Tradewinds

What is going to give any of us the Edge? Cause and Effect Statistical Analysis Cause and Affect - Can you determine a cause for what the price did? Statistical Analysis - Under certain situations, does price behave a certain way more often than not? Then there needs to be a test. You can run the test by practice trading. There are endless theories about why the market does what it does. Some of it is tested, much of it isn't. If 95% percent of traders loose money in the market, then you need a grade on the test of A or A+ in order to make money. Or you could think of it as a 3.8 to 4.0 GPA score. Unless any of us are performing at that level, you will loose money, guaranteed.

Don't spend money before you've earned it. Reward yourself when you have done well. The way you run your personal finances will influence how you take distributions from your trading account. To put yourself into the right frame of mind, do something like buy a good life insurance policy. Put some of your trading profits into a retirement account, but if you feel the need to choose between a retirement account, and life insurance, the estate tax benefits of the life insurance, make it a much better choice. The question of how much of a distribution to take, and what you want for capital should be quite easy to calculate, based on your historical rate of return, and what your goal for capital is. Decide what your goal for capital is, and when you want to achieve that, then do the math.

Our brains are wired to seek certainty. Uncertainty can cause the brain to go into an automatic avoidance response. A shot of adrenaline hits your heart faster than you can blink an eye. This is a pre-wired biological response, it's not based on a rational assessment of risk management. The brain couldn't care less about risk management. The brain, in many people, wants zero risk. I like to think of this process as a software program running in my brain. And it was "factory installed". :rofl: When I think of this automatic biological response as a program, I am able to detach myself, and think of it in a very mechanical and technical way. So when you write of desensitization, this is what I think of. It's "not personal", it's that pesky program trying to run. I think of it as "Spam" that I can add a filter for. Hit the delete button to stop it from running. Of course, we should all be comfortable with our trading rules. If our trading rules are very precise, and leave little room for user discretion, it becomes more mechanical.

I tend to think of scalping as taking profit on every new price level move, whatever the price move may be. Either that, or waiting to take profit until I expect some retracement. Basically, I think of scalping as taking profit before the price has a chance to retrace or reverse. In other words, locking in profit. I don't think of scalping as any particular price move. I think of it as simply price cycling back and forth. And the price cycle is shown by my indicators.

It's possible to make money, then after we made money, really have no conscious understanding of why it worked. The market may have been choppy, and we were in a contrary mood to do the opposite of whatever the market was doing. You can make money that way. But that would have been a combination of the traders mood matching market conditions. So, as you state, there would have been a positive outcome for uncontrolled, moody and contrarian trading that day. The negative behavior gets rewarded. You feel good, the brain gets wired to do it some more.

Just trying to generate some controversy and traffic for Traders Laboratory. :rofl:

The worst thing you can do is to try to make money trading. You will loose. Try to follow your trading plan. If your trading plan is profitable, and you follow it, you will make money. Here are 4 possibilities: Trading Plan Profitable, You Don't Follow It Trading Plan Profitable, You Do Follow It Trading Plan Not Profitable, You Don't Follow It Trading Plan Not Profitable, You Do Follow It If your trading plan is profitable, and you don't follow it, you will probably loose money. If your trading plan is not profitable, and you don't follow it, you won't know whether it's your trading plan, or it was your fault. If your trading plan is not profitable, and you do follow it, then you will know for certain, that your trading plan is at fault. The only usable results come from the two options when you do follow your trading plan. The best result is that your plan is profitable, you follow it, and you make money. The second best result is when your trading plan is not profitable, and you follow it. Then you know for sure, that it's the plan, and not you. If you don't follow the plan, then you know nothing except that you can't follow a plan.

Are you saying that I shouldn't be posting this? I'm not looking for confirmation from anyone. Part of my reason for posting it was to throw an idea "out there". I see fear as real. I would say that a large amount of fear is nothing but damaging and serves no positive purpose. Fear shoots adrenaline into the body, makes your heart pound, and diverts glucose to the muscles instead of the brain. Fear makes it more difficult to think well. So for tasks that need calm thinking, fear is counter-productive. In trading, fear is probably at least 98% destructive. There might be some benefit to fear in trading. I'm not saying that fear has no benefit at all in trading, but if I'm loosing money I don't need fear to motivate me to to do something.

Whether fear is real, not real, imagined or not, is almost immaterial. Your cash balance at the end of the day doesn't care; the market doesn't care. In some ways, I would tend to believe that fear in trading is not "real". But it all depends on how you define fear. If fear is defined as your body being in danger of being fatally wounded, then the market is incapable of creating fear. Yes, that's what I'm saying. From that perspective, the fear you or I feel while trading is not real. It is just one big lie that has been perpetrated by our confused brain.

I have a part of myself that wants to save the world. And I think that many people genuinely want to help others. But that whole issue gets very convoluted and messy. If I sold a good system just because am full of love and goodwill for the planet, it might get into the wrong hands, and be used by evil people. So that wouldn't work very well. If I did come up with some great trading system, I'd be better off just programing a bot to trade it, and hire people to monitor it. If I came up with a mediocre system with slightly better than normal returns, then it would make sense to sell it, take people's money from selling it, and hope that it turned into a "self-fulfilling prophesy".

This is the classic example of the two extremes of fear and impulsiveness. Both those extremes are bad. A trader needs to be impartial, not cold, . . . impartial. Also, calm and decisive. Traders trade their psychology. Whatever their psychology is, that is what they trade. When it comes to a person's psychology, the assumption is, that you get what you get, and there is nothing you can do about it. When it comes to knowledge or technical ability, the assumptions are often different. Facts can be memorized; and practice and experience can increase proficiency. Good attitudes, hard work and motivation can increase productivity. Many businesses send employees to courses like Dale Carnegie, or train people in business decision making models. In trading, it is almost impossible to practice avoidance, or push problems to the back of the mind and not have that effect your performance. But this aspect of trading is often ignored.

The book describes a calm, confident, impartial, and courageous state to trade from. This is the objective for the trader to achieve. One way to move towards this state, is to allow ourselves to take a look at the things that often get pushed to the back of our minds. This process takes effort and willingness. I would say that the effort and willingness to face these uncomfortable inner issues can only come from an adult, responsible action.

Everyone is prone to self criticism. This internal criticism can go mostly unnoticed by our conscious mind. Inner criticism limits our potential. It's important to be aware of and test our inner criticism. One characteristic of destructive criticism is that it makes global assessments with little or no evidence to support the bias. Something I learned from the book.

People can also choose to be aware of the influences that affect how and why they act in a specific way. There is indeed, random outcomes, and non-random outcomes. Most people are totally at the mercy of randomness. But it goes even deeper than that. Most people don't even know that they don't know anything. We first need to become aware that we are constantly being influenced by randomness. If a person does not know or believe that they are being influenced by randomness, then it's unlikely that they will do anything about it. The book, Mindful Trading, teaches that we are limited by this randomness, and that we can become mindful of that randomness, in order to achieve a "non-random" outcome. This randomness takes the form of thoughts going through our head that we are really not aware of. Once we become aware of these random thoughts, and are able to objectively filter and process them, we can then work towards regulating this randomness. You state that it took years for you to realize something. In "mindfullness", the person learns to be aware of, filter and test random thoughts in "real time" with some simple questions. This personal discipline helps us to discover things in a very short span of time.

This interaction between you and I is an example of emotions triggering an automatic response. That is what is happening here. Emotional triggers illicit an automatic response that shuts down the ability of the cerebral cortex to think. The emotional brain takes control. The higher level brain shuts down, and the lower level brain takes over. Most people have no control over this automatic, pre-programed behavior. They can't control themselves, and they are powerless to do anything about it. They allow the faulty program to dictate their behavior. This is something that I have learned from the book, Mindful Trading. Even though being accused of being paranoid makes me want to attack back, I am aware of how I can be sucked into this automatic behavior, and I'm focusing on the effort of being impartial. This is the kind of behavior that a trader needs to make accurate decisions in the market. This is an excellent example of what the book Mindful Trading teaches, and illustrates how we can modify and guide our behavior. Right now you would be "revenge trading", while I would simply be managing risk.

Steve, when I provide my opinions and thoughts, I try to do so in a neutral way, and not make it personal. But at this point, you have intentionally made it a point to initiate taking it to the subtle insult level, by stating that "I just don't get it". Writing something like, "I don't seem to get it", is pathetically petty. That's the real point here. On one hand, you are telling me, that if it works for me, then fine, you are happy for me, and why don't I just shut up and go away. That's your mentality. But you won't live by the same standard. If you don't like it, they why don't you just keep quite and go away? You are telling me to do something that you refuse to do. I didn't initiate making this issue personal. It seems like your mentality is; that it's okay for you to make your subtly insulting innuendos, but I should just keep quite and go away. If you want to cross the gentleman's name off your list, then cross it off your list. Do you understand my point? You are telling me that if it's of some value to me, that your happy for me, and good luck. If I value this thread, then why would I just go away? That doesn't make any sense. Maybe I'm wrong, but your wishes of "Good Luck" at the end of your posts seem arrogantly sarcastic.

Yah, probably. I guess there is a distinction to be made between the two. There could be low volatility, and sideways or very little range, or there could be low volatility, and the price goes way up all day long. Those would be two totally different situations.

In trying to determine what is really going on. It's important to define the standards. Let's define what religious mumbo jumbo is, and then both agree to adhere to the same standard. Typically what happens, is that people make statements, and then are not willing to have the standard apply to themselves. Talking about a belief system doesn't make it religion. Religion is about supernatural powers. E.g. God. Religion is a subcategory of a belief system. I'm not talking about a supernatural belief system. So it's not religion. If you are talking about what I put my faith in, then you could correctly state that I'm putting my faith into what Rande is teaching, and in that sense, it has similarities to religion. But you put faith into your perspective. And it seems that you are just as passionate about your perspective. It seems like you are saying that it's okay for you to have a perspective that you put faith into, and are passionate about, but if I do the same thing, that I'm a cult following person spewing religious mumbo jumbo, but you aren't. It seems like you feel the need to resort to petty insults. This is the perfect example of how the emotional part of the brain has dominance over the higher thinking part of the brain. If you felt secure and safe, the dominant emotional part of the brain would not have "kicked in". So when you resort to accusing me of being a cult follower spewing religious mumbo jumbo, you have no control over yourself. You are at the mercy of the emotional part of your brain. This is the exact situation that needs to be avoided in trading. The higher thinking mind can be highjacked by the 'flight or fight' response of the brain. In this case, you have the urge to attack. So you are letting the little "pea brain" part of your mind control you.

When I talk about "speed" of the price move in this context, I'm not really talking about volatility. Even in a low volatility market, I believe that, relatively speaking, when price decides to go to the next level that it is going to, that it moves relatively faster than when it's paused at the established level. I'll use an uptrend as an example. The price behavior that I see, is that when price decides to go higher, the price surges up, defines the new high, then almost immediately retraces a little. The market tells you where it is going before it goes there. The market shows you how high or low it's willing to go before it breaks that level. So the price will surge up, just for a very short while, show you where the next high target is, then go back.

Definitely. Either high or low volatility both offer opportunities. Something that I believe, is that a volatile market still trends. Before I had a basis for recognizing a trend, I would look at a volatile market and think that there was no trend. A trend is much, much easier to recognize in a nice, smooth, low volatility market. But now I can recognize what the trend is in a high volatility market. In a high volatility market, the trader must deal with the possibility of much, much larger draw downs and retracements. In a highly volatile market, those larger draw downs and retracements could be misunderstood as a trend reversal, when they are really just a blip. Let's say the price moved by 10x in a low volatility market. That would probably be a reversal. But if price moved by 10x in a high volatility market, it could just be a little blip (in relative terms) on the way to wherever the trend is going to continue to. It's all relative.

I am reading Rande's book, and becoming aware of thoughts and behaviors that I previously didn't consciously realize. The most recent revelation is that I have been seeking certainty from the market, which is a very random and uncertain place. To seek certainty from something like the market, puts me at an automatic disadvantage. It creates the exact opposite perspective that I need to have. Even though I "know" that I can only receive what the market is willing to give me, I tended to view that only in terms of price action, and not feelings and thoughts that can trigger while I'm trading. I look for certainty in terms of taking profit to early, or wanting to win 90% of my trades. In my quest for certainty from the market, I sacrifice opportunity to a desire for feeling safety. Now I am at least knowledgeable of what I mindlessly do. From this new realization I can work on recognizing my impulses to seek safety and remind myself that seeking safety might be sacrificing opportunity IF I am contradicting my trading plan.

I don't understand what you are saying. I agree that entering during low volatility in anticipation of an expanse can be an excellent opportunity. That is, if there is something to base the future direction on. The issue I have with low volatility, is that I personally have a more difficult time judging what direction the price is going to expand to. During low volatility the trend signals are very, very faint. They are there, but small. It's probably just a matter of zooming in, or looking at the longer time frame trends. It does seem like periods of low volatility are more likely to be a major reversal point.

Yes, so true. I don't need to be in first place, or even in 50th place. As long as I'm making more money than I could in the working world, then I'm doing just fine. That is an attitude that I need to work on.

I think I understand what you are saying. When I say, "It will become automatic", it becomes something external, something outside of myself. If my confidence builds, then it is something at the core of my being, not dependent upon anything outside of myself.

Let's say, hypothetically, that I decided to give up and abandon trading right this second. The things that I have learned about myself from trading, will stay with me for the rest of my life. The things that I have learned from Rande will be a part of me for the rest of my life. I don't see any downside to what I've learned from Rande by reading his posts, and reading his book. At least for me, there is no negative side to reading Rande's information. I can apply the knowledge and understanding I've gained to any aspect of my life that requires it. If a person is very secure in their belief system, then they don't need to feel threatened or be upset if someone disagrees with them. In the past, when I have had discussions with people, and I found myself getting upset because I couldn't convince someone to believe what I believe, at some point, I asked myself, "Why am I so upset that they don't believe what I believe?" If I really do believe what I say I believe, then I will be 100% secure, and have no worry or concern about what anyone else says or believes. On the surface, one argument against what Rande is teaching, seems to be a concern that it will keep incompetent traders trading until they completely destroy themselves. But the crazy irony here, is that the people who seem to be the most aggravated by what Rande is teaching, have adopted a belief system of "dog eat dog", "eat what you kill", "I'm going to take every penny you have" mentality. And it seems to me, like you guys feel that your belief system is being threatened. When somebody's belief system is threatened, it threatens the very foundation that their whole world is built on. That's what I think is going on here.