The New Psychology of Trading

Discussion in 'Psychology' started by Duref Mudgins, May 29, 2008.

  1. The hoary academic discipline of trading psychology is long overdue for an overhaul. Once a proud and sober science, with its roots in the centuries-old study of manias panics and crashes (see Kindleberger, 1957), it is now being hawked and pimped in sound bytes by heal-thyself-and-get-rich-quick barkers at trade shows. No more. I intend to put an end to this shameless pandering. To do so I shall use the trading industry's most respected and participant-vetted medium of communication, ET.

    Let us begin with the concepts of fear and greed. We live in the 21st century, my fellow traders! These are outdated notions which we should cast aside with our new sophistication! In studies with our trained trading monkeys (see Doaks et al here), we have discovered that the chart itself reinforces the continuation of fear and greed. The universal chart coloring of green for up bars (greed, gold, US currency) and of red for down bars (blood, red ink, foreign funny monies) perpetuates emotional responses to price action.

    We have therefore devised a new coloring scheme for bars: burnt Umber (for Up) and olive Drab (for Down). We have found by extensive polygraph testing (reliable because monkeys do not lie) that this color scheme neutralizes the fear of shorting, makes counter tend bars look more inviting as trend entry retraces, and makes extended up trends look less intimidating.

    We hope that you will join our monkeys in adopting this new paradigm, as represented by the attachment. We call this schema "Soothing".
  2. An unexpected side effect for our consulting practice is that Third World traders prefer "earthy" colors (known colloquially in our offices as "chickenshit"), and they are increasingly drawn to use our services when they see our charts.
  3. A most noteworthy contribution. But what of the color blind?
  4. We encountered that issue when we attempted to move down the vertebrate chain from monkeys to dogs. Our workaround is to expand on our already extensive use of audibles.

    I might add by way of explanation to those not familiar with Mudgins and Associates Trading that we use monkeys rather than humans for both our in-house trading and our managed customer accounts because monkeys cannot read. Therefore although they are somewhat internet savvy (in particular they favor pornography of humans behaving like monkeys), their illiteracy means they cannot be led astray by posts on ET.
  5. And for Mr. Name-of-the-Day, thank you for jogging my memory with your Mexican color commentary. We have recently had improved success rates teaching support and resistance to our Latin American clients by renaming our best tool "Fibonacho" ratios.
  6. Two questions. First, in the matter of the audibles, what directional sounds would you propose to moderate vascilating, and potentially debilitating, emotional responses? And second, is not the use of monkeys in your research and testing a form of cheating? It is an established fact that monkeys with dart boards are potentially formidable financial adversaries. Why do you assume that humans will be able to replicate the simians' performance? (And if that is not your objective, then I don't mind telling you that your training an army of monkeys to trade in the financial markets raises the specter of subversion.)
  7. Curiously enough, we WANT our audibles to have emotional impact, because they are tied to hard-and-fast rule in multiple trading systems. Audibles, combined with certain proprietary combinations of pleasing and painful electrical stimulation, are what we use as training signals for the monkeys. At present we have 26 audibles, a trading alphabet as it were. But please excuse me for a moment, one of my smarter monkeys is trying to access ET, and I must go re-educate him. Severely, I might add.
  8. I'm back, sorry about that. He was attempting to access one of the more pernicious frauds perpetrated, nay perpetuated, on ET.

    As an example of an effective audible, we have five distinctive audibles representing five levels of the spread. The lowest, two ticks, is the hoot of a wise old owl. It communicates quite viscerally the simultaneous messages "Uncertainty" and "Be Watchful".
  9. i think you meant papertraded
  10. Oh, a good one, that! We may have a position in our firm for a bright young associate like you. Bent over for the entertainment of our office monkeys.
    #10     May 29, 2008