:: actio-et-reactio ::
amg's market charts and blather
"Legendary LP of twisted folkpsych/ singer-songwriter crossover, like a Tim Hardin from hell. He has a great beatnik voice and plays acoustic guitar like noone before or since, the instrumental tracks are more psychedelic than ten layers of Sgt Pepper tape loops." [more]
What's this doing on the trading page, anyway?? Let me tell you.
Perry Leopold is also a trader, programmer, and all-round modern Renaissance
type guy who just so happens to run the
Crystal Ball trading chat site
(a link I have to the left). Besides having an uber-kewl past as a muscian,
his talents in the cyber world have deep roots, as founder of The PAN Network,
which is the world's oldest continuously operating online service. PAN was the
world's first online service for the music industry, the world's first
vertical network, and the world's first global B2B network.
NetMusic recently announced plans to acquire PAN.
Way to Go, Perry!
Don't panic! "Chick Sent me High is how to pronounce
Csikszentmihalyi , the author of Flow: The Psychology of
Optimal Experience, published in 1990.
How does it feel to be in 'the flow?
1. Completely involved, focused, concentrating - due to innate curiosity or as
the result of training
2. Sense of ecstasy - of being outside everyday reality
3. Great inner clarity - knowing what needs to be done and how well it is
going
4. Knowing the activity is doable - that the skills are adequate, and neither
anxious or bored
5. Sense of serenity - no worries about self, feeling of growing beyond the
boundaries of ego - afterwards feeling of transcending ego in ways not thought
possible
6. Timeliness - thoroughly focused on present, don't notice time passing
7. Intrinsic motivation - whatever produces 'flow' becomes its own reward
Create vs. Destroy, Creative vs. Destructive. When contemplating the latter,
flow to the former.
And since we like graphs
lecture synopsis
::
Quotes from Csikszentmihalyi ::
Interview
In his article,
Finding the
Zone (a Word Dcoument), Brett Steenbarger summarizes
how a trader can self-check for being in "the zone":
Ensign Software users can experience something few other programs can
offer: artistry! The following image was created using the Ensign program
ESPL, a programming language that allows users to directly query, calculate,
and plot using the internal Ensign engine. Isn't it wonderful? In the next
post, I'll return briefly with an illustration of "emotional waves"
Earth-Mercury
orbital dance, from the July 2003 Ensign Trading Tips Newsletter
I've started a page on templates, and as time permits, other comments or
information about my favorite charting software:
Ensign Software.
amg's Ensign Templates and
Comments
Those with sharp eyes will notice that it is at a new website:
amgallo.com, which over the next couple
of weeks, will be the new home for all my work. My pages at The
Mystery Box site will all have redirects, so hopefully, no
panic!!
The first I heard about EFT- Emotional Freedom Technique was from croc's journal, who at the time was trading in woodie's cci room (croc's current blog). His observation is worth repeating before proceeding further
EFT will help you to stay calm, but EFT will not be a shortcut on your trading path. If you have not enough experience, not enough screentime, EFT can not substitute for lack of experience.
The same thing can be said of meditation. These emotion-management tools
will not make you a better trader. But they will help clear the fog so that
you can evaluate your methods and performance as a trader from a position of
clarity.
EFT uses accupuncture meridian
stimulation along with intention-based somatic (and/or memory) focus. The
technique is straightforward and consists of first
tuning into the problem,
from which a phrase is composed and repeated during the Setup. I want to
stress the importance of this phase, to focus attentive care and awareness
into it. Then, using only the "tag end" of the Setup phrase, one "taps" the
meridian points as described in the
technique link.
I would like to make one observation that, to some extent, deviates from the
EFT methodology. You will see some suggestions to focus on prior "negative
memories". If one has an extremely specific and overpowering memory, perhaps
this is appropriate. However if one does
have such a memory, perhaps professional help is also advised.
I do not do this as this is, in my opinion, a trip down an endless corridor of
mirrors. From my experience and study of feedback, focusing on body responses
associated with a complex emotional form will yield significant and important
results. I believe this because from the day of our birth we begin registering
reactions to the world around us, and from a very early age begin to embody
our memory with emotional attachments. Who can say exactly which memory
triggers which body reaction? Why search for a "possible" memory
in the past when you can feel a body
reaction in the now? I offer this in
particular to those who just cannot dredge up a miserable memory for their
setup. Instead say something like "Even though I put tension in my neck..." or
"Even though I turn my stomach in knots..". Start with that, you know that.
Aside from the benefits it confers, "tapping" can be just the Emotional Stop
and Reverse break one takes
just when an emotional form threatens to disrupt things. Walking away
from your trading office, to a quiet spot for tapping might help turn focus
away from emotion and bring equanimity back to business.
What we've covered in these articles can be thought of as an Emotional Stop
and Reverse. Sensing an emotion rising, you stop not the emotion, but your
reaction to the emotion, and in the process reverse the destructive pattern.
I don't like to give advice to people. But I can share what I've found to help
me and perhaps there is something there that sparks an interest in you. So,
please take what I say as just that.
My own method of stop and reverse is based on mediation. Don't confuse this
with religion or blissed out nirvana, it is very grounded and has highly
practical results. I don't suggest going at this with a "goal oriented"
attitude, but rather as something that is right and good, like bathing daily,
which pleases you, your body, and those around you.
I sit quietly with my eyes and ears closed to distractions. I let my mind and
body experience stillness for 30 minutes or more each day. I don't find a need
to chant, wear special clothes, special cushions, or special places. Your den,
bedroom, or even office will be fine, as long as you and your family know it
is your private time. My focus is simply the breath going in, going out. And
with that focus, I then observe what is happening within my mind and my body.
Imagine if all day long you waved your arm all over the place, never stopping
for anything. This is what we do with our mind. It never stops. You will
discover this in your quiet silence. Don't panic!!! You don't have ADD or
other psychotic disease. Treat the quiet time as a treat for your mind. I call
it defragging (laughing). Simply allow thoughts to happen, but do not follow
them.
Similarly, you discover that your body is in constant motion, even as you are
sitting still as a statue! Starting from the top of your scalp, allow yourself
to sense what your scalp, ears, face, neck, back, chest, arms, tummy, legs,
and even insides are doing. You may discover that while you are in constant
motion, a constant state of change, your inner eye is still.
This doesn't happen instantly. In fact, just sitting for 30 minutes is nearly
impossible for many. The best way to learn is through a reputable teacher,
many of which are free or nearly so. There are
Vipassana retreats worldwide,
but they do require a commitment of ten days. This is too much for 99% of the
world, so, simply sitting is at least a good start. You will experience
patience.
Finally, do not cover your inner eye once finished with your quiet time. This
is the part where you "use" it in trading. Put attentive care and awareness in
what you do, use the skills you learn in silence to observe emotions rising,
and to choose to not react, letting the wave rise and fall away, clearing
space for the work of trading.
Here
is a thread I started on this subject you might enjoy. More than a few
traders practice meditation.
A second practical method that I only recently discovered but am more than
happy to share is called Emotional Freedom Technique. This is worthy of a
larger piece, so will save it for the next post.
Life sparkles, crackling with experiences ranging from the sublime to the
terrifying. In looking to make the best of our relationships, careers, and
selves, pushing the boundaries and maintaining a balance are often at odds.
What we think of as emotions can add zest but when they overpower our
intentions, emotions leave a destructive path we usually chalk up to "life's
tuition". The same is true for trading, which after all is simply a subset of
our life, and for many of us, a substantially large part if time is a
consideration.
Transforming destructive patterns to creative ones is the work of refining
awareness through persistence and caring. With caring, awareness becomes
wisdom. With awareness, caring turns knowledge into creative action. They go
hand in hand. Changing deep patterns isn't a weekend of tricks and techniques,
no more than trading is a chart with a few indicators. It also doesn't happen
one day and you are through. Rather, it is an evolving, the best kind of
living.
To recap, we are looking at the idea that emotions interfere with trading. For
those that need to know the why of emotions, I've given a brief description of
modern science's view of how emotions are created through sensory input,
perception and interpretation by the brain. The intent of this article is to
introduce a few ways to learn to recognize your own emotions so that the work
of trading can progress unimpeded.
The concept that trading involves "controlling our emotions" is a confusing
one. Many interpret that to mean suppress or repress them and become a
dispassionate automaton. While a crocodile temperament might be useful in the
S&P pits, human nature is a bit more complex. Emotions are a natural
by-product of living. What need not happen is that they sabotage your efforts.
Retraining ourselves to stop living the through the lens of the past-- the
seat of emotions, and learning to live in the present moment, where responses
are based on the now, is what is needed.
There are many ways and methods, but there are a few simple and practical
methods that are free and involve just a bit of time otherwise spent in
amusements. I will discuss them in the next two posts.
In the last post, I said
For a trader to recognize the waves of emotion and reject them in favor of riding the market waves means transforming negative behaviors into positive attitudes and effective actions.
How do you recognize emotion? What is an emotion anyway?
Our body is a complex sensor, with our eyes, ears, mouth, skin, nose relaying
simple data to the brain about what is going on around it. Synapses move the
signal along to the brain, where it is logged in, significance attached, and a
response created and relayed. A form of actio et reactio.
image: Limbic System
The James-Lange Model better fits recent findings
So emotion can be thought of as a reactive wave. Examine a recent negative
emotional experience during trading. Perhaps overtaken by a wave of anger, you
berate yourself. Not yet spent, this emotional wave harkens a memory from your
youth when you miserably lost a sporting event.
Wait. What does an memory from 20 years ago have to do with a trade you made
today?
Nothing. Absolutely nothing. But the emotional "echo", created in the limbic
brain long long ago, has spent years compounding itself with other similar
events, and no doubt had *its* origin in a prior, unremembered event. In this
example, the pain of a losing trade is made equivalent to a past pattern of
loss. This form of repetitive behavior serves no creative purpose. It is a
simple emotional impulse that once had a use, but rationally no longer does.
Ari Kiev in
this
NYMEX presentation (Second link from top, "Psychology of Risk") says,
"When you feel trading anxiety, start the stopwatch". What he means is that
emotional impulses are waves with a very short time cycle. Simply timing your
emotional response (be it anger, panic, euphoria, elation, or any other
"emotion") will prove it is short lived.
Knowing this, it becomes useful to recognize your particular "emotional forms"
earlier and earlier in their cycle. By witnessing your impulse to display
anger, dejection, euphoria, etc, you see its arrival, its peak, and its
passing. You become free to choose instead to not react,
clearing the way for a rational response. You begin to experience for yourself
that level-headed trading has a higher probability of success.
Our intellectually focused work has literally put us "out of touch" with our
feelings. Traders are from Mars! By observing how your body responds during an
emotional impulsive wave event isn't touchy-feely. With focus and persistent
practice, it can speed you towards your goal of being a Trader in the Zone.
More in the next post.
Study finds day-traders with cooler heads prevail
"Traders with extremely intense emotions had the worst overall trading performance, researchers found. Traders with the best performance had reactions somewhere in the middle, stronger than those reporting little emotional response, but not intensely happy when their trades did well or down in the dumps when they didn't.
'Having an intermediate range of emotion response seems to be the sweet spot,' said Lo.'
Researchers also found there isn't necessarily a trading personality marked by aggressiveness, for instance. The researchers said that suggests "different personality types may be able to perform trading functions equally well after proper instruction and practice," provided they don't get too emotional about profits or losses."
As a trader, you don't need academic proof: you have lived it daily,
perhaps at times even been a victim of your own emotions. Looking inward can
be just as useful as charts and technique if improving your performance is
what you are after.
If you haven't delved into trading psychology,
Innerworth.com, which offers an
excellent free newsletter, is one place to start.
Another would be Trading in the Zone, by Mark Douglas. Douglas
is himself a trader and a pioneer in this field with his 1990 classic,
The Disciplined Trader, written before most business schools
discovered "financial engineering".
Trading psychology has even earlier roots. Charles Mackay's
Extraordinary Popular Delusions & the Madness of Crowds describes
manic markets of the past, and
Jesse Livermore's
Reminiscences of A Stock Operator chronicles the inner life of
a daytrader in the early 1900s. Finally, Candlestick charting, with its
origin in 1600s rice futures and final development in Meiji Japan, exploits
emotional terms for market behavior.
For a trader to recognize the waves of emotion and reject them in favor of
riding the market waves means transforming negative behaviors into positive
attitudes and effective actions. Forgoing charting for a bit, I'll be
sharing my own thoughts on this subject over the next few posts.
An important disclaimer: my knowledge on this subject no more indicates my
own success than does a spoon taste the soup it holds. However, an "A" for
effort counts.
I've been tracking the action of this rally in daily posts over at
dacharts. To keep myself honest (and keep this journal alive), I thought I'd
better say something about it. A picture is worth a whole bunch of words. I
don't think they come so close to form as this move. I also just love the
way the bisect harmonics have played along.
Trading it, however, has been more than a challenge as the intraday price
action has been fast and chaotic, the later being reflected in the numerous
intraday expandos that have formed.
Expandos are perhaps like hot chili's, you either love them or wonder just
why in the world people actually like them. Expandos, a.k.a. "Broadening
Formation", is, like all patterns, a reflection of the underlying trading
sentiment, in this case, drenched in the emotion of buyers and sellers
fighting for fair price. The buyers have won every round, this time.
click to open in separate pane
What's there to say? It's trying to put us to sleep. A fitfull sleep too
as there is almost an expando type of look developing. Sellers took the
upper hand, but didn't make much of a dent for all their efforts. No fresh
signals on the daily. Too sleepy to look further. :)
Updated ES, 01
Apr 05
|
moon phases |
At last, over the rim
of the waiting earth
the moon lifted with
slow majesty
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows
blather: nonsensical talk.
At times my analysis log, at times sharing what I've learned. Always my own work and views.
Content: amg
Basis: glish &
bluerobot
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