It's A Heart-Mind Game... Are You Ready?

Lol!
I have to say you tell a pretty entertaining story, and I'm looking forward to the next chapters(I think I know how it ends though)

Just trying to keep it real Aldente. I want to provide a roadmap to help traders troubleshoot and find the gold at the end of their trading rainbow: you know that colourful journey we all go through? The one only the trader, the broker and God know about . Brings tears of laughter to my eyes.

FX4

Gotta tell this one...(I'm laughing before I even begin to type)

From my newbie days...I had just started trading live...maybe a few months. I put on a long and the price went down...almost on cue. After waiting a bit, I closed my long and went short. Again, almost on cue, the price went up. I found a neat feature on my platform that allowed me to reverse my position with one click. After a few rounds back and forth, I called my rep at the broker's office and said:

"Pete (not his real name, though I'll never forget it), please tell the guys in your trading room to take my name and account off of their dart board - hit list." He laughed so hard. "Do you know how many orders come in here? They can't single yours out." What was funnier, was that I was dead serious. I was not laughing. He was bustin' up. I called him again several weeks later and said the same thing. Don't think I knew about Fibs then (and the spontaneous tendency we can have causing us to respond to those percentages). You know how we can have an innate/instinctive response to, or preference for some proportions as they actually may be more appealing? Don't think I really understood retracements too well either. Ah boy...the journey.

Just to let you know, Paul Tudor Jones did the same thing (not sure he called the broker though) but he lost about 40% of his capital doing that dance. That just lets me know I'll be there soon with the big boys and girls, 'cause that's been a good while ago.

Ah...laughter: good medicine for the soul.

FX4

P.S. Was laughing hard trying to type this .

It's been about two months now. Harry has gone through the trading education offered by his broker and has a little trading method he is going to use in his Demo. He has placed a few trades, and is up buy $139.00...and that was just playing. He's feeling pretty good. He hadn't started using his system yet, 'cause he'd been practising to get comfortable with the platform etc. He understands how his trading methodology works and posted his sequence of steps on his trading room wall. He's ready.

On Sunday afternoon, he calls Joe to tell him that's he's ready and going to start officially trading in his Demo on Monday when the London Session opens. Joe wishes him well and reminds him that he will be available via Skype to chat if there are any problems.

Tomorrow we'll begin walking up the heart-mind road so we can be ready when we meet with Harry Scaredy again. If you'd like to come up to speed on the previous conversation between Joe Wonderboy and Harry Scaredy, click here.

FX4

P.S. Decided to give Harry Scaredy the week to trade. We'll catch up with these guys again on the weekend .

I trim houses.

Figured out the perfect dimensions for a mantle. Based on fibs.... Forgot to quote your post. This is what is appealing to the eye. Like your retracement story.

Looks good Rufus...perfectly balanced. Good example. Thanks much. Some traders may be saying, "What? Fibs?" Yes....58 1/4 divided by 36 = 1.6180...the Golden Ratio. See Fib videos to come...

appealing to the eye...doesn't take much thought either: very instinctive...like our reflexes...no thinking process; very automatic.

Fibs levels can have that impact even when looking at the chart. There are certain times, we just want to click because the proportionate distance (of a previous swing) that price has moved looks good or something, and we have to say, "No, not now.", 'cause if not, we'll find ourselves clicking without thinking. Next thing you know, just then, somebody starts taking profit, and we would be in the red if we had gotten in.


Wish that retracement story was a real story and not real life. But, we live and learn.

FX4

Fibs.......Definition (When the market is lying to you.)

I like it.

They can come in handy though. Just gotta know when they're tellin' the truth.


FX4

Aldente,

I remember a charting session I had with one of my first mentors, long time ago, a gentleman who gave much of his time to help and became a very good friend, we were discussing fibs ratios, he said that we were approaching the .618 retracement of the last leg. I spouted off that he must have had that plotted on another chart as the current chart we were studying didn't have it marked, i pulled up the fibs and sure enough we were just a few pips from being there.

He didn't have the fibs marked on his chart, he didn't need too......, after literally drawing thousands upon thousands of charts, he could visually gauge a pullback or extension.

It's been said, an old adage, that there's many ways to skin the cat. Traders use a multitude of different means to gauge the market, pattern traders, indicator traders etc, etc........ what you will find after a long search, most are much more closely linked than most realize, one pattern may show as divergence on this indicator and the like so on and so on,...... All can be boiled down to simple price action denominators.

If one can last long enough in these markets they will find that it doesn't matter what tool is used, the brain will start to process the information, the markets slowing down, it's coiling, it's breaking out, it's reversing, it's a fake..... that is if we allow our brains to function. Reliance on the indicator isn't the answer, in time you must learn to rely on yourself. Most don't get there, it's too easy to try to tweak the formula and ignore the inescapable truth that the answer isn't in the chart, it's in that faint reflection we see on the monitor screen when we really look close, that of our self.

time for a vacation.

regards.

An Update:

Will be continuing with the heart-mind discussions.

Decided to give Harry Scaredy the week to trade. We'll catch up with these guys again on the weekend .


FX4

Found something interesting on the Classification of Emotions. Most of the time, the average person doesn't really think about these things much. Glad there a people out there who have done extensive research, because they recognize the importance of them.

Here are some groupings I think traders should pay attention to. The Emotion Annotation and Representation Language (EARL) proposed by the Human-Machine Interaction Network on Emotion (HUMAINE) classifies 48 emotions.[2]

Other classifications exist. Just selected these seven as I think they are what we might deal with most.

 

1. Negative and not in control

1. Anxiety
2. Embarrassment
3. Fear
4. Helplessness
5. Lonely
6. Powerlessness
7. Worry

 

1. Negative thoughts

1. Doubt
2. Envy
3. Frustration
4. Guilt
5. Shame

 

1. Positive thoughts

1. Courage
2. Hope
3. Pride
4. Satisfaction
5. Trust

 

1. Negative and passive

1. Boredom
2. Despair
3. Disappointment
4. Hurt
5. Sadness

 

1. Negative and forceful

1. Anger
2. Annoyance
3. Contempt
4. Disgust
5. Irritation

 

1. Quiet positive

1. Calm
2. Content
3. Relaxed
4. Relieved
5. Serene

 

1. Agitation

1. Stress
2. Shock
3. Tension

The following table[1] identifies and contrasts the fundamental emotions according to a set of definite criteria. The three key criteria used include: 1) mental experiences that have a strongly motivating subjective quality like pleasure or pain; 2) mental experiences that are in response to some event or object that is either real or imagined; 3) mental experiences that motivate particular kinds of behaviour. The combination of these attributes distinguish the emotions from sensations, feelings and moods.

Once again, I selected the ones I thought might apply. If you click the [1] link for the table, you may have to scroll up to see it, as there are a few models presented on that Wiki page.


EMOTIONS RELATED TO OBJECT PROPERTIES

Positive Emotions: Interest, curiosity, alarm, panic, attraction, desire, admiration Negative Emotions: Aversion, disgust, revulsion, surprise, amusement, indifference, familiarity, habituation


FUTURE APPRAISAL EMOTIONS

Positive Emotions: Hope Negative Emotions: Fear


EVENT RELATED EMOTIONS

Positive Emotions: Gratitude, thankfulness, joy, elation, triumph, jubilaton Negative Emotions: Anger, rage, sorrow, grief


SELF APPRAISAL EMOTIONS

Positive Emotions: Pride in achievement, self-confidence, sociability Negative Emotions: Embarrassment, shame, guilt, remorse


SOCIAL EMOTIONS

Positive Emotions: Generosity, sympathy Negative Emotions: Avarice, greed, miserliness, envy, jealousy, cruelty


Might pick this up later today or tomorrow, and start tying some bits and pieces together: thought, emotion, belief etc.

FX4

Just throwing up these YouTube videos here in light of the Fib discussions earlier. They discuss the Golden Ratio (sometimes called the Divine Proportion). Many more interesting videos there as well.





Not intending for this to take us down the path of TA . Just using them to help flesh out the earlier Fib discussion for some.

FX4

We're going to begin to connect the "heart-mind dots".

What usually happens when a trader comes to their trading desk to begin looking at charts? One of the first things after checking the news and maybe going through their motivational routine, is to update the chart with their method of Technical Analysis. Then the trader might study the chart looking for a possible set-up and entry or to determine the trend etc.

Of course the market "knows" this. So, knowing that there are potential "bulls" and "bears" out there, the market makes "suggestions" both ways, to see who's out there and how many (remember the dealer can see stops and pending orders). What is a suggestion?

A suggestion is an idea submitted for consideration.

A Google search turned this definition up for an idea...

An idea is a thought or suggestion as to a possible course of action

Ideas get us thinking...about a course of action.

However, something happens to the mind when we sit there watching those candles and set-ups come and go for an extended period of time.

Lee Hopkins makes an interesting statement:

The psychological basis of suggestibility is simply a tendency in human nature to believe any statement that is repeated a great number of times. This tendency to believe has nothing to do with the ‘truth’ (or otherwise) of the statement. Reasons for believing the statement to be true or false are not taken into account; the statement is believed solely because it is repeated many times.

With each move of a candlestick or bar, the market is making a statement. With the close of each candlestick or bar, a clearer statement is made.

Once a trader starts thinking along certain lines, several other things begin to take place. Tie that psychology of suggestibility to the snake charmer scenario, and before long, the trader is no longer watching the market with an active desktop: the market, via the chart and price action, has taken over the trader's "mental remote control", and has "access" to possibly "program" the trader's course of action. How many times have you wanted to go short (based on your analysis), but for some reason, a buy order ended up on your screen, that you put there? Hmm...Still haven't added the effect of emotions yet to seal the deal so to speak.

Wooh...let me take breather on that one .

FX4

A little help on the side (some TLC) for traders using LED backlit displays. Thought this was informative and good to know.

Something else to think about...how your brain waves can be "modified". An interesting fyi... Here is an excerpt:

“Brainwave Entrainment” is the process of changing your brain’s electrical activity to match a form of sound or light stimulation. In order to entrain brain waves, people usually use binaural beats, isochronic tones, monaural beats, or in other cases, a mind-machine. Light goggles can be utilized for light stimulation, though this method is typically not as effective as sound stimulation. A combination of light and sound entrainment can also be used.

Every time your brain is stimulated, it produces a corresponding electrical response (changes your brain wave activity to align with that specific stimulus frequency).

I find it fascinating how the brain can produce these corresponding electrical responses...wondering now what really happens when we are being conditioned.

FX4

Coming next..

What happens when an idea has been submitted to the trader by the market via the chart for consideration? For the foundational definitions and concepts, please read the earlier post.

FX4

Dot 1: "I'm thinking. I'm thinking."...What Is A Thought?

A very tough question to answer. What we do know is that a thought is able to impact the body in a tangible way. This can easily be demonstrated using muscle testing (sometimes considered as a branch of Applied Kinesiology). In muscle testing it can be tangibly demonstrated that negative thoughts weaken the body and positive thoughts strengthen. It has been said that thoughts are energy. Thoughts can even be communicated with a look; sometimes you can even feel the person's "energy" behind it.

We can also classify thoughts: good thoughts, evil thoughts, business ideas etc. I'd say a thought is an avenue for the heart-mind of man, to package and submit its ideas, desires, feelings, etc. to an internal "creative" procedure that would allow them to gain expression. From the earlier post, it was mentioned that an idea is a thought or suggestion as to a possible course of action. The "kind of thought" is characterized by the intended outcome or the factors that were involved in generating it.

So, you're at your computer looking at a chart and you notice something happening: price seems to be gently bouncing off of a particular price level. The chart is making a statement at that moment. Based on what you have learned about trading, you might think, "Buyers are here." Another trader might think, "Stops are below." Yet another, "Accumulation zone?" What makes different questions come to mind for different traders? The individual's relationship to the message in the chart. I'm sure if you thought about it, you could guess who was thinking what. His thoughts reflect what is important to him: what he is looking for. The same message from the chart is being filtered differently, and may very likely produce different responses. The end result is the trader's perception (discussed earlier in the thread).

When the market presents an idea or a suggestion, it is looking for a response from the active/potential trader.

Next...Dot 2: The Response Process.

FX4

Dot 2: "I'm trying to decide."...The Response Process.

In our example, the market makes its statement by showing support at a certain price level. The trader gains information about the trading environment according to his interests and observations etc., and has a thought. The market's statement/suggestion generates a thought/an idea in the trader. The trader is faced with a "crisis": they have to give their response, which could likely involve putting money on the line.

In trading there are four basic decisions that need to be made each time a trade is placed: 1. The time to enter. 2. The trade direction. 3. The time to exit. 4. The acceptable/appropriate risk. (It would be good if the risk approach could be decided in advance, so as to free the mind's "decision-making" resources for the heat of the trading moment). The "whens" automatically include the price level, though some traders may focus more on the price. The decision not to trade is also a trading option. Hopefully the reasons for not trading are valid. Usually, decisions are made that the trader believes would achieve their desired goals.

So much can happen in a trader's heart-mind as they try to make a trading decision in response to the market's suggestion/trade idea. The goal of the trader though is to remain objective, honest and logical (rational); and to hold to their trading decisions that are in sync with the market...as they see it, until something in the market shows them differently: right or wrong. The trader must learn to maintain control of their heart-mind. According to Ed Seykota (New Market Wizards): Being bullish and not being long is illogical. If a trader is being illogical, some degree of control has already been surrendered: but to whom or to what? Now, why would a trader be illogical? Do they want to be?

The filters (discussed earlier in the thread) that the trader allows in the response process, will "colour" how they perceive the market and therefore their action or reaction. Being logical versus being emotional (or illogical) is always a big battle in the heart-mind of the trader. Have you ever thought that the price would go up; wanted to buy, but did not buy...and price did go up? Maybe I should have asked, "How many times have you thought that price would..." Hmm...too many.

Tomorrow...Dot 3: The "Colouring" Process.

FX4

Dot 3: "I'm still trying to decide."...The "Colouring" Process

Price continues to gently bounce along the support level, and your finger is poised to click and buy, BUT, something pops into your mind from who knows where and says, "What if the market starts selling as soon as you click?" You pause; you hesitate. The market still looks bullish, nothing has changed there, but you've changed because of that "thought". It was really an imagination.

An imagination is the formation of a thought-image (or a temporary mind-set) using extracts from a person's real world to "create" possibilities that may not exist, or ever exist. These possibilities are not being perceived by the sense organs, namely the eyes, ears etc. So where does the mind get the "raw material" to create it? In this example, it could be from a memory..."The last time I bought this pair, the price tanked on me." Memories are one of those "colouring" filters that can shape a trader's perception/awareness of their real trading world.

So, here is price (in the now) still looking bullish, and the trader is having second thoughts about going long. Now here's the problem. If the trader starts thinking, "Go short", because some little red candle comes along the way, and it feels safer to do so, that imagination coupled with some strong emotional ties could tip the scales and have the trader selling instead.

So, what's a trader to do? Rufus had one suggestion: Hogtie it!!! There was a discussion on that earlier too. You might even have to speak to it (the imagination) or say to yourself, "No! I see a long. If I am going to trade, I need to look for an entry to go long." Take control! If a trader feels a little afraid: feel the fear but do it anyway if that is your trading decision!

Is there a way to minimize the chances of those filters kicking in? Perhaps .


FX4

So, what's this trader to do? Price is beginning to move up, but the trader is now vacillating because of the imagination, and the fears or other emotions associated with the memory that triggered the imagination. But what invited that imagination anyway? Maybe the trader's need to feel safe (see the post on Maslow): a knee-jerk sort of reaction. Self-preservation and feeling secure are very strong human instincts.

The trading problem now is this: If the trader waits too long before they click to "buy", they run the risk of price falling as they enter because someone who entered earlier is now taking profit. That momentary "loss" could activate the fear even more and cause the trader to become emotional...no longer rational. The trader can then be is in a mess, as a repeat of the same could condition their heart-mind even more. If the trader sells, and they're wrong, but hoping they're right...trouble. My suggestion: if a trader is in-between minds and can't regain control, pass on the trade.

Would love to get some feedback on these dot-related discussions before continuing on . Other heart-mind comments also welcome.

FX4