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  1. GordonDK

    Fear of losing

    Hi all, I'll make this simple: at the moment, I'm at a stage of my daytrading career where I feel that the fear of losing is holding me back, i.e. the fear of pulling the trigger on a trade where I can see that I have some edge. Anyone have suggestions to resources/tips on how to overcome this? Would like to hear your opinion on this issue, since I'm most likely not the only one dealing with this. Thank you in advance! Br., Jimmy (Gordon - my middle name - in the chat)
  2. Article about three studies that highlight the benefits of accepting emotions and thoughts, rather than judging them, on psychological health. When a stressful situation causes negative emotions, accepting feelings of frustration or upset — rather than trying to pretend you’re not upset, or beating yourself up for feeling this way — reduces guilt and negative self-image. Over time, this will in turn lead to increased psychological health. Feeling okay about feeling bad is good for your mental health
  3. Hey guys. I just wanted to put together a little document on what I have been doing to learn the /ES. This isn’t exclusive to futures, this is for ALL trading and for those looking to give themselves the edge and to take their trading to the next level. This document is for beginners as well as jaded traders such as myself. The point here is you need to adjust how you view the market and change your thought processes. Recording Trades This may seem like a no-brainer, but not many people do this. I didn’t realize the power of recording the market until I started doing it. There are plenty of free programs out there (I use Open Broadcaster Software, OBS: https://www.obsproject.com). Since I am only trading 1 instrument, I just need to record my primary monitor. If you are trading equities and use several monitors to trade from, this may become a bit of a challenge. However, you should really only try to focus on 1 stock as it is anyways. In this case, you can record the screen that you are trading from. The other option is, just record 1 screen and ONLY trade from that screen. I also highly recommend that you record the entire day’s action, even if it’s just 1 stock that may die in the middle of the day. The reason for this will become clear in the next section. But the point here is that you NEED to be recording what you are doing, because in the heat of the moment, you don’t always know what is happening, but the recordings can help you with that. Reviewing your Trades If you record your trades, like I mentioned above, then you absolutely need to spend time reviewing your trades. I know many people here simply copy and paste their trades into their journals, put in a little blurb about what they saw happen, then never go back or care to look at it again. While this is good in practice, unless you are actually reviewing your trades in depth (and you are able to remember what was happening and going through your head at that time), there’s really no value to the journaling; you need to review! This is where the recordings come in. I mentioned in the chat that I record the entire day then I go back in the evening and re-watch everything. While this may seem a bit extreme, this is the only way you can improve your skills. Why? Well think about it this way, in the heat of the moment while the market is open and you are trying to trade, do you think you are really seeing every possibility? Are you seeing the probable outcomes of your trade? Probably not! Furthermore, you are under the “gun” so to speak of getting in at the right spot, managing the trade and exiting with a profit or a loss. This all happens at lightning speed and sometimes, you don’t even have a second to think about what is happening. When you re-watch the recordings in the evening, you are more relaxed and you can observe A LOT more of what is happening in the market/with your trade than you can while it is happening in real-time. Even doing your journal review at the end of the day, you are still a little stressed from the day and may not remember/see everything that you thought you remembered or saw. This is especially true for a really bad day. You do not need 6 and a half hours at night to literally re-watch what you already saw earlier in the day. Instead, scrub through the recording (this means taking the time scroller and moving it to different sections of the video) and find important points in the market action. Areas of major support/resistance, technical levels, VWAP, moving averages and most importantly, reversals. If you focus on these areas exclusively, you can start to see what is happening at these key spots and learn what to look for. Also, do not do this right after the market closes. You need a few hours to decompress after 4PM EST. If you jump right back into it, your mind is still going to be fried and you will be missing out on key points, so take a break and do this after dinner and before bed if you can. The recordings allow you to calmly review the market action, what you did right and what you did wrong and learn from what you are seeing, which leads me to my next piece. Taking Notes Of course, we all went to school at some point in our lives and had to take notes on what the teacher or professor was telling us. Or, we read several textbooks and took notes on that. Trading is no different. We are in school essentially trying to learn a rather subjective subject with about a million variables going on at every microsecond. But, there is a lot of information in all of this noise and by taking proper notes, you will be able to find small pieces of information that can help you gain your edge. Now, taking notes, trying to trade and also watching the market is literally impossible. Some people use dictation software and speak into a microphone that records their statements either into a document or just a voice recorder. This is an incredible process! I tried it but the dictation software didn’t understand me and since I hate the sound of my own voice, re-listening to myself is impossible (yes this is petty, but something about my high-pitched nasally voice drives me batty). However, if you have a pen and paper available and you can quickly jot down a quick note, even if it’s an important price level where you saw a large order get executed, will still be very helpful. However, what I am getting at here is if you do the recordings like I mentioned above, then you will have a much easier time taking notes when the market is closed, you are relaxed and you can focus a bit better on the action. You would be amazed as to how much information is out there when you are able to sit back, relax and just watch and take simple notes of what is happening. However, I have found an even better way of note taking for trading which is in the next section. Asking the right questions Everybody learns at different paces and via different styles. One way of learning that I felt has been dramatically helpful for me is simply asking a question then finding the answer to it. While we can read books, watch videos and listen to others talk about their trading, until you truly understand the “why” or the “how” you are just blindly following somebody else around and this will get you into trouble. When you are unable to look at the market from a purely objective perspective, then you cannot understand what is actually happening. I’ll get into this more in the next section, but it’s important to discuss here. If you come up with questions about things you are seeing or things you are not understanding, then you will be forcing yourself to find the answers to those questions and forcibly build your knowledge. Because now, you are seeking the answer instead of being told simply “look for this”. Well, “how do I look for this, why do I look for this?”. Here’s an example: “Do value areas and High-Volume Nodes (HVN’s) on the DOM (Depth of market) provide entries and price targets?” This is a question I wrote down on my notepad and I am working on answering. Another question you can ask yourself is “How strong is the VWAP in AAPL? Does AAPL respect its VWAP?” Or, “What happens when a large order is executed on Level 2? Does price retrace then try to retest that price again? Is price being held down by a large player”? It is then your job to find the answers to these questions. You won’t find the answers in one day or in one recording, but now you have something to work with. Just sitting at your screen, watching the live market or even a recording without any direction or guidance isn’t going to help you. I know because I spent 4 years doing this. Sitting at the screen and trying to make sense of what is going on with all of this noise. Well, by not having questions to answer and trying to seek the truth or answers within the noise, I just sat there and wasted my time getting lost in all of the noise of the market. Get a pad and a pen, write down your questions then watch the market live and most importantly, watch the recordings and find those answers. Once you find the answers to your questions, watch how your trading changes. Charting your own path (pun-intended) I mentioned above that most of us like to follow something blindly, especially in such a complicated environment as the markets. But you need to learn to think for yourself and think objectively. As humans, we need structure. It’s how our brains work, it’s how we live our lives – with structure (and lots of it). We are logical beings and we need “rules” in order to function properly. Everything in our lives has structure and a set of rules. Driving, working, sleeping even eating. There is structure and rules in place for everything in our lives. Trading is no different. So, we seek out ways to find rules that say “If a then b”. Well, I hate to break it to you but most rules don’t work. The market isn’t about absolutes. Far from it. There are millions of people in the market place (as well as machines) all making decisions based on their subjective point of view of what they “think” will happen. Sure, some people do have rules and I am not saying you shouldn’t have any rules – quite the contrary, but you need to understand that just because you have a horizontal line on your chart from a higher-time frame doesn’t mean that price is going to touch it to the penny (or tick) and bounce off of it. This happens, but usually, you have larger players that know that all retail traders are looking at that level and most people have stops there. So, the large players will throw a bunch of money at that zone to break it and trigger the stops, then take the money from the stops getting hit and push price back down and even further lower. Well guess what your “rules” told you… “let’s go long when price breaks this level”. Guess what just happened? Johnny Stock at Goldman just pushed price through the level, trapped you (and millions of others) into a failed trade, then sold it faster than cold water on a hot day, just to get a better price. This happens all the time. This is why you need to answer QUESTIONS rather than have rigid rules that tell you A=B. Because that’s not how this works. Yes, rules for stop losses and profit targets are critical and you can be somewhat rigid on those, but just understand that you need to think for yourself in this and develop your own way of viewing the market. Having somebody like Andrew at your disposal is critical because while I encourage you to answer your own questions by putting in the time watching the recordings, Andrew can absolutely help you in getting the answer a little bit faster and even assist you in finding that answer. And it’s not just Andrew, anybody here in our wonderful community can answer your questions. We are all here to help one another out and to work together. I implore you to come up with some questions (only after you have watched the markets long enough and watched some recordings) and find the answers to those questions. Everybody is different and the questions and answers you have may not work for me, but that’s quite ok. We are all here to build knowledge on the market and to most importantly, learn for ourselves and develop our own style of trading. While it is impossible to master the market (anybody who says they have is full of themselves), we can certainly take advantage of certain imbalances. If you think you mastered the market, you have a rude awakening coming because the market is impossible to master and will put you right back in your place. But put in the time and effort, and you will be rewarded. Do not look at trading as a way to get rich quick or start making tons of money, because you will just lose tons of money with this mindset (I know from personal experience). Treat the market like it’s a school and a game that you need to learn the strategies of. Approach it like this and follow what I said above and you will reach success IN TIME.
  4. I was browsing Farnam Street when this article caught my attention: What You Can Learn from Fighter Pilots About Making Fast and Accurate Decisions about the OODA loop, a practical concept designed to be the foundation of rational thinking in confusing or chaotic situations, developed by strategist and U.S. Air Force Colonel John Boyd for fighter pilots. OODA stands for Observe, Orient, Decide, Act. Boyd intended the four steps to be repeated again and again until a conflict finishes: 1: Observe The first step in the OODA Loop is to observe. At this stage, the main focus is to build a comprehensive picture of the situation with as much accuracy as possible. A fighter pilot needs to consider: What is immediately affecting me? What is affecting my opponent? What could affect us later on? Can I make any predictions, and how accurate were my prior ones? A pilot’s environment changes rapidly, so these observations need to be broad and fluid. And information alone is not enough. The observation stage requires awareness of the overarching meaning of the information. It also necessitates separating the information which is relevant for a particular decision from that which is not. You have to add context to the variables. The observation stage is vital in decision-making processes. 2: Orient Orientation, the second stage of the OODA loop, is frequently misunderstood or skipped because it is less intuitive than the other stages. Boyd referred to it as the schwerpunkt, a German term which loosely translates to “the main emphasis.” In this context, to orient is to recognize the barriers that might interfere with the other parts of the process. Without an awareness of these barriers, the subsequent decision cannot be a fully rational one. Orienting is all about connecting with reality, not with a false version of events filtered through the lens of cognitive biases and shortcuts. Including this step, rather than jumping straight to making a decision, gives us an edge over the competition. Even if we are at a disadvantage to begin with, having fewer resources or less information, Boyd maintained that the Orient step ensures that we can outsmart an opponent. 3. Decide Having gathered information and oriented ourselves, we have to make an informed decision. The previous two steps should have generated a plethora of ideas, so this is the point where we choose the most relevant option. Boyd cautioned against first-conclusion bias, explaining that we cannot keep making the same decision again and again. This part of the loop needs to be flexible and open to Bayesian updating. In some of his notes, Boyd described this step as the hypothesis stage. The implication is that we should test the decisions we make at this point in the loop, spotting their flaws and including any issues in future observation stages. 4. Act While technically a decision-making process, the OODA loop is all about action. The ability to act upon rational decisions is a serious advantage. The other steps are mere precursors. A decision made, now is the time to act upon it. Also known as the test stage, this is when we experiment to see how good our decision was. Did we observe the right information? Did we use the best possible mental models? Did we get swayed by biases and other barriers? Can we disprove the prior hypothesis? Whatever the outcome, we then cycle back to the first part of the loop and begin observing again. Boyd developed this strategy for fighter pilots. However, like all good mental models, it can be extended into other fields. So I googled OODA and Day Trading and our good buddy Brett N. Steenbarger, author of The Daily Trading Coach, came up. Right in his website there is this 11 page article "Trading as Mental Warfare" (a new window will open to download a .doc file). In this article, Steenbarger explains how trading, like the battlefield, offers an environment typified by risk, danger, and uncertainty, rewarding the efficiency of mental processing. The successful trader is one who can rapidly observe market conditions, orient himself, integrate information into effective decisions, and quickly act upon those decisions. So, lets watch Top Gun again!
  5. How Much Dopamine Is Too Much For a Trader? Some on the Street like to talk about how making money is "in their DNA." But it's always surprising to see what turns up when real scientists actually look at traders' chromosomes. In the latest such study (via Wall Street Journal), two researchers at Claremont Graduate University's Center for Neuroeconomics Studies found that the most successful traders had a "moderate" amount of dopamine — not too much, but not too little. The study profiled 60 New York City-based institutional traders, looking at whether certain alleles (how genes are expressed) are more common in successful traders than a control group. They used a simple but intriguing measure of success: tenure on the Street. Analyzing returns, they argued, would not provide enough accuracy since returns depend on a host of factors. Instead, they reckoned that longevity would correlate with an ability to "weigh risk and reward, rather than [take] excessive risks." They found that traders do indeed have more elevated levels of dopamine than the general population, but also have greater levels of genes that control risk behavior. But there's hope: They also found the dopamine system can be trained to better assess risk and reward in the context of trading. Their conclusion: the loudest guy in the room is not necessarily the best: Our results suggest that using a history of risk-taking and competitive behaviors when hiring traders could be a mistake, though this is often done. Having too little or too much risk-aversion is not associated with success by those in our sample; rather taking a balanced level of risk appears to be optimal.
  6. The week just finished was rough, and some BBT members were hit by the market, I just read this article in today´s StockTwits newsletter, good reading for everyone. Insights into Breaking a Trading Slump By Ross Heart Ever been in a slump? A bad one – a really bad one? If you’ve invested in the markets for an extended period of time, you likely have had a trading slump or two. There’s no way around it and despite its discomfort, trading slumps are an inevitable component of investing. Eventually everybody gets stung and regardless the systems, process, and disciplines that traders (or investors) follow, strategies are not infallible, and stretches will invariably pop-up out of nowhere where you can’t seem to buy a hit… the dreaded trading slump. Whether I was in a slump or feeling badly or having trouble off the field, the only thing to do was keep swinging ~ Henry Aaron If you’ve found yourself in this situation the first thing you need to do is acknowledge the trading slump, and immediately determine the overriding goal is to simply get through it as unscathed as possible. Second, try to define the nature of the slump you’re currently in. Are you missing opportunities? Are current positions not working and giving you fits? Do you find yourself missing major moves? Are you deviating from your normal processes? Or are you the proverbial deer in the headlights and too frozen to act? Every situation (and person) is different, but once you’ve acknowledged the trading slump and defined its nature, I would suggest not disengaging from the markets. As tough as this may be, try to keep yourself involved, but definitely try not to press. Sidenote: I would overwhelmingly encourage you to disengage from individuals and commentary that appear to be endlessly right about everything. These people add nothing more than frustration, and frankly, they may likely struggle the most when tides turn. Staying involved and abreast of the markets, however, does not mean taking a couple extra hours of batting practice in the cage. Trading slumps are mental, so try to increase breaks, walks, naps, exercise and other stress reducers in an effort to allow your inner pressures to subside and your subconscious mind to strengthen. Re-developing the confidence and level-headedness needed to deal with volatile markets on a day-in day-out basis will likely take some time. Remember that patience is your friend. Start to go back and examine stretches in a trading journal where you ripped the cover off the ball, and try to recapture your state of mind. Re-read classic investing books and understand how and why Hall-of-Fame investors have gotten to where they are. An over-riding and underlying message that you’ll likely reacquaint yourself with is that frankly, there are no easy answers. Hank Aaron’s quote may not translate perfectly to investing – you don’t receive an unlimited number of at bats but you can wait much, much longer for the really fat pitch. The important message though is that slumps are merely a natural part of the game. Ironman Cal Ripken Jr. once played on a team that started a season 0-21, and also endured a painful 1992 season, in which he batted .190 over a 73-game homer-less streak. I’m guessing the key for Ripken was similar to a slumping investor – show up every day and grind it out with that underlining goal of merely getting through.
  7. Hi everyone, made a video about psychology and journaling, hope you enjoy it is my first video ever. Please leave feedback in the comments positive or negative I dont care PEACE ♥
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