thetradingdoctor

The new issue of Porfolio has some great pictures of trading floors around the world: Full article: http://tinyurl.com/2j98de Interactive Gallery: http://www.portfolio.com/infographics/2007/09/stock_exchange Shorcuts to photos: CBOT http://tinyurl.com/2b55vb CME http://tinyurl.com/ywz752 NYSE http://tinyurl.com/2vtyek Nepal Stock Exchange http://tinyurl.com/2yp5bl Nairobi Stock Exchange http://tinyurl.com/2kwpwz Dubai Stock Exchange http://tinyurl.com/2lece2 BM&F Sao Paulo http://tinyurl.com/33ksud Tehran Stock Exchange http://tinyurl.com/2qfaqz Kuwait Stock Exchange http://tinyurl.com/3cy296 Hong Kong Stock Exchange http://tinyurl.com/32vwp4 Thanks! Doctor Janice

Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices. The exchange will stop prohibiting brokerages from entering some program trades when the NYSE Composite Index rises or falls more than 2 percent, according to a notice sent to member firms today. The so-called collars had been in effect since 1988 and were triggered 17 times this year, according to a filing with the Securities and Exchange Commission. ``Volatility is neither restrained nor enhanced by the imposition of the collars,'' the NYSE said in the SEC filing making the changes effective. ``The exchange is making this change since it does not appear that the approach of market volatility envisioned by the use of these collars is as meaningful today as when the rule was formalized in the late 1980s.'' The curbs applied only to some index arbitrage trades on stocks in the Standard & Poor's 500 Index executed at the Big Board. Brokerages weren't barred from turning to rival exchanges to complete those trades. Increased electronic trading has also made arbitrage strategies a smaller piece of daily equity trading, the NYSE said in the filing. Index arbitrage strategies accounted for about 4.6 percent of the total shares bought or sold at the NYSE, according to data on its Web site. The Dow Jones Industrial Average fell 22.6 percent on Oct. 19, 1987, its steepest one-day decline ever, according to the Stock Trader's Almanac. At the time, some analysts and regulators said index arbitrage trades handled electronically contributed to the drop. During the final half-hour of trading, index arbitrage strategies accounted for about 3.2 percent of trading at the NYSE, according to the presidential report on the 1987 crash. Program trading represented a total of about 12.2 percent. Brokerages will still be required to report program trades, defined by the NYSE as the purchase or sale of a basket of at least 15 stocks valued at a minimum of $1 mill http://quote.bloomberg.com/apps/news?pid=20601087&sid=ahZh1lKYXD8w Thanks! Doctor Janice

Hi brownsfan019. I am unable to get to the link you posted. Please either repost on this forum or write to me directly: janice@thetradingdoctor.com. I will do what I can to help you. Thanks! Doctor Janice

Hi All, Between now and the end of December, I am either preparing for travel or on and off airplanes. I will do everything possible to check in with you will I am gone. If not, please know that you are in my thoughts and I will return! Thanks to everyone for the wonderful posts and interaction! Thanks! Doctor Janice

Absolutely agree with what you say, Pyenner. The challenge for many is what is reality. There is so much self-delusion going on--well that is a big of an exaggeration as delusion is a form of psychosis. Let's put it this way: People see what they want to see. They believe what they want to believe.Reality is not the same from person to person. That is the reason for looking at the one technical indicator that does not lie. OK. Sometimes there are bad prints! However, the one technical indicator that does not lie is price. Now if you see a print of 20 and I see a print of 20, how many others are seeing that same print? Tons. Yet, there are those who will question that constantly--it can't be right, the market is wrong, this is a temporary thing, I know better, etc. Denial is more than just a river in Egypt! Look at some of the famous permabears that have been wrong about the direction of the markets for years. Yet they persist. WHY? Do they see a different price from the rest of the people that see 20? Why do permabears persist? Why do permabulls persist? Why is Cramer so popular? What is this all about? Re: doing battle with the markets, this is a semantic issue. Anyone who sets out to attack the market better have huge pockets. The idea here is that trading is a battle. We are trading the markets. That means we are trading other tradings. We are buying and selling risk and trading our beliefs against the beliefs of other traders. Fighting the markets is futile. Why? Because the markets are always right---EXCEPT at two significant times. THe greatest battle is not with the markets but with oneself. Turn down the noise, shut off the phones, seal your room, and just be with yourself and your position. You always have such great stuff to say PYenner and thank you! Doctor Janice

I think the "simple but not easy" part is a bit hard to get a handle on. When I first started to trade ( way too many years ago!) I really thought it was simple. I made every possible mistake that a trader can make. One of them was listening to other people. I thought that these big name "gurus" knew so much! They were self-assured, on TV!! (now I know about CNBC and infotainment and please stay tuned for FOX Business Channel--as if we don't already have enough noise during the trading day!!) and they were promoting hundreds and thousands of percent profit gains, etc. I knew absolutely nothing. Even today, I am not really sure how much I know because I question my beliefs constantly. That said, I was lured into the markets thinking that I was smart, intelligent, educated and it would be really easy for me to do it. WRONG. Massively wrong. It became very easy for me to lose money, and I proceeded to do that almost continuously for three years. I had two doctorates and I was losing money in the markets. Then, I got my third-- a Ph.D. in losses. It was only when I became sick and tired of beating myself over the head and losing money that I knew I had to make a decision---go back to the drawing board ( little did I realilze that I hadn't really gone there in the first place and was basically shooting from the hip!) or quit. I had enough of self-pity, screaming in the car and whining about what a miserable failure I was. I took a couple of months off and made a trading plan and strategy. I started to keep a journal. I concentrated on one market only and still do that toay. I have a couple of indicators on my charts, but they are really almost bare. I found that simple was the answer to getting to easy. This is not rocket science. Far from it. Some of the highest paid traders in the world do not have a college education. They have experience with trading, many of them from the time they were teenagers. They are not intellectuals and they dont want to hear any intellectual talk. I have taken a massive amount of heat for the way I write. People tell me that no one understands me! People tell me I have to write for the "masses" because traders don't thinkand don't want to think. The other day, someone told me that unless I take my writing down to the level of "trailer park" no one is going to read it! Well, I have news for these people. I think traders are among the smartest people I know. I think that some the best minds in the world are in the financial markets. Just because someone does not go to college means nothing. What means something is absolute passion and dedication to what that person is doing. What means something in the markets is the ability to be profitable year after year through ever-changing cycles. Seriously, I want to continue this, but the moving emoticons on the page right now are distracting me enormously. You see, I am a trader and I don't like distraction when I am attempting to execute! So- I will write more later or tomorrow or next week. Meanwhile, let these emoticons go ahead and beat themselves over the head and look puzzled and stick their tongues out at me. Do I care about when people say or do? Do you? What is it that gets you out of bed every morning to do battle with the markets? Are you competing with others or are you competing with yourself? Where are you on the path to unconscious competence? Thanks! Doctor Janice

The last category is way cool because there are so few people that can trade AND teach. I am always looking for them, so please feel free to share names anyone that fits the category. Thanks and have a great weekend! Doctor Janice

Ask and ye shall receive, Walter! Article: So You Think You Can Trade? has been posted, thanks to James. Doctor Janice

So You Think You Can Trade? Janice Dorn, M.D., Ph.D. You can have anything you want if you want it desperately enough. You must want it with an exuberance that erupts through the skin and joins the energy that created the world… Martha Graham (1894-1991; fierce, innovative dancer and choreographer) OK. I fudged the title from the TV sensation du jour: So You Think You Can Dance? Having been a dancer since age 5, I actually thought I could dance! That was before I watched these amazing young dancers battling it out week after week; one by one, falling down, getting up, getting safe and getting booted. The field continues to narrow until, one day soon, the winner will be chosen. These people have talent, training and experience. So what separates the winners from the losers? Passion. Pure, unbridled passion. That is what separates the winners from the losers in dancing, life and trading. Why do so many people think they can do something with confidence, courage and competence when they cannot? The so-called overconfidence bias and other heuristic biases are topics for another day. Today, I would like to focus on the Learning Ladder of Trading. One day, you get up and realize that you are in a dead-end job, and just sick and tired of being sick and tired. Your buddy has been trading the markets for a few years and doing OK…not great...but getting by. Your buddy's buddy just set up a trading account, paid thousands for software, books and courses, but is not making any money. In fact, he has lost half of his initial stake. Yet, you hear others touting returns of 100-1000% gains a year, and the siren call of greed coupled with the idea that if they can do it, you can do it better, is too tempting to resist. I mean, how difficult can it be? You just buy the right books, get the best software, go to the right seminars, subscribe to the hottest newsletter, and--with the click, click of your mouse--buy low and sell high or buy high and sell higher or sell high and buy lower. No problem. Piece of cake. So, you announce to your family that you are going to quit your job, become a full time trader, monies will flow effortless into your account and everything is going to change. It all seems so easy, and the seminar people are doing it, so why can't you. You are just as intelligent as the next guy. This type of thinking borders the delusional. Just as one cannot wake up one day and announce that one, without any formal education training (including the school of hard knocks) is going to start practicing law or medicine, one does not become a proficient trader overnight. Get over yourself, because it just isn't going to happen. No matter how many bells, whistles, indicators, seminars and books with which you surround yourself, you have to pay your dues. You must learn that that piece of cake needs to be converted into humble pie, and that the most-successful traders got that way by first getting a Ph.D. in losses. Trading is simple, but it is not easy. Trading is a skill and an art that takes time, patience, perseverance and courage. Successful trading and investing are skills, which combine both art and science. In order to achieve and master these skills, one must progress on a path, which is mental, emotional, physical and spiritual. For many, this is the most difficult journey ever taken. Start where you are, and understand that it is about the process, that time takes time and that the rewards are worth it if you just keep going with passion. Without passion, why bother? There are no secrets to success. It is the result of preparation, hard work, and learning from failure…Colin L. Powell Every trader must climb the four rungs of the Ladder of Learning, and must do this one step at a time. You cannot skip a step, but if you let your guard down, do not continue to study and practice, you can and will fall down a step or two. What do I mean by the Ladder of Learning and the four steps? In this case (and putting other learning theories and the neuroanatomical bases for them aside for now) I am referring specifically to the four stages of trading competence: Somewhere in your make-up, there lies sleeping, the seed of achievement which, if aroused and put into action, would carry you to heights such as you may never have hoped to attain…Napoleon Hill (1) Unconscious Incompetence: You don't know that you don't know, and you don't know what you don't know, a.k.a. ignorance is bliss. At this stage of your trading, you are not aware of the existence of, or need for, specific trading skills. You don’t know what you don’t know, including that you have any deficiencies (since you don't know that there are any specific trading skills). Denial may come into play here as well, as you may think that such skills are unnecessary or not useful, and all you have to do is to subscribe to a service or hotline, or jump on the next "hot" pick and money will come rolling into your account. In order to move to the next stage, you most overcome your denial and become consciously aware of your incompetence. Without taking this next step, you will not progress and no new skill will be acquired. There will be no learning. The next step is: (2) Conscious Incompetence: You know that you don't know, but you are not entirely sure what you don't know. At this stage, you become aware that trading is a skill, which exists, which is practiced by many and is relevant to your success. You also become aware of your deficiencies in this area by attempting to trade or practicing how to trade. This is the stage in which you begin to figure out how much you don't know. Successful traders will, at some point during this stage of the learning process, make a commitment to learn. They will make a commitment to study, to be teachable and to practice, practice and practice until you know what you don’t know. Now, you are ready to progress to: (3) Conscious Competence: You know what you know, and you can trade, but you have to think about it. During this stage, the skill of trading can be performed reliably, consistently and at will. However, you have to concentrate a lot, and think a lot, in order to do it. It is not second nature, nor is it automatic. At this stage, you are open totally to more learning, but you are not able to teach anyone else how to do it. The only way to proceed from this stage to the final stage is to practice more and more until…eureka...one day you have reached the stage of: (4) Unconscious Competence: You know how to do it, and don't have to think about it. You just do it. At this stage, the act and process of trading consolidates within the memory and pattern recognition areas of your brain…it becomes second nature. If you are really good at it, you can trade and do other things at the same time (I do not recommend this, however). Certain people at this stage are capable of teaching others, but this is not universal. In fact, it may be more difficult to teach at this stage since the skill has become largely instinctual. It is at this stage when, if someone asks you how you knew to do that, you have to pause, think and say, "I don't really know. I just did it." This is trading mastery. There is another, final and rarely-discussed stage that is called Conscious Unconscious Competence. Those who have reached this stage are the best teachers, and they are rare and difficult to find. Find one of these people to guide and support you if you really want to learn how to trade. Champions execute the fundamentals with unconscious competence. That means they've practiced the moves so many times in the past that they can do them almost perfectly without thinking about it. When you can perform brilliantly without thinking, you can perform at a very high level…June Jones (Head Football Coach, University of Hawaii Warriors) Until next time, Good Trading and Brain On! Janice Dorn, M.D., Ph.D. Train Your Trading Brain http://www.thetradingdoctor.com

Good points, here brownsfan. What do we do when we trade? We look for patterns that repeat. Our edge is in pattern recognition and the disciplined execution of the trade. I am coming to believe that a large part of what is called "trading intuition" is built into the brain syanptic strategy that underlies the fourth of five stages of mastery. That stage is called "unconscious competence." I will send an article to James that describes the stages of competence ( in case anyone needs a refresher or reminder). Thanks for this post brownsfan and please let me hear from others? Thanks! Doctor Janice

This is a good point, brownsfan and it gets back to what we know about the stages of trading competence. If a trader is unconsciously competent, the trader "knows" what to look for and what to do. I heard a story once about a guy that used to come down to the exchange in the 1940's. He looked like a bum--unshaven, dirty, smelly. He walked into the exchange, put an empty coke bottle against his ear and placed a trade. He said he got the message from the coke bottle. His trades were amazing-- very profitable and the others sitting around the exchange tried to figure out how he did it. They never could. You are right about the masses, but it is important to understand that you are unique and your intuition might not be the same as that of someone else. Then...there is that famous dart board. What about that? Statistically speaking, stocks are not serially correlated. That means there is an equal chance for the stock to go down as there is for it to go up. Where is the real skill in trading? What is the real skill in trading? Is it the implicit knowledge that comes from seeing patterns over and over again and acting on them? Are there trading savants? Why do some people just seem to "get it?" while others struggle for years and years? Thanks! Doctor Janice

This is a very powerful and thoughtful post, Abe. The way the brain is constructed, there are two main pathways for processing decisions. One is rapid and emotional and is the limbic or rat brain. It is largely subsconscious and intuitive or instinctive. The other is the new brain--the cerebral cortex. This is analytic, non-emotional, logical and linear. The rat brain is a very fast processor and can completely take over the new brain-- especially in situations where one is bombarded with large amounts of conflicting information ( eg, during the trading day). Under these circumstances, the new brain "defaults" into the rat brain and the decision is made based on emotion. It is only later, perhaps in quiet, down time or in sleep when the new brain is has time to think about what the old brain has done without thinking. What do you think? Thanks! Doctor Janice

One idea about this is that the brain is freed from all sensory input during sleep. This allows time for the brain to process all the information that has come in during the day and the brain did not have the time or the ability to process. Freud was a pioneer in the study of sleep, but he did not know about the various stages and the EEG and REM sleep. Here is a short history of theories about dreams: I: Sigmund Freud theorized that dreams were vital keys to unlocking the mysteries of an individual's personality, motivations, and the overall psyche. He first used the term "interpretation" to refer to the unscrambling of dream content. II: In 1977, Alan Hobson and Robert McCarley published research which argued that dreams were random, meaningless activities carried out by the nerve cells in the sleeping brain. They called this theory Activation Synthesis Theory. However, a few years later Alan Hobson changed his mind and reported that it seems that dreams have important personal significance to the dreamer. Today, some psychologists believe that dreams are an Extension of Waking Life and that in our dreams we express our emotional concerns and most private thoughts. III: Dr. Stephen La Berge conducted extensive research on Lucid Dreaming and wrote popular books on the topic. Lucid Dreaming occurs only 1 to 2 percent of time during REM sleep. It is the type of dreaming in which an individual is aware that he or she is dreaming. Dr. LaBerge concluded that the purpose of this type of a dream is to make the dreamer aware of something important. With practice we can direct our lucid dreams and improve our ability to navigate through them. I do not know where you are in your spiritual practice, Walter, but have a look at this and let me know if it gives any insight. If it does not, I will take you in another direction. http://pune.sancharnet.in/nariphaltan/dreams.pdf Thanks! Doctor Janice

I will reply to Walter first and then to Abe sometime tomorrow. The reason for my quick reply to Walter is this: From a physiological standpoint, humans go into what is called Rapid Eye Movement ( REM) sleep. This occurs approximately every ninety minutes and is characterized by specific bodily activity, including but not limited to: rapid respiration, elevated heart rate, relaxation of the antigravity muscles, back and forth ( sacaddic) movements of the eyes , characteristic changes in the EEG brain waves and---dreaming. If you wake a person from this state of sleep, the person will tell you a dream. Also, most deaths from cardiac collapse occur in the early hours of the morning during a period of REM sleep ( this is because of the intense demands on the heart during this time). Walter, it is most likely that you were in REM sleep, i.e. dreaming, at the time you experienced these intuitions. Another, less possible explanation is that you were in a state of what is known as hypnopompic hallucination ( a semi-sleep that occurs shortly before awakening). I think the more likely situation is that you actually were dreaming, thus your intuitions ( that were then transferred onto the shower wall) came to you in a dream. What do you think about this, Walter? PLease let me hear from others about the source of your intuitions and how they have impacted your trading? Thanks! Doctor Janice

I am interested in learning how you feel about the importance of intuition in your trading? I am aware that certain studies have been done in FOREX traders that indicate that emotions or feelings played a very large role in determining what positions traders would take. If you ask these traders why they took this position in the dollar or the euro or some currency, they will tell you that they "had a gut feeling" about it, or "had a dream" about it, or it just "felt right." I realize that the subject of intuition does not get a lot of respect. One reason is that is difficult to quantify. It is highly personal. Many traders keep it a secret because it is almost a kind of taboo. What do you think about your own trading, particuarly in the FX markets? What role, if any, does intuition play in your decisions? Thanks! Doctor Janice