Better to Predict...or React?

Discussion in 'Psychology' started by dac8555, Nov 22, 2005.

  1. In fact, in control engineering, in the process of catching an object, the human's bionic system would definitely be considered an adaptive predictive control system.
     
    #41     Dec 4, 2005
  2. stfreak

    stfreak

    @cheese:

    you are absolutely right. thing here is, that one has to build up so called predictive models aka setups or patterns, that show you the direction of the next move but you do this work BEFORE you trade and thats important.

    you predict, before ever having a closer look at the markets possible direction concerning the next trade you are about to enter. it´s clear that in terms of market movement, there is nothing new under the sun. financial instruments behave in similar patterns (i don´t say that they are always the same, thats why i rather call the entryies " market situations" than patterns), and only that fact makes it possible to make money out of them.

    important to stress here is, when does the process of predicting the move happen? when sitting in front of the screen ready to pull the trigger or before even pushing the "power" - button of your PC?

    noone would be able to enter a trade without having an idea what possibly will happen and important: why. thats why one has to predict in a certain way. but the other thing is HOW you predict. is it guessing driven by opinion or is it evaluating a Risk to Reward Ratio based on the fact, that this situation has happened before under similar circumstances.
    And thats where the key point is. when you
    have a pattern, you know how the market should behave and what might happen, when it does not (breakout vs. fakeout) and what to do in those situations. and i don´t write of setups, that a trader might have seen in a book or on a website and that he/she never used before, I´m talking about setups that the trader uses in most of his/her trades, because only by repetition experience can be build up. it´s also a common mistake, that traders try to look for setups that match the current market situation. they think: "hm, I can remember this...I have seen this pattern on this and that website. let´s see, if I can press a bit of money out of it" instead of WAITING for a special pattern. Those traders are about to change their "system" very often (especially during a drawndown), because they don´t know the nuances of the strategy and how to apply it properly.

    when a trader has modelled his/her own rules (I can´t stress that enough...been through all of this sh*t and I needed a very long time to realise, that adaption doesn´t work. one has to find his/her own niche), the feeling of "driving 180mph on a snowy slippery road" disappears, because one doesn´t care about market direction, when entering a trade. the setup shows up, you pull the trigger and manage the trade as u are used to do(that is the "reaction" - thing, but you don´t react on the market itself, you react on the pattern, the market provides you with...).
    during the actual trading action, it is more important to take care about emotional controll than about market direction. u don´t mind it, because you allready did this by modelling a set of rules
     
    #42     Dec 4, 2005
  3. I wouldn't even dear to "drive at 180mph on a" sunny dry road.
    :D
     
    #43     Dec 5, 2005
  4. stfreak

    stfreak

    hm...but I hope u know what i mean :D
     
    #44     Dec 5, 2005