Archive for: April 2007

The hypotheses are as follow:

I. Exchange of market related information. (Learning?)
- Is a community where posters choose to come and go. Psychological ideas, techniques of relevancies, and student/teacher style advice are some of them.
- Looking for latest trader thoughts, insights, spontaneously mind meld, expect the unexpected thread. It’s like turning on TV flipping all channels until something catch your eyes.
- I am there to read mostly, but trading is a lonely business, so it’s good to interact with traders. It’s also nice to be able to help when I can and to be helped.

II. Place to meet people from same “category” trying to solve same situations.
- For a solitary trader: Reading the forums and sometimes contributing to them makes me current and I feel I am a member of a community. During the last 5 years, I mostly read market related forums for entertainment value, not the arguments and nonsense, but because no one else I know outside of computer-platform has a clue about trading. And forums is addictive for some reason. Also an excuse not to work, i guess.
Personal broker, software, data reviews, psychology, individual triumphs and failures, etc. Where else would you find info like that? A lot of people seem to be frustrated about not being able to quickly find an easy and profitable system, so they can make money right now. I think that they should ease up on finding answers from someone else and get to work.

III. Entertainment purposes.
- Is a place to hang out with like kind. This is the closest to a 24 hrs coffeeshop/bar/restaurant gathering of fellow peers I’ll ever approach.
- I few things of character I learn there are that many feel they are in a dueling competition and feel the need to compete by trying to discredit others, some like to bash stupid questions, and some have an overall negativity. I read these for entertainment as well as to give myself an idea of all the walks of life. Allowing me to choose who to be a role model, who I feel sorry for, learning how I want my character as a trader to be.
- There are so many posters that actually live out their trader fantasies. There’s a psychology dissertation somewhere amongst all their posts. The great thing about the Internet, anyone can be anything at anytime even with markets related themes.

Independent minded trader

Independence of your mind is essential for trading success.
Why you have to be independent? If you`re not independent on your thoughts you`ll feel yourself uncomfortable without approval of your actions, support and confirmation or even disapproval from somebody else. Markets won`t always provide you with confirmation for your decisions. It is difficult to trade in the short term if you wait for confirmation and require a sense of certainty. If you wait for a classic chart pattern to materialize completely, for example, you may be too late. Staying ahead of the masses requires you to think independently. Let’s suppose that you wait for a head and shoulders pattern to develop. It may take some time, and, most of the cases you`ll be late - you may end up selling as everyone else is also trying to sell. There are times when it is vital to anticipate the crowd and try to stay ahead of them.
Today i started buying USD/GBP, got stopped, noticed today is a USD day, went short, closed the position on small profit for today, knowing this pair have 90% probability to hit 1.9912 today. Fear of a trending up of the price won a battle to my independent mind. Fear + the point to not overtrade + something else.
I`m not sad as long as:
1. Good stop placed for first position (USD/GBP long).
2. Without any doubts shorted this pair later according to the plan.
3. Market followed its way and i was there.
4. Closed second position on good profit for today.
5. The price dropped 90 pips more without me, again i`m not sad here ;-).

Conclusion: Independent mind + good entries (long and then short) - fear - patience.

A Trader and his money
This is hurdle most everyone goes through in their evolution in their money management.
Why is it hard to take a loss?
The loss is not anticipated, and comes as a total surprise, and shakes the mental foundations and confidence, the loss on average is much larger then the minute to minute fluctuations. Thus when trading, the trader feels it would be prudent to wait for it to retrace a little before registering loss.
Why is it hard to let a win run?
The ability to register a win in a account even though small, induces a sense of overconfidence in the trader, so the trader registers small wins instead of letting it run. The win is not anticipated either similar to a loss, so the surprise reward makes one want to push the button earlier.
Why is hard to buy or sell something on breakout?
Where the price is much higher then what it was or where the price is much lower then where it was.
What causes fear and greed in the marketplace?
Remember remedial work or corrections in junior school ? Go to Staples/ WHSmith get yourself a ruled A4 notebook and write the following throughout the whole book: “…My analysis, perceptions, beliefs and decisions on past,current and future market price action may be wrong at times…” When your hand starts to ache do 20 more pages, I did the same for stoplosses and changed immediately or I was faced with the prospect of writing out again
Why do people register small wins and large losses?
Why do people try to pick tops and bottoms? Do tops and bottoms have a better risk/reward profile?
People are anticipating accelerated price change counter trend. Tops and bottoms are only retrospective. And they do offer a better risk/reward because of the accelerated price change, but its post print. The risk/reward is higher when anticipating a top or bottom before it actually prints. The risk is less after it prints.
Why do people over-leverage their account?
They treat their grubstake like a lottery ticket. The gambling/probability based trading approach is a tough situation to begin with. Once it becomes a belief system it affects everything psychologically and physiologically. The main effort of newbies is learning failure and it is a tough experience until most of them fail completely as a result of their choice of learning approaches.

…The end of the week.
52 pips profit for this week. Compared with 20 and 15 from previous 2 weeks this is way better…

Few short notices bellow from last week.
- You don`t do entry or exit trading. You trade.
- There`s about 90-120 bars a day on a five minute chart, or more. Or less. As I see the bars I am in the market.
- Think for a moment and visualize a guy in the market all day long.
- The purpose is to be holding a position as price is changing its way. Not yours.
- So I hold as price changes and try make money all day long.
- Have you ever seen a reversal @ market? Yes you have but you did not recognize it. Look at the MODE of the market: continue or change. All day long it is usually continue as price changes. Sometimes it is “change” when price stops changing. If price stops changing it is time for me to get on the other side of the market?
- I see an entry and an exit as the identically same thing. I always do an exit and entry at the same time; it is called a reversal.
- If price is not moving I am not making any money. Then I have to leave the market because the only thing in the market then is the RISK of my being on the wrong side of the market if price begins to move again. You buy and you sell or you sell and you buy.
- Most of the time you are out of the market when price is moving.
What is your role?

- A person only has to stay on the right side of the market all day long to make money all day long.
- People are losing when they are in the market.
Why is this?
It is because they do not see the markets and they follow the conventional orthodoxy. That is just the way it is and will be for most people.

- Every day before start of trading i was telling myself: “think about you and the market. Today you could lose. But this is normal.”

- The market won`t say, “Go long here!” or “Short the hell out of that over there!” The market simply provides the trader with signals for continuation or change. Once one has the ability to distinguish and differentiate between the two, nothing else more is needed.

…the Friday, 13th is in the past. It was profitable for me because i did non-traditional action? ;-).

“Top professional traders understand how to read the interrelationship between volume and price action. They also understand human psychology. They know that most traders are controlled in varying degrees by the TWO FEARS: the fear of missing out and the fear of losses”. Tom Williams, Master The Markets, p. 47.

Greatest fear in the market is that of missing a move. I just can’t stand the thought of missing “the big one.”

Let`s turn around. Why people tend to buy at tops and bottoms?
I think the buying is not causing prices to rise, but rising prices causes buying.
Price rise. The trader fear missing out so he wants jump aboard. After jump on board - the price turns around.
If you can read price and volume, you can see these games as they are being played. Not everybody can. That is a fact the Professionals count on and knows about your fear(s).

Learning prices and volumes indicators is possible, but not enough.
Overcoming the fear of missing a move, however, means looking into the deep dark places inside and, possible, meet there another bigger one fears. Everybody tried to look there, conscious or unconscious, awake or, more probable, asleep. After such experience everybody`s conscious will do his “best” to avoid such interventions.

Back to this fear.
The best way to handle that kind of fear is walk away from the environment causing this fear, but not from the fear. Get up, walk away from the computer, news you may be watching, bed, or something else. Remove yourself from whatever it is that triggered the fear. Do anything that will take you out of the fear/panic mode and walk, trying to analyze the source of this fear.
Don’t sit down to trade again, and don’t return to the markets until you have managed to achieve some emotional control over your fear/panic reaction.
Don`t trade again until you find 1-2-3 conclusions about the causes of your fear. How to know these conclusions are right ones or you`re in a correct direction/s? I couldn’t`t say you how long will last for you, which thought you`ll have and how right will be it collated to you, and it is not as important at the start. Most important is the start. Once you achieved to a certain point toward the source of your fear, you`ll start/want to think about something else immediately. Don`t miss this point, don`t lose your concentration, and force yourself, your mind to work here. “Working” in this grey area with your thoughts at some point you`ll feel 1-2-3 conclusions/thoughts regarding the origins of your fear that will cause a strange status of the mind. For me this feeling is a different one from the ecstasy, a feeling like rapture, like sunset or sunrise seen from the peak of a mount, escorted with a cool breeze. Last 33 years I never tried these feelings except 1-1,5 when using self analysis…

I don`t know if i`ll be very successful in trading, what I know for sure is that markets forced me to start looking to my external problems into my unconscious, finding there something that leads me onward. To become better from this point is not that hard as I used to think.