Trader Emotional Trading

I’ve turned into somewhat of a self help junkie within the past month.  The reason is simple: the audio and or books are so positive! How could I resist!?  They have also helped me a great deal in creating better more vivid visualizations during meditation.  These are so helpful in mastering everyday activities I thought why not apply this concept to trading!

I was inspired to make this video last week and yesterday I was over come by this inspiration and ran with the idea.  The video is a guided meditation with real trading involved in order to help you become mindful of your emotions then be able to overcome them.  It’s the first video and I hope there can be more.  Feedback is always welcome.

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Contributing to Society as a Day Trader

Lets face it, day trading isn’t the most beneficent job in the world.  Even the most popular saying involves comparisons to farm animals, “Bears get rich, bulls get rich and pigs get slaughter.”  We’re often assicated with the pursuit of one goal, to aquire that which is “the root of all evil,” money.

After being in the red for nearly than 8 months.  Then oscillating between above and below water for 2 months I finally starting to turn consistently profitable after reading One Good Trade by Mike Bellafiore from SMB Capital (That’s another post).  I felt a great sense of accomplishment but it was pinned to a lack of contribution to a greater good.   So I devised a way to give back. To take the greed, the karmic “debt,” and try to give day trading a new name.

Any day I make equal or greater than 2 standard deviations of my average net profit in a day (about 500 – 1000 for me) 10% of all earnings before taxes gets donated in one of two ways.  I give to my favorite charity or “donate” the amount of time I spent trading that day to an organization through volunteer work. I donate to organizations dedicated to helping/saving animals and “donate” my time to Forgotten Friends of Long Island.

If the market and I were in such flow that my hard work was rewarded with a statistically improbable return it makes sense for me to pay homage and give thanks for this.   I felt a great sense of accomplishment after my first donation because I had traded hard, stuck to my plan, had an above average pay day, and help one of my favorite charities.  I can’t think of a better way to feel happy about the work I do.

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How to Ace Calc 2

Introduction to Math: It was 2 years ago that I started my journey back through the mathematical landscape.  My GRE’s were no where near competitive and hours of studying for them seemed to produce little to no results.  In June of 2009 I took remedial math at Nassau Community College (001 & 002 Preparatory math).  I learned how to add and subtract fractions.  As if my ego wasn’t damaged enough, challenging problems consisted of calculating percentage discounts on a grocery bill.  As I progressed through each course from remedial math to calculus, my grades represented my knowledge base accurately (of course I got all A’s).   Then Calculus 2 came.  The “Organic Chemistry of math,” so to speak.  It was this class that I earned the most accurate, humbling and most deserved B in my academic career .

The Calculus Myth: Every math professor spoke of the horrors of Calc 2 as they had uttered about all other math classes in which I quickly picked up the material.  In hind sight, it was naive not to believe them.  The Professor, Dr. Philip Cheifetz, talked of the same folk tale the first day of class.  Going as far to pulling students outside asking them if they were ready for this class (I know because I was one of them).  “I had a Master’s Degree,” I chuckled. “I have taken ANOVA, Multiple Regression / Multivariate Analysis, and Factor Analysis. This can’t be harder,” I gloated.  No matter what he said, it would not have produced the courage nor strength for the emotional, intellectual and spiritual challenge I was about to face.

Part 1 Integration: I had inquired with my Calc 1 professor, “If Calc 2 is so hard, how can I prepare?”  His response, “Learn the basic 8 integrals.  Know them by heart.”  Again, my arrogance reared its contorted view.  I had already done this, how much harder could it be?  Within the coming weeks Dr. Cheifetz hit us with integration by parts, then substitution, partial fractions, trigonometric substitutions, completing the square and problems that incorporated more than one of these methods to solve it.  The first exam approached like antelope trying to outrun a leopard.  In all, I did some 200+ problems in preparation, not including all the assigned homework.  I thought I was ready… 77 that’s what I earned and knew after all my practice.  I thought, “Where are the other 15 or 20 points?  Did he miss them?”  I began to question my resolve. Was I really not good at math?  Would this be the class that proves to everyone I’m not that “smart.”  How, after studying so much could I be so dumb…

Part 2 Measuring Solids: Dr. Cheifetz described this section as the “love part of a relationship.”  While integration, mainly mechanical, was “flirtatious.” Triangles turned into pyramids, circles into spheres and donuts, and cones twisted into shapes I had never seen before.  It was our job to calculate the volume of these objects, but why stop there!  In the proceeding weeks these objects began to take on densities and water pressure.  We now needed to discover “work” calculated in joules!  The antelope again fell to its predator.  100 problems later including redo’s from homework ( I ran out of problems in the book), I sat down to take this exam on Wednesday night with an emotional set I won’t ever forget.  Contempt and a fierce, burning sense of competition.  It was me Vs. Calc 2. On Monday two letters branded themselves onto a now fragile ego… 76

Part 3 Sequences & Series: I had never heard of either of these before calc 2.  The first week wasn’t very hard, but this old dog learned a new trick.  Look ahead, be prepared because you will not expect what’s coming.  I was right!  Sequences and series with the same formula perform differently.  There are over 7 ways to test for convergence!  Ratio tests, Limit comparisons all working against once another to create this beautiful cacophony of confusion! I did every bit of homework assigned, but something shifted in me.  Emotionally, I was readying for a humbling defeat, but could not stop marching on.  Nor guns, nor atom bombs let alone Taylor’s Series would stop me from the journey I had started 10 weeks ago.  Every exam felt like a battle losing pieces of myself and class mates too.  This time it would be different though. It was take home 🙂  Three numbers danced upon the war torn battle field… 100.  I smiled, rejoiced and ran forward in a mad dash, like the brave soilders at Piket’s Charge, for the war had yet to be won.

The Final Exam: I took stock of my ammunition.  Over 500+ problems completed.  I peered over my shoulder, only half the class remains.  I asked myself, “Why do you care so much?  It’s just Calc 2.  You’re here to learn not to get a grade.  You already have 2 degrees!”  I wasn’t able to answer that question then.  It rattled inside my head replenishing and stealing confidence, but I can answer it now.  I was challenged.  Every exam produced a flow state because I wanted to learn.  Dr. Cheifetz challenged us fairly and was a man of his word.  Unlike some professors he told you exactly what was expected.  Not only was I intellectually challenged, but emotionally as well.  Calc 2 retaught me about humility, preparation, and most importantly how I perform under adverse, difficult conditions.  When my own confidence becomes weak, the ego attacks and feedback through grades is in opposition to my success…  I keep pushing forward.  I had thought I was the antelope waiting for the exam to strike, but I truly was the leopard.

I believe calc 2 for me represented a great motif; that of life.  Do you give up? Do you march forward?  Whether it be calc 2, another course, or an event in life.  Perseverance is key.  As my Mix Martial Arts coach says, “Leave nothing in the ring, I’ll carry you out if I have to.”  What I received on the final exam I will never know, nor do I care.  In the end, I earned a B in Calc 2.

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Mastering the E-mini Gap

Masterthegap.com has inspired me to create a program which will do just that… Master the Gap. I’ll be posting the results from 1000 days of intra-day data this week. From the preliminary results. It appears that gaps have different probabilities of filling given the day of the week (Monday, Wednesday, etc), the day of the month (1,2,3,4,etc), the month itself, and also the time at which it fills. Interesting stuff…

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Leader & Laggers S&P 500 Update

In my last post I talked about a program that would find a stock that would lead or lag a stock you selected.  Lets take $AAPL for example.  Below are the top 5 positive and negatively related intra-day stocks for Apple Computers calculated on 9/18/2010 with 5 minute bars.

AAPL Leaders and  Laggers

However, there is a special attribute to this information.   $AAPL time1 is not correlated with $DTV time1 then squared (that is how you calculate R^2. Read about it here).  It is correlated with time3 of $DTV.  The illistration below should help.  (Please note the prices below are for examples purposes only)

Lead Laggers Example

On the left is the traditional stock by stock correlation.  On the right is a leaders/laggers correlation.  What this does is allow you to have an understanding of what $DTV will do with greater confidence than if it was correlated with $AAPL time1.  The reason is this:  When a stock is trending that trend can change suddenly and if you’re pairs trading or using correlated stocks it will change immediately with it.  When you lead/lag the R^2 tells you that while $APPL is rising 10 mins later $DTV should be rising as well (within a degree of confidence of course). Also if $APPL is reaching a bottom $DTV should reach a bottom 10 minutes later.  The chart below should illustrate this concept

AAPL DTV Chart Lag Lead

As you can see as $AAPL hits a bottom at $243.62 at 11:45am $DTV hits it’s bottom at 37.70 11 minutes later at 11:56.  This is the power of lead/lag.  There are many strategies one can implement knowing this information.

I am working on posting popular lead/lag coefficient such as the ES_F, EURUSD, and $AAPL within this up coming month.

Hope you enjoyed this post

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Leaders & Laggers of the S&P 500 Index

Some time ago I began coding a program that would iterate through a list of stocks (that list being the Standard & Poors 500 (S&P500)). I use intra-day 5 minute bars going 20 days back. The information tells me how to best hedge my current intra-day positions. For example lets say $AAPL has a negative correlation with stock XYZ with an R^2 above .90. When holding $AAPL for longer periods of time I know stock XYZ will follow suit in the opposite direction. If $AAPL spikes against me and my stop lose is hit, my hedge would have covered the lose from $AAPL. I will be posting a more detailed example as well as data this up coming week.

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Eastern Psychological Association 2010 Conference

Sayeed, Dr. Gorman and I had a successful presentation on March 5th at the Eastern Psychological Association 2010 Conference presenting “An Exploratory Qualitative Analysis of the 2008 Presidential Campaign.” You can read about my current research, including the work on Presidential Leadership on the research section of my website. Below is the short abstract along with Scribd version of our paper. In addition, all graphs are included for your viewing pleasure

An Exploratory Qualitative Analysis of the 2008 Presidential Campaign.
Short Abstract: A content analysis using Hart’s DICTON program was performed on the 2008 Obama vs. McCain presidential campaign speeches. It was found that the content of the speeches varied over time on the DICTION dimensions of certainty, activity, optimism, realism, and commonality. Obama consistently demonstrated higher levels of communality throughout the campaign. Implications for dynamic, time series content analyses are discussed.

Scribd link to our paper entitled: An Exploratory Qualitative Analysis of the 2008 Presidential Campaign.

Realism Scores – Graph
Activity Scores – Graph
Certainty Scores – Graph
Commonality Scores – Graph
Optimism Scores – Graph

Where are we taking this research next? We are exploring machine learning techniques to evaluate factors of leadership.

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Micro-Evolution

Have you ever witnessed or read about a family who repeats mistakes generation after generation? The unfortunate daughter whose father is an unemployed alcoholic who consequently finds herself in the same position later in life. The “great” buy & never EVER sell strategy that your grandfather used, then your father, now you? This is what I have defined as Micro-Evolution.

define: Micro-Evolution – Short term survival strategies that are learned unconsciously from childhood.

In typical evolution a mutation in the organism (psychological or physical) creates an attribute that will allow the organism to proliferate or suffer because of that mutation.  If this mutated characteristic is more advantageous than his predecessor’s attributes, this new breed will pro-create in larger numbers rendering it the dominate one.  This is different from micro-evolution in that it is not a mutation, but an unconsciously learned survival method.  Regardless of how successful one can be with a different strategy, your predecessor used it and it worked.  Your unconscious learned that it worked and instilled mechanisms to assure it would be used.

How do change your Micro-Evolutionary destiny in Trading?

By learning new habits through practice.

ThinkorSwim just integrated a new “on demand” feature.  This feature replays the market live from a certain date forward.  This would allow you to try new and different strategies.  You can watch a video on it here.

Furthermore,  (since my idea is now in a major platform, which I had nothing to do with) you can write a simple AutoIt Script to click the chart along allowing you to practice 24/7.  I discuss this in my youtube video here: Expertise in Day Trading.

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The New Blog @ AndrewIlardi.com

Hello!  I want to welcome you to my new blog.  Here I will post information regarding psychology, statistics, the stock market & their ever interchanging relation to one another.  You can visit my old blog here for older posts from Andrew Ilardi.  In addition, there are additional pages to peak into the other areas of my work.  At the top you’ll notice 5 tabs:

  • Home: The Main Blogging Area.
  • About: Information regarding my background.
  • Research: Current research I’m working on at the academic level.
  • Services: Information on what I provide and contact.
  • Capital Markets: Posts regarding daily research I do into the markets.
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