koyasan

Read Demark and Jason Perl and always have Demark sequential on the chart. My problem is simple...........quite often Demark (maybe 50%) nails the market turn on the Sequential 8/9 but I've yet to find a filter that identifies the failed turns and puts the odds more in my favour. Would welcome suggestions from anyone who has maybe discovered something I have missed.

Rande....I find it hard to agree with what you say but you challenge and help clarify my thinking, a very big thank you. A few comments I would like to make: It seems that the basic premise of your argument is that as traders we have to overcome the evolutionary biological bias of our brain, which predisposes us to seek certainty and avoid uncertainty. I’m not so certain this is the case. I would have thought that our evolutionary bias is to manage uncertainty and find ways to minimize the risk inherent in not knowing the outcome of an event. Primitive man would be well aware that not all hunting expeditions would be successful but if tactics and weapons could be improved upon then the success rate would increase. Trial and error, creative thinking and perhaps even random events could all be used to manage uncertainty. The future by definition is unknown and therefore uncertain and I believe that as humans we have evolved to live with this uncertainty without becoming paralyzed by it. Uncertainty has not stopped us from exploring our planet and beyond and uncertainty does not prevent us from getting on a plane or going about our daily business. Control is not as you suggest an illusion but something we all seek in the knowledge that only absolute control is usually unattainable. King Canute could not control the tide but we have learned how to harness its energy to generate power. I can have absolute control over how I bake a cake but I cannot control whether you will enjoy the taste. I don’t know when or how I am going to die but I can at least control some of the factors that will help me live such as food and exercise and general lifestyle. When I drive my car I don’t know if some other driver will crash into me but I can control how I drive. I am not seeking certainty otherwise I would never drive again, I am actively managing whilst at the same time accepting uncertainty. I am seeking to control the factors, which are in my power to control. When I started trading I think it was a natural process to discover the extent of what I could control. I wish I could control everything and the search for the magical indicator which removes uncertainty is a legitimate one. I am an intelligent human being and just because no one else has discovered (or maybe disclosed) the Holy Grail does not prevent me from trying to find this out for myself. My search for the Holy Grail in trading is what I am wired to do in the same way as a scientist searches for a cure for cancer or an astronomer searches for life beyond earth. The search may not be successful but the process of searching is never futile. As a trader the search for the magic indicator helps me to discover what I can control (money management, setup recognition, entry and to some extent exits) and what I cannot control (outcome of any single trade, slippage, black swan events etc). The learning has helped me to define uncertainty and to manage it. My search for certainty is not driven by fear but rather a passion not to put limits upon what is achievable. This brings me to a more fundamental difference of opinion. In your article you have a view of the human brain as something which needs reprogramming. You state that “we cannot discern the difference between biological threat to the continuance of life and psychological discomfort”, we need courage to make internal shifts to our ‘fundamental biological and psychological bias’ and we have to recognize the fallacy of our ‘pattern recognition’ brains which thinks random solutions have wider significance. You believe that our minds ‘cannot separate uncertainty, ambiguity, confusion, and fear from one another’ and ‘probability-thinking and perception does not come naturally’. It’s a dismal and depressing view of mankind in general and traders in particular. Given where we have come from as a species it might explain our atrocities and mistakes but does nothing to explain our successes. And where does our salvation come from? No less a source than psychology whose proponents must have already done battle with our evolutionary demons and have at least discovered the Holy Grail of behavioral reengineering. As a trader you give me no credit for my evolutionary bias to survive, succeed, prosper, be creative, resourceful, determined, focused, to learn from mistakes and ultimately to trade with uncertainty and without fear. As a final thought how exactly would you help ‘John’ become a successful trader?

'Archetypal language' may be a new idea for many traders but we are all familiar with strugggling with our demons (fear,greed,self worth,doubt etc) and we need all the help we can get to develope our 'inherent talents'. Personally I like variety in my "food for thought" so I look forward to your next offering.

A couple of points. In the context of managing fear I think there first needs to be a assessment of whether the fear is a response to a real or perceived threat. Two simple examples: Trader A.. Well capitalised account, proven plan, consistent track record but is now paralysed by fear of going bust Trader B, Under capitalised account, ad hoc plan and inconsistent track record and is now paralysed by fear of going bust. Trader A might well benefit from emotional state management from a perceived threat while Trader B needs to recognise the fear as a response to a real threat and act accordingly. I also think that as a Trader I am faced with some unique challenges which leaves me vulnerable to being adversly affected by fear. If I underperform as a Trader I may not be able to pay my bills, support my family and even go bankrupt or worst still have to admit my failure and try and get a 'real job'. As a Trader I work alone and work without the everyday contact/support of colleagues. As a Trader it is a stretch of the imagination to argue there is any direct social benefit unless of course I make enough money to support a social cause. So as Trader I have to battle alone with the fear that failure comes at a high cost. Of course I would argue that I battle successfully but what we mean by 'emotional state management' is hopefully the topic of a future article. This brings me to my last point and it is a general criticism of psychology articles (not personal to Rande). Like sales pitches for the 'latest and best trading system' they are good at identifying a condition, highlighting a need,describing a symptom but fall short on solutions. For solutions , just like the 'latest and best trading system' we must 'sign up' and part with real or yet to be realised trading profits. Of course if we don't we then have to manage the fear that we could be missing out on the key to success.

I think we are actually saying the same thing except we might differ on what comes first. My view is that you can learn the skills set to manage uncertainty and that the demonstated evidence (being profitable) will change the core beliefs you may have had about uncertainty. This is essentially a dynamic process and contains a positive feedback loop. Let's say a child wants to learn how to swim but may understandably have a fear of sinking or not being able to float on the water or depending on age may have a real concept of drowning. There is an issue of how to manage the uncertainty of what will happen when the child lifts it's feet off the bottom of a pool.....will it sink or float? Given the right coaching the child can learn what it takes to swim and then it's core beliefs about water will change.Nothing will change unless the child gets into the water and learns a new behavior. Behavior and the new experience alters beliefs.I will accept that in the process of learning to swim the child needs help on how to manage uncertainty and this comes in the form of support and encouragement and instilling confidence from the parent/instructor. Of course this leads back to the issue (this is off topic) of whether or not you can split the mental coaching from the technical and given the growth of sports psychology it seems you can. When it comes to trading I think most newbies are like amateur swimmers.....teach me how to float first (the technical side) and only when I turn professional do I need or indeed can afford the mental coaching.

Just maybe the fear is more recent than our evolutionary past and has more to do with an ever decreasing capital account. Try telling a gambler he has to face the fear and keep betting. I suspect that for many traders trading is akin to gambling and the result is consistently finding themselves on the wrong side. Fear can be controlled, not by some positive thinking or self talk but by the confidence that comes with skills, knowledge and experience and seeing the evidence in an ever increasing capital account.

I suppose for any observation to acquire meaning in the context of trading it has to be shown to make money or at least preserve capital and it has to do so in a consistent and repeatable way. The closing price of any single bar may in itself not be that significant though I do remember reading Linda Bradford Raschke that if a daily close was in the top 25% range of the day then a follow through was statistically more likely the next morning and vice versa for close near the bottom. Tom Demark has looked at the significant of closes in relation to previous bars and would argue that there are patterns which are consistent and reliable enough to make money even down to a 1 min timeframe. A quick example of this would be if the close of the present bar is greater than the close of the fourth bar previous then the price has flipped and the odds favour a change of direction. (in Metastock code C > Ref(C,-4))) If you start from the belief that Technical Analysis has meaning (as opposed to belief in a purely random market) then the use of any phenomenon which can be backtested and shown to have reliable and consistent results has meaning. In this context the H,O,L,C all have the potential be full of meaning...........if as traders we are creative enough to find a way to use them profitably.

This is what works for me........a clear typed trading plan which defines set up,trigger,entry,stop loss, profit target. My plan has 7 steps only and each step is described in max of 8 words so my plan is very specific and easy to follow. I use 2 indicators only (TSI and a Vol Indicator I have developed) and I trade Aud Futures on 15 min time frame. The system must be profitable in backtesting and show acceptable drawdown and risk reward.....my system in an average week consistently shows profit of 125/250 pips with maximum drawdown of 7% and risk/reward average of 1:3 , number of trades approx 5 to 10 (yes for most of the time I am on the sidelines) and number of winning trades usually between 56% to 80% (in other words with proper money management my system has an edge). I do look at larger timeframes just to have an overal picture but I trade on one time frame only without reference to other currencies. It has taken me 3 years to get to this point where I have distilled all my technical knowledge into a concise strategy that actually works. Technically my system is very complex but more importantly it is robust and easy to use and I think that is what you should aim for. Ask yourself this....Could you teach someone how to trade your system in less than an hour?.....until you can answer yes it's back to the drawing board.. Hope this helps..sounds like you have done all the hard work already......good luck.