Jul 27, 2012

Trading Psychology Journal Part 3


Identifying and neutralizing beliefs that are no longer useful in helping one fulfill their objectives.
  • The next step is to properly integrate the five fundamental truths into your mental environment at a functional level.
  • Using technical analysis you can begin to define these patterns as edges. 
  • Any pattern defined as an edge is simply and indication that there is a high probability that the market will move in one direction or another. 
  • Believe in random results -outcome for each pattern is random relative to one another
  • Believe in random risk-Risk on each pattern is random relative to one another
  • Believe in sample size Trading 
  • At the macro level, over a large sample of events,
  • I will have a satisfactory outcome. At the micro level 
  • each individual event has a random outcome.’
  • Neutralise existing self 
  • sabotaging beliefs and adopt the Seven Principles of 
  • Consistency 
  •  make them a part of your identity by 
  • making them a part of your set of trading beliefs.
  • ‘If you believe it, you will create and perpetuate it 
  • because it will be a natural function and expression 
  • of who you are.’
  • ‘Your consistency happens inside your mind, not in 
  • the market.’

Creating and growing beliefs about trading, that promote objective observation and flawless
execution of one’s chosen trading methodology.
  • Practicable trading beliefs to adopt as part of my personality (the Five Fundamental Truths and the Seven Principles of Consistency).
  • Completed my understanding of the role that 
  • trading with a mechanical system plays in thinking 
  • from the market’s perspective.
  • Confirmed for me the reasons why a mechanical 
  • system is required for nearly everybody that 
  • attempts trading. I say nearly because there are a 
  • very small number of the population that I believe 
  • can learn to trade markets intuitively.




Trading Psychology Journal Part 2

Understanding the nature of beliefs:-
  • ‘Beliefs seem to naturally resist any force that would alter their present form.’
  • ‘Once you tap into a belief it forces itself into your conscious mind.’
  • ‘An inherent characteristic of a belief is that we severely reject any possibility that exists outside the limitation of what we believe is true.’
  • ‘There is a huge difference between being aware and believing.’
  • Committing yourself to trade a mechanical system in predefined sample sizes will cause a head-on confrontation between the variables that define your  edge and any mental forces that are in conflict with the Five Fundamental Truths and the Seven Principles of Consistency
  • Effectively working through these conflicts will create a resolute belief in probabilities and build a sense of self-trust that you will always, without hesitation, act in your own best interests.
  • You are ‘there’ when you are no longer experiencing any conflicting thoughts when you execute your mechanical edge

Why do traders not recognise that  they are making trading errors?
However, it all comes back to beliefs. The beliefs that stand people in good stead to make them successful  in society/business do NOT work in the markets.



To be successful in society/business you need to:
1. Control people, companies, opposition.
2. Be better than people, companies etc.
3. Have better and bigger ideas than others.
4. Manipulate data, people, companies, situation etc.
5. Convince people that you are right and your
company is the right solution.
6. Compete and beat.
7. Win and be right (or more appropriately, not lose 
and not be wrong).
8. Outsell and out maneuver the opposition.
9. Be a step ahead of the opposition – try to predict 
their next move.




    Automatic hard-wired programs that all human beings have are to:



    • Associate the current moment with previous 
    • experiences, and


    • Avoid emotional and physical pain
  • ‘As long as our minds are associating we are NOT  in the “now” moment’.





    ‘Your ultimate trading objective is to get to a point where you can trade from a care-free, objective state  of mind where you are making yourself available 
    to perceive and act upon whatever the market 
    is offering you in any given now moment from its  
    perspective.’






    Through your hard-wired mechanism of association you have likened current 
    information to a past painful experience which is out 
    f the ‘now’ moment. The association creates the 
    perception of a potential threat of emotional pain which automatically invokes your pain avoidance 
    mechanism. This mechanism will cause thoughts 
    to pop into your conscious mind (your beliefs are 
    at work) that result in actions such as delay, freeze,
    avoid, justify, rationalise etc. In this state of mind you 
    cannot be carefree and objective.




    ‘As long as our minds are associating we are NOT in the “now” moment’.


    The actions that could result would be doing more analysis of the charts, researching stocks on the internet, phoning a broker for advice, reading newsletters for additional input into your buy, hold or sell trading decision - all subjective actions – when you should have just acted on your edge.


     In a market environment emotional pain is experienced through:
    1. Being proven wrong.
    2. Losing money.
    3. Missing out.
    4. Leaving money on the table.


    These are the four primal fears that traders, whose trading paradigm is set by the same beliefs that they   operate under in the community and in business, try   
    to avoid. Meaning that we become hard-wired   
    to avoid the above four situations in a market   
    environment. Any action that a trader takes to avoid   
    any of the above four situations is a trading error. 



    This is why people do not recognize that they are making trading errors. To them their mind, through  their time grown beliefs, is operating correctly. 
    And it is, only it is operating correctly for 
    a non-market environment.





    Identifying and neutralizing beliefs that are no 
    longer useful in helping one fulfill their Objectives.










    Trading Psychology Journal Part 1




    Mark Douglas states: ‘The trading environment presents us with some very difficult and unique psychological obstacles, or challenges. Until these challenges are transcended in some way, getting into the flow of the market and trading without fear or error will be virtually impossible.’


    Trading Psychology Journal is divided into four main sections
    1. Learning how to think in the markets’ perspective (thinking in probabilities).
    2. Understanding the nature of beliefs.
    3. Identifying and neutralizing beliefs that are no longer useful in helping one fulfill their objectives.
    4. Creating and growing beliefs about trading, that promote objective observation and flawless execution of one’s chosen trading methodology.

    Learning how to think in the markets’ perspective (thinking in probabilities)
    ----------------------------********************--------------------------------------------------------
    It means to believe at the very core of our identity that:
    anything can happen
    every moment is unique
    there is a random distribution between wins and losses on any given set of variables that define an edge


    Each one of these beliefs will keep your expectations in line with what is possible from the markets perspective.   To the extent your expectations correspond with what is possible from the markets perspective, you eliminate the potential to define and interpret market information as painful.


    Ultimately ~ you can get to the point where you can trade from a "carefree" and "objective" state of mind where you are making yourself available to perceive and act upon whatever the market is offering you in any given "now" moment from its perspective.


    ----------------------------********************--------------------------------------------------------
    To think in probabilities means to have an edge and believe the Five Fundamental Truths
    THE 5 FUNDAMENTAL TRUTHS OF TRADING:

    1. Anything can happen.
        =>  It Ok ,that you have an edge and u have probability ,but there is something outside these which you cannot quantify. An edge is just a higher probability  of  one thing over another and nothing else.

    2. You don’t need to know what is going to happen next to make money.
    =>Just be slave of your trading plan and nothing else matter really.‘The ONLY way to KNOW exactly what will happen next would be to tap into EVERY market participants’ mind and know what they are going to do.’

    3. There is a random distribution between wins and losses for any given set of
    variables that define an edge.
    => In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities. 

    4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
    =>Probability will never be guaranty.

    5. Every moment in the market is unique.
    =>Market movement is net between Buyer and Seller.Intentions and Volume of each  participant (Buyer /seller)  will never be known. 
    ----------------------------********************--------------------------------------------------------
    THE 7 PRINCIPLES OF CONSISTENCY:

    1. I objectively identify my edges.
    => There is no reason to workout the market and beat the market through analysis.What are you looking for , what is your stop loss ,where is profit taking level and predefined  Ur risk.

    2. I predefine the risk of every trade.
    =>I am dependent on some body else to make me a winner.so stop loss is essential.

    3. I completely accept the risk or I am willing to let go of the trade.
    =>To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully. 

    4. I act on my edges without reservation or hesitation.
    =>When edge present itself,there is no points analyzing the edge.Since we have done the done back testing , appearance of edge shown higher probability of market moving in your favor. 

    5. I pay myself as the market makes money available to me.
    =>There is no point in letting winner turning up in loser. We should have profit  taking regime and follow it. 

    6. I continually monitor my susceptibility for making errors.
    => Regular exercise  

    7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.
    => Regular exercise  and practice 

    Trading in its simplest form, is a pattern recognition numbers game. We use market analysis to identify the patterns, define the risk, and determine when to take profits. The trade either works or it doesn't. In any case, we go on to die next trade. It's that simple.


    ----------------------------********************--------------------------------------------------------
    Trading Reality are 


    1.Each trading result generated from pattern is random and unique.


    2.There is no relationship from pattern and outcome.


    3.There is no correlation ship between pattern and risk.


    4.Technical method will give winning percentage over series of trade.


    5.I am dependent on some body else to make me a winner.so stoploss is essential.


    6.Pattern - whem this set of criteria there is higher proabilities one thing over another.


    7.When pattern present itself => there is no points analyzing the pattern.


    8.It required no skills to be winner.‘you don’t need to know ANYTHING about trading or the markets to put on a winning trade.’


    9.Trading in the markets is an odds game, and the object is always keep the odds in your favor .


    10.Proper execution of signal require mental skills.


    11.Technical method are  designed to put odd in our favor over a series of trade. we will never know sequence of win and losses .


    12.Trading in its simplest form, is a pattern recognitionnumbers game. We use market analysis to identify the patterns, define the risk, and determine when to take profits. The trade either works or it doesn't. In any case, we go on to die next trade. It's that simple.


    13.There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities. 


    14.I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!” 


    15.To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully. 


    16.The less I cared about whether or not I was wrong, the clearerthings became, making it much easier to move in and out of positions,cutting my losses short to make myself mentally available to take the next opportunity.


    17. If you really believe in an uncertain outcome, then you also have to expect that virtually anything can happen. Otherwise, the moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won’t let you have it both ways. If you believe you know something, the moment is no longer unique.


    ----------------------------********************--------------------------------------------------------

    TO ACHIEVE CONSISTENCY IN TRADING



    •Trade with a plan and stand by the rules (Trading methodology)
    •Know your entry, stop and target before entering any trades (Trading methodology)
    •Always make sure to have a stop in place. THIS IS A MUST (Trading methodology)
    •Risk Parameters 
    •Money Management(Position Size)
    •Profit Objectives
    •Ability to execute trade flawlessly so that you can utilizes  trading plan to its maximum potential.
    •Develop the ability to recognize if you have crossed the threshold from normal self confidence in the state of euphoria.
    •Maintain Discipline
    •Keep it simple silly




    ----------------------------********************--------------------------------------------------------


    Jul 25, 2012

    Nifty Analysis for 26 July 2012

    Daily and Weekly Trend is down below 214(SAR)
    Support are 5088-5040-5000-4950-4800
    Resistances are 5160-5270-5300-(5344)-(5377-5385)-5498-5630
    Hammer formation (low 5077) - 5077 important level to watch
    Symmetry move completed......chance of reversal if 5077 is protected. 
    At current level , LONG trade do not provide favorable RISK :REWARD 









    Jul 22, 2012

    Nifty Analysis for 24 July 2012


    Daily and Weekly Trend is down below 260(SAR)
    Support are 5088-5040-5000-4950-4800
    Resistances are 5160-5270-5300-(5344)-(5377-5385)-5498-5630
    Change of Polarity at 5160-5260 level












    UPDATED CHART  :24 JULY 2012