Stop Thinking

#1
Trading on the stock exchange is all about playing against the mind of the masses. The big guys and operators successfully will beat your mind by making you think, think and think. Is the right time to get in, will the market fall, and so many times people have asked me when the BIG correction is going to come?

Many people have gone short in this Bull Run and felt the heat. 'Go short' that is what your mind will tell you when the NIFTY makes 3% over 2-4 days.

There are many traders who suffer from this mental gridlock. Chances are that you are one of them. Human beings excel at pattern recognition but when coupled with risking money, they fail miserably. Fear or greed gets in their way of thinking. It is your ability to recognize charts, without needing conviction from another trader or CNBC that will separate you from the rest.
Predicting is a curse that is thrust on a trader, because normal thinking tells you that to make money you have to be able to predict a movement in a certain direction.

This is where you take out the emotion and thinking from trading. Use the best charting software and setup a tri-state signaling system that should tell you when to long, short or be out of the markets. It doesnt matter if you following a trend trading system or a breakout system. You will be probably fit into one of these categories of a trend trader or a breakout trader. It is for you to choose. The master can be both. Once the decision-making is handled by emotionless software, which work tirelessly for you, most of your time you can spend on money and risk management. Stop thinking about whether the buy/sell signal is valid or not. Just make sure that the difference between entry point and the stop loss is acceptable by your risk management system. Focus most of your on capital management. Things will become easier for you. Stick with your system and dont keep changing it. Do as many as a test you would like before applying it to your trading style.

You will still not be successful if you dont develop a good profit taking mechanism. You or your system be may be very good at generating 80-95% perfect buy or sell signals, but unless a good stop loss and profit taking strategy is not is place you will be out of the game maybe not soon enough but later. A sloppy stop loss is all that is needed to make things go against you accumulation. On the other hand your impatience will not let your ride the full Monty. There is no way to tell if this is a top or a bottom if you have made it on the right side of the trend. The best way is to change the stop loss of your first lot above your or below your entry point using time as a parameter. The rest you can exit when your decision system tell you to. The more time you allow your trade to flow more are the chances that it makes you a good bundle.

You will perfect your system by surviving in the market. Taking a small hit today is the best strategy. Learn and device your risk and money management techniques and leave alone making entry decisions, because there is no perfect signaling system and there will not be one. There are plenty of tools available out there that can do better than you. Making money in our markets or for that in any conventional market is the art of capital and risk management.
:D
 
#2
Great stuff....very nice.Thanx!!

Saint
 
#4
Dear sac max,
This is with reference to your article titled STOP THINKING dated 1st Sept 2006.
I could not agree more about the traders psychology you have discussed in this article. You are absolutely correct in saying that the main job of deciding when to long, short or stay out should be left to a trading software doing it's job without any emotions like greed, fear etc so that one can have time for money management etc.
But where issuch a software which has been tried and tested with a reasonable rate of success of atleast 75%? If you know one, can I share that info with you? Please advise
With Regards
Sharantaka
[email protected]
 
#6
Hi guys,

I would agree to disagree with sac_max here. I agree to a lot of things (s)h has talked about but use of technical analysis is flawed.

We are assuming that markets would move purely on past trends. It is like predicting the outcome of the next toss of the coin where past seven tosses have resulted in 3 heads and 4 tails. And anyone with a bit of (un)common sense cal tell the chances of a heads or a tails.

Technical analysis can be used for timing the market but certainly not for selecting the companies ...

And yet again ... this is my humble opinion ...

Regards
 
#8
Trading on the stock exchange is all about playing against the mind of the masses. The big guys and operators successfully will beat your mind by making you think, think and think. Is the right time to get in, will the market fall, and so many times people have asked me when the BIG correction is going to come?

Many people have gone short in this Bull Run and felt the heat. 'Go short' that is what your mind will tell you when the NIFTY makes 3% over 2-4 days.

There are many traders who suffer from this mental gridlock. Chances are that you are one of them. Human beings excel at pattern recognition but when coupled with risking money, they fail miserably. Fear or greed gets in their way of thinking. It is your ability to recognize charts, without needing conviction from another trader or CNBC that will separate you from the rest.
Predicting is a curse that is thrust on a trader, because normal thinking tells you that to make money you have to be able to predict a movement in a certain direction.

This is where you take out the emotion and thinking from trading. Use the best charting software and setup a tri-state signaling system that should tell you when to long, short or be out of the markets. It doesnt matter if you following a trend trading system or a breakout system. You will be probably fit into one of these categories of a trend trader or a breakout trader. It is for you to choose. The master can be both. Once the decision-making is handled by emotionless software, which work tirelessly for you, most of your time you can spend on money and risk management. Stop thinking about whether the buy/sell signal is valid or not. Just make sure that the difference between entry point and the stop loss is acceptable by your risk management system. Focus most of your on capital management. Things will become easier for you. Stick with your system and dont keep changing it. Do as many as a test you would like before applying it to your trading style.

You will still not be successful if you dont develop a good profit taking mechanism. You or your system be may be very good at generating 80-95% perfect buy or sell signals, but unless a good stop loss and profit taking strategy is not is place you will be out of the game maybe not soon enough but later. A sloppy stop loss is all that is needed to make things go against you accumulation. On the other hand your impatience will not let your ride the full Monty. There is no way to tell if this is a top or a bottom if you have made it on the right side of the trend. The best way is to change the stop loss of your first lot above your or below your entry point using time as a parameter. The rest you can exit when your decision system tell you to. The more time you allow your trade to flow more are the chances that it makes you a good bundle.

You will perfect your system by surviving in the market. Taking a small hit today is the best strategy. Learn and device your risk and money management techniques and leave alone making entry decisions, because there is no perfect signaling system and there will not be one. There are plenty of tools available out there that can do better than you. Making money in our markets or for that in any conventional market is the art of capital and risk management.
:D
Sac ...
Interesting ideas....

But if you were to summarise your writeup in 3 or 4 lines... what would they be ?

Just checking if my interpretation is correct

Thx

AGILENT
 
C

CreditViolet

Guest
#9
Sac ...
Interesting ideas....

But if you were to summarise your writeup in 3 or 4 lines... what would they be ?

Just checking if my interpretation is correct

Thx

AGILENT

‘When one is painting one does not think.’ — Raphael

CV
:eek:
 

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