Calling all traders who "get it"

[jm1054]

It warrants comprehensive discussion but I would narrow it initially to stay focus on some key elements. The basic conversation is about market events or the trade environment, the information flow arising and its interaction with our trading mind and the consequent decision making arising from it. Self awareness is simply about the broad phases of awareness, acceptance, and actioning.

When we interact with the market, we are constantly consuming and digesting the information arising form key events. Market information by themselves are benign in nature. However a familiar theme we all understand is that the moment we have a position in the market, any information arising thereafter seems to take on a different meaning. It is important to understand why is there a sudden transformation in how information is perceived if we are to understand the nature of self awareness.

As I alluded in an earlier post we trade our beliefs of the market. Therefore how we perceive information is critical in influencing our behaviour. Let's illustrate with an example. Recently the Dow made some major moves including dropping 1000 points in one trading session. What was your reaction to such a market event? Say if you :
(i) Had been shorting the Dow for the past few weeks and finally closed your short and giving up just before the big move; or
(ii)Had been building up a series of long positions and was profitable but now is in a loss situation because you had only a mental stop; or
(iii)Are an observer waiting for an opportunity to go long; or
(iv)Are the public reading the headline news.

I would safely venture to say that the reactions would be different across the spectrum depending on individual circumstance. The process in developing self awareness is to conduct self examination and to understand our own reaction and understanding on how that reaction is driving the decision process. The idea is to build up a personal profile on how you personally react to different market events as you engage the market.

As the trading mind process market information, it induces certain thoughts and those thoughts influence our decision making. There is a common expession about "buying your thoughts". In essence you are prepared to go along because you are beholden by that thought. In cognitive terms, fusion is when the thoughts over a certain event are perceived in a certain manner and because there is buy-in it will influence how you react. Say if you are investor (ii) the drop of a 1000 points is a threat to your long positions. What happens if it continues to drop? Those are thoughts that will certainly arise. Such thoughts most likely will generate a certain amount of discomfort if not fear. They are emotions arising from a market event based on your perceived thought that maybe "I am going to have a loss". Are you going to close your long positions out of fear of a further drop? If you were investor (iii) would you be buying instead of selling? Self awareness is simply about understanding how we perceive information and how we are emotionally reacting to situations. Why is it a threat in (ii) and an opportunity in (iii)? As I mentioned before information itself is benign but how we perceive it is critical. it also means we can train to reframe information such as a threat can be an opportunity and hence we might end up with a different decision.

We know emotions influence how we behave but we can't trade without emotions. It is scientifically proven that we cannot even make basic decisions without emotions and so I would suggest to drop the notion that you can trade without emotions. Self awareness is about accepting that emotions play a role and more importantly be able to identify it when it arises and to work with our emotions rather than against it. A common approach is to use defusion techniques and will be the next item of conversation.

Now this is fascinating! So many traders think they have to eliminate emotions in order to trade well, so this is an interesting antidote to that.

Thanks for your great posts.

I wonder how much a trading strategy would be improved just by not trading when we recognise our emotions are out of kilter. That would be a great experiment. A simple extra line to a trading plan - if you feel grumpy, don't trade!

 

[mpups]

Feeling the same pain but acting differently

We learn to be more aware of our own emotions with repeated experiences of them negatively effecting our trades. We can't simply stop feeling these emotions, but we can improve our ability to make rational trading decisions despite what we are feeling. This emotions management doesn't just go on in the mind though (im not suggesting anyone is saying that here), for example:

We develop individual styles/methods of trading that help to keep our emotions in check
We gain experience and understanding of our markets thus improving confidence and conviction
Our trading plans and strategies evolve to be better at dealing with difficult situations
We have a better awareness of our open risks and so losses are not so shocking

 

[robleregal]

Great discussion on this thread.. has me considering using the forum more often! I'd like to offer my two cents on the matter:

As extreme as it sounds, I find the best way to do well trading is to treat every trade like it's life or death. I like to trade with an adrenaline rush - I find my focus is heightened and my mind makes connections it normally wouldn't make. After taking the biggest loss I took a few years back, I ended up on a winning streak I credit to adrenaline.

 

[jm1054]

Great discussion on this thread.. has me considering using the forum more often! I'd like to offer my two cents on the matter:

As extreme as it sounds, I find the best way to do well trading is to treat every trade like it's life or death. I like to trade with an adrenaline rush - I find my focus is heightened and my mind makes connections it normally wouldn't make. After taking the biggest loss I took a few years back, I ended up on a winning streak I credit to adrenaline.

Life or death sounds a bit scary! :cheesy:

But you know what, I wonder is it's all about consistency? Life or death on EVERY trade, or chilled out on EVERY trade. It doesn't matter which approach a trader chooses, as long as it's the best choice for their temperament and they're CONSISTENT.

As an aside, I know it's always recommended that traders trade a small percentage of their equity but some of my best trading has been when I have been up against the wall (not something I would want to repeat obviously). It made me incredibly focussed on not putting on superfluous trades and therefore only waiting for the best set-ups. Conversely, not needing to trade (due to not being up against the wall) is also a good reason to be picky and wait for the best set-ups!

 

[Quantt]

This is a great discussion, so here are my $5 for the benefit of the new traders reading this, so they know there is another way to the stock market...

First let me say that even tough I am a self proclaimed Jedi (on the census forms), mind tricks just don't work on me

The only time I am using intuition or should I say discretion based on experience, is when I come up with trading ideas, after that I'll spend few days coding and run back and front tests to see if it is actually working or not...

Maybe I am just lazy, but if I have to do the same thing few times, I will definitely automate it, so personally for me the systematic approach is the best thing since sliced bread: easy to automate, easy to back test - there is just no way for me to remember how I felt on Friday 7 years ago, maybe I was still drunk in the morning or had to work all night or overslept and missed the market altogether, etc...

Same with mindfulness, meditation, yoga, etc... I do exercise tough, I don't like it one bit, but I don't have a choice, because I like to eat and drink a lot and I am developing a nice beer belly, even tough I just red about cool sculpting, so I might got my solution right there

Again, as always, I am not judging, so if it works for you, just go ahead and use it as advantage...

 

[jm1054]

This is a great discussion, so here are my $5 for the benefit of the new traders reading this, so they know there is another way to the stock market...

First let me say that even tough I am a self proclaimed Jedi (on the census forms), mind tricks just don't work on me

The only time I am using intuition or should I say discretion based on experience, is when I come up with trading ideas, after that I'll spend few days coding and run back and front tests to see if it is actually working or not...

Maybe I am just lazy, but if I have to do the same thing few times, I will definitely automate it, so personally for me the systematic approach is the best thing since sliced bread: easy to automate, easy to back test - there is just no way for me to remember how I felt on Friday 7 years ago, maybe I was still drunk in the morning or had to work all night or overslept and missed the market altogether, etc...

Same with mindfulness, meditation, yoga, etc... I do exercise tough, I don't like it one bit, but I don't have a choice, because I like to eat and drink a lot and I am developing a nice beer belly, even tough I just red about cool sculpting, so I might got my solution right there

Again, as always, I am not judging, so if it works for you, just go ahead and use it as advantage...

Definitely agree, each has their own strengths and weaknesses. Just the thought of programming/automation fills me with dread!

I laughed reading your comments on exercise. It reminds me of a T-shirt my friend has which reads "I run because I love food"

 

[Quantt]

I laughed reading your comments on exercise. It reminds me of a T-shirt my friend has which reads "I run because I love food"

This is great!

 

[NVP]

Hey gang

What a great thread this has turned out to Be....

Some great discussion and debate on very interesting and important elements of trading ...and mainly overlooked by many

Firstly I make a confession here ........I am a Discretionary trader ....

I need to come out of the closet .....I cannot hide it any longer .......

Having finally completed some work contracts I managed to get back to FT trading in January and I have been subsequently doing some major navel gazing on my approach and systems

I have also been promising folks some training and ebooks on forex strengthmeter trading ...so I really needed to review and tidy up years of trading notes and files etc etc .....the attic was overfull with junk !

So an interesting time for me...and a chance to evaluate what makes me and my trading tick....

For me you do have to construct your own subjective model of the market in order to develop trading strategies ......unless you do this the market will just be a random set of price movements ......and therefore not worthy of any investigation or involvement for seeking financial gain from an edge

How many rules and conditions you set is based on the years spent researching and observing the markets ......at least that’s my view......I find that the more time spent has allowed me to continue to peel the layers off of this exhaustive and fascinating subject ......and the more you learn the less you know

Forgive the analogies here....but For me it’s like being a football manager ......you are constantly trying to read the game from the sidelines .....based on your opinion and views.....you are then constantly orchestrating your team and it’s components to improve your position in the game to win ......in fact for me there is even a more important subtlety here In that my first consideration is NOT LOSING....

Anyway I think people get my drift .....as traders we assemble many rules that we believe are needed .....however how we combine them and when we use them ...that’s the secret in trading ......and for me the discretionary part of the game ........the X factor .......the elusive,maddening but also exhilarating thing that separates bad traders from good traders from suoertraders

We will never stop learning and evolving as traders ....and that’s also the fascination of this lifelong vocation......it’s,not just about the money ....that’s just detail....it’s about trying to master something and achieve true satisfaction and contentment in that mastery .......

N

 

[NVP]

i'm a visual & intuitive trader...if had to describe myself this is it. math was never my best subject...i see patterns..not numbers..maybe in my deep mind's eye i turn those patterns into numbers...i don't no.that's just me

had my druthers i'd be a number cruncher...but not my aptitude..gotta go with your strengths

in keeping with thread's central idea, my pscychology needed a bit of tweaking too

I missed this post before ..........Piphoe is a man after my own style....I am lucky enough to have a decent mathmatical brain but also see most of my trades and systems in my head as patterns ......I even dream them a lot of the time

patterns rule !

N

 

[FXX]

I missed this post before ..........Piphoe is a man after my own style....I am lucky enough to have a decent mathmatical brain but also see most of my trades and systems in my head as patterns ......I even dream them a lot of the time

patterns rule !

N

The only patterns I look at are with my daughter, lol. Not having to stare at charts is bliss.

 

[NVP]

The only patterns I look at are with my daughter, lol. Not having to stare at charts is bliss.

careful ....you will see them there as well