How To Think Correctly

[SOCRATES]

...And I am sitting here....observing how all of this has gone off the rails...and giggling....because it is so excruciatingly funny to see how you all succeed in shooting yourselves in the foot without any help....the only one to have made a really worthwhile contribution since yesterday is Kiwi...My Compliments to You.
But as usual anything of value is ignored.:cheesy:

 

[darkwanderer]

Let's say we are all thinking correctly, now. We now need to apply this to trading, where do we start? If we strip and deduce trading down to it's catagories and sub-catagories, and so on, what do we need to think of first. What is the logical 'first step'?

 

[SOCRATES]

Let's say we are all thinking correctly, now. We now need to apply this to trading, where do we start? If we strip and deduce trading down to it's catagories and sub-catagories, and so on, what do we need to think of first. What is the logical 'first step'?

You really want to know ?

Here is a super simpified version.

1. Abandon ego when you are in front of a screen and the market is running.

2. Step outside yourself and examine yourself in front of it to question yourself why you are thinking what you are thnking.

3.Keep your hands off the keys if you do not understand what is happening.

4. Press the correct buttons if you do understand and are absouletely certain you do.

5. Make provision to get out if you turn out to be wrong, quickly. Use a stop.

6. In the event you are right, remain there whilst you are right, and exit immediately when conditions change, which no longer makes you right.

....and all of this at a very basic level.

 

[darkwanderer]

You really want to know ?

Here is a super simpified version.

1. Abandon ego when you are in front of a screen and the market is running.

2. Step outside yourself and examine yourself in front of it to question yourself why you are thinking what you are thnking.

3.Keep your hands off the keys if you do not understand what is happening.

4. Press the correct buttons if you do understand and are absouletely certain you do.

5. Make provision to get out if you turn out to be wrong, quickly. Use a stop.

6. In the event you are right, remain there whilst you are right, and exit immediately when conditions change, which no longer makes you right.

....and all of this at a very basic level.

How much money would i need to follow these actions through?

 

[SOCRATES]

How much money would i need to follow these actions through?

You don't need money to do these things.

You need to do them unless you want to get fried everytime.

And I am only talking basics anyone should do.

And if you do not do them and get fried, then you will end up with no money at all.

 

[darkwanderer]

You really want to know ?

Here is a super simpified version.

1. Abandon ego when you are in front of a screen and the market is running.

2. Step outside yourself and examine yourself in front of it to question yourself why you are thinking what you are thnking.

3.Keep your hands off the keys if you do not understand what is happening.

4. Press the correct buttons if you do understand and are absouletely certain you do.

5. Make provision to get out if you turn out to be wrong, quickly. Use a stop.

6. In the event you are right, remain there whilst you are right, and exit immediately when conditions change, which no longer makes you right.

....and all of this at a very basic level.

It's not very specific, in fact it's all been said before what you have stated. To be honest, it's a bit slippery. Are you really into trading, or spiritualism?

 

[Mr. Charts]

You really want to know ?

Here is a super simpified version.

1. Abandon ego when you are in front of a screen and the market is running.

2. Step outside yourself and examine yourself in front of it to question yourself why you are thinking what you are thnking.

3.Keep your hands off the keys if you do not understand what is happening.

4. Press the correct buttons if you do understand and are absouletely certain you do.

5. Make provision to get out if you turn out to be wrong, quickly. Use a stop.

6. In the event you are right, remain there whilst you are right, and exit immediately when conditions change, which no longer makes you right.

....and all of this at a very basic level.

Beautifully and succinctly put.
Richard

 

[SOCRATES]

It's not very specific, in fact it's all been said before what you have stated. To be honest, it's a bit slippery. Are you really into trading, or spiritualism?

Don't be cheeky.

If I had known in advance this was going to be your response, I would never have told you these series of fundamental truths.

It goes to show my instinct is correct and that very few of you are worthy of any help.

 

[darkwanderer]

Don't be cheeky.

If I had known in advance this was going to be your response, I would never have told you these series of fundamental truths.

It goes to show my instinct is correct and that very few of you are worthy of any help.

Help? I didn't ask for help. I asked for answers...you gave the wrong ones.

 

[SOCRATES]

Help? I didn't ask for help. I asked for answers...you gave the wrong ones.

Right ! That's it ! You get nothing more from now on. Absolutely nothing.

You once again confim my instincts are correct.

 

[darkwanderer]

Right ! That's it ! You get nothing more from now on. Absolutely nothing.

You once again confim my instincts are correct.

You are joking, right?

 

[SOCRATES]

You are joking, right?

No I am not joking, I always listen to what my subconscious tells me...on this occasion I disregarded it and against my better judgement offered to be helpful, and thankfully only at a rock bottom basic level, but not any more.

 

[dlpirl]

Objectivity as the Answer to Reactivity?

Let me try for a bit more clarity.
As part of a learning process we might say there are two possibilities. One is to be given information ,that is being told what to think because what is known has from an experiential point of view been found to be sound.
Eg The Battle of Hasting was indeed in 1067
.

Chump, you seem to be advancing the opinion that success in trading, and in life for that matter, is about good information processing. I certainly agree that we need to learn how to think, not what to think. In fact I would argue that mechanical thought is not true thought at all. However, it does have value as an exercise in discipline. But what drives the direction of thought are one's values. In the long run, understanding and adjusting our motives will help us become less reactive.

How we integrate the information we chose to receive is extremely important. When I receive information about trading systems, my questions are 'Is this information true in a context that is meaningful for me? Can this improve my trading system? How can I know? Is this useful now or later, etc. In other words just gathering valid data, doesn't really help much. The data must be processed. Some ways for processing are much more beneficial than others. What I pay attention determines my processing priorities. What I pay attention to is determined by what I value. Do I really know what I value?

So my thesis is that the objectivity prized by most traders is much more elusive than most of us realize.

 

[SOCRATES]

"The objectivity sought by most traders proves to be more elusive than at first realised" is altogether a more constructive way to explain it.:cheesy:

 

[dbphoenix]

Help? I didn't ask for help. I asked for answers...you gave the wrong ones.

Understand that the market doesn't know who you are or, even if it did, care what you want. Also understand that you have several choices of approaches. You can approach it as a gladiatorial combat (this is bertie's choice; he enjoys gladiator movies); as a game of chess; as sailing (Ruth Roosevelt has a good article on this); as a tracker and hitchhiker, stalking the elephants, then going along with the ride that they provide until they stop or change course; and so on. Your choice will depend partly on "who you are". But it must also depend on what is productive (you can, of course, drive yourself into bankruptcy through a stubborn devotion to a losing strategy, but this is not productive).

You must then decide just what it is you want from the market. Are you recreational? Are you looking for the same adrenaline rush you get from games of chance or extreme risk sports? Are you looking to supplement your income? Make a living at it? Are you looking for a hobby? a diversion? a career? a way into something? a way out of something (or away from somebody or something)?

And there's more, all of which is addressed in the Trading Journals posts linked in my signature. But at some point, you're going to have to look for profit opportunities, usually -- though not necessarily -- in charts. Studying trader behavior/psychology and understanding how that relates and is reflected in price movement may interest you. Or you may be interested solely in how indicators may provide direction and signals. You may become interested in patterns or formulaic approaches. None of that really matters. What does matter is working/playing/experimenting with all of this to see (a) what has a chance of working for somebody, somewhere, sometime and (b) what has a chance of working for you, given your wants and your strengths and your proclivities, then developing a consistently profitable trading strategy through back-testing, forward-testing, paper-trading, small-scale real-money trading, then the "real" thing.

The goal is to develop a consistently profitable strategy that will build your confidence and, during the build phase, lose as little of your equity as possible. A great many traders -- not all of them beginners -- have insufficient respect for their money. They talk of "tuition" and of "money you can afford to lose". But you can't afford to lose any, and the tuition need be paid in little more -- or perhaps nothing more -- than time and effort.

If any of this makes sense to you, look at the TJ posts below. If it doesn't, there are many other ways to begin trading, including bertie's. But relying on your own intelligence, your own sense, and your own initiative and drive will most likely get you where you want to be quicker and cheaper.

Db

 

[dbphoenix]

Let me try for a bit more clarity.
As part of a learning process we might say there are two possibilities. One is to be given information ,that is being told what to think because what is known has from an experiential point of view been found to be sound.
Eg The Battle of Hasting was indeed in 1067

No amount of thinking will change this fact (probably).

However , we could impart this knowledge a different way. We could suggest to the learner that they go visit the site of the battle and look for clues. We could ask them to consult historical texts.We could ask them how after accumulating their data they would conclude that The Battle of Hastings was indeed in 1066.
At no point in this process did we spoonfeed the information , we directed , we asked them to ask questions and consider same to form a conclusion.
When we take this approach it becomes a generalisable skill. That is when confronted with any unknown situation they can take the steps to confront it by investigating it and collecting data and then asking questions about that data as to what exactly does it mean.
By contrast in the absence of this approach anyone who's simply been told what to think by being given information is simply not prepared to learn about anything that is unknown except by being given the information by someone who already has it. Moreover they are also ill prepared to consider whether that information is actually sound.Hence my former statement as to this being "pretty useless" , an unfortunate overstatement on my part ,but nonetheless in relation to being taught how to think holds some relative merit.

Of course there is a place for giving information and therefore telling people what to think.. If my daughter were to step off the road without looking for traffic I wouldn't stand there for an hour talking her through the thought process so she could see for herself what a dangerous thing it was to do. Obviously I would simply tell her at that point.
Much of our being told what to think ,or being given information is done for exactly that reason , time , or lack of it. In school were our teachers not able to simply give us some information they would simply not have the time to cover what they need to cover. This of course does not mean it is the only method of learning and I think you can see that in my view it is not the optimum mode of learning for some purposes.
We have to be pragmatic , we just don't have the time to learn everything we need by being told how to think about it correctly , but unless at some point we make the effort to learn how to think correctly for ourselves as opposed to being told what to think then we are working far below our potential.
My response was to the specific situation outlined above and the comments made re same, nothing more ,but clearly my initial reply has been generalised so i have added to that reply for clarity.
Given my views you also understand why I'm pretty happy to just go away now and leave you to think ,or not as the case might be. I can see below you will not be wanting for views on this subject so you don't need mine.

Another excellent post, chump (have you changed your breakfast cereal? ). And the following post of yours, copied from elsewhere, is a good companion to it (if you want any of this deleted, let me know)

Jt,
Trade management strategy.
The financial markets are in a way rather strange in that they operate in a way that is at odds with the way general life works.

What I am saying is this. Imagine you had two girls whom you're interested in . You choose to pursue A and subsequently date and marry her. In this choice you never have a chance to evaluate how your choice worked out against the alternative that was available. Basically , you made your choice (took the trade)and got on with it and perhaps only occasionally will you wonder how it might have worked out with choice B. Something you can wonder about ,but never form any real conclusion about.

The markets don't work like that though. They hold up for you like a mirror how your choices worked out ,both those you took and those that you might have taken as an alternative. That is your trade selection and your trade management.
On the one hand this is a positive as it gives you ample opportunity to to analyse the data and make conclusions as to which choices were the 'best' to make. Unfortunately , as with much of life their always seems to be the a balancing negative which in this case is you are also offered the potential opportunity to view those prior choices as a mechanism on which you can hang your ego. That is , damn I'm useless ,see how I got it wrong again. I sense that this is where your frustration is coming from. You can deal with it simply by acknowledging the fact that we will always make mistakes , it's our human nature to do so because most of the time it's how we actually learn. If you can acknowledge this , smile that this is the way it is , then just turn your attention to the positive aspects of this feature of the markets that you can evaluate choices and refine your strategic approach on the strength of what you find then you might find that frustration starts to go away. In other words don't take it so personally ,not only are you trying to deal with a facet of human nature to err in learning , you also have to deal with a market feature which offers ample opportunity to you to berate yourself over that , be kind to yourself .

 

[counter_violent]

It's all becoming very tiresome and tedious.

Endless waffle, no doing.

So here is some classic verse so you can all go away and have a think about yourselves.


IF. Rudyard Kippling


If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too:
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or being hated don't give way to hating,
And yet don't look too good, nor talk too wise;

If you can dream and not make dreams your master;
If you can think and not make thoughts your aim,
If you can meet with Triumph and Disaster
And treat those two impostors just the same:
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build'em up with worn-out tools;

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings,
And never breathe a word about your loss:
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,
Or walk with Kings---nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much:
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man, my son!

C V

 

[Splitlink]

OR

If I had a shiny gun,
I could have a world of fun
Speeding bullets through the brains
Of the folk who give me pains:

Or had I some poison gas,
I could make the moments pass
Bumping off a number of
People whom I do not love.

But I have no lethal weapon---
Thus does Fate our pleasure step on!
So they still are quick and well
Who should be, by rights, in hell.

Dorothy Parker

Split

 

[zupcon]

At last this thread starts to get interesting!

The way I look at this is that anyone who’s trading successfully, at whatever level will have spent a considerable amount of time and effort at some time stumbling around in the dark, finding a trading style that’s comfortable, and confronting the typical problems that we all have faced at some point on the journey. In simple terms doing the work DBPheonix advocates.

I assumed that the 6 step plan presented by Socrates would only be applied when “trading”, as opposed to gambling, or taking random entries, or generally being completely without a clue as we all where at some point in our development.

I’m not at all sure if Socrates is advocating using such an approach whilst an individual is stumbling around in the dark clueless, or whilst an individual in the process of undertaking the work that definately needs to be undertaken before getting into a position where you at least stand a fighting chance. Hopefully he’ll clarify this point.

If he is, that would seam rather a strange approach, I will concede that there is more than one way of skinning this particular cat, but it’s an approach that I personally wouldn’t be particularly comfortable with.

I would have thought that if you’re at the stage where you’re approaching the markets with a reasonable strategy or plan that these types of approachs do start to have some value, for some individuals, and some trading styles.

In my own situation I trade a system which involves a degree of discretion, and can see how this simplified 6 step “control mechanism” is actually in operation whether I like it or not. I’ll be honest, I hadn’t explicitly though of it in the terms Socrates describes, as Im more focussed on the mechanical elements at this stage of my development, but nevertheless the mechanism does exist even though I’m not actually consciously controlling or managing it. I think Ive managed reasonably well without actually being aware of the process, maybe concentrating on this aspect will improve my trading and maybe it won’t, but it doesn’t hurt to consider it.

On the other hand, I also trade a non discretionary system based on currency pair correlation, this model is statistically driven, and in this case this particular “control mechanism” makes no sense whatsoever. The software simply does what it does based on tens of thousands of hours of research, ego, psychology etc simply arnt an issue in this case.

regards
mick

 

[dlpirl]

Seeking Objectivity

"The objectivity sought by most traders proves to be more elusive than at first realised" is altogether a more constructive way to explain it.:cheesy:

I'll agree with that, Socrates, and from there advance my further point that seeking objectivity requires external referencing. At the very least we need to have others in our lives that help us to see where we are stuck in automated reactivity. Seeing our reactive nature within a context that includes other modes of reactivity can also help greatly. Its so easy to excuse our flaws, but magnify those of others.

If others wonder what I use for context, take a look at a section I have up on my site that I call the Enneagram of Trading and Investing: http://www.s2pmarketsignal.com/Investing_Psychology.htm. I really think traders and investors can benefit greatly by understanding their own reactivity within this framework.