Mark Douglas and all trading psychologists emphasize being "open" to whatever direction the market may go (up or down). My problem is, when I tell myself I have to be open to the market's direction, whether up or down, that's when doubt starts to creep in. It seems to take the place of any directional bias I have based on my signals. As soon as I try to release my mind from my own directional bias, "something else" has to take its place, and doubt is more than happy to step in. So how does the expert traders deal with this? I'd like to hear what thoughts you place in your head to stay open to the market's direction without doubt coming in to replace it?
don't swing trade. just daytrade and every day make a list of stocks that are potential shorts and another for potential longs. Then you will have both biases in head.
Wavetrader - I reference SPY as a proxy for the market, and use an RSI of SPY to help view the market as "up" or "down". Each day my systems look to whether SPY is up or down relative to recent price. I use RSI for this, as it tends to do well in measuring trend. I use an 8 day RSI 50 as a baseline. If RSI (SPY) is above 50, my systems assume an uptrend. If RSI is below 50, they assume downtrend. This is not perfect, but it is a simple and rather effective way of helping my mechanical systems to consider whether the market is "strong" or "weak" before initiating alerts. If you are trading a mechanical system, it might help. And if you aren't, there's no way in the world in a market like this that you can determine trend or direction with any certaintly.
Seriously, I don't think being open to market's direction means you need to deny any directional signals you rely on. It just means be willing to make your decision based on those signals as you receive them, rather than saying to yourself "the news said blah blah about Greenspan, etc., so market must be going up/down". Seminar guy quoted Theodore Roosevelt as having said "The best thing to do, is the Right Thing. The second best thing to do is The Wrong Thing. The worst thing to do, is nothing."
You have your own bias/idea what the market will do , but you have to be willing to accept that your signal will fail and go the other way. New traders freeze up because they haven't considered what they'll do if it goes against them. There's nothing wrong with having bias, you just have to know when you're wrong.
>all trading psychologists emphasize being "open" Oh ? That would astonish me if they emphasize on being "closed" hihi ! Very good advice like politicians can give. They always say what should be but rarely how to achieve it except by exhortation only. As I said Deming, the Quality gurus denounces them in Quality Management as being responsible for their ineffficiencies in industries.
You never said what type of trader you are? I'm guessing your a swing trader. Regardless...its human nature to have opinions in this market. Such is completely unavoidable. Yet, as soon as you see a trade signal or think you see a trade signal... that trade signal should be based upon the price action and not on your opinion. Also, if your having doubts about what the charts are saying to you...best to be on the sidelines. In situations like the above...veteran traders may simply change chart interval to a higher chart interval to see a bigger picture or to at least get a different perspective to remove any doubts. As for myself...I'm a daytrader (not a scalper) and I have tons of opinions every trading day about the direction of the market... however to quickly ignore those opinions...I concentrate on what the charts are telling me. I would rather be wrong about how I viewed my charts instead of being wrong about my opinion on the direction of the market because taking a loss via a wrong opinion is a lot more difficult to swallow than being wrong about the charts. In my opinion (pun intended) NihabaAshi
Even on the principle they are wrong: by efficiency principle of market, the majority cannot win against the organisers of this big casino. This means, that statistically your opinion will not defer from the average or majority's opinion. From time to time, also by statistical law, you could find yourself on the tail of the statitiscal curves either on the very bad side either on the very good side but at long term you can't be, only by your normal human intuition, out of the average, or you have rather a super human nature. If so you don't have any trouble which doesn't seem to be the case. So opinion that one can have is a fake, at least for stock market and on average. So without OBJECTIVE TOOL you have great chance to lose. Tools don't do everything but like compass it helps very much to get the direction.
Thanks. I appreciate your replies. Thanks for sharing your knowledge and insight. Some times I think I know it already in my head, but it helps to hear it from somebody else. It cystallizes it. Good trading to you guys.