Monday, November 19, 2007

Turkey's in the Rain

I thought this story might be appropriate since we are only a couple of days away from the
Thanksgiving Holiday. Turkey's are not the brightest creatures. They have been known when it is raining to stand out in the rain looking up at the sky with mouths open and drown.

You might wonder how this relates to trading. Trader's also at times can be like Turkey's in the rain, when a trade is put on and a profit target is reached, they sort of look up at the sky and wonder if more is coming, don't take the profit and let a profitable trade turn into a loser.

This whatI call the "Turkey in the Rain Syndrome". Traders have to always remember they are trading to make profits not to prove to the market that they can guess where it is going. There are many profit opportunities available in the markets every day.

It seems like whenever we try and stretch for that little bit extra, the market seems to know our intentions and reminds us to trade our plan.

The only reliable method that i know to avoid the 'Turkey in the Rain Syndrome' is to plan profit targets and then take them when they are there, no sense drowning on a sunny trading day!

Have a Happy and Safe Thanksgiving!

Leslie

Friday, November 9, 2007

Trade What You See (Was that an 800 pound Gorilla?)

One essential skill in trading to develop is to be in tune with what the market is doing. This sounds simple in theory. This one skill can be responsible for success or failure in trading. This comes down to beliefs a trader has. If a trader has beliefs that the market is going to go up,as an example, then they will filter all information to support that belief, regardless of what the market is actually doing.

I have heard of traders blowing out of accounts due to beliefs like this. They just can not seem to "see" the real information the market is conveying. If they had it would not have been possible to blow out an account.

I saw a fascinating film that was shown to 200 people in a room. The moderator said before the film that there were two basketball teams, one in white and one in black. We were to focus only on the team in white and count how many times the basketball was passed between the players.

Everyone focused intently on getting the count correct. After the film, about 3 minutes, we were asked how many passes. The answers ranged from 8-20. Even with that you wonder how so many people saw it so differently. Then we were asked to watch it again with the same instructions. This time many people changed their counts. Then we were asked to watch the same film one last time except we were asked if anyone saw the "Gorilla", yes, Gorilla. The film was played again and lo and behold a large guy in a gorilla suit had walked through the center of the court, stopped, pounded his chest, and then walked off.

No one saw this the first viewing! Sounds incredible doesn't it, but this shows you the power of our brains when we are locked into believing something, we just do not see or hear all the information, everything is filtered to support our beliefs.

Next time you struggle with the markets, look back on the charts when your mind is clear and fresh and see if there wasn't an 800 pound gorilla that walked across your screen!

Leslie