I am a fan of Dr. Menaker's ideas and the clarity in which he presents them at his blog www.andrewmenaker.com. If you are like me and have a grasp of the technical/chart analysis portion of trading but just can't reach the "brass ring" of succesful trading, you will find his site a treasure chest of concepts related to the emotional and psychological aspects of working the markets.
This post really made me ponder... I read it three times and so closely identified with it that I had to repost it here. I am most certainly a perfectionist. I absolutely want to do things right the first time and strive for it. I am uncomfortable with failure, which has led me to the following behaviors through much of my life, often to my detriment: over-competitiveness, self-critical thoughts when I do not win, failure to honor effort but instead focusing on achievement/outcome, to name a few. Quite frankly, I don't like the feeling of failure and it manifests itself in negative behaviors both in my private life and in my attempts to trade. It has become clear through my study of human behavior and trading psychology that this is at the root of much of my struggle to trade. I think the fear of criticism and embarassment is likely to blame, and I have always thought that doing things right will prevent it. I see it in other parts of my life: discomfort with public speaking in front of groups of my peers is the one that comes to mind first. I have worked over the past few years to face this down. Back when I still owned my business, I took part in a marketing group of about 20 of my peers that required a brief weekly stand-up synopsis of my business and also a lengthy presentation a few times per year. I also volunteer as an instructor for firearms education and safety, in front of a class of 15-25 students. These have helped tremendously, putting me in positions where I have to confront my insecurities related to public embarasment or criticism; bringing my perfectionism into the light of day. It is important to face emotional walls by repeatedly trying to scale them. The walls become smaller and easier to hurdle by continually meeting them head-on. But how do I transition to doing the same for trading? Unlike acting as an instructor where I make a commitment that I cannot dodge, trading is just me and the computer with nothing other than personal willpower to make me face the challenge. If I run from a commitment that involves other people, the embarassment or criticism is greater than that which comes from the actual public speaking. That same sort of motivation is not present here alone in my office when facing the markets. And that is why I think learning to trade from home is so incredibly difficult.
Here is the blog post and it is followed by a link to the original at his site.
A Question You Need to Ask
May 31st, 2011 Leave a comment Go to comments
Taking a pre-defined loss is part of the business. Exiting a winning trade and watching it continue to work without you is part of the business. Missing an opportunity is part of the business. Many traders cannot accept these realities of the trading business because they have a need for perfection and a need to be right.
Consider the following: You aren’t sure if you should scale your last unit at your target because you notice that momentum has increased and it looks like it could keep going beyond your target – do you hold it? Flatten at your target?
To know what to do, you need to answer the following questions for yourself. First, which is more painful to you…..exiting at your target and watching it run further? Or not exiting at your target and watching it come back in? You also need to know what your default action is when you experience different types of discomfort. Is that typical response of yours adaptive or is it emotionally reactive? Only you know the answer to this question; and it behooves you to know.
http://www.andrewmenaker.com/a-question-you-need-to-ask/
Sunday, February 26, 2012
Wednesday, February 15, 2012
Saw it, Liked it, Reposting it here.
Abnornal Returns has a great new piece and I've provided a link here:
http://abnormalreturns.com/there-has-never-been-a-better-time-to-be-an-individual-investor/
In addition, I picked out a paragraph and a half that dovetails nicely with some of the stuff I have been writing about recently. Namely, the emotional/psychological side of trading. Take the time to read the whole blog post by clicking on the link... it's an individual investing macro viewpoint that you won't regret seeing.
"However this example points out the double-edged sword that is today’s markets. Now we do have access to all manner of investment and trading vehicles. However like any tool these vehicles need to be used responsibly. The vast majority of investors should likely take a pass.
The reason is that despite the much technological advancement we have seen in investing our brains are still largely hardwired for an age of scarcity. That is why so many of our innate behavioral biases work against us when investing. That is why we consistently buy high and sell low, i.e. the behavior gap. That is why we often only seek out (and recognize) that information that conforms to our long held beliefs, i.e. confirmation bias. In the end the most difficult hurdle to investment success is not the market environment or the range of investment vehicles, it is us."
http://abnormalreturns.com/there-has-never-been-a-better-time-to-be-an-individual-investor/
In addition, I picked out a paragraph and a half that dovetails nicely with some of the stuff I have been writing about recently. Namely, the emotional/psychological side of trading. Take the time to read the whole blog post by clicking on the link... it's an individual investing macro viewpoint that you won't regret seeing.
"However this example points out the double-edged sword that is today’s markets. Now we do have access to all manner of investment and trading vehicles. However like any tool these vehicles need to be used responsibly. The vast majority of investors should likely take a pass.
The reason is that despite the much technological advancement we have seen in investing our brains are still largely hardwired for an age of scarcity. That is why so many of our innate behavioral biases work against us when investing. That is why we consistently buy high and sell low, i.e. the behavior gap. That is why we often only seek out (and recognize) that information that conforms to our long held beliefs, i.e. confirmation bias. In the end the most difficult hurdle to investment success is not the market environment or the range of investment vehicles, it is us."
Thursday, February 9, 2012
Excerpts from "The Inner Voice of Trading," by Michael Martin
The Inner Voice, by Michael Martin is the best stock market book of the nearly twenty I've read.
From it, I take these two excerpts:
Page 160: "The book Talent is Overrated, by Geoff Colvin, got me thinking. In the trading world, education is over-rated. People with average IQs financially outperform those with high IQs a whopping 70% of the time, (footnote 5) and a study on this topic concluded that only 36% of those tested (foonote 6) were able to identify their emotions in real time with any accuracy. Two thirds of people are controlled by emotions that they cannot identify. This has huge implications for traders and what they need to do to become better traders. You need to have a system for finding out what your feelings are trying to tell you-- especially your subconscious feelings. These feelings are always running in the background in everything you do, although you are unaware of them. You probably can see the results of this subconscience system but are likely not to know the progenitors."
Page 161: "If you don't learn about your feelings, your outcome is predicted whether you know it or not. You might as well surrender and learn about your feelings so that you can have a more profound effect in the navigation of your trading career.
With two thirds of the crowd being controlled by emotions they can't identify, you can define part of your trading edge immediately by developing your sense of self awareness. This turns the odds in your favor: By trading against you, your opponents are, in effect, a '1-2 shot' -- and you don't even know what the acronym MACD (footnote 9) stands for. You are the favorite with a large edge, and you might not know how to trade yet."
-----------------
What I have found after personal observance and study is that the stock market in the short term is nothing more than a game like poker. It is the transfer of wealth, by way of a market mechanism of valuing the price of a share of stock, bond, currency, or commodity,from the majority of traders who are captives of their fears and other emotions to the small number of traders who are able to master the human behaviors driven by emotions.
I saw this yesterday in TNA where I impulsively (emotionally) entered against the trend at a point that seemed perfect for me, only to have the ETF run against me. I held instead of stopping it out. Then it occurred to me what I was doing, I was on the opposite side of a trade from the 10% (?) of traders who are successful at this business. Instead of considering the chart as a picture on a screen, I saw it as interaction of buyers and sellers... and I thought about who they were. My practice trade entry was a bad choice, which means that someone who isn't operating out of emotion is on the other side. Later as I thought about it at a sushi lunch with a friend, I considered where else on the chart would there be examples of bad behavior; traders taking an initial trade long against downtrend too soon as well as those who were far too early and decided to average their losing position. After the day had ended, the chart bagan to make sense to me. I saw where those happy traders must have been, where the nervous traders got in (those who got long against trend too early but at a better price than me). And, I saw where the Screwed & Panic-stricken traders were... how the market moved in relation to their emotion-gripped responses to what was happening on their screens. I saw the final plunge of TNA designed to drive them to give up and liquidate their huge losses (what Quint Tatro calls the "Towel Trade" in his book, 'Trade the Trader;' the point on the chart where you can see the last of the fools 'throw in the towel'"). Later after the turn, I could see the candles indicating relief selling by those whom I've called 'Nervous Traders' who got in counter but toward the second half of a trend... they had smaller losses but managed to hold through the move against them. I saw the relief liquidation of the "Screwed & Panic-stricken" traders with big losses who held with white knuckles instead of stopping out. Some of them probably were traders who added to their losers against trend as the price plunged, though by my intuition and prior bad performance of doing the very same, I'd say most of the truly freaked out traders who added to their losers were chased out for huge losses on the final push down (The Towel Trade) before the reversal. Compliments of the 10% of traders who are self-aware and able to manage their emotions.
How did I come to these conclusions? To begin, I've seen it play out hundreds of times; stocks trade in patterns. If you take the spot where I got in long far too early, and then consider lower levels where amateurs were adding to their losers, and then you calculate the average of the prices, you will get the price point on the chart where the rebound from the downtrend hits resistance. The resistance is generated by all the trapped emotion-wracked traders finding relief by liquidating their trade at or near breakeven. Never mind that with this reward for bad behavior they have been exponentially damaged by this "bailout." They have discovered that they can hold onto the stupidity without consequence. "No need for taking a small stop loss at all, this trading shit is a breeze," they say! Until they experience the inevitable trend that doesn't reverse soon enough and ruins them. This is the reason so many Wall Street hedge fund geniuses blew up during the September 2007 - March 2008 vicious downdraft! Even the deep pocket fools get their come-uppance eventually.
So, after all the relief-selling had cleared, the consolidation derived from it also cleared, and price soared up on the buying pressure from traders who were in touch with their emotions, doing it the right way and not out of fear. And to be sure, the uptrend brought in early sellers who didn't stop out as price rose, causing the cycle to repeat as it has every day a market has been made in anything since the dawn of time. This is how a market is made.
The markets are a complex game where wealth is transfered from willing but emotionally ignorant greedy traders to calm, practiced, emotionally correct traders who swim like sharks in the money pool, gorging themselves on the fear-bloated carcasses of the amateurs.
Don't trade with real money until it can be done flawlessly on a trading simulator. Spend time orienting the mind and getting in touch with the emotions which compel the harmful behaviors that hollow out a trading account. Get "The Inner Voice of Trading," by Michael Martin and then REALLY take the lessons to heart. Believe in what he says. Read and internalize all the posts by Scott Farnham at Bankrobber.blogspot.com that deal with the psychological aspects of trading. And expect that a "rock bottom" might have to be hit before really understanding what it is they are trying to convey.
My thought after 10 months of full time market practice and three prior years of part-time study is this:
People have fears that manipulate them. Fears that lead to patterns of self-destructive behaviors of varying degrees of intensity. Gambling, drug addiction, overeating, alcohol abuse, shopping for comfort,sex addiction, and anorexia are just a few examples. I believe these are attempts to medicate oneself, in part or wholly resulting from the inability to face painful emotions. These same emotions are also behind self-destructive trading too, in my opinion. Again, the degrees of intensity vary.
Admit and truly accept being wrong. This is humility. Find the people in your life who love you and care about you and value them instead of material goods. The boast of material things is superficiality, attractive wallpaper covering feelings of inadequacy; a way to make one appear to be stronger or more valuable than what one truly feels inside.
Be positive. Be forgiving of yourself, and from that you will see the value of forgiveness of others. No longer be the prisoner of your hidden feelings.
This is the path I am on. I struggle with it every day. I define my attempts at this as it relates to trading as a form of a "12-Step program," much like Alcoholics Anonymous. One day at a time, I will stop out losing trades. One day at a time I will not exit too soon out of fear of the unknown. One day at a time... that is how I will face the emotions causing me to trade in self-destructive ways. I surrender.
I am certain there is wisdom and benefit for me in the practice of meditation. The buddhists have looked inward for the answers for thousands of years. Christians and Jews have done the same for millenia through prayer. Catholics release their burdens through Confession. Casting off the weight promotes healthy psyches. It is the reason our justice system tends to favor those up for parole when they are contrite and express humility. If you can admit, you are a more acceptable candidate for society. It is a sign of growth and maturity. I'm sure there are many more examples in society which do not come to mind as I write this.
Release the burdens, admit you have made mistakes and are not a bad person for it. Forgive yourself. Mistakes are part of the human existence. Admit that it is ok to take a stop loss.
As an aside on this topic, I recommend this February 2nd essay from Josh Brown at Reformed Broker entitled, "No One Is Ever Wrong Anymore."
http://www.thereformedbroker.com/2012/02/02/no-one-is-ever-wrong-anymore/
It dovetails nicely with what I am talking about.
This is my journey now. Trading is the reason I have come to this juncture in my life. Even if I am never successful as a trder, I will become a better person as a result of the pursuit of it. Of that I am sure.
From it, I take these two excerpts:
Page 160: "The book Talent is Overrated, by Geoff Colvin, got me thinking. In the trading world, education is over-rated. People with average IQs financially outperform those with high IQs a whopping 70% of the time, (footnote 5) and a study on this topic concluded that only 36% of those tested (foonote 6) were able to identify their emotions in real time with any accuracy. Two thirds of people are controlled by emotions that they cannot identify. This has huge implications for traders and what they need to do to become better traders. You need to have a system for finding out what your feelings are trying to tell you-- especially your subconscious feelings. These feelings are always running in the background in everything you do, although you are unaware of them. You probably can see the results of this subconscience system but are likely not to know the progenitors."
Page 161: "If you don't learn about your feelings, your outcome is predicted whether you know it or not. You might as well surrender and learn about your feelings so that you can have a more profound effect in the navigation of your trading career.
With two thirds of the crowd being controlled by emotions they can't identify, you can define part of your trading edge immediately by developing your sense of self awareness. This turns the odds in your favor: By trading against you, your opponents are, in effect, a '1-2 shot' -- and you don't even know what the acronym MACD (footnote 9) stands for. You are the favorite with a large edge, and you might not know how to trade yet."
-----------------
What I have found after personal observance and study is that the stock market in the short term is nothing more than a game like poker. It is the transfer of wealth, by way of a market mechanism of valuing the price of a share of stock, bond, currency, or commodity,from the majority of traders who are captives of their fears and other emotions to the small number of traders who are able to master the human behaviors driven by emotions.
I saw this yesterday in TNA where I impulsively (emotionally) entered against the trend at a point that seemed perfect for me, only to have the ETF run against me. I held instead of stopping it out. Then it occurred to me what I was doing, I was on the opposite side of a trade from the 10% (?) of traders who are successful at this business. Instead of considering the chart as a picture on a screen, I saw it as interaction of buyers and sellers... and I thought about who they were. My practice trade entry was a bad choice, which means that someone who isn't operating out of emotion is on the other side. Later as I thought about it at a sushi lunch with a friend, I considered where else on the chart would there be examples of bad behavior; traders taking an initial trade long against downtrend too soon as well as those who were far too early and decided to average their losing position. After the day had ended, the chart bagan to make sense to me. I saw where those happy traders must have been, where the nervous traders got in (those who got long against trend too early but at a better price than me). And, I saw where the Screwed & Panic-stricken traders were... how the market moved in relation to their emotion-gripped responses to what was happening on their screens. I saw the final plunge of TNA designed to drive them to give up and liquidate their huge losses (what Quint Tatro calls the "Towel Trade" in his book, 'Trade the Trader;' the point on the chart where you can see the last of the fools 'throw in the towel'"). Later after the turn, I could see the candles indicating relief selling by those whom I've called 'Nervous Traders' who got in counter but toward the second half of a trend... they had smaller losses but managed to hold through the move against them. I saw the relief liquidation of the "Screwed & Panic-stricken" traders with big losses who held with white knuckles instead of stopping out. Some of them probably were traders who added to their losers against trend as the price plunged, though by my intuition and prior bad performance of doing the very same, I'd say most of the truly freaked out traders who added to their losers were chased out for huge losses on the final push down (The Towel Trade) before the reversal. Compliments of the 10% of traders who are self-aware and able to manage their emotions.
How did I come to these conclusions? To begin, I've seen it play out hundreds of times; stocks trade in patterns. If you take the spot where I got in long far too early, and then consider lower levels where amateurs were adding to their losers, and then you calculate the average of the prices, you will get the price point on the chart where the rebound from the downtrend hits resistance. The resistance is generated by all the trapped emotion-wracked traders finding relief by liquidating their trade at or near breakeven. Never mind that with this reward for bad behavior they have been exponentially damaged by this "bailout." They have discovered that they can hold onto the stupidity without consequence. "No need for taking a small stop loss at all, this trading shit is a breeze," they say! Until they experience the inevitable trend that doesn't reverse soon enough and ruins them. This is the reason so many Wall Street hedge fund geniuses blew up during the September 2007 - March 2008 vicious downdraft! Even the deep pocket fools get their come-uppance eventually.
So, after all the relief-selling had cleared, the consolidation derived from it also cleared, and price soared up on the buying pressure from traders who were in touch with their emotions, doing it the right way and not out of fear. And to be sure, the uptrend brought in early sellers who didn't stop out as price rose, causing the cycle to repeat as it has every day a market has been made in anything since the dawn of time. This is how a market is made.
The markets are a complex game where wealth is transfered from willing but emotionally ignorant greedy traders to calm, practiced, emotionally correct traders who swim like sharks in the money pool, gorging themselves on the fear-bloated carcasses of the amateurs.
Don't trade with real money until it can be done flawlessly on a trading simulator. Spend time orienting the mind and getting in touch with the emotions which compel the harmful behaviors that hollow out a trading account. Get "The Inner Voice of Trading," by Michael Martin and then REALLY take the lessons to heart. Believe in what he says. Read and internalize all the posts by Scott Farnham at Bankrobber.blogspot.com that deal with the psychological aspects of trading. And expect that a "rock bottom" might have to be hit before really understanding what it is they are trying to convey.
My thought after 10 months of full time market practice and three prior years of part-time study is this:
People have fears that manipulate them. Fears that lead to patterns of self-destructive behaviors of varying degrees of intensity. Gambling, drug addiction, overeating, alcohol abuse, shopping for comfort,sex addiction, and anorexia are just a few examples. I believe these are attempts to medicate oneself, in part or wholly resulting from the inability to face painful emotions. These same emotions are also behind self-destructive trading too, in my opinion. Again, the degrees of intensity vary.
Admit and truly accept being wrong. This is humility. Find the people in your life who love you and care about you and value them instead of material goods. The boast of material things is superficiality, attractive wallpaper covering feelings of inadequacy; a way to make one appear to be stronger or more valuable than what one truly feels inside.
Be positive. Be forgiving of yourself, and from that you will see the value of forgiveness of others. No longer be the prisoner of your hidden feelings.
This is the path I am on. I struggle with it every day. I define my attempts at this as it relates to trading as a form of a "12-Step program," much like Alcoholics Anonymous. One day at a time, I will stop out losing trades. One day at a time I will not exit too soon out of fear of the unknown. One day at a time... that is how I will face the emotions causing me to trade in self-destructive ways. I surrender.
I am certain there is wisdom and benefit for me in the practice of meditation. The buddhists have looked inward for the answers for thousands of years. Christians and Jews have done the same for millenia through prayer. Catholics release their burdens through Confession. Casting off the weight promotes healthy psyches. It is the reason our justice system tends to favor those up for parole when they are contrite and express humility. If you can admit, you are a more acceptable candidate for society. It is a sign of growth and maturity. I'm sure there are many more examples in society which do not come to mind as I write this.
Release the burdens, admit you have made mistakes and are not a bad person for it. Forgive yourself. Mistakes are part of the human existence. Admit that it is ok to take a stop loss.
As an aside on this topic, I recommend this February 2nd essay from Josh Brown at Reformed Broker entitled, "No One Is Ever Wrong Anymore."
http://www.thereformedbroker.com/2012/02/02/no-one-is-ever-wrong-anymore/
It dovetails nicely with what I am talking about.
This is my journey now. Trading is the reason I have come to this juncture in my life. Even if I am never successful as a trder, I will become a better person as a result of the pursuit of it. Of that I am sure.
Saturday, February 4, 2012
Aside from trading
When I first started this blog a few years ago http://www.bluecollartrader.blogspot.com/2009_02_03_archive.html ), I was pretty much clueless about the markets and offered that the blog would cover things other than trading, "...It is my hope that as I progress as a trader, the content will improve and perhaps be of interest even to experienced market folks. Until then, you can expect mostly personal reflections of trading, discussion of other blogs, of the economy, politics, and finance rather than stunning technical analysis and savvy trading ideas!"
I have limited my discussion of things other than trading and markets to a handful since then, but I thought I'd touch on politics and economy this morning.
My political affiliation has been registered Republican for about 13 years, but with a soundly-beating Libertarian heart. I consider my views not as Republican, or Conservative, but very much Freedom-Loving. I support Ron Paul, but am not 100% in favor of his foreign policy. In terms of electability, he doesn't have a shot. I don't favor the other three candidates in the Repub field; I truly despise Newt Gingrich and will write in Ron Paul's name on the ballot for president in November if Gingrich gets the nomination. I know, it could lead to Obama being re-elected. I don't care, and it makes me sick to say it because I think the current president is among the handful of most incompetent, devisive presidents in American history. But, he is still a better man than Gingrich. I don't mind Santorum, but he is looking at America through rose colored glasses if he thinks that this election can be won on a "values" platform. He is out of touch with the whole economy issue... approaching the election with a focus on faith and family while we bear the deficit/debt burden is short-sighted in the extreme. I'll hold my nose and vote for Mitt if he gets the nod. I suspect he will. I am from the northeast and I understand the "Northeast Moderate" republican platform. I am not comforted by it. But on the other hand, Mitt has shown competence in the things he has achieved in his business life. He does not carry around personal-life baggage like so many politicains do: Bill Clinton, Herman Cain, Newt Gingrich, John Edwards, Al Gore, etc. I am one who still thinks this type of thing matters. If you're character failings lead you to break your promise to the most important person in your life, your spouse, how can we possibly believe that the same character failings won't affect how you govern complete strangers? Either you are trustworthy or you are not. I will admit trustworthiness is not the be-all and the end-all, however. George W. Bush was a good, trustworthy man in my opinion, but his eight years of middle-east policy have assisted in drowning this country's citizens in red ink. I voted for him both times and will have to carry that heavy burden with me forever. His neo-conservative approach has soured me on that brand of Republican governance.
With all this in mind, I offer this paragraph from a recent article (Feb 1st online) in Forbes written by Richard Salsman. It is a beautiful work of truth, delving into US tax policy and the politics of same.
The whole article can be found by clicking this link:
http://www.forbes.com/sites/richardsalsman/2012/02/01/the-inequality-debate-senseless-without-consideration-of-what-is-earned/
And here is the snippet:
Mr. Obama likewise accepts a false theory of “fairness” that rejects the common-sense, merit-based concept of justice that older Americans might recognize as “desert,” where justice means we deserve (or earn) what we get in life, if by our free choice. Legitimately, there is “distributive justice,” with rewards for good or productive behavior, and “retributive justice,” with punishments for evil or destructive behavior. Yet for many decades now, instead of this valid principle of “justice as desert,” most political theorists, politicians, and policymakers have adopted and enacted, explicitly or implicitly, the invalid notion of “justice as fairness,” a scheme presented in the famed 1971 book, A Theory of Justice, by John Rawls, one-time Harvard professor. For Rawls and his acolytes in academia and Washington, “fairness” means not equality before the law but instead equality of opportunity and equality of result. Rawls asserts, as a “moral intuition” (his feelings), that wealth or income gaps can be justified only if they benefit society’s “least advantaged” persons. This is “social justice,” not true justice, and at root it denies that anybody earns anything. At the same time, it insists that needy have-nots somehow “deserve” mandated handouts from those who’ve achieved and have things, that taxpayers are right-less and duty-bound to surrender liberty and wealth whenever a need is claimed.
It should be clear to all who read this that I support kindness and charity with all my being. I believe that our value as human beings can be judged by our willingness to share what we have with those around us. I personally give my time and a portion of our limited amount of money to helping others. What I rail against is government sponsored assistance. Charitable giving is kindness. Redistributive tax policy is confiscation under threat of punishment. One is sourced in the best of human behavior and the other is rooted in darkness of the actions. Like my hard-core New Deal Roosevelt Democrat mother always told me: "The road to hell is paved with good intentions." A societal structure that confiscates wealth from one and hands to another without merit is a perfect example of her wise words.
I have limited my discussion of things other than trading and markets to a handful since then, but I thought I'd touch on politics and economy this morning.
My political affiliation has been registered Republican for about 13 years, but with a soundly-beating Libertarian heart. I consider my views not as Republican, or Conservative, but very much Freedom-Loving. I support Ron Paul, but am not 100% in favor of his foreign policy. In terms of electability, he doesn't have a shot. I don't favor the other three candidates in the Repub field; I truly despise Newt Gingrich and will write in Ron Paul's name on the ballot for president in November if Gingrich gets the nomination. I know, it could lead to Obama being re-elected. I don't care, and it makes me sick to say it because I think the current president is among the handful of most incompetent, devisive presidents in American history. But, he is still a better man than Gingrich. I don't mind Santorum, but he is looking at America through rose colored glasses if he thinks that this election can be won on a "values" platform. He is out of touch with the whole economy issue... approaching the election with a focus on faith and family while we bear the deficit/debt burden is short-sighted in the extreme. I'll hold my nose and vote for Mitt if he gets the nod. I suspect he will. I am from the northeast and I understand the "Northeast Moderate" republican platform. I am not comforted by it. But on the other hand, Mitt has shown competence in the things he has achieved in his business life. He does not carry around personal-life baggage like so many politicains do: Bill Clinton, Herman Cain, Newt Gingrich, John Edwards, Al Gore, etc. I am one who still thinks this type of thing matters. If you're character failings lead you to break your promise to the most important person in your life, your spouse, how can we possibly believe that the same character failings won't affect how you govern complete strangers? Either you are trustworthy or you are not. I will admit trustworthiness is not the be-all and the end-all, however. George W. Bush was a good, trustworthy man in my opinion, but his eight years of middle-east policy have assisted in drowning this country's citizens in red ink. I voted for him both times and will have to carry that heavy burden with me forever. His neo-conservative approach has soured me on that brand of Republican governance.
With all this in mind, I offer this paragraph from a recent article (Feb 1st online) in Forbes written by Richard Salsman. It is a beautiful work of truth, delving into US tax policy and the politics of same.
The whole article can be found by clicking this link:
http://www.forbes.com/sites/richardsalsman/2012/02/01/the-inequality-debate-senseless-without-consideration-of-what-is-earned/
And here is the snippet:
Mr. Obama likewise accepts a false theory of “fairness” that rejects the common-sense, merit-based concept of justice that older Americans might recognize as “desert,” where justice means we deserve (or earn) what we get in life, if by our free choice. Legitimately, there is “distributive justice,” with rewards for good or productive behavior, and “retributive justice,” with punishments for evil or destructive behavior. Yet for many decades now, instead of this valid principle of “justice as desert,” most political theorists, politicians, and policymakers have adopted and enacted, explicitly or implicitly, the invalid notion of “justice as fairness,” a scheme presented in the famed 1971 book, A Theory of Justice, by John Rawls, one-time Harvard professor. For Rawls and his acolytes in academia and Washington, “fairness” means not equality before the law but instead equality of opportunity and equality of result. Rawls asserts, as a “moral intuition” (his feelings), that wealth or income gaps can be justified only if they benefit society’s “least advantaged” persons. This is “social justice,” not true justice, and at root it denies that anybody earns anything. At the same time, it insists that needy have-nots somehow “deserve” mandated handouts from those who’ve achieved and have things, that taxpayers are right-less and duty-bound to surrender liberty and wealth whenever a need is claimed.
It should be clear to all who read this that I support kindness and charity with all my being. I believe that our value as human beings can be judged by our willingness to share what we have with those around us. I personally give my time and a portion of our limited amount of money to helping others. What I rail against is government sponsored assistance. Charitable giving is kindness. Redistributive tax policy is confiscation under threat of punishment. One is sourced in the best of human behavior and the other is rooted in darkness of the actions. Like my hard-core New Deal Roosevelt Democrat mother always told me: "The road to hell is paved with good intentions." A societal structure that confiscates wealth from one and hands to another without merit is a perfect example of her wise words.
Friday, February 3, 2012
LOVE THIS VIDEO of Evan Longoria
At Dr. Menaker's site http://www.andrewmenaker.com/ , I found this gem. It is a video of the mental edge that Tampa Bay Rays star young player Evan Longoria used to achieve his elite status in the game. It's about 9-10 minutes but well worth the time. Once a person reaches a certain physical ability, a certain mastery of the skills; the "science" of a task or job, the difference between success and failure is all between the ears. I'm a huge Boston Red Sox fan and have been all my life. How does a guy with the limited physical attributes like Dustin Pedroia get the Rookie of the Year and Most Valuable Player awards in a league where there are some of the most physically gifted athletes in the world? In the end, it comes down to who can perform under pressure. The one who can be in the moment, carefree to focus on what is at hand only, without emotional baggage from the past and without anticipation of unknown outcomes. The "art," rather than the "science" of what one chooses to be involved in, in my opinion, is all about what's between one's ears. Inner peace, inner calm, self-acceptance, being humble and well-grounded: these are the building blocks of sustained excellence and the requirements of prevailing in a highly competitive, performance-based environment.
Here is the video link: http://vimeo.com/6153913
Here is the video link: http://vimeo.com/6153913
Thursday, February 2, 2012
TraderHabits- The Hits Just Keep on Coming!
I put up my last blog entry a short time ago; a post from my newest favorite blog. I then came across this gem and felt it needed to be Reposted Here. Here is the link:
http://traderhabits.com/would-watch-your-exgirlfriend-making-out-her-boyfriend/
Here is the text:
Would you watch your ex-girlfriend making out with her new boyfriend? h/t @gtotoy
Written on January 12, 2012 by Eli Radke in Uncategorized The always wise @GTOToy made a point and it should be emphasized.
There is no doubt in my mind as a trader you have to be somewhat of a masochist. There are many potentially painful moments. There are rarely days that I can go back and say I did it perfectly. That is ok, you do not have to be perfect to make money. A weakness is an attribute applied too thickly. You need to like a little pain but not apply so much that you can’t function.
Traders must constantly be separating what happened from how they feel about what happened. Sometimes that means looking away for a little bit. I am not saying you should ignore it. But no need to hit yourself when you are already down. When you learn something in a different state of mind than you use it, it is like not learning it at all. When you review your trades do it with a clear head. Do not stare at a trade once you exited second guessing yourself. Start over, there will thousands of thousands of other opportunities. You are not always going to get out on the best tick but that does not matter. The market is a promiscuous girlfriend but you do not have to watch.
About trading being 90% mental, it does not have to be. But maybe GTOtoy and I can discuss that before the Eagles playoff game this weekend, oh wait…
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com or twitter, stocktwits, youtube and facebook. Subscribe to Traderhabits by email or to newsletter.
http://traderhabits.com/would-watch-your-exgirlfriend-making-out-her-boyfriend/
Here is the text:
Would you watch your ex-girlfriend making out with her new boyfriend? h/t @gtotoy
Written on January 12, 2012 by Eli Radke in Uncategorized The always wise @GTOToy made a point and it should be emphasized.
There is no doubt in my mind as a trader you have to be somewhat of a masochist. There are many potentially painful moments. There are rarely days that I can go back and say I did it perfectly. That is ok, you do not have to be perfect to make money. A weakness is an attribute applied too thickly. You need to like a little pain but not apply so much that you can’t function.
Traders must constantly be separating what happened from how they feel about what happened. Sometimes that means looking away for a little bit. I am not saying you should ignore it. But no need to hit yourself when you are already down. When you learn something in a different state of mind than you use it, it is like not learning it at all. When you review your trades do it with a clear head. Do not stare at a trade once you exited second guessing yourself. Start over, there will thousands of thousands of other opportunities. You are not always going to get out on the best tick but that does not matter. The market is a promiscuous girlfriend but you do not have to watch.
About trading being 90% mental, it does not have to be. But maybe GTOtoy and I can discuss that before the Eagles playoff game this weekend, oh wait…
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com or twitter, stocktwits, youtube and facebook. Subscribe to Traderhabits by email or to newsletter.
Saw it, Liked it, Reposting here.
I have 17 favorites on my blog list that focuses on Trading & Investing. Most reside there permanently: Bankrobber, Points and Figures, Alphatrends, Tickerville, SMB Trading Blog, Stocktwits, Traderfeed, & PopDocTrader, to name many of them. Others, I shuffle in and out. Recently, I added a new one to the list called TraderHabits http://traderhabits.com/ . I began reading it today. The following post from January 20th struck me as very important, considering my work to look inside myself for the answers to making a living as a trader.
http://traderhabits.com/not-failing-worse-than-failing/
Not failing is worse than failing.
Written on January 20, 2012 by Eli Radke in Uncategorized Some types of failures are good. If I continue to have the opportunity to fail than I am doing something right. But there is good failure and bad failure. Good failure is giving everything you have and it just not being enough. Bad failure is not getting to that launch point.
I go out of my way to help anyone I can. Two things happen. They either take the initiative or they don’t. Those that don’t, believe the end point is the contact. Those that take complete advantage understand that the end point is their goal.
Failing is not easy, but failing with action is something that can have a very positive impact. It burns a bridge that needed to go anyways. Failing without action will create a bad habit, steal your time, and it will suck the energy right out of you. The reason they fail without action is because they do not have to accept that they were not good enough or they didn’t know or are unwilling to do what it is necessary.
The other day, was in a meeting with a marketing firm. They hate the name E-mini Executors, the name of our trading group. Nothing is more fun than having to hear for 2 hours that your name sucks. So I explained to them the difference between failing in those ways that I described above. We do not believe that every person can be a successful trader. What every person can do is get to the point where they can honestly say that they gave it their all. That they understand how to accomplish their goals and how to get the tools to do so. The next step is to execute it.
Do I think most people get to that point in trading, no? What I do know is that there are less people that fail at that point than before getting to that point. Trading or anything related to performance is about execution. That is why two people trading the same “system” or from the same background will have dramatically different results. One can execute better. A successful traders knows that the goal is not to have a trading account but to be profitable or that getting money means nothing without being able to keep. To be profitable you have to get to the point where it is just about execution. Everything before, during, and after a trade is taken care. Being alone with your execution is key.
Trying to explain to a marketing company that you are purposely trying to eliminate part of the market specifically by your name is a foreign concept to them. That we do not want people who would rather read a book about trading than be a trader. So after explaining this for a couple hours, I think they got it. But that does not mean they agreed at all. (Would like your feedback on the name if you have a moment.)
Sorry if this post seemed liked a big commercial. This blog isn’t about promoting our business, it is about getting the things out of my head and giving back and ensuring that there is a community of traders in the future. (I could have included a link to the website and I did not have to post this on a Friday.) We will get your money between the bells. At the same time, what I believe in and what I do are completely aligned. I don’t believe in it because I do it. I do it because I believe in it. We started this because the marketplace was filled with people whom we felt were not trying to make people better traders and expand the community of traders. The trading floors are dying and there are limited places where you can legitimately learn. We have a vested interest in seeing the futures market grow.
I have failed without taking action. As much as I hate to admit it, my football career ended in that way. There was also a girl in junior high. Those failures were hard but once I recovered they provided me with an invaluable lesson. If it is worth doing, it is worth putting your best effort out there.
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com
http://traderhabits.com/not-failing-worse-than-failing/
Not failing is worse than failing.
Written on January 20, 2012 by Eli Radke in Uncategorized Some types of failures are good. If I continue to have the opportunity to fail than I am doing something right. But there is good failure and bad failure. Good failure is giving everything you have and it just not being enough. Bad failure is not getting to that launch point.
I go out of my way to help anyone I can. Two things happen. They either take the initiative or they don’t. Those that don’t, believe the end point is the contact. Those that take complete advantage understand that the end point is their goal.
Failing is not easy, but failing with action is something that can have a very positive impact. It burns a bridge that needed to go anyways. Failing without action will create a bad habit, steal your time, and it will suck the energy right out of you. The reason they fail without action is because they do not have to accept that they were not good enough or they didn’t know or are unwilling to do what it is necessary.
The other day, was in a meeting with a marketing firm. They hate the name E-mini Executors, the name of our trading group. Nothing is more fun than having to hear for 2 hours that your name sucks. So I explained to them the difference between failing in those ways that I described above. We do not believe that every person can be a successful trader. What every person can do is get to the point where they can honestly say that they gave it their all. That they understand how to accomplish their goals and how to get the tools to do so. The next step is to execute it.
Do I think most people get to that point in trading, no? What I do know is that there are less people that fail at that point than before getting to that point. Trading or anything related to performance is about execution. That is why two people trading the same “system” or from the same background will have dramatically different results. One can execute better. A successful traders knows that the goal is not to have a trading account but to be profitable or that getting money means nothing without being able to keep. To be profitable you have to get to the point where it is just about execution. Everything before, during, and after a trade is taken care. Being alone with your execution is key.
Trying to explain to a marketing company that you are purposely trying to eliminate part of the market specifically by your name is a foreign concept to them. That we do not want people who would rather read a book about trading than be a trader. So after explaining this for a couple hours, I think they got it. But that does not mean they agreed at all. (Would like your feedback on the name if you have a moment.)
Sorry if this post seemed liked a big commercial. This blog isn’t about promoting our business, it is about getting the things out of my head and giving back and ensuring that there is a community of traders in the future. (I could have included a link to the website and I did not have to post this on a Friday.) We will get your money between the bells. At the same time, what I believe in and what I do are completely aligned. I don’t believe in it because I do it. I do it because I believe in it. We started this because the marketplace was filled with people whom we felt were not trying to make people better traders and expand the community of traders. The trading floors are dying and there are limited places where you can legitimately learn. We have a vested interest in seeing the futures market grow.
I have failed without taking action. As much as I hate to admit it, my football career ended in that way. There was also a girl in junior high. Those failures were hard but once I recovered they provided me with an invaluable lesson. If it is worth doing, it is worth putting your best effort out there.
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com
Wednesday, February 1, 2012
Trading is mental
Having read and re-read Michael Martin's "The Inner Voice of Trading" over the past month, I am finding some relief when it comes to the self awareness necessary to be a successful trader.
I have taken to spending quiet time reflecting on the WHY that compels me to make bad trading decisions and where they truly originate. I reinstituted exercise into my day by walking about two to two and a half miles per day back in early November and moved to the treadmill in the cellar after the Maine winter arrived. With bad knees, I can no longer run, so I stick to walking and it gives me time to relax and think about the WHY. I've thrown in some strength training over the past two weeks and I feel better for it. Mostly, I am in this for mental dialysis and exercise second. Thirdly, my ability to stick to the regimen will reflect whether or not I have achieved the same discipline necessary to stick to proper trading fundamentals. Mrs. Bluecollar bought me two relaxation CD's that encorporate breathing exercises, muscle relaxation, positive affirmations, and calming music. I play them while I use the treadmill and am now in my second day of it. It is true that anxiety, stress, and fear are near the top of the list of reasons for trader failure.
As part of this whole thing, I am digging deep into my past and evaluating my life and the influence of those with whom I've encountered and the impressions that were left on me as a result.
I have also picked out some articles from Dr Andrew Menaker's blog at his website as part of my quest to become a trader: http://www.andrewmenaker.com/
I hope you get something from this one from March 29, 2011 entitled "Handling Uncertainty."
Handling Uncertainty
March 29th, 2011
Everyone talks about uncertainty, and many of you realize that the only thing that is certain in trading is uncertainty. The problem is that most people understand it on an intellectual level (“yeah, I think in probabilities”), but in reality, where the rubber meets the road, most traders don’t really accept uncertainty.
How do you know when you’ve truly accepted uncertainty? You’ll know, when you’ve embraced the randomness of probability (each trade or individual data point is a unique occurrence with a 50/50 chance, even in a skewed probability distribution). When you begin to truly embrace uncertainty you’ll notice one of or more of the following also occur; you won’t be thinking or worrying about it as much, you won’t be doing as much ‘mental P&L accounting’; and the symptoms of tick-itis will also remit.
I coach clients to not be attached to the outcome as one particular strategy to deal with uncertainty. And the good news is that when you begin to truly embrace uncertainty you also begin to create a positive feedback loop where realizing that its not worth being emotionally attached to any one trade, or even a series of trades; making it even easier to embrace the uncertainty. Non-attachment to outcomes helps one deal with uncertainty, and embracing uncertainty reinforces non-attachment to outcomes. That’s how it works, folks.
Think about this question for a moment:
When you put money in a slot machine and you lose, how do you feel? Most people don’t feel that bad. But when you bet your money on a trade and you lose, how do you feel? Most traders say they feel upset, angry, frustrated, ripped-off, even betrayed (betrayed by the market, betrayed by their method, or betrayed by the person who taught them the method).
So, what’s the difference between the slot machine and trading? In slots, there is no judgment or ego involved (the need to be right is greatly diminished). However, in trading it is 100% judgment (you might be ‘wrong’). In a trade, our ego, our judgment, our sense of self-worth and even our personal status in the eyes of others (e.g. trading partners, family, etc.) is susceptible to feeling assaulted for each tick away from our intended target. But in slots we become a robot. Go to a casino and walk by the slot machines; everyone is glazed over, practically in a hypnotic state as they automatically (brainlessly as my wife puts it) dump more coins into the machine, pressing the lever and not getting very upset for lack of a pay-out. No judgment is on the line, there is no possibility of being wrong….the slot player recognizes the situation for what it is, pure unadulterated randomness.
Trading is not random, but you must fully accept, beyond intellectual understanding, the randomness of probability.
I have taken to spending quiet time reflecting on the WHY that compels me to make bad trading decisions and where they truly originate. I reinstituted exercise into my day by walking about two to two and a half miles per day back in early November and moved to the treadmill in the cellar after the Maine winter arrived. With bad knees, I can no longer run, so I stick to walking and it gives me time to relax and think about the WHY. I've thrown in some strength training over the past two weeks and I feel better for it. Mostly, I am in this for mental dialysis and exercise second. Thirdly, my ability to stick to the regimen will reflect whether or not I have achieved the same discipline necessary to stick to proper trading fundamentals. Mrs. Bluecollar bought me two relaxation CD's that encorporate breathing exercises, muscle relaxation, positive affirmations, and calming music. I play them while I use the treadmill and am now in my second day of it. It is true that anxiety, stress, and fear are near the top of the list of reasons for trader failure.
As part of this whole thing, I am digging deep into my past and evaluating my life and the influence of those with whom I've encountered and the impressions that were left on me as a result.
I have also picked out some articles from Dr Andrew Menaker's blog at his website as part of my quest to become a trader: http://www.andrewmenaker.com/
I hope you get something from this one from March 29, 2011 entitled "Handling Uncertainty."
Handling Uncertainty
March 29th, 2011
Everyone talks about uncertainty, and many of you realize that the only thing that is certain in trading is uncertainty. The problem is that most people understand it on an intellectual level (“yeah, I think in probabilities”), but in reality, where the rubber meets the road, most traders don’t really accept uncertainty.
How do you know when you’ve truly accepted uncertainty? You’ll know, when you’ve embraced the randomness of probability (each trade or individual data point is a unique occurrence with a 50/50 chance, even in a skewed probability distribution). When you begin to truly embrace uncertainty you’ll notice one of or more of the following also occur; you won’t be thinking or worrying about it as much, you won’t be doing as much ‘mental P&L accounting’; and the symptoms of tick-itis will also remit.
I coach clients to not be attached to the outcome as one particular strategy to deal with uncertainty. And the good news is that when you begin to truly embrace uncertainty you also begin to create a positive feedback loop where realizing that its not worth being emotionally attached to any one trade, or even a series of trades; making it even easier to embrace the uncertainty. Non-attachment to outcomes helps one deal with uncertainty, and embracing uncertainty reinforces non-attachment to outcomes. That’s how it works, folks.
Think about this question for a moment:
When you put money in a slot machine and you lose, how do you feel? Most people don’t feel that bad. But when you bet your money on a trade and you lose, how do you feel? Most traders say they feel upset, angry, frustrated, ripped-off, even betrayed (betrayed by the market, betrayed by their method, or betrayed by the person who taught them the method).
So, what’s the difference between the slot machine and trading? In slots, there is no judgment or ego involved (the need to be right is greatly diminished). However, in trading it is 100% judgment (you might be ‘wrong’). In a trade, our ego, our judgment, our sense of self-worth and even our personal status in the eyes of others (e.g. trading partners, family, etc.) is susceptible to feeling assaulted for each tick away from our intended target. But in slots we become a robot. Go to a casino and walk by the slot machines; everyone is glazed over, practically in a hypnotic state as they automatically (brainlessly as my wife puts it) dump more coins into the machine, pressing the lever and not getting very upset for lack of a pay-out. No judgment is on the line, there is no possibility of being wrong….the slot player recognizes the situation for what it is, pure unadulterated randomness.
Trading is not random, but you must fully accept, beyond intellectual understanding, the randomness of probability.
Subscribe to:
Posts (Atom)