Breaking your negative mindset

How do you break a negative mind set? Psychology offers some insight into what may work.

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.

Market Tarot January 7th

Daily Market Tarot

Today’s Market Tarot is less about the market and more about my Trading this morning.  I had a great number of losers and nearly reached my daily lock out for the day.  In the afternoon I asked “what happened this morning, What can I change.”  These are the cards I drew.  Again,  the set I use is The Wild Wood Tarot created by Mark Ryan & John Matthews with illustration by Will Worthington.

20. The Great Bear – This card is about judgment.  These includes judgement of self and others.  It teaches us to be compassionate and loving to self.

5. The Ancestor – Represents your inner guide, the part of your unconscious that knows everything. She is leading you to a new path.

17. The Pole Star – Is about guidance, again from your inner self.  Knowing that the stars are aligned so that you may follow.

I saw this layout as The Great Bear crawling towards the other two cards.  That my judgement is attacking if you will my inner guidance.  Both from a feminine & male perspective.  While the Ancestor leads you into the woods with her heart, the male depicted in the pole star follows point A to B.  Knowing how my morning went I understand this as following my intuition, my trading ideas, and to stay away from judgement.  That being kind and forgiving to self is most important.

In turn, I had a successful afternoon 🙂

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Market Tarot January 3rd

Daily Tarot 1-3-2013
I thought it would be fun to do a reading mid-day on the market. Read the Market Tarot cards can help.  The layout that I felt was Past->Present->Future (from left to right). I drew the following cards…

Aces of Stones: The Foundation of Life – This card discusses manifesting your dreams, wishes etc into reality.
Six of Stones: Exploitation – This card speaks of an imbalance of resources that are damaging to yourself or the environment.
The Ancestor – Represents your inner guide, the part of your unconscious that knows everything. She is leading you to a new path.

How does this relate to the market? The reading was done around 1:00pm EST. Aces of Stones represents the base that was built in the AM. This is also related to the large significant up move we had on Wednesday. Six of stones I believe speaks to the grind higher all afternoon. This was not a healthy move and we have damaged ourselves in the process. The last card, The Ancestor talks about a new path. I would think that this card speaks that the close of today / afternoon trading will represent a new trend in the market.

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Confidence in Trading: The Approach

Have you ever seen a gorgeous goddess?  A woman so magnificent you just are beeming energy inside to go talk to her?  But as you walk over you start to notice how you’re walking, what facial gestures you’re making, where your hands are, confidence fading… You’re becoming self-conscious and that wonderful feeling of excitement has now turned into fear.  Do you remember the last time you talked to a woman in this energy? In this self-conscious / fear mentality?  Didn’t go so well did it?  Why is a stock any different?

It’s all about the approach and mental confidence prior to the trade.  When you approach an event with fear that energy gets transferred into it.  I’ve talked about how The Energy of Fear is Consumption in this prior post.  So if you’re feeling nervous before a trade take note of this.  Where is this fear coming from? Is it related to money? Lack of confidence in yourself? Lack of self worth? It could be a million different things but you need to find and focus on the one that resonates with you.  I’m currently working on a meditation that will assist you through the process of finding this fear and making it your ally.

Remember the emotion will come during the “approach.” Keep track of how you feel, as this will set the course of how the rest of your interaction with the trade will go.  Keep in mind that magnificent woman: Do you approach her as nervous, not confident, and fearful of reject or strong, confident and full of love?

confidence

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The Holy Grail of Trading

These top traders didn’t have a super mechanical trading system, they had a SUPER MENTAL SYSTEM!

Recently I started at a prop firm in NYC.  Some of the best traders in the country reside in this office and I have the privilege of hearing their insights everyday.  I’ve also been exposed to less “popular” traders but those who have turned this “casino” into a consistent cash generating business.  They have also achieved a position few have been able to actualize: the ability to withstand the test of time in the market.  However both these peoples have one similar characteristic that I feel encompasses all others.

 

While listening to these traders everyday, hearing their comments, their dissatisfaction and happiness when a trade nears its completion. I do not listen to their words as much as the structure to what they say.  Listening between the lines.  Their trading style is not mine nor am I them, so to imitate them would be foolish.  It would most likely lead to my own demise. There is one quality that we can learn from them that will propel us in our trading and take our lives to a higher vibration… TRUST IN YOURSELF.  It really that simple!  These top traders do not doubt their trades, they trust the moves they make, they trust their abilities to adapt their strategies to current market conditions, they trust themselves.

My experience with a friend was that he had great intuition on where the stock was likely to move next.  7/10 times he was correct, but he always scared himself out of the trade early.  Once he started to recognize and trust his intuition he began to increase his profit and in my opinion I hear him cursing a great deal less.  This quality of self should never be overlooked in trading, in whatever profession you choose, or in life. 

How do you develop trust in yourself?  Start to meditate on the concept of self trust and what it means to you.  Write this down.  Next keep a detailed log of what your true self is telling you to do. Take a “snapshot” of the feeling.  If you are correct reinforce that feeling.  Most of us are programmed not to see the trust & power we hold inside.  Once you begin this practice let it flow naturally cause all the truth you need you already have.  This idea finally clicked after a good friend / guide told me flat out, “you don’t trust yourself.”  It imprinted itself on my psyche and I knew what it was these top traders possessed.  These top traders didn’t have a super mechanical trading system, they had a SUPER MENTAL SYSTEM!  

 

Good Luck with trading & finding your Super Mental System 🙂

http://nurturingyoursuccessblog.com/want-to-build-trust-in-your-relationships-start-with-yourself/

http://mysuperchargedlife.com/blog/learn-to-trust-yourself-to-climb-to-greater-heights/

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Earnings Seasons Q4: My Love Hate relationship with Gap Data

It was 2 years ago I created a profitable fade strategy. However, as my risk tolerance shrank so did my use of the strategy. The strategy was simple: find stocks that were up a huge percentage relative to themselves and the market. Most importantly, they had to have no news. No catalyst that drove them up. These stocks were more likely than not to fill their gap. However, in some cases it took up to 3 months with 100% draw down of investment capital to receive a 20% gain. It was not worth it.

I took the next best thing Earning Season Gap Data. These couple of months out of the year are packed with gaps that fill, run, or simply stagnate. Version 1.0 of the Gap Bot grabbed data from yahoo and analyzed the gap of a given stock. By the end of 2010 Q4 I had 1000+ data points. As I was using this technique to analyze earnings gaps, my data set lacked individual stock robustness. In other words, I only had two data points for Amazon, Apple, and the like. This was not sufficient (though profitable) to achieve a robust algorithmic procedure for trading earnings gaps. After 1k + lines of new code and scarping the internet I now have 50,000+ points of data dating back to 1998. With all this new data more challenges arose.

Below you will see 6 graphs. It’s obvious they provide very little value at all! Big data sets from unknown distributions will produce data in which you can not use most statistical tools (ANOVA, Regression, etc) because they are based on assumptions of a normal distribution. Looking at the histograms you can see how the outliers distort the picture, but you can’t just take them out! Take MAA on 5/6/2010 for example. It created a $0.05 downward gap (it opened below the previous days close). It ran $0.94 from that open, closing the gap by a huge margin. That margin is 1880% and an extremely important piece of information.

Luck for me data can be transformed. By transforming the data you can make non-normally distributed data normally distributed. The glory of this is that now we can go back to our arsenal of statistical tools and begin to play 🙂 Below is the data after it has been transformed. As Earnings Season 2011 Q4 approaches I will be posting most data and more results. Happy Trading.

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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…

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

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.