived for every word.

all still so very applicable and timeless --- words that i repeated and repeated to all the newbs that came under my wing !

the only thing we have to work with is our equity --- remove the equity and you become a ditch digger !

thnx for the posts though --- its really nice going back in time !

enjoy and trade well

mp

 

[rags2riches]

Keeping it simple

simplify trading

The advice has been repeated over and over again but just to hammer the point home.... (u'll have to ignore the plug for the guy's website at the end)

 

[dcraig1]

simplify trading

The advice has been repeated over and over again but just to hammer the point home.... (u'll have to ignore the plug for the guy's website at the end)

Just a plug his courses. He lost me when he said trading fx is the same as any other financial market. I call nonsense on that one.

 

[nine]

In response to a question:

<< snip quite a lot >> Now I'm doing ok but I don't have a trading plan. I guess that in the back of my mind I now know what works and what doesn't and so it could be argued that I have a plan but I just haven't written it down. I would find it hard to write a plan now though as so much depends on context. (e.g. the plan may say front run size or the plan may say go into size. Both are a good idea but only the context will tell you whch is the right choice at the time.)

Looking back I can see that without my first plan I lost money and it was only by making a plan that I started to make money... But had I made a plan right away based on what I had read I doubt I would ever had made anything. The first time I read about about Stochastics I can honestly say I thought I would be a millionaire within 3 years, but had I made a plan right there and then based on stochastics and given it a good time to see the results would I have done so well?.. and then if upon relaising stochastics aren't the way forward I had made a new plan based on RSI....

So my question is.. Should we advise newbies to make a plan and rigidly stick to it? Or by doing this are we stifling the learning process?

I wrote (and thought it was worth adding to this thread):

You have illustrated why a plan and attempting to rigidly stick to it is important. By doing so you discovered new things about the markets and about yourself and the combination of your intended plan and a good diary would give you material for improving.

My question to you, Aspire, is "would you benefit by trying to create a plan for what you are now doing?"

I suspect that a new plan plus a good thorough journal would help you improve more than you will do without it. My plans are a continuous improvement thing. They also have to change if the market changes in ways that impact the plans. Continuous improvement methodologies the world over require both a base plan and good records to help you along the path.

One other thing I would assert is that you should test the changes from your plan before you trade them ... and again that works best if you have a plan (straw man that it might be) than if you don't. I think Mark Douglas said you should trade each iteration of your plan for a month before you make changes and I think that makes a fair bit of sense unless you discover that your plan was totally f***ed. Depending on how well you had observed the markets, your initial plans might need weekly revision for the above f* reason.

I hope you start a new plan; and new records. Best wishes and good trading.

 

[nine]

Here's a sample of an excellent article on this site written by Jea Yu:

Most day traders are going to blow out their accounts, they just don’t know it yet. The same applies to almost every new trader entering the game. They are all on borrowed time, a disaster waiting to happen. It’s a gloomy picture, unless they take the right steps to prevent the impending disaster. The initial goal of trading is to diffuse the bomb before it explodes. It’s not about making money. This is what traders don’t realize until it’s too late.


Jea then goes on to explain a bit about why this should be so and some good steps one might take to improve their chances in this glorious game we call trading the financial markets.

Trading on Borrowed Time

 

[nine]

Many seem almost to deify Nassim Taleb. Often I have been a little negative about him, particularly his arrogance but he did warn of the dangers of Fannie Mae back in 2006 (who can remember that far back?)

In 2006, using FNMA and bank risk managers as his prime perpetrators, he wrote the following:

The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."



Nassim Taleb explains the problem on the Edge

 

[Bladerunner]

thanks for the links nine

thanks, appreciated, just un-loaded the gun

A few from my collection that may be of use to someone ~



To the ego, the present moment hardly exists. Only past and future are considered important. This total reversal of the truth accounts for the fact that in the ego mode the mind is so dysfunctional. It is always concerned with keeping the past alive, because without it - who are you? It constantly projects itself into the future to ensure its continued survival and to seek some kind of fulfillment or release there. It says 'One day, when this, that or the other happens, I am going to be okay, happy, at peace'. Even when the ego seems to be concerned with the present, it is not the present that it sees: It misperceives it completely because it looks at it through the eyes of the past. Or it reduces the present to a means to an end, an end that always lies in the mind-projected future. Observe your mind and you'll see that this is how it works.

The present moment holds the key to liberation. But you cannot find the present moment as long as you ARE your mind"

Eckhart Tolle


The reasoned trade contains several components:

1. An assessment of current price behaviour: Is buying pressure expanding or contracting; is selling pressure expanding or contracting; is price volatility expanding or contracting?
2. An assessment of market conditions at shorter and longer time frames: trending or bracketing?
3. A target for the trade: A move to new highs/lows for a trend trade; a move toward a price mean for a bracketing trade.
4. Criteria for stopping the trade: Conditions that will convince you that your trade idea is no longer valid
5. A decision of resource allocation to the trade: How much of your capital you are willing to put at risk on the trade idea.


A Lesson in Trading Psychology

A trader saw buying come into the market, and he quickly jumped on board. He saw that the odds of taking out a recent high were good, given the size of the buying. To his surprise, however, the trade stalled out before the target and reversed. He quickly exited with a tick loss.
He turned to me and said, "I just paid for information."
When the market bounced higher a few ticks several minutes later, the volume was weak. No big players were taking the long side. He aggressively sold and quickly made a couple of points.
He placed a good trade, and it didn't work out. He didn't view that as a threat, as a loss, or as a failure.
He viewed it as information. The market was telling him that we weren't going to take out the recent high.
How he entered the first trade and exited it and how he used the loss to prepare himself for the winning trade: *There* was a clinic in trading psychology.
If your setups are valid, there are only two kinds of trades: Those that make you money and those that give you information.


Position size yourself according to ATR in higher time frame scale in via lower time frame = confirm not the other way round

by Grey 1

It takes professional money to alter the trend of the market.

Professional traders will not fight the market.

To fight the market means you are ~

• buying on up-moves when there is supply coming onto the market.

• selling on down-moves when there is no supply.


Profit factor Win Ratio Needed to break even
0.1 91%
0.25 80%
0.5 67%
0.75 57%
1 50%
1.25 44%
1.5 40%
2 33%
2.5 29%
3 25%
4 20%
5 17%


by Hoggums, appreciated Hogg"s



Douglas' approach is best summed up in his own words:

"All traders give themselves exactly what they deserve."

He means this in many different ways, but the main one is: our successes and failures are the inevitable result of the way we think, usually unconsciously.

I think this probably applies to life, too!


Nick


Things are the way you think they are, because you think they are that way. Your perception determines your experience.


matter of calculation and of the size of the account.

With a 30k account, you have to do the 1%, using leverage, otherwise it is not worth the time.



My approach looks like this:

1. I choose the product, which suits my trading style. Mine is the FDAX.
2. I look at the daily trading range and the size of single "straight" moves. Here I use ATR and look every day, which are typical move sizes. 28 points for example.
3. I look, what probability I have, to catch a move and which SL makes sense. At the end I came up, that ON AVERAGE, I can catch ONE 28 move NET every day.
4. To do that EVERY DAY, I shoot for DOUBLE that amount, 56 points and use 28 as a maximum stop.

That means, I want 28, risk 28 and if I have 56, I quit or risk only half of the extra 28 for a last trade, if this is successful, I risk only half of this gain. a.s.o.

Anyway, it works for me.

This is an example, at the moment, the volatility is far bigger, so the targets and stop losses are bigger as well.


by Dax Destroyer




good weekend :clover:

latter


Andy

 

[nine]

Nice post Andy.

I discovered something on the web earlier this week that really resonates for me. I suspect it also affects other traders. Does it affect you?

"Feeling out of control sparks magical thinking:
October 02, 2008 mindhacks

Psychology Today journalist Matthew Hutson covers some fascinating experiments just published in this week's Science that found that reducing participants' control increase the tendency for magical thinking and the perception of illusory meaning in random or patternless visual scenes.

Hutson covers all six experiments, but here's a sample from his article which should give you the general idea:

In the fourth study, people who recalled a situation where they lacked control were more likely to see nonexistent images in snowy pictures and were also more likely to suspect conspiracies in ambiguous vignettes. (In one story, three local construction companies raise their prices after their owners all spend the same weekend at one bed and breakfast. In another, the protagonist was denied a promotion right after his boss and a workmate exchanged a flurry of emails.)

The fifth experiment showed that describing the stock market as volatile (versus stable) renders people more likely to spot false correlations in reports on company financials—and then make stock investments based on their unfounded conclusions.

Finally, the sixth study showed that feeling good about yourself reduces the frantic grasping for straws. There were three groups. One group recalled not having control, another recalled not having control and then performed a self-affirmation task, and a third group did neither. The first group saw more figures in snowy pictures and perceived more conspiracies than the other groups did. Apparently, increasing self-esteem fosters a sense of control over one's life and reduces the need to seek additional stability in random noise.

Two of the 'snowy pictures' are shown on the right. The one on the top is completely random, the other has an embedded picture.

This is particularly interesting to me, because one of my own studies I completed with some colleagues in Cardiff also involved getting participants to perceive images in random visual patterns.

We did something a little different though, in that we didn't have any hidden images, so every time someone saw something we knew it was illusory.

However, we also managed to alter how often people saw the images, but we used electromagnets (a technique called TMS) to alter the function of the temporal lobes which have been previously thought to be involved in the magical thinking spectrum - from everyday examples to diagnosable psychosis.

This study was inspired by an earlier study by neuroscientist Peter Brugger, who found that people who professed a belief in ESP ('telepathy') were more likely to see meaningful patterns in visual noise than those that didn't.

Both the new study and our study are interesting because they show how this type of magical thinking can be manipulated.

However, this new study takes it to a whole new level because it involves a whole range of magical thinking tests (not just the 'snowy patterns') and shows how a number they are subject to the tides of emotion and feelings of being in control."

--------------------------------------------------

So, how did it affect me. OK. Simple.

When I get back from lunch I often find it difficult to get a read on trend. So I don't know what to do. So I feel out of control. So ... damn it ... magical thinking. Which for me translates to seeing correlations that are NOT there.

I try to use other markets to give me a lead on this market (Nikkei to get a lead on SPI say). Now the fact of the matter is that the correlation is weak, and is very weak in my trading timeframe. But, I have had a weakness for adding it after lunch when I can't get a read on the market ... and then, worse, sometimes trading SPI based on what Nikkei does. Then MUCH WORSE, sometimes after losing that trade taking another one.

What's happening is that as I feel further out of control then the magical thinking gets worse. And worse.

So, here is the question for you: are you seeing correlations that are not there (other indexes, volume, internals etc) or patterns that are not there when you feel out of control? If anyone is then let me know and I'll post how I resolve it.