I've mentioned before that I am a fan of Dr. Andrew Menaker's website and the blog there that he occasionally updates. I found him through the SMB Training Blog, of which I am also a big fan. At Mike Bellafiore's request, Dr. Menaker once addressed my question to the SMB Blog regarding overcoming bad trading habits.
I liked this blog post from April 13th...
http://www.andrewmenaker.com/something-you-need-to-know/
Something You Need to Know
April 13th, 2012 Leave a comment Go to comments
A trader with a superior trading strategy but lacking in self-management skills will generally underperform a trader who has a less than superior strategy (but still has en edge) and is superior in self-management. I see this all the time.
Consider re-directing some of your energy and time toward self-mgt. Self mgt. includes a lot of things….but the big one is understanding how your emotions – including subconscious emotions – influence your decisions and actions.
Your trading plan or your strategy must include self management.
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And from his April 17th blog post, he wrote this. It is as if he was peering into my mind when he wrote it. I am a knee-jerk reversion-to-the-mean trader. My first instinct is to wait for trend to end, then play for a reversal. In periods of high volatility, I tend to play for reversals which end up being "fades" because momentum keeps stocks trending for longer timeframes. That is to say, high vol sends stocks further from the mean than is customary and I play for reversal too early. My reversal plays are actually fades. This is precisely what happened a number of days last week. Fortunately, I have been working on my discipline and have been doing well engaging stops, which turn trend fades that would then become too much risk into stopouts. I spend an inordinate amount of time analyzing myself for the reasons why. I have to believe that with this constant high level of personal scrutiny, I will find a way to make proper trading decisions free from the clutches of anxiety or habit.
Until then, I remain a trader in training.
http://www.andrewmenaker.com/my-bold-prediction/
My Bold Prediction
April 17th, 2012 Leave a comment Go to comments
The prediction is that I’ll get a large number of emails by EOD and later tonight after traders survey the damage.
Yes, some things never change. Fighting a strong tape is a time honored tradition among many intra-day traders. Unfortunately.
A few reasons:
Many intra-day traders tend to have a short bias….you know, ‘elevator down and stairs up’…’make more faster on the down moves’.
The fading mind-set….or regression to the mean type thinking.
Probabilities. As someone who uses Market Profile and volume profiling, I’m well aware that the market tends to be rotational about 80% of the time, and makes directional moves about 20% of the time. The traders that cling to probabilities often do really well for a period of time…during rotational times…and when the directional day comes…BAM…all those rotational profits are gone in a heartbeat. This scenario plays itself out ALL the time. Especially when the market makes nice reversals such as today.
The moral of the story here is that one can not trade by probabilities alone. This is one of the reasons why I’ve been invited to speak at an institutional investing/trading conference in Japan in June.
