Market Curiosity: Exploring Markets And Systems

May 1, 2010

Psychology — the supreme key (updated Jan 2011)

Filed under: Editorials — Tags: — Jeff Fitzmyers @ 3:10 pm

The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. — Jesse Livermore

He (Dick Fuld) finally fell into the career-shortening habit of telling the market it was wrong. Now I’ve done that too, but I wasn’t running a balance sheet leveraged 30 to 1. — James Grant

Van Tharp: You do not trade the markets—no one does. Now that might sound surprising to many of you. But what you really trade are your beliefs about the market. Furthermore, your ability to do so is tempered by your beliefs about yourself.

I can’t observe what the market is announcing if I have a bunch of filters mangling the info.

I have been attached to being overly bullish on silver and THEREFORE, surer that the Sun rising tomorrow, I lost money trading it. That’s trading: exact and instant feedback. For me, the desire to trade well illuminates subconscious issues, that once worked through, engenders “being present” here and now. Only then can I observe, and take action on what a chart is indicating. I ONLY make money when balanced, unattached, and am having fun exploring charts.

If you have a workable system and are not making money there is a 100% chance you have at least a few layers of psychological baggage to shine a light on. There is no getting around it, only through it.

“Everybody gets what they want out of the markets.” — Ed Seykota

“In the end, I think every trader should develop his or her own strategy for buying and selling, for money management and for dealing with him or herself.” — Thomas Basso

An interview in The New Market Wizards By Jack D. Schwager

People sell the idea that trading is really complicated. It does not have to be. Simply buy every test of a rising 20-35 day moving average with IBD stocks less than 8 years old, less than 30 million shares outstanding while in a bull market and it is hard NOT to make money IF your psychology is good enough. “You will be incorrect only once: at the top.” — Oleman posts from Avid Trader.

20 GOLDEN RULES FOR TRADERS

Trading With Patience: Using Trading Metrics to Aid Trading Psychology

Bulkowski’s Trading Psychology

A fantastic resource for enhancing sanity is Dr Will Joel Friedman.

I am still looking for the reference, but I think it was Richard Dennis, (he turned a $400 family loan into $200 million) of Turtle fame who said something like, ~”My trading rules are simple, but I could put them on a billboard and people would still not be able to make money.” There seem to be many Turtle wannabes, so I am not sure the following is 100% accurate. (For instance I don’t think “all” of the Turtles made money at first. But it’s close enough for now.)

Interestingly the Turtles all made big money while they were working for Richard Dennis. However in 1988 when they went out on their own things it was another story for some of them.

“Many didn’t stick with it and fell apart. So even though there was a mechanical system that they all knew worked, at the end of the day other factors such as character issues became their downfall.

Not only did they know it worked — they experienced it working for themselves. But once they were out of the supportive environment many were not profitable anymore.

Good resources from Van Tharp

“Gratitude is not only the greatest of virtues, but the parent of all the others.” — Cicero

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