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Now this is my idea of some good thoughts, asking lots of questions is my
style. If the answer doesn't make sense, you ask a lot more. Some good
questions and answers here. Good work Robert.
In case someone out there is wondering, I'm getting sick of the same old
regurgitated advise that is seen on list after list. Most of it is BS. As
much help to trading as a bowl of oatmeal.
Prosper
----- Original Message ----
From: "Robert Hodge" <r-hodge@xxxxxxxxxxxxxxx>
To: "Realtraders@xxxxxxxxxxxx Com" <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, May 09, 2001 2:16 PM
Subject: [RT] thoughts on the psychology of trading
> i've just been thinking about "noise" and in particular signal-to-noise
> ratio with respect to discretionary trading, and in particular the signal
> processing unit between your ears.
>
> what prompted this was another attempt by myself to grapple with
>
> Neural, Novel & Hybrid Algorithms for Time Series Prediction
>
> i began thinking that the same motivation which drives a neural net model
> builder to pre-process inputs and to eliminate as much extraneous data as
> possible from the neural net could be applied to a discrectionary
trader...
>
> so, letting your brain take the role of the neural network:
>
> - you'd want to make sure you didn't overload it with too many indicators
or
> too many of the same type of indicators.
> - you'd want to make sure that it did NOT receive any inputs other than
the
> specific few you have trained it to work on as this would simply dilute
the
> signal even more.
> - you'd want to make sure that its processing of each input was
commensurate
> with each inputs' importance in predicting the output.
> - you'd want to understand how it behaves under extreme market conditions
so
> that you could take it offline or subsume it within a prudent money
> management framework if it starts to breakdown.
> - futher to that you'd monitor its performance and note those occasions
> where it failed to trigger an appropriate response to the market. over
time
> patterns of behavour might emerge that could be usefully embedded in the
> "system".
> - you wouldn't want it to treat entering or exiting the market differently
> (in that it would have no underlying protective or aggressive biases).
> - you'd want its signals to be easy to follow and execute...as in the
> signals would have some visibility prior to triggering and they would be
> concrete - buy now/sell now, not "maybe now is a good time to buy".
> - you'd want it to be on all the time and not switch off unless you
> deliberately switch it off.
>
> the outcome of thinking about this is that even if you can't achieve a
total
> zen-style mindset then you can at least do some things to LOWER THE NOISE
> LEVEL in your head:
>
> - are you sure you really need to look at ohlc bars, why not look at
> something simpler (ie less data points to confuse you) like line-on-close
> charts, p&f charts, market profile etc
> - do any of the "indicators" you look at predominate disproportionately on
> your screen or in your concentration? why is this? is your attention
> attracted by the fast moving volatile indicator more than the apparently
> less volatile indicator. Have you scaled your visual cues appropriately?
> - if you feel particulary tense around the times when you enter or exit
the
> market then perhaps it is worth considering adopting a stance of always
> being in the market...so that there is a less of an adrenalin rush when
> putting-on or taking-off risk to distract you and more focus on just
> executing flawlessly.
> - how many markets/instrunments do you feel comfortable watching and
> gleaning information from at any one time? if you feel stretched and/or
> confused by all the different things you watch then get rid of as many as
> possible until you're brain is happy.
> - how do you concentrate? are you a short intermittent bursts type person,
> or do you just sit there happily watching and absorbing the market for
hours
> without being distracted? what timeframe might be better suited to your
> concentration style? would/does the company of other traders help, hinder
or
> otherwise modify your concentration pattern?
> - do you get bored trading sometimes and miss opportunites because you
have
> unconciously switched off? maybe you need a higher timeframe where you can
> manage the market's concentration requirements of you better.
> - if you know that sometimes you trade when you don't feel up to it, or
put
> on trades you know you shouldn't or sometimes chase the market to make
back
> losses from earlier in the day/yesterday...what practical steps could you
> take to prevent this happening? maybe you need to talk to another trader
or
> another person you can trust and tell them when it happens you need their
> help to take you offline before you do damage to yourself and your
account.
> - what other ways can you avoid contaminating the signal processing
element
> of your trading?
>
> just some random thoughts,
>
> Robert
>
>
>
> =============================================
> Robert Hodge
> Moonlight Systems
> r-hodge@xxxxxxxxxxxxxxx
> (on MSN messenger as hodgerobert@xxxxxxxxxxx)
> =============================================
>
>
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