Friday, January 6, 2012

Avoiding Mental Sabotage

Alot of thoughts went through my leechie head as i read some of the articles shared...i need to work on my psychology...fell in love with my out-of-favor stocks which have been jilted by Smart Money...think i over-ANALyze too many stuff...resulting in fear to take action...n i ended up being a stuckist...ya, u've heard of terms such as "stock operator"...well, i'm a "stock stuckist"! nothing to be proud of...but i'm juz being honest here :'( i shld juz treat trading as a biz n make rational decision n take positive action...

Words of wisdom from derrick:

"Newbies die in a trend, old bird die during sideways. There is always a way to kill you if you do not have enough knowledge."

"Whatever TA method that you used to predict the market movement, it should begin with a complicated process. Try to visualize what can happen and the interaction of the various indicators. What picture is it trying to tell you. From the behavior of each indicator, try to predict the markets next move. Stream line each indicator watch its reaction. then combine them together to have stream lined answer of a simple "YES" or "NO". There cannot be guessing after you have entered a position, why it moves against or in favor of you; you must have the mental picture in place to control your emotions. Otherwise, you cannot even take the stress of 1min of movement be it big or small."

"Plan your trade, trade your plan. Study the chart at various level and link up everything. One for direction and the other for execution. This will set your mind at ease and not guessing along as the price moves.If it moves against you, you need to know why, if it moves in your favor, note down all the conditions that resulted in the move. Only then you can improve.

One thing for sure, you really need passion in everything you do. If not you will fall asleep after watching the chart for 5mins."

To be honest...i actually doze off while looking at my charts n accidentally cleared all my indicators! -.-" n i muz start to read all the many, many books tt i bought n havent read!
"Investment books that hope to teach you how to avoid making mistakes in the markets:
Do you notice that people who do read the investment books, who do show up in the bookstands reading such books, are the ones who generally do not need such advise? I just read it for fun and to see and laugh at what are the mistakes made. Ironically, folks who do need such information and advise, generally they do not go to bookshops. So, who is going to buy such books?" ~ Richchee

" In trading we cannot live in fantasy hoping our long/short position going way high/low, however once we are in a position we live in the reality to manage the risk. If we have not get into the position, yes by all mean we can dream and" ~ Neo Mui Kian

"long or short dont chase, first to react wlth BB earn big time, react after BB make small time, react after BB stop die big time."

"If you listen to so called ANALyst 100%, you'll be a bankrupt who has to eat maggie mee for your meals everyday. You may also be seen collecting cardboards for your retirement!!!" ~ Digital


"Secret Trading Tip #8 by Larry Levin
By Neo Mui Kian

Avoiding Mental Sabotage

... I have heard that 95% or more of all traders ultimately fail.

Have you ever wondered why?

Most traders will tell you it was the system or method they were using. They'll also tell you they had a few bad trades they couldn't recover from. Or their dog chewed through the telephone cord just as their computer crashed, and they couldn't get out of a losing trade.

Everyone has a different reason, but when you hear enough of them, a pattern begins to develop. I believe most traders fail because they sabotage themselves.

The markets work differently from other investing opportunities. There is probably more freedom in the trading business than any other industry in the world.

You can do what you want, whenever you want to do it. You can trade 1 contract or 100. Buy the market or sell it; it's up to you. The only thing that holds you back is running out of capital.

Most people are not accustomed to that much freedom.

If you can't control the market, the only thing you can control is yourself.

Trading is also very different than the things we do on a daily basis. In everyday life we exercise some control over our environment. If a room is too dark we turn the light on. If we want to go somewhere, we jump in the car and turn the key.

In trading you can't control what the market does.

No matter how much you want the market to go in a certain direction, there is nothing you can do to force that to happen. You can't turn a key or flip a switch. Hoping, pleading, screaming... nothing will make the market do what you want it to.

Embrace the uncertainty - plan for the best and worst cases

One of the most important things you can do to avoid the mental sabotage is to understand the lack of control you have over the market, and plan for every trade. Now I don’t mean a trading plan like buy a contract and then close the position when the market trades higher. I mean a real plan. That includes specific entry points based on certain market movements or conditions. It means exit strategies for when things go right and for things go really wrong. It means placing limits and stops and keeping your emotions in check. If you have a roadmap for your day, you are less likely to fall into that trap of mental sabotage.

Remember: if you can't control the market, the only thing you can control is yourself."

"Trading Psychology 101
by RealityTrader

This is one of those neverending debates among newer traders - role of psychology in trading. Some claim it's all there is to trading. Some argue it's nothing but red herring, and one just needs to follow his signals (system, indicators, whatever one fancies) and no psychobabble will ever be needed. Yet some say psychology is important and assign some weight to it - "80% of trading is psychology"... or 95%... Not sure how they measure it, I personally like 76.364%.

Two things must be said about this.
First, we all are different. Some simply cannot change their behavior and, no matter what system they are given, they just can't follow it. Their personality takes over pushing them into all kinds of trading No-No's. They can't enter when entry signal comes in; they don't apply stops when the trade fails; they take profits too soon or never.

Then there are others who don't seem to be influenced by their inner workings; they just see the light and follow it. Obviously, the role of psychology will be drastically different for those two types.

Second, and most significant for most of us: We go through different stages in our learning curve. As far as trading psychology is concerned, I can clearly see three stages common for the most traders.

First stage is total ignoring or underappreciation of this aspect of trading. By ignorance, by arrogance or for whatever else reason, a trader doesn't give it much thoughts while focusing on technical side of trading.

Second stage is acknowledgment. Running into troubles with their inner gear, reading books or listening to others, traders become aware of the ways their personality interferes with their trading. They have met the enemy.

Finally, third stage is dismissal of psychology again. Maybe dismissal is not the right word but that's how it feels for it's (psychology as a subject of thoughts) no longer needed. At this stage focusing on it becomes unneeded as a trader overcomes his inner barriers, changes himself, learns to behave in a right way - and this correct behavior becomes second nature. Just as learning to swim you stop thinking of how to move when swimming, in the same way you stop giving time and thoughts to psychology of your trading again - seemingly returning to a first stage, although it's obviously another level you reach. You simply mastered it and stopped thinking about it - just as learning to drive you stop thinking of switching gears, turning the wheel or pushing the pedals.

It's important to understand that this third stage exists and make it your target to achieve it. Too many traders simply get stuck at the second stage - they think of it all the time, they make it their point of focus to such degree and for so long that they just can't seem to get out of it. Their development stops, they become locked in this endless inner digging - means become the end. There is no need to rush through the second stage but to get stuck in it forever is no fun either.

In the following articles we will go over each of those three stages a bit deeper - and make one step beyond that, defining a fourth stage which I don't want to define before we are done with first three. If you are lucky to belong to that second type that needs no stinkin' psychology, skip these series but do check out that fourth stage for it's the highest craftsmanship of this side of trading.

To conclude the series, we are going to go over some particular and very common problems traders tend to have and show what causes them. We are going to keep it strictly practical - no academic stuff, only the things with which every trader will identify"

"Analysis Paralysis - Part 1
by Janice Dorn, M.D., Ph.D

The ability to simplify means to eliminate the unnecessary so
that the necessary may speak…
Hans Hofmann,
Introduction to the Bootstrap, 1993

E-mails from traders and investors of every ilk come to me daily. I am grateful, and urge you to keep them coming, as you inspire me, challenge me and force me to think. Everyone has a different way of being in the world and, as a logical corollary, in the markets. I get charts, graphs, opinions, links to articles, and more opinions. There has been so much speculation lately about what the Fed will or will not do and how it will affect precious metals and the dollar, that I must work hard to prevent my head from spinning, to keep it attached firmly to the neck area and to attempt to filter out the signal:noise ratio."
Did I mention that people send me charts? They range from the utterly and overly simplistic, to something that might be considered a Rorschach test gone bad. I respect those who can trade from intensely complicated (to me anyway) charts that contain 10 or more different technical indicators plus at least three colors. If that is what works for your particular brain structure, then that is what works.
Over many years of trading and experimenting with more systems and indicators that I care to recall, I have come to the conclusion that, in trading, less is more. For my own purposes I like to see price, volume, and a couple of moving averages and then draw trend lines. For me, the simpler, the better. It helps me block out noise, obviates conflict when indicators are not in synch or are giving different messages, and allows me to be definitive with what I do.
Trader Alex (name changed to protect the innocent) sent me a batch of charts the other day. The charts were in several different time frames, and were loaded with so many indicators that I was barely able to make out what Alex wished to trade. Worse still, I could not figure out HOW Alex was trading. In this situation, one does the logical thing. One asks Alex. The response I got was quite revealing and, perhaps you can find a trading lesson in it.
Alex told me that he lived his life by making flow diagrams. Everything he did or planned to do, he diagrammed beforehand in order to prepare himself for any eventuality. For example, if he was invited to a party, he would do the following: starting a week before, he would map out (on paper) everything he had to do to prepare for the party, including selection of clothing, washing his car, telling selected people where he would be during those hours, finding out who would be at the party and how they would be dressed, how they would be arriving, how they would be mentally (good or bad moods), what they would be bringing to the host and hostess and on and on. Sometimes, he would wake up in the middle of the night to expand the flow diagram as new thoughts and possibilities crossed his mind. A day or two before the party, Alex began to be infused with doubt. Had he thought of everything? What could happen that he had not anticipated? Would be go into a state of social paralysis if someone was at the party whom he had not expected or if someone said something to him for which he did not have an answer? If you think this sounds a bit whacko, you are correct.
In Part 2, we will see how Alex carried his desire to be prepared for every possible eventuality in his life into his trading activities. And how these complicated measurements hampered his ability to actually make the trades he so conscientiously analyzed."

"Analysis Paralysis - Part 2
by Janice Dorn, M.D., Ph.D

Simplicity is the ultimate sophistication…
Leonardo DaVinci
... In Part 1, we saw how Alex created overly-ordered charts and diagrams with many different indicators and contra-indicators and extended his OCD (Obsessive-Compulsive Disorder) from every aspect of his life into complex trading charts and diagrams.
Nonetheless, to Alex, this was his modus operandi. It began in his early childhood when he felt his life careening out of control after the divorce of his parents. He took almost complete responsibility for the divorce and vowed that he was going to do everything possible to ensure that he did not make the same mistake again. Alex's response to what he perceived to be HIS problem (the bitter divorce of his parents) was to develop OCD (Obsessive-Compulsive Disorder). The manifestation of this was the development of increasingly complex flow charts and diagrams which he believed would allow him to control every aspect of his life through prediction.
Now, take this one step further. Alex enters the financial markets and attempts to trade. Before he is able to place a trade, he makes the equivalent of a life pattern flow diagram. He adds technical indicators, one after the other and intersperses them with every possible news development or economic report that could possibly impact the trading on any particular day. Alex is ready, so he thinks. Alex is prepared, so he thinks. Armed with a total overload of information and unable to sort out what is real and what is not, Alex is set to trade.
Why is he writing to me? Because he is totally unable to execute. Alex suffers from trading paralysis. He has done all of the work, yet he feels that something is wrong. It is not the right time to make the trade, more news will come out which will affect the trade, he decides to wait for a better entry, he thinks he should do an option spread, just in case. Alex finds every conceivable excuse for not trading: It's the wrong time. There is too much risk. Maybe if he just waits a little bit. Something just doesn't look right.
Alex will not get through this situation easily, as it is a modus vivendi for him, which is transferring to every aspect of his life, including trading. What can you do ? Learn from this. To risk means taking chances in the face of uncertainty. We cannot control what the markets will or will not do. We cannot map everything out on a neat flow diagram, expect things to go our way and then panic when they do not.
The best traders are flexible, adaptable, embrace uncertainty and get out quickly when they are wrong. The best traders do not make excuses and do not blame others. The best traders do not get themselves into states of analysis paralysis. They keep it simple and remain fluid.
Everything should be made as simple as possible, but not simpler…Albert Einstein"

"On Track Towards Your Better Self
by Adrienne Toghraie
In order to put your trading on the right track, the rest of your life must support that direction. Here is a success model for giving you a good foundation for becoming a profitable trader. All aboard.

Clean out the clutter
Start with the immediate environment of your trading area and work outwards from there. When you have too much clutter, your focus will be disrupted from clear thinking. So give it away, throw it away.

Decide to listen to positive minded people
It is easy to fall into the trap of all of the negative media on the state of things. While you are getting back on a positive track, stay away from those people who encourage negative thinking and therefore negative emotions.

Take a walk or sit quietly where you will not be disturbed
A clear mind is a mind without stress. When you start out on a new or improved path, you are more likely to get there when you have a clear mind.

Ask the creative part of you to come up with ideas and actions that will take you towards your goal.
We have many parts of ourselves that are both negative and positive. When you focus on the positive side of yourself, you will discover within you actions that you can take to lead you in the right direction.

Make a list of all of your resources
It is important to feel good about yourself and your accomplishments. Every book you have read, every positive action, every teacher has given you the best of who you are. List those resources as if someone were challenging your value in life.

Collaborate with alliances
Positive people who care about you are your strongest resource. Keep in contact, share ideas, ask questions and ask for assistance.

Create new alliances
Create a situation to give value to others who you seek out to know. While you might not benefit directly from those people, just being in a prosperity mind set will attract goodness towards you in ways you did not imagine.

Allow others to do good things for you
By allowing others to do good for you, you give them the opportunity to draw good towards themselves.

Create an optimistic environment
Direct conversation to positive thinking with significant people in your life as well as all those you come in contact with. Refuse to participate in negative conversation by redirecting conversation to positive, optimistic points of view.

Write an action plan of simple tasks that you can do the next day
Along with your master plan, you should also have a daily plan that is drafted the day before. This allows your mind to work on how to accomplish your actions in the most efficient and effective way. It also allows you to motivate yourself as if you are playing a game that you want to win.

Note the tasks that will inevitably present themselves
The momentum you get from completed tasks will lead you to other tasks. Each new task will bring new resources and that creates the new and improved you.

Keep your mindset on the goal
Every good book has a main theme, and all of the characters must have actions that go towards that theme. And so it is true for anyone who wants to have a continuously growing and successful life. Know what you want and direct all of your actions towards that goal.

To be the best trader you can be requires that you become the best person you can be. Look to improve all areas of your life and you will reap the rewards in your ability as a trader."

"‎100 Percent Returns In The Futures Market - How You Can Do It
by Kevin Davey

Don't let anyone ever tell you the futures game is easy. I've been speculating in futures for 18 years, and it took me most of that time before I had any degree of success. I attribute successful futures trading to following certain steps. My guess is that these steps will work for you, too.

Step 1: Have a Plan
I've never seen someone build a house without detailed drawings, and I bet you haven't either. To build a house, you need a plan. The same holds true for speculating in the futures market. Your opponent, the market, has a plan - to take all your money - so you need one, too.
There are 3 major pieces to a good plan. First, you must be specific with your investment goals. Second, you must determine what you are willing to invest to get it, by identifying the amount of time and money you will invest. Finally, know what you'll risk to reach your goals. Are you willing to spend a year learning, or lose thousands of dollars before you start winning? Better to find that out now, upfront, before you invest the time and effort.

Step 2: Find a Strategy
Finding a viable strategy is the most difficult part of developing a trading system. You might not think that's true, based on ads and infomercials you see, which show you how easy picking a strategy is. Alas, if it were only as easy as going to a free seminar in a hotel or visiting a website! In reality, finding a good strategy involves 3 main areas: skill assessment, research and detailed development.
The first part of determining how to reach your plan is to do an accurate, honest skill assessment. Done correctly, this will point you in the right direction. If you don't do this assessment, you'll be doomed to wander the "land of the losers."
The second component of your strategy is research. Before you settle in on a strategy, you need to see what is out there, what is working today, etc. Keep your mind open, and you'll soon find something that you like, and that has potential.
Finally, it's time to get your hands dirty by doing detailed development. Whether you create a system yourself, or sign up with a service or an advisor, the key is to perform "due diligence." Make sure you learn all you can, before you put real money on the line.

Step 3: Check and Double Check
Remember when you were in school and the teacher always said "check your work?" If you were like me, you thought checking it was something you didn't need. Well, if you avoid checking your work before trading a strategy, you can easily fall into trouble.
Depending on the route you choose, there are many ways to double check your work. It might be as simple as checking your strategy code for math errors, or asking an advisor to back up claims with brokerage statements, or simply asking for references. Remember, it is your money, so take the time to thoroughly check everything out.

Step 4: Execute Your Strategy
At this point, you are ready to pull the trigger, and trade your strategy with real money. The key here is to plan your trade, and trade your plan. Simply put, once you develop a method or select an advisor, stick with it, without deviation, for at least three to six months. Anything less, and random chance could make a good strategy look bad. Give a strategy time to show its long term potential.
Step 5: Monitor and Adjust as Necessary
Once you start trading, it is essential that you monitor your results. One way is by keeping a trading log. Recording the details of trades, along with your thoughts and feelings, can be very helpful when you review your system performance. This log is especially powerful when you violate your system, as you likely will at some point. Reviewing why you violated your system may help you refine your signals to more closely match your psychology. The key here is to keep close tabs on your trading - otherwise, it can quickly get out of control.

So there you have it - the five steps to trading that I have used in my own trading. Don't be surprised if it takes a year or more to move through the steps. My advice is to not rush through them. I obviously can't guarantee that you'll have favorable results, but I can tell you the steps work, and work well."

OverANAL-yze =.="

This is sooooooooooo good!

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