Mind Hacking

It’s Opex Friday and instead of posting our usual line up of symbols I decided to explore some of the ruminations which followed an epiphany I experienced earlier this morning. Just like many of you one I have slowly developed an now ingrained habit of reaching for my tablet right after waking up. My rational justification is that of an online entrepreneur and professional trader who needs to remain connected, and if nothing else wants to assure that nothing urgent has come up which may require my attention. The truth of the matter however is more along the lines of me enjoying a few more lazy minutes reading in my cozy bed, especially when it’s cold outside.

Now on my actual MacBook Pro I have gone to great lengths to prevent advertisers, spammers, hackers and the sorts from getting through my digital gate. We are talking ad blockers, anti-tracking plug-ins, Flash blockers, black lists, you name it - all of which designed to aid an ongoing arms-race of avoiding useless crap I don’t want to waste my time on. My tablet however is a bit more limited in that respect and thus the following twitter reply managed to slip through this morning:

2015-07-17_mind_hacking

First up let me apologize to my male readers for the liberal use of pixelation in order to protect some of the more fragile minds amongst you. We over here in Europe are less affected by nudity but it’s the Interwebs and all and I really don’t feel like answering angry emails today. Now I’ll come right out and admit that I enjoy the view on nice set of mammalian glands as much as the next guy.  But I had just woken up and quite honestly I found it a bit annoying. Which upon further reflection surprised me little at first.

Some of you well meaning readers may think that I may ‘have grown up’ but let me assure you that nothing could be further from the truth. The mental wiring in place to stimulate sexual urges goes deep, leading right past the hypothalamus, directly affecting hypophysis and the limbic system. As such sexual triggers accompany men way longer in life than they actually may care for. Of course the more malicious amongst you may just say that I’m getting old and heck, that may be true – however I doubt that I ever get ‘that old’ if you get my drift, so let’s just leave it at that. ¡Callate mugabe!

Be this as it may – as you know much of my time in recent years has been spent analyzing the art of manipulation and deception. If you think that trading is a purely technical endeavor then think again. Being good technically just gets you through the door – the key to long term success as a market participant lies in suppressing a laundry list of cognitive biases that institutional traders have become masters in exploiting. And not surprisingly I have devoted quite a bit of time covering this topic over the past few years. As the old saying goes – there’s a sucker born every minute. Hence a significant portion of the financial industry has always revolved around luring hapless retail victims into the big meat grinder. That’s right – you are not alone.

Information Diet

Knowing the statistics (i.e. over 90% of retail traders fail) I have over the years adopted an instinctive habit of questioning every single piece of information that I come across. A few years ago I wrote a post about how to abide by a strict information diet which you may find interesting. It outlines a pretty practical approach to avoiding information overload and how to primarily limit your attention to useful data that aids your personal and professional goals instead of hijacking them. However it is the latter, the hijacking of people’s attention, that is today’s topic and as it is extensive we will have to split it into several parts.

The Genesis Of Spam

In order to understand the reason for my almost instinctive dismissal of Ms. Masterchef let’s go through the process and motivations involved that preceded its delivery. Amongst the daily barrage of information (wanted or not) it’s easy to lose sight of the fact that there are actually people out there who do this for a (rather profitable) living. And let me assure you – they have this down to a science:

  1. The carrot: Create an attention grabbing message or image. A whole chapter can be devoted to this but in general what is known to work well and repeatedly are sexual triggers, small children, cute animals, violence, shocking imagery, etc. – all of which press emotional buttons and stimulate arousal, empathy, or curiosity.
  2. Deliver the carrot to a vast but targeted audience via advertising, spamming, viruses, etc. A growing Billion Dollar industry exists now to expedite that very purpose.
  3. The hook: Upon delivery exploit momentary attention to produce a click through.
  4. Monetize the hook via a vast range of approaches. We won’t cover those but they roughly group into sales of products, subscriptions, or services as well as promotions, advertising, lead collection, etc. In more recent history they also serve as a means of personal profiling as well as manufacturing of consent, and we’ll cover these subjects later.

Sounds a lot like fishing, doesn’t it? And clearly quite a bit of work and thought has gone into introducing Ms. Masterchef to yours truly. And clearly it’s not being done for fun either. While the underlying motivations may be as old as humanity itself (e.g. to sell, deceive, manipulate, track, etc) the means of delivery are becoming increasingly sophisticated while the level of access into our respective sphere of privacy is unparalleled. Don Draper would have sacrificed a limb to such unmitigated means of dissemination.

What appears to be happening on a large scale basis is a concerted effort to manipulate, to trigger emotional responses in an Pavlovian manner. And a large aspect that accompanies this effort is that of digital profiling which happens every time you search something on Google, click on a particular news item, ad banner, or promotion, participate in social media such as twitter, Facebook, listen to music on Pandora or Spotify, etc. The list is long and it’s growing by the day as more and more of our time is spent in the virtual world.

Hacking The Human Mind

In information technology the art of gaining unauthorized access to a system or network is called ‘hacking’ and sometimes ‘cracking’ with the latter describing intrusions with malicious intent involving sophisticated exploits.

Cracker – This is the common term used to describe a malicious hacker. Crackers get into all kinds of mischief, including breaking or “cracking” copy protection on software programs, breaking into systems and causing harm, changing data, or stealing. Hackers regard crackers as a less educated group of individuals that cannot truly create their own work, and simply steal other people’s work to cause mischief, or for personal gain.

Hacker – This is someone that seeks to understand computer, phone or other systems strictly for the satisfaction of having that knowledge. Hackers wonder how things work, and have an incredible curiosity. Hackers will sometimes do questionable legal things, such as breaking into systems, but they generally will not cause harm once they break in. Contrast a hacker to the term cracker.

What both share in common is the underlying purpose – to gain access to systems without permission according to their respective motivation. The hacker may do it out of sheer fun or curiosity, the cracker does it for personal gain or to affect political change, deface, to embarrass, blackmail, again, the list is long. Although people on the inside draw clear distinction between the activities involved are  colloquially referred to as hacking.

There is even an aspect of ‘hacking’ that doesn’t involve any computers. Let’s say I may want to get access to a particular person’s private phone number. I may call his/her secretary and claim to be an IRS or FBI agent who needs to talk to that person about an urgent matter. I bet you good money that, if only halfway convincing, in at least half the cases I will be given that number (no I haven’t done this in case you wonder). And that right there would be called ‘social hacking’ - Wikipedia has a good write up on this in case you’re curious.

So clearly this is not a new concept but it seems that the emergence of the Internet has become the impetus for a whole new generation of social hackers if you will. Given the exponential reach and means of message delivery social hacking and mass manipulation is being perfected to a whole new level. Which brings me to a Japanese manga series – quite a segue but hang with me as it’ll all make sense in a minute.

Ghost In The Shell

The series originally emerged in 1991 and describes a possible future where computer technology has advanced to the point that members of the public are equipped with cyberbrains and related technology that allows them to interface their biological brain with various networks. The level of cyberization varies from simple minimal interfaces to almost complete replacement of the brain with cybernetic parts, in cases of severe trauma. This can also be combined with various levels of prostheses, with a fully prosthetic body enabling a person to become a cyborg. The main character of Ghost in the Shell, Major Motoko Kusanagi, is such a cyborg, having had a terrible accident befall her as a child that ultimately required that she use a full-body prosthesis to house her cyberbrain. This high level of cyberization, however, opens the brain up to attacks from highly skilled hackers, with the most dangerous being those who will hack a person to bend to their whims.

Now in comparison with such a dystopian future the twitter spam I received this morning is rather harmless. Or is it? Think about it – already today our minds are constantly being bombarded with messages and information we did not request and that we often actively avoid. We have taught ourselves to ignore most of them but the few that slip through do often accomplish their purpose. And in most cases that involves separating us from our hard earned cash, to give up some of our personal privacy, or to draw us into various political or social justice causes. The onslaught is constant and it is becoming increasingly difficult to escape. Although we all like to think that we are able to resist we are all victims of manipulation to various degrees. Some of us are more vulnerable than others but I am not going to claim that 20 years of Internet access has not fundamentally changed the way I perceive the world around me.

A Recent Example

Just a few days ago on July 14th Twitter’s stock jumped around 8 percent and then closed up 2.6 percent on the day even though the report that triggered the price jump was quickly revealed as a sham. Effectively what happened here was that a large number of market participants had been mentally hacked into buying Twitter. Although I admire the execution and nefarious intent events like these give me the shivers. Because we are only at the cusp of a technological revolution and over the coming decades I expect closer and closer integration of the human mind into the digital matrix. Right now the extent of our capabilities is limited to handheld devices, digital watches, and sensors integrated into clothing. Most recently Google attempted but eventually failed to gain traction with its Google Glass project. But where Google missed the mark Apple and its many competitors may be able to slip by our personal guards and gradually equip us with increasingly intrusive gadgets designed to integrate with its users.

The Future Is Now

For instance – already today the 1.0 version of the Apple watch is able to monitor your heart rate via photoplethysmography. And I expect even more sophisticated sensors to be added over time – all of which will greatly aid in monitoring our bodily and perhaps mental functions. But where does it stop? How will I prevent for instance a website or twitter message from monitoring my heart beat while I’m reading an article, look at a twitter message, or perhaps evem while I’m trading? Wouldn’t it be really tempting to for example identify people of a particular group and then track not only their online activities but also collect data on how their respond emotionally to certain stimuli or events? I frankly would be very surprised if nobody had thought of this yet and I have an inkling that deep inside some corporate lab efforts are underway to exploit capabilities just like that.

Now going back to the silly Twitter message featuring Ms. Masterchef earlier this morning. I wonder how many people besides me received this message and wound up ‘following the conversation’. I was able to resist the temptation (no jokes please) but in the future my emotional response may be tracked that very instance and then added to my personal profile online. And even that may appear to be clumsy if we one day manage to interface directly with computers.

It’s already started with eye tracking, motion tracking, face detection, thumbprint reading, and now various body sensors. But where will it all end? And how will it affect the world around us, including the financial markets? Could an emotional mass response to a planted news item one day actually lead to a stock crash? Or to a lesser extent – will faceless entities hiding behind cyber walls manage to succeed in manipulating markets via exploitation of integrated personal gadgets? The possibilities are vast, only exceeded by the profits that could be gained. And what would be the legal implications on financial regulation and oversight? Will we perhaps live to see a investigative cyber unit not unlike it was portrayed in a Japanese manga in the early 1990s? Not questions I ever imagined pondering in my lifetime.

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

Chasing The Market’s Tail

Judging by the measly comment count it seems most of you guys are ready to call it a week. Plus the market seems to be in shake out mode and my E-Mini campaign met its maker, fortunately at the break/even point. Heck,  it was worth a shot but the odds were low to be begin with. Just one out of 10,000 campaigns  - moving on. So I won’t bore you with more short term setups this morning  - instead let’s talk about a cognitive bias of sorts that many of us have fallen prey to but which I don’t see being addressed very often.

2015-04-17_spoos_briefing

Today’s events are actually a prime example of what I call ‘chasing the market’s tail’. In a nutshell this rather common behavior is triggered by a series of events that cleverly draw you into taking repeated entries despite diminishing probabilities of success. You may start out with getting out clean – meaning at break even or with a little win. But after being stopped out you look at your chart and you think to yourself – hey, I got swiped just by [one handle, one tick, just below that SMA, etc.]. And you just know that after shaking out those weak hands it’ll reverse and continue higher [or lower] again.

What’s happening here is that your ego has been bruised. You got stopped out – be this for a loss or perhaps at break even or a little gain. But you really really liked this campaign, especially as you got a great entry, grabbed it right off the lows, who knows what. And you want it back – plus remember your ego is a bit bruised – and there’s that little voice in your head that keeps telling you that you’re smarter than the market and that your supreme charting skills or your unique ability to predict the future will surely overcome this temporary setback.

Yes, of course you’re never going to say all this out loud – sounds quite ridiculous after all. But we all have been there – we all have felt that temptation to go right back in, haven’t we? I mean look at that E-Mini chart above – such a juicy bounce off that lower 100-hour BB and who’s to say we’re not going to run up from here after having shaken out all those weak hands?

Of course none of us really know – especially on a Friday with only a few hours left to go. All that stuff going through your head is mental masturbation and needs to get cut at the root. That is exactly how you wind up getting drawn into bad entries – and never forget, that in fact is the main function of the market – to suck you in when the odds are aligned against you. Or maybe there are no odds – it may look that way to you now but is this entry really in line with your system rules? That’s right – I didn’t think so.

Of course Dr. Mole has the right remedy – just watch the above. Whenever I find myself after a ‘regrettable’ stop out I habitually ask myself if a new entry is justified. I also monitor my own emotions and if there are any vestiges of regret or disappointment – if so, then I simply repeat the following mantra:

Homey Don’t Play That!

That’s clear enough and it usually fixes the problem. Look guys – we’ve had a great ride recently despite equities running around in circles. Let’s not test our luck, shall we? I’m fine with letting this one go – perhaps it’ll jump higher from here and perhaps it’ll drop like a rock and we test the lower border of this sideways range again. I really don’t know and my crystal ball is still in the shop. But what I do know is that this is not a good spot for taking entries and so I’ll graciously decline and wait for a better opportunity. Which will come – believe me – if nothing else we have proven that over the past seven years ;-)

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

Evil Speculator 101

So I found myself waking up last night and habitually reached for my iPad to catch up on emails and check my systems. Of course I wound up peeking at the blog as well and then for some reason decided to head over to the Slope to see what those bears were up to these days. I have to concede that I don’t visit there often as I truly have my hands full with running my own blog, maintaining various automated systems, coding and bug fixing, attending customer support duties – and then there of course are my own trading activities. Not a weekend goes by where I do not spend a minimum of five hours working on various projects behind the scenes or am preparing for the week to come.

That doesn’t leave much time for virtual socializing as I barely manage to catch up with the comment stream over here at the lair. But I always had a soft spot for the Slopers as I used to be one way back in the early days. And for some reason that sentiment appears to be mutual as much to my surprise Tim actually mentioned me in the very post I was reading. And yes in case you wonder, it was a positive plug – deservedly so or not.

However more importantly - some of the various points Tim was highlighting as part of a rather candid self analysis really chimed with me as they outlined the very challenges we have worked very hard to address here at Evil Speculator. And I dare say issues we eventually managed to overcome in time with a lot of effort. So if I may be so bold to offer some assistance here – by offering solutions that you hopefully will not wind up ignoring. To quote Winston Churchill’s commentary on man: “Man will occasionally stumble over the truth, but most of the time he just picks himself up and stumbles on.”

I have been a financial blogger for over six years now and believe me – I know how how most of you guys think and operate as I have literally seen thousands of people come and go. Personally I myself have walked through the shadow of the valley of death on several occasions – not only in the course of my own trading endeavors but also in my interactions with my readers, critics, and followers. Because it turns out that the pursuit of what actually works, i.e. what makes you a consistently profitable trader, is not just one of the most difficult personal challenges you may face in your life, but also happens to be very unpopular. Which really is an interesting contradiction if you happen to run a trading blog as a side business. Of course you want to turn retail rats into winning traders but while readers may expect excitement and get rich quick systems, you offer nothing but hard work, sacrifice, and the discipline to show up every day and do the same boring thing over and over again. Not exactly a tantalizing recipe in the face of an audience with the average attention span shorter than that of a goldfish.

The sad truth that has to precede the remainder of this article is that most of you will fail in becoming successful traders on a long term basis. Yes, I just said that, and if you disagree with that, well then please stop reading right now and just move on, because I cannot help you. Now Tim is way too kind and jovial to be telling you this but fortunately for you I am not. There is a reason why I’m operating as Evil Speculator and it’s not just due to an admittedly dark sense of humor. Which helps but the real challenge lies in overcoming your personal daemons and implementing positive habits whilst at the same time suppressing a large portion of your most deep rooted human instincts.

Now telling all this will accomplish exactly nothing as most of you will simply move on to the next post and forget all about it within a matter of days. So instead I am offering to work together with Tim Knight and the rest of the Slopers to produce your own system. One that has a long term edge – and most importantly you are comfortable trading on a daily basis. But first things first – let’s take it from the top – I am going to compile a list of the personal hurdles that Tim has presented and will address them one by one:

  1. Inability to implement knowledge into action and personal change.
  2. Personal beliefs.
  3. Directional bias.
  4. System and/or market hopping.
  5. Overcoming emotions.
  6. Quantitative vs. qualitative aspects of trading.

Inability to implement knowledge into action and personal change.

How many of you have more than three trading books in your bookshelf? How many own more than 10? How many have more than 20? Have you read them all? Why aren’t you trading any of those systems? Because they don’t work or because you are unable to follow them? Are you attending trading seminars? How much have you invested into all that? $500 – $1000 – $10,000 – more? I think you get where I’m going with all this. Unless you are new to the trading game odds have it that you have already absorbed a mountain of knowledge and trading related information and most likely that learning curve will continue as long as you follow the markets.

So the problem is not the quantity of information really – it’s being able to absorb useful information and to apply that to making successful trading decisions. In most cases less is actually more – back in 2012 I wrote a post on maintaining a strict information diet and I invite you all to read it. However whatever information you choose to absorb on a daily basis – ask yourself: Is this information useful to making successful trading decisions? If that answer is not a resounding yes then it’s nothing but noise that will distract you from your core mission (i.e. banking coin). So don’t make the mistake of equating information with knowledge.

Once you have found statistically verifiable information that you believe will lead to successful trading activities then you must take steps to implement them into your personal life. The fact is that over time you will come across many excellent systems that have a clear long term edge but which you are unable to pursue due to a variety of personal reasons. Perhaps the drawdown periods are too deep for you, maybe the entries happen too frequently during the day, the system doesn’t take enough trades for your taste (lack of opportunity), it works best in markets you are not comfortable trading (e.g. futures, forex, bonds), your account size does not permit proper position sizing. The list is long and it’s one only you can answer for yourself. Don’t expect to abide by even the best system in the world if the qualitative aspects of that system are incompatible with your personal beliefs, dispositions, and life style.

Personal beliefs.

You probably expect me to say that your personal beliefs do not matter but actually it’s the other way around. They matter the most as you will not be able to pursue a system that is not in line with your personal beliefs about the market and how to take advantage of opportunities on an ongoing basis. And I’m not talking about drawing lines on charts either. Look, I really don’t care about what anyone paints on any chart – if I am not able to turn that information into winning trades it’s just noise to me.

Most retail traders are focused on market analysis while professional traders are focused on developing a low risk idea.  To quote Van Tharp on the subject: Market analysis for most traders amounts to building a straw house. They collect data about the markets; they look at different patterns of charts and specific market indicators; and they even make predictions about the future direction of the market and then focus on trying to help those predictions come true. However they consider the probabilities of winning and losing or the amount that may be won or lost. In other words, what most traders do in terms of market analysis has nothing to do with making low risk trades. Hunters build straw houses, but that activity has nothing to do with catching prey.

So instead of ‘charting’ or ‘market analysis’ I simply think about developing low risk ideas. I start out with various ‘beliefs’ that I have developed over the years and then put them into context with the market. For instance I personally enjoy using Net-Lines, a price pattern technique I stole from Chris Carolan a few years ago. They work very well for me but they don’t mean zip to Scott – a fellow from Australia who I have been collaborating with over the past few years on automating various trading systems. Even if trading Net-Lines turns out to be a promising idea for taking entries Scott would never be able to trade them as the concept doesn’t chime with his particular market lens. We all have one by the way – a lens that is – a way of observing and processing information given to us on a chart. It’s all a matter of how we are wired mentally.

Some of us share a similar lens while others use one very alien to us. For instance 2sweeties from Italy (a contributor on the Slope) uses a sophisticated blend of statistics and fibbonaci retracements. Works very well for some – others will find it difficult to build a system around it. Most of you Slopers seem to enjoy bearish markets – I expect maybe also for a number of reasons beyond the scope of your trading activities, but also perhaps due to the inherent characteristics of bear markets. Meaning high volatility combined with directional trending tape. They are actually a lot more difficult to traverse then you would expect but that’s a different story. Bottom line is that you need to sit down and write down your personal beliefs about the market – where you believe opportunities can be found and how you plan to take advantage. Here’s an example using Net-Lines really quick off the cuff:

  1. I believe that Net-Lines produce statistically valid support and resistance levels.
  2. I believe that these levels grow exponentially weaker as time progresses.
  3. I believe that inverse entries prior to a breach and directional entries post breach should be taken.
  4. I believe that exits should be set at the opposing end of the trigger candle.
  5. I believe that entries should resolve into producing 1R within the following two candles or the odds for a reversal increase significantly.
  6. I believe that an accumulation of several Net-Lines of equal direction (i.e. sell or buy) increases significance.

And so on – I could probably list five six more and you may agree with some or none of them. But that’s not today’s exercise and it’s just an example and a first step in developing your own system. Once you have produced a set of beliefs about the market you start develop a system around it, which unfortunately is beyond the scope of today’s article. I merely attempted to demonstrate that personal beliefs are important and can actually be leveraged in developing a system that works for you personally. If there is any interest I would be happy to produce a pertinent series which covers this step by step. The offer stands Tim! ;-)

Directional bias.

You would be right in saying that it’s probably a bad thing. However it seems that many traders are unable to look in both directions and see the same amount of opportunities. Perhaps it’s because their mind is wired in a particular way – or it’s based on past experience. You can either fight it (my approach) or perhaps you can simply take advantage of it. Fine – you only like to take short trades – I bite! Then develop a system that only goes short – problem solved! What you should NOT ever do however is project your own directional biases onto any particular market. You want equities to crash and burn? That’s a rather perky disposition you got there tough guy – now see what happens over in reality. Mrs. Market is not kind to opinionated people – usually instant punishment is generously lavished.

System And/Or Market Hopping

Tim mentioned that he recently started trading binary options in collaboration with Dutch. Now there’s nothing wrong with exposing yourself to other markets and I encourage you look at all of them. However don’t expect any of them to be the answer to your personal limitations. They are not better or worse – simply different – that’s all. Forex trades differently than the futures – stocks are loosely tied to various market segment ETFs but the latter trade completely differently and have their advantages and disadvantages. Binary options sound like fun but require a win rate of over 50% for you to reach break/even. Futures offer leverage and require overnight margin – stock options are also highly leveraged but are what they call a wasting asset. All these different type of markets requires a different trading approach and it’s up to you to figure out which may work best for you. I personally like forex and the futures – but that’s me – I like things simple and I also enjoy trading 24×5.

The same applies to systems – many retail traders move from one system to the next – like nomads. They try their ‘luck’ with a promising one and at the first drawdown pull out and move on to the next system. Which is inherently the worst approach one could take as you keep taking drawdowns and then move on to another system, most likely during its earning period, which statistically speaking is prone to experience a drawdown in the near future.

Overcoming Emotions & Cognitive Biases

I have written about this subject in much detail in the past and if you’re familiar with my work you know that it’s an uphill battle. No matter how well you know yourself and how hard you work on it – you’re only one or two trades away from turning into an sobbing emotional wreck. It never ends and it’s a battle you will wage until the end of your days – and don’t believe for a minute that you are immune. The best thing you can do is to produce a system with iron clad rules and take yourself out of the equation as much as possible. Tim mentioned that he kept looking at gold and was happy that he ‘had dodged a bullet’.

That’s exactly the opposite of what you should be doing – sorry Tim. If you have a system then your entry happens in a very specific fashion and once you take that entry you already know when you will exit. I actually decided to not talk about stops anymore as they are an emotionally laden term. People equal them to ‘stop the bleeding’ or ‘stop the pain’. Which is another reason why I don’t talk about money or percentage even – I simply refer to ‘risk’ which is referred to as R – some trend traders call it N. You devote R (usually between 1% – 2% of your assets) to a position, set your stop (ahem) and then you walk away. Either it gets to target or it’ll exit at the point you require the campaign to end. If that sounds too complicated I can help – here’s a risk calculator for the futures and here’s one for you forex aficionados.

The rules are there to protect you from yourself. And that includes, me, you, Scott, Tim, Bill Dunn, Richard Dennis, William Eckhard, Ed Seykota, everyone. We are all flawed human beings and the less we are involved the better our systems are able to perform. In essence – give it enough time and we just mock it up.

Quantitative vs. Qualitative Aspects of Trading.

Nick Rage produced a great video that demonstrates how most people focus merely on the quantitative aspects of trading, meaning system development, campaign management, risk management, etc. As a matter of fact many of the views I present here are covered and I strongly suggest you watch it in its entirety. It also makes a point about trading systems on a long term basis which is another Achille’s heel of most retail traders.

This has turned into a rather lengthy post but believe me that I’ve only scratched the surface. Developing your system is actually the tiniest aspect of it all – the majority of your trading activities should actually revolve around managing yourself. Trading involves human performance and that performance can be objectively measured in terms of profit and loss. You cannot hide from your performance record, no matter how much you may want to mentally rationalize your losses. And since you are the most important factor in your performance, doesn’t it make sense to spend time analyzing yourself? The best traders do it constantly but subconsciously. So be one step ahead of everyone else and do it on a conscious level.

Let me conclude this with another Van Tharp quote (clearly I’m standing on the shoulders of giants today): Successful trading is 40% risk control and 60% self control. In turn the risk control portion is one half money management and one half market analysis (i.e. developing low risk ideas). Thus market analysis is only about 20% of successful trading. Yet most traders emphasize market analysis while avoiding self control and de-emphasizing risk control. To become successful, traders need to invert their priorities.

Happy hunting.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.




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