Andrew Ilardi

Focus on the challenging tasks.  There is only so much time in a day and while completing small easy tasks is great short term reward focusing on the more difficult tasks while you have the most energy will yield an even better reward.

Today’s trading goal is: Don’t Sweat The Small stuff.  If you let the small stuff go (getting filled a few cents below or above your limit. Let it go.  The energy spent on being frustrated can be focused on creativity and development as a trader.

Ken Wilber is the famous, possibly infamous, creator of integral theory.  The theory in brief (I can’t stress that enough) posits 5 major tenants:  Lines, Levels, Types, States, and Quadrants.  We’ll be looking at quadrants in this post.

Each quadrant represents an internal (psychological) or external (behavioral) on an individual or collective (societal) level.  As I trader I use these quadrants as a tool to check my perspective.

Upper Left: What am I thinking feeling, expecting from this stock?

Bottom Left: What are other people thinking, feeling, expecting from this stock?

Upper Right: How is the stock moving? What are the patterns and trend?

Bottom Right: What is the sector doing, the collective?

As complicated as integral theory can get. One can typically break it down for practical everyday use.  Metatheories are often good for that. 🙂

Maintaining your perspective can be challenging when markets reverse or become volatile.  What is your perspective? How did it change? Stating these out loud may make your days easier and far less stressful.

Nothing says failure like giving up.  This week, while optimizing and running walk-forward tests on upwards of 12 stocks with 5 tests each, I was confronted with this FAILED almost every morning I woke up.

To wake up every morning seeing the word FAILED in bold capital letters plastered across the screen can weaken your resolve that it’s even possible to make money in the market using automated strategies.  After a few days, I saw PASSED! I was ecstatic! 

I could feel the rush of dopamine flood my brain like a well trained rat pushing that level for a fix.  Of course, the moment was fleeting and further degraded as the next FAILED came up again and again.

I was soon reminded of Carel Dweck’s groundbreaking research in Mind Set.  Focus on the process, the growth, what you learned NOT the outcome.  I supposed that’s a beautiful element of being human: how quickly we can be overtaken by our ancestral brains.  I’m not a zen monk and I won’t pretend that seeing FAILED doesn’t bother me but refocusing on the process made the work less emotionally draining.

Focus on the process, not the outcome.

What was my process?  :

1. Find stocks that “look” like they trend
2. Run optimizations with at least 10k bars in each & 1 year worth of data
3. Run walk forward analysis
4. Log it
5. Live paper money test for PASSED

The process is productive, thinking about FAILED is not.  Keep persevering, focus on the process.

When you first start trading & open your new trading platform it should remind of a bit like vegas.  It’s designed like that on purpose.  Not only are there color lights flashing but a plethora of indicators, time frames, and types of bars to try to use.  There are thousands of combinations.

For example, Tradestation has well over 100 indicators but let’s say they only have 100. You would have 161,700 combinations to choose from if you only wanted to pick 3 at at time. That’s a lot of choices!.

In the TED talk below choices create an ideal opportunity cost.  If I had used a MACD instead of a stochastic indicator this trade could have worked!… DARN!  This most likely isn’t true but we can’t help our ancient brains.

All the potential combinations of indicators, time frames, and chart styles create endless choices which create more opportunity cost, implying that you could have done better.

My question to you: Are you changing your strategy because the market is demanding adaptation from you? OR are you changing your strategy haphazardly based on the potential opportunity you perceive you could had?

 

When we have a series of bad trades, bad days or worse a bad week we can mentally start to believe all sorts of fiction.  “I’m not a good trader.” “I don’t have how to do this anymore.”  I have been experimenting with a cognitive exercise that works well for me.

Remind yourself of better times to change your emotional state.

There are a number of exercises around the self-help community that focus on bringing in love, light, and gratitude if you believe in that stuff…  My favorite version of this was created by Phil Stutz & Barry Michael in their book titled The Tools.  This is a great book in which the authors describe real life cases in which these short cognitive exercises can be used to achieve remarkable results.

I have shortened their Grateful Flow into a trading exercise. I have created three steps to help get your mind believing you can trade again.

1. Find your best trades from the week or month or year.
2. Print them out
3. Cognitively review each bar of each trade as you mentally run the trade in your head.

Without going into the depths of endocrinology the dopamine circuits in our brain are rewarded for risk taking, even if that risk fails.  There are other steroids & endorphins that will condition you if that behavior failed.  They are two different things.

How does this exercise help? Cognitively it allows you to create a different mental emotional frame.  It reminds your brain that you can trade and helps stop the intrusion of negative thoughts.  Emotionally, this may help alleviate the negative stress hormones floating around in your bloodstream by creating a mentally more soothing environment.

 

Doing the right thing isn’t always easy.  As I take the time to prepare a salad, shaving and chopping beets. Then cutting the carrots and washing the lettuce.  A canned Amy’s organic soup stares me in the face. In 5 minutes I could be eating, but I have another 10 minutes of prep to go…

When we trade the market, we are always in preparation, searching, no hunting for that one good trade.  When we find it, we eat and are ideally rewarded.  The last week, however, there has been a famine. With the market eagerly anticipating the fed announcement on Wednesday markets went sideways an extremely difficult market to trade for those who use the trend to trade.  What is the right thing to do?

For me, sit & prepare.  My coach John over at John Fitzpatrick Coach summarized a passage from the famous Bhagavad-Gita, “That within inaction is action.”

Within Inaction is Action.

Every trader is different and trades differently. This week for me was a lesson is patience discipline and knowing when to focus energy elsewhere when the fruit is too high to pick.

It happens to all traders.  9:30 you hear that bell ring, with your plan in hand, you are ready to trade.  9:45 you put on your first trade: Stopped out. 9:51 you put on the second trade: Stopped out. You know where this is going…

All the statistics in the world wouldn’t prove to your feelings that the next trade is going to be different.  Two things are happening here 1) Unconcious negative priming 2) Fixated mindset.

These thoughts can range from “This next trade just isn’t gonna work I can feel it.” To “f@&k this! I’m a horrible trader, nothing I ever do is right.”  How do you break this mind set?  Move the body, but why?

“How do you break a negative mindset? Move the body!

In John Coates book The Hour between dog & wolf, he cites numerous studies supporting the idea that the endocrine system as a whole is meant to prepare the body for movement.  You are sitting there trading though!  Move the body! As the chemical cocktail permeates your system you are prepared to escape that tiger, fight that local villager, or keep your rank as Alpha Male.  But you’re still sitting there.  Get up!  There is support that exercise does more than just burn calories (more on this in a later blog & how it may effect trading)

Use the endorphins that flood this biomechanical machine to move. Go for a walk, go hit the heavy bag, do short sprints, squats, burpees, or push ups!  Anything that will let those chemicals be used in the way they were supposed to.

November 7th 2014, I had the pleasure of attending Dr. Karim’s talk about his latest album The Sirius Odyssey. No, Dr. Karim is not a Dr. of Hip Hop, like Dr. Dre or even a musician, but a D. Sc in Tourist Planning, the founder of BioGeometry and now newly established composer!  I don’t know about you, but I was set for a chaotic ride up, down, and through the curves of the 8th dimensional WuWu roller coaster.

We’ll start with my favorite anecdote by the spiritual community that Dr. Karim enthusiastically summarized:  Dr. Emoto’s water experiments. In this study a petri dish with water was assigned one of 2 conditions: good or bad.   The “good” water condition was praised, while “bad” water condition was scolded.  Amazing results appeared!  It seemed that water that was in a “good” condition, when frozen, turned into beautiful crystalline structures, while the water in the “bad” condition, when frozen, crystallized into ugly cancer like tumors. ICK! If only it were repeatable… Dr. Tiller from Standford University, who was featured in What the Bleep Do We Know which popularized these experiments, wrote In Scientific Visions that, “Dr. Emoto’s experiments was neither controlled nor measured, a necessary requirement to be fulfilled if one wanted to prove that it was the new factor of specific human intention that was causative.”  Searching the internet you will find many scientists debunking Dr. Emoto’s “scientific” studies.  You will also find people, such as Carrie Poppy, on the internet who tried to reproduce his results with zero luck (cause that’s exactly what anyone would need).  Repeatability: A necessary evil in the spiritual community when something magical needs a basis in reality.

Why am I saying all this?  Dr. Karim praised Dr. Emoto’s experiments and posited that his music will have similar results.  This was the first dip on the WuWu roller coaster.  “Did Dr. Karim not do his research,” I thought. Does he just believe because you have to have faith?  He proclaimed himself a scientist and so does the Vesica website! I’m so confused, LORD HELP ME!

Then it came. Dr, Karim exclaimed, “We did brain tests with the music.” I rejoiced!  He showed us a picture of a man hooked up to an electroencephalography machine.  I was impressed.  This man is surely a scientist!  I could feel the car on the roller coaster climbing up a steep slope, all the harsh discorded metal clanking as we climbed higher and higher.  “You see we did these tests,” he said assuredly,  “we hooked up a person and did not play the music then we played the music.  Then we shut off the music and then played the music.  As you can see from the picture there was a difference, a significant difference, we sent it to a lab.”

We had reached the summit and it was a vertical drop.  It took all the will power in my body not to stand up and say, “That proves nothing, except your music does something to the brain. GUESS WHAT!? ALL MUSIC DOES THAT.” The audience was impressed though. “WHY!!!,” I snarled in my head.  For this to have been an effective study, he would have had to demonstrate that the effects of his music on the brain were significantly different from both no music at all, AND another genre or two of music.  For example Cradle of Filth & Snatam Kaur would have had to produce different results.  He also could have induced stress into the subject by using a basic stroop test and use his “no music, then music” design to demonstrate its ability to reduce tension.  Any undergraduate student who paid attention in experimental psychology class could have fixed this study from supporting a conclusion that read, “Yes, music has an effect on the brain,” to “Yes, The Sirius Odyssey has a significant effect on the brain beyond that of a variety of other musics,” or “Yes, The Sirius Odyssey has a significant effect on the brain, beyond that of a variety of other musics and evidence supports its ability to reduce tension beyond that of a variety of other musics.” Now that science baby!

In the beginning, he said he doesn’t make any medical claims, but he does claim that this music combined with the series of BioGeometric patterns will fix your, “bad stomach,” or “cure your depression.”  To know whether listening to The Sirius Odyssey while dancing around creating biogeometric patterns with your hands has a better or worse effect on your brain than listening to Depeche Mode would, is critical!  Personally, I feel fantastic dancing around to Personal Jesus, without placing my hands in a prayer position and drawing the patterns shown in the picture below.

It’s not that I don’t like Dr. Karim. I don’t know the man.  He seemed very jovial and excited.  I would probably be too if 200 people came to see me talk at $15.00 a pop and were buying my merchandise. But that aside, I believe he really wants to help people, and that I applaud.  However, to make scientific claims like his weakens the idea of what scientific research represents: Testability, repeatability with logical causal inference.  Furthermore, it continues to add to the many, poorly designed, far fetched conclusions other spiritual “scientists” have made.  The WuWu Roller coaster stopped around 9:00 PM, where I safely dismounted the car unaffected, and curled up at home shortly after with Cook, Campbell & Shadish’s Experimental and Quasi-Experiment Design for Generalized Causal Inference book.

############

I pride myself on not being an internet troll per say. If a member of Dr. Karim’s staff happens to read this, I would happily donate 5 hours of my time to assuring his next experiment could claim causal inference.  Furthermore, if there is more to this study please release it to the public so it can be repeated. 🙂

References:

William A. Tiller, What the BLEEP Do We Know!?: A Personal Perspective

A Grain of Truth: Recreating Dr. Emoto’s Rice Experiment

Vesica Institute

Personal Witness to: A Special Evening with Ibrahim Karim, Ph.D. The Ancient Egyptian Sirius Odyssey:   A Journey into Spirit and Sound.