The following article summarizes several of the psychological pitfalls that interfere with accurate pattern recognition. My hope is that traders can focus on these three âvicesâ as mental preparation prior to entering the markets. One of the best ways of becoming an observer to your negative behavioral patterns - rather than a trader lost in those patterns - is to periodically take your emotional temperature. That means standing back and asking yourself: Am I falling prey to one of the vices below? Remember, observing and interrupting your patterns are the first steps in altering them! Your patterns lose control over you as you become better at not identifying with them. When you become an observer to your patterns, you are separating yourself from them. What great progress that is! I got this article from stockalyzing. Would anybody like to share their thoughts on what is ment by "Your patterns lose control over you as you become better at not identifying with them. When you become an observer to your patterns, you are separating yourself from them." would anybody like to share their thoughts on what is ment by
I absolutely agree! I have heard about this concept before and it is one of the most effective ways to really detach yourself from your emotions. I can also add that when you are the observer, you can do what is called "mental rehearsal," which is also a technique where you visualize your actions before they happen. In other words, you know what you are going to do at any given moment. This also takes away that emotional charge that we can encounter when trading. Thanks for bringing this up!!
You will always find a pattern that is pleasing to your eye. It is best to understand the reality of what is happening. You will win or lose when you act on your understanding. The better you become at understanding the greater the number of your winners than your losers.
I have just started a thread where I keep track of my bad patterns. If you made a mistake it is to easy to forget about it. It is only through keeping a journal of trades that one can determine at years end where adjusting needs to be and what the P/L is. But what trades are put in the journal ? Do we include ones that we broke our own rules ? If the calculation is to calculate emotional mistakes we include it (it is the real P and L) If we want the P and L of the system itself we do not include the bad miss managed trades but we must add a foot note to our trades mentioning this. however keeping track of bad habits allows us to have direction on what needs to be fixed and it gets done faster. We can also add these notes in our trading journal to see how changes effected trading. The goal is to get a clear and constant entry and exit as fast as possible. The best way to do this is to realize after every trade where you veered off. That being said. The mind is special on its own and can be thought of as a neural network type of system. It can be an adaptive indicator or and indicator that recognizes patterns from various data sources. Information goes in and out comes a trade in this case not allowing the brain to trade as it wishes violates the system. Naturally the brain would first have to pass back testing and show consistency.
if you play poke, you know, the more you observe, the more patient you are, the winning certainity is greatly improved. particulaly in last several rounds, since you rembered all cards delt from your members or opponents, you almost certain what others have. most people say the top/bottom is the hardest to predict. to me, I find I often buy the last thrust, or sell the last drop, I find the money in those last thrust or drop are so sure, the easiest to make. that is why I do not gamble on earning report. count what cards the market already delt, do not fool around. your odd of winning is greatly improved. do not oberse yourself, let God sit beside you. you observe the market.
If you have much faith in your method, then it is the method that makes/loses money. I am just there to hit buttons. There will be times when I get frustrated the method has losses, but it is the method that lost and not I. Now if the method was supposed to have a winning day and didn't, then it is my fault as I didn't have enough faith. Working on the faith is a constant job cause as humans, we always "think" we can do better than the stats show, human nature. So I must have two patterns to trade, well back/forward tested method and the faith to trade without reservation.
stock market is not a casino machince. after you crack dealer's probability, you beat dealers or the house. since those machines are built based on well known bell-curve gausian distribution modelling. if you apply statistics, like count cards, rember what dealt, you know what probility of those left those quants/system traders look smart, math, sophiscated math,... end up they are those most stupid..... when I look those guys trade, I just laugh, and I know I can beat them easily. Issac Newton thought stock market is a place to apply his math, he lost 20000punds, and call a quit: I never able to caculate out the madness of the market.
people will never have faith in probability or uncertainity. if you have faith in something, that thing must be certain. it is fruitless to try faith. when I look back to my trades, sometimes I found I hesitate, since I know that may be a trap. it turns out my hesitation is right. but sometimes I hesistate, it turns out my hesitation is wrong, I missed a gold opportunity. the same setup or the trading idea, sometimes work, sometimes horrible. we human being, will never have faith in something like that. so forget about that. move on. what I learned is: find more clues about each case, increase my odd, the more information you get, the more certain that thing is. do not stay on the same table, change table. since market is dynamic, the odd is dynamic too. yesterday opening, I tried to figure out "buy puts or buy calls of AAPL"? from the point of view of buy puts, that makes sense, sell pop on a down trend, so I kind of buy puts, but I hesitated, I hate to short a gap up: I know lots of gap up is a good buy, not a good sell. then I realized 450 is fridays' closing, I told myself, if aapl went through 445, I buy puts, if it bouced off 450 or last sessions' closing that means it is going up and my target is the gap up opening, so I waited, when I saw it started to print the first green 5' bar, it is very clear to me: I buy calls (465). of course shorted it in the opening gap up is a good decent trade too. but in the opening I just did not realize that yet. we traders often face "this way or that way" choice. in order to make the choice certain or near certain, I excercise patience, plus, actively seek evidence or clues (not just one way, two ways), then often suddenly I become clear: which way is right. in those cases, when I get "ah, that is it". I almost 100% correct. I trades FB too. intinally I was looking for buying calls when it hits 32.5+, then one thing tipped me off: the market may already factor in surprise earning beforehand, and most time it dips before the earning. when I pull out the daily chart, I immediately realize buy puts at the opening, kind of sense of market paricipants have the same idea. that is "ah" moment. it turns out FB dropped a whol day, nice ride.
do not gamble gamble is a sure way to lose gamble is a sure way to lose intelligence trading is not a casiono machine it is an intelligent game. not a mental game. try to be brave is no use. try to be coward cauition is no use. most people are mislead by a belief: if bet enough suppose they have a winning system, the odd is in your favor. it is true, coin flip is 50/50. to prove it, you need throw as many as you can, mathematically infinite. if you think your system is 60/40, you may think in the long run, you will beat the market, since your winning odd is 60. obviously it is flawed. in reality, you will be out of chip quickly if you gamble. gamble means you know nothing about the individual event, but you know the odd beforehand. you bet based on the odd, but not what you know. just like buying lottery, you know the chance of maga-million lottery ticket's odd, but you do not know the individual ticket. an intelligent person will try to collect more information, such as counting, or cheating (get inside information), almost certain the event is what he expects, then he bets. the last thrust in a rup up or last drop in the decline is the easiest money to make