Trading Psychology, The 14 Stages of Investor Emotions

Efficient markets are based on the assumption that rational people enter transactions with the intent to maximize gains and minimize losses. While this theory is sound, most investors are not the purely rational robots that efficient markets rely upon. Instead, emotions often cloud our decision-making and prevent us from acting in a rational manner.
Knowing we can never conquer our inherent emotional biases, we should seek to understand the range of emotions we may experience as investors and how it affects our interactions with the market. A common market psychology cycle exists that shines light on how emotions evolve and the effect they have on our decisions. By understanding the stages of this cycle, we can tame the emotional roller coaster. The fourteen stages are:

1. Optimism – A positive outlook encourages us about the future, leading us to buy stocks.
2. Excitement – Having seen some of our initial ideas work, we begin considering what our market success could allow us to accomplish.
3. Thrill – At this point we investors cannot believe our success and begin to comment on how smart we are.
4. Euphoria – This marks the point of maximum financial risk. Having seen every decision result in quick, easy profits, we begin to ignore risk and expect every trade to become profitable.
5. Anxiety – For the first time the market moves against us. Having never stared at unrealized losses, we tell ourselves we are long-term investors and that all our ideas will eventually work.
6. Denial – When markets have not rebounded, yet we do not know how to respond, we begin denying either that we made poor choices or that things will not improve shortly.
7. Fear – The market realities become confusing. We believe the stocks we own will never move in our favor.
8. Desperation – Not knowing how to act, we grasp at any idea that will allow us to get back to breakeven.
9. Panic – Having exhausted all ideas, we are at a loss for what to do next.
10. Capitulation – Deciding our portfolio will never increase again, we sell all our stocks to avoid any future losses.
11. Despondency – After exiting the markets we do not want to buy stocks ever again. This often marks the moment of greatest financial opportunity.
12. Depression – Not knowing how we could be so foolish, we are left trying to understand our actions.
13. Hope – Eventually we return to the realization that markets move in cycles, and we begin looking for our next opportunity.
14. Relief – Having bought a stock that turned profitable, we renew our faith that there is a future in investing.

Individuals clearly follow this cycle in their decision making process. Since broad indices like the S&P 500 are comprised of the decision of millions of individuals, we should expect index prices to track this pattern as well. If we are aware of the stage of the cycle we are experiencing at a given point in time we will have a greater grasp of how our emotions are affecting our investment decisions. This knowledge will help us manage our own investment portfolios as well as predict the next step for the broad market.

Sean Hannon, CFA, CFP is a professional fund manager.

Have you ever seen two people in the same situation act differently? With trading futures this is really evident. Only one side gets to make money.

How a person handles sinking (losing money) will help shape what they become as a trader. The second thing that my mentor every told me was learn how to lose. Winning is easy. Here are some key things about losing:

Losing is a result. A loss is a culmination of an action or inaction, own it.

You can’t control when you lose only how much. It is ok to lose, it is not ok to lose big.

In the beginning, it is easier to learn through losing than winning. Understand why you are losing and winning. Losing is what makes you put in the work. Winning is what makes you continue to put in the work. Allow yourself the second opportunity.

Don’t run on a broken leg. The worst day is always the second day. You will get better at healing until then recognize it.

Stick to your limits. If you cannot stick to your loss limits than you should not be trading. It creates a path you do not want to go down and hole that is hard to get out of.

Run it like a business. If you are losing more than you are making, risk less. If you can’t make $200 you should not be risking $800 a day.

You can’t prevent yourself from losing but you can control everything before and after. That is the best that the market has to offer. It has to be enough. Lose with a purpose or it will always be greater than your wins. Don’t epitomize the definition of insanity. Clear your head and come back, however long that takes. Learn how to lose so that your winners count. Exit every trade the same, with confidence.

No trader likes to lose but the best traders know how to swim.

From Trader Habits blog...

The market is on the upward move as shown from this chart, Russell 2000 (the small caps).

Switching my concentration to monitor the small caps which comprises all the small companies as compared with the S&P's and the Dow.

Though they all move almost in the same direction, this time I am preferring to concentrate with the Russell 2000 which is the equivalent of the IWM etf.

Dont Follow Your Passion, Follow Your Effort

Mar 18th 2012 2:47PM

I hear it all the time from people. “I’m passionate about it.” “I’m not going to quit, It’s my passion”. Or I hear it as advice to students and others “Follow your passion”.

What a bunch of BS. ”Follow Your Passion” is easily the worst advice you could ever give or get.
Why ? Because everyone is passionate about something. Usually more than 1 thing. We are born with it. There are always going to be things we love to do. That we dream about doing. That we really really want to do with our lives. Those passions aren’t worth a nickel.

Think about all the things you have been passionate about in your life. Think about all those passions that you considered making a career out of or building a company around. How many were/are there ? Why did you bounce from one to another ? Why were you not able to make a career or business out of any of those passions ? Or if you have been able to have some success, what was the key to the success.? Was it the passion or the effort you put in to your job or company ?

If you really want to know where you destiny lies, look at where you apply your time.

Time is the most valuable asset you don’t own. You may or may not realize it yet, but how you use or don’t use your time is going to be the best indication of where your future is going to take you .
Let me make this as clear as possible

1. When you work hard at something you become good at it.

2. When you become good at doing something, you will enjoy it more.

3. When you enjoy doing something, there is a very good chance you will become passionate or more passionate about it

4. When you are good at something, passionate and work even harder to excel and be the best at it, good things happen.

Don’t follow your passions, follow your effort. It will lead you to your passions and to success, however you define it.

From blog maverick/mark cuban

The market made a nice pretty move last Friday's session.

A surprising move considering a Friday trading is usually a profit taking day.

But that's not quite a surprise since the market is on the downward trend since Monday's trading open.

The Dow made a nice classic pattern to trade, a cup with a handle setup.

It drops further after the open to make a small cup formation opening for the setup at the consolidation when it reach red line.

Every Adversity Contains The Seed Of …

by: Bill Zimmer

Friday, March 23rd, 2012 at 9:58 am

The path to success consists of knowing your outcome; taking action; knowing the results you are getting; and having the flexibility to change until you are successful. You have to find the beliefs that support your outcome, the beliefs that get you where you want to go. If your beliefs don’t do that, you have to throw them out and try something new.

The accumulation of all of our experiences creates the impression that “we know“. When in fact, we “don’t know“, we merely believe “we know“. Confused? Take for example the old cliché “Everything happens for a reason “. As a normal human being we usually invoke this cliché in our minds when something goes wrong, when something bad happens. There must be a reason this happened to me, perhaps someday I will understand. I knew I should have… I knew it, I knew it, I knew it. How will I ever recover? Sound familiar? It’s happened to everyone! Now comes a choice.

There are numerous ways people react to this situation. If we use trading as an example and assume for the moment we’re not doing well, we may; refuse to even open our statements (out of sight out of mind). We can feel hurt and frustrated. We might sit home and mope, or go out and get drunk. We will be mad. Seek blame; the broker, the advisor, a friend who recommended it, the company insiders whose shares we invested in. It doesn’t really matter, it just must be someone else’s fault, it can’t be me!

All of this might allow us to let off some steam, but it doesn’t help. It does not bring us any closer to our desired outcome. It takes a lot of discipline to be able to retrace our steps, learn painful lessons, mend fences, and take a really good look at new possibilities. That is, however, the only way to get a positive outcome from a seemingly negative result.

All successful people have the uncanny ability to focus on what is possible even in a negative situation, what positive results could come from it. They think “everything happens for a reason, and a purpose, and it serves them”. They truly believe that every adversity contains the seed of an equivalent or greater benefit.

The bible says, “you reap what you sow” it does not say you reap what you desire. Could the mistakes you have made, the losses you incurred, sow the seeds of learning? Does it make you think, perhaps all I need is a further education? And then get one? Or does it make you think, you need to be a professional, an insider, a floor trader, to make money in the markets?

You probably paid for your professional education. The market is your new education. Your losses, if any, are the cost of your new education. If you take the positive approach, say this is just the school of hard knocks. I will read, study and learn. Next time I’ll make money. From now on I’ll make money. Now you can say, this happened for a reason and it serves me!

Trade Like A Turtle

Been learning and observing the market for a quite a while and participates daily with its movements even in an "on and off" activities.

The thing that I noticed from all (or most) participants (especially the individual retail traders, the home traders) were all looking for the "kill" in the market.

And also looking for the "short cut" in trading the markets to make easy profit.

But that's not how the market works.

Unless you are working for the sophisticated prop firms, but if not, you need to trade in a slow pace with minimal but consistent expectations.

Making a low profit in the market that is equivalent to a minimum day's work might be enough considering how the markets is tough to trade.

Especially if you are still at the initial stage of your trading endeavor, expecting high returns should first ignore.

Trade like a turtle might be the suitable words to describe in trading the markets.

Trade the market in a slow calculated edge with minimal profit enough for a day's work is the right way to get involved in the market.

In other words, treat trading as a day job, not for the get rich quick scheme.

Otherwise, you will quickly lose your capital and if you are not ready also your sanity.

Trade the market carefully!

JAMES ALTUCHER: These Are The People Who Really Make Money On Wall Street

James Altucher, The Altucher Confidential

I came up with an ultra-perfect top-secret method for beating the stock market. I saw it right there on the screen after thirty straight hours of computer programming. My heart was beating fast. I was sweating when I went to sleep. I could only sleep for about two or three hours and I had to get up and check my work. I added up all the money I was going to make. I would never work again!
It didn’t work.

Every day I get a message that sounds something like this. “Can you introduce me to Steve Cohen. I have something that will make him a lot of money.”

I don’t mean to sound arrogant and I certainly don’t want to piss off people who take the time to send me emails (usually they flatter me first and say, “I love your blog and can you give me [insert rich guy]’s personal cell phone number.”)

Playing along I write back, “Why?” Like why would I give anyone’s email to someone I don’t know, for one thing.

Answer: “I have a method that beats the stock market.”
Usually it involves some moving average bullshit or there’s some new theory about commodities or whatever.

It’s all BS. NOTHING works. Let me repeat it a different way:
YOU ARE NO GOOD.

You’re not even a good person. You’re arrogant and rude. You smell.
I know from personal experience. You’re smart, talented and yet you want to use those talents to do some hocus-pocus that you think will put you ahead of the other 5 million people who are trying to win in the markets: people a lot smarter than you are, a lot hungrier, have a lot more computers, have a lot more inside information, have teams of analysts, etc. I cannot believe how stupid you are.
Let me describe to you the ONLY people who make money on Wall Street (and note: I am very bullish on stocks in general). By the way, all of the below people will slit your throat in a dark alley. They don’t like you, they want you to die a painful and disgusting death and they want all of your money. So beat it, punk.

People who hold forever. Warren Buffett, Bill Gates, etc. These are usually the founders of companies, who build their companies up, take them public and never sell their shares. Some people who try this have companies that fall apart and they make nothing. Some people who try it turn out to be multi-billionaires. If Bill Gates had sold his company in the early days instead of going public he would’ve made about $100 million or so. A good amount. But not the 50 or 60 billion he has today. Ditto for Buffett who was worth about $20 million in 1970 but didn’t sell a single share of Berkshire Hathaway stock during its climb from $6 to $100,000. (See, 8 Unusual Things I Learned From Warren Buffett).

So this presents an obvious way to make money on Wall Street. START A GOOD COMPANY that actually helps people. Then take it public and ride it forever. You’ll make money.
People who hold for one trillionth of a second. i.e. high frequency traders. Let’s say you want to buy some shares of IBM. These guys have computers with cables hooked right into the exchange who slip in the middle, buy some someone else, sell to you 1/10 of a penny higher and makes a sliver of money. These guys make money every single day and it’s a race to the bottom: who can get their faster, quicker, and more deflty to screw you out of 1/10 of a penny every time you make a trade. And by the way, probably more than 50% of trades on the stock market are done by these guys and a single mistake (think: flash crash) can cause the market reeling within seconds.

People with inside information: If you know Hilton is about to buy Marriott then you can make an awful lot of money. The Feds arrested a handful of people engaged in insider trading a few years ago but my guess is they only got about 1/10,000 of the people who have inside information. Every hedge fund manager trades on inside information all day long. There’s no other way for them to get any edge on their peers.

They use every means at their disposal. Not the old-fashioned bribery stuff of the 1980s. They hack into networks, they vacation where your CFO is vacationing, they use so-called “expert networks”. There’s no stopping the culprits.

By the way, this does mean that micro-cap companies that have public information but seems like it’s inside because nobody pays attention to them, could provide a small edge in the markets. But whoever is trading the large-cap companies are just losers. The kind of people you want to play cards with.

Congressmen. It’s legal for congressmen to trade on inside information. So, let’s say your congressman knows that a vote on some energy tariff is going to go a certain way he can go to his local casino table (stockbroker) and place his bets accordingly.
Guess whats happened the past few years since 2007 when all of America lost money in the stock market. As a group, congressmen are up 30% per year. If this continues I might consider running for Congress sometime soon instead of just running for the Vice-Presidency.

This is one of the reasons I think we should just abolish Congress.
People who take fees. I’ve been invited twice in the past few weeks to become a partner at different $100 million funds. In one case I said no and in the other case I kind of just blew them off. I’ve become a bit of a shut-in lately and the thought of meeting people and negotiating and selling..blah. I can’t handle it right now. I think I need medication.

But here’s how it works. You raise $100 million and you make about $2 million straight off the top in fees which you split with your partners and the people who raise you money. Then you split any money that comes in off the profits on the $100 million. In the long run you lose money for all of your investors but you make a TON of money on fees.

My favorite example is super hedge fund manager John Paulson. He turned one billion dollars into six billion during the housing crisis in 2007-8. He probably took a billion in fees off the table. Then he raised his fund from six billion to 30 billion as more investors poured in. Then, or so people tell me, he lost 50% and his fund went from 30 billion to 15 billion (these are rough numbers. Its give or take a few billion). So net-net he lost about $10 billion to the markets. And yet, he’s pocketed about $3 to $4 billion in fees, making him one of the richest people in the world without providing any useful service in the world. He made that money simply by losing even more money. That’s a pretty good job if you can get it.

Ugh, in general, try not to be an arrogant loser. And, by the way DO NOT spell “loser” as “looser” like everyone on the yahoo message boards. Also, shower more frequently. And don’t think you have a system for beating the markets. And, in the worst case, if you can’t get over your bad habits then either start a company or run for Congress. At least there you can legally steal from us and pretend like you are “representing” the people. Good luck and God Speed.

This post originally appeared at The Altucher Confidential.

The market made a nice move today.

Buying at the consolidation and selling at the top is the easy trade I can see for today.

Quite choppy early in the trading day but as the trading day unfolds, it's all in the bag.

The market did not do anything today except to move sideways.

An ugly market range if I may conclude.

Not much to do except to watch the market move in a zigzag/choppy mode.

A choppy boring Friday trading day!

The market just move sideways today for traders got tired making money the past four days.

Probably they're on the sidelines taking a break toasting their profits with drinks.

I don't see any opportunity to trade as of this post.

We'll keep watching.

The market did not do anything today except to move sideways.

It got tired/burned from yesterday's big upside.

It paused for a little bit and both participants are watching each others back who's going to move where.

No convincing trade setup for today except some scalping which are good for quick traders.

How To Trade Successfully

That's the four words every aspiring, novice, struggling wannabe' traders trying to find out.

There are lot of ways to trade the market as there are many instruments to trade of.

Like the individual stocks, bonds, currencies, commodities, futures, other European markets, indexes, etc.

As you go along with your trading endeavor, if you treat it seriously, you will encounter lots of obstacles in finding the right way to trade the market.

Since you are looking for the quick buck to make in the market, you are jumping from any instruments to trade.

Then you realize that trading the market is not just like that.

That's where you have/need to search for some help/solutions how you can beat the market.

Subscriptions, chat rooms, alerts, newsletters, blogs recommendations, and the likes won't help since the market moves on a different time frame.

Plus the market is more on human psychology than predictions.

Trading successfully lies mainly from trader's own understanding about the markets.

This can be acquired through years of watching how the market works. It takes time.

Taking all the ideas of reputable traders and mold them into your own way is the right approach to trade the market successfully.

Other than that, your own psychology about the market matters too.

And finding the right instruments (niche) to trade the market is important.

Mastering/familiarizing few instruments to trade the market will give you an edge.

The market made a stunning surge today due to positive reports coming from the Fed.

After it opened high in the regular open, it leaps vertically when the Fed reports came out late in the afternoon.

A sign that the market is on the bull run.

The market rallied today as soon as it surge in the open.

A sign that the bulls are in the momentum.

Buying after the pullback in the open is the best setup for the entry and just ride it from thereon till the close(?).

That depends on your time frame.

But as the great trader, Bernard Baruch profess, "I make my money selling early".

For this "posted by", trade "in-between" is the preferred  setup which offers the low risk.

The whole market struggled today with only the Dow who made a slight convincing move.

And the rest (Nasdaq, S&P, Russell) were all traded in a range that looks like they all came from heavy drinking holiday binge.

The market might be in a tight consolidation moves in the coming days or maybe weeks.

The only opportunity are the short time frame traders take advantage of.

How To Start Keeping A Journal

At some point you have probably already read somewhere about the importance of keeping a trading journal. In other words, taking time each and every day to write down and store your thoughts, observations and actions concerning the market and your trading activities.

This exercise is done not only to keep those stored for future reference, but also as a self-evaluation tool to track your development. Given the complexity of the market, it is impossible for most us to recall simply from memory what we’ve learned, how we’ve acted in certain situations, and more importantly the best tactics to employ in specific market conditions and situations. In fact, the more and longer you trade, this task become even more challenging. A big part of trading successfully is learning how to use and take advantage of your past experiences and remembering lessons learned.

If you ask most successful traders they will tell you that keeping a journal can be helpful. However, the reality is that most traders don’t keep one. For example, when interviewing traders that have applied for my
mentorship group, I often ask them to send me copies of a journal entries for various time periods so I can see what they’re keeping track of every day and how organized they are in doing so. Would it surprise you that most cannot provide those samples? And, those who do, the journal looks like it was recently made up. In sum, this easily separates out the jokers from those who truly are doing what it really takes to achieve long-lasting success in the markets.

So, why don’t traders keep good journals or not at all? In my view, part of it is certainly time. We are all busy enough working our own strategies and keeping focused conditions and trades that adding yet another daily task is tough things for us to do. Another big part I think has to do with the basic fact that some of us just don’t develop the habit. Most of us have routines and if you don’t add journaling to it at some point, there there will never be enough time in the day to do it!

Looking back, I was very fortunate. Early on in my career before agreeing to mentor me, my first mentor asked me to start keep a trading journal for an entire month. He didn’t tell me what to put in there, just simply to “write down in a paragraph every day what you learn each day.” Simple and straightforward and every day since 1994 I have been doing exactly that!

This also raises the third issue I see – most traders don’t really know or understand really what a trading journal should include and so they don’t even begin. Since most successful traders won’t openly share their methods with strangers, you won’t find many helpful samples out there to work with as a starting point. Moreover, if you ask a 100 traders what things to include in a journal, you’ll get 100 different responses. Since everyone trades differently and operates in different time frames, your journal must reflect that as well.

So, if you are one of the traders that understand why it could be important to keep a journal OR you are at least willing to try it for a period of time to start the habit to see for yourself if it can be helpful, here are five tips to help get you started:


Make The Commitment: To help start and maintain the habit, make the commitment that for every day for at least one entire quarter with no exceptions you will write a journal entry. It needs to be daily at first to start the habit so you’ll need to update it on weekend as well. To avoid running out of time daily to do it, make the journal entry the very first thing you do every day before anything else. I would also encourage you to set a reward (i.e. a carrot) you really want (i.e. golf outing, new gadget, etc.) as long as you keep that daily commitment for an entire quarter.
Start Slowly: Put and stick to a ten minute time limit on all journal entries. Yep, actually set a timer on the time you spend. Many think they must spend 30 minutes or even hours journaling out everything which is why they never have the time and quickly abandon their commitment to try it. In addition, long journal entries will not make the process helpful as you’ll be just as reluctant to review them later on. After all, who has the time to reread a bunch of long-winded rambling garbage? No me, that’s for sure and I doubt you have the time either. So, in just a few sentences, you should be able to write out everything you need to keep for that day. Be concise, clear, and only put in items you think are worth remembering. Before you write every journal entry, think first of how you might later use these notes to develop an edge. This will help you know what to include and what to leave out.
Be Organized From The Start: Create an organized, logical structure from the start. Making random comments in a journal without any overall structure is not going to be useful. You want to be able to review these journaling entries after some time has passed so organize it in a manner that makes sense to you with this in mind. From the day one, you need to figure out what each journal entry should include and how plan to organize your daily thoughts. I’d recommend using a bullet format at first to make sure you’re concise and to the point as well. Concise, clear entries are much better than long-winded journaling notes that you won’t have time to read/filter later on.
Make It Fun: If you don’t actually enjoy the process of keeping a journal chances are good you will stop doing it. Fortunately, there are lots of online services now like Evernote and others that help make journaling fun, easy to do from anywhere on just about any device, not very time consuming and also secure. At first, I would not recommend that you do a open blog, post notes on twitter, etc. for all to see and comment upon. This is only just for you and no one else!
Share It: If you have a trusted mentor or trading buddy or just someone you respect who trades successfully, you need to share your journal with him (or her) and ask for feedback and suggestions on making it better and things to include based on their experience. While most successful traders are reluctant to share their own journals, you will still find many are willing to provide feedback on your journal and offer helpful suggestions. Seek out that help after some time passes and you have already established a consistent journaling routine.

Like most things, the most difficult thing is just to get started to develop the habit in your daily routine. These five recommendations should help get you past that point. If you make and stick with your commitment to maintain a trading journal, in time you will gain a powerful tool in your trading weaponry. Through the years, many of my best trades have come following reviewing my notes of prior situations and setups that I am facing once again. In many ways, that has proven to be a valuable edge for me and, if you do the same, in time you will discover this as well.

Once you do and you find out that the process isn’t as awful or as difficult as you currently might think or fear, then it is time to actually improve your journal and focus so that it really will help you. At first, it is ok just to do what it takes simply to develop the habit. After that, I would highly recommend reading the following trading journal suggestions from my friend Dr. Brett N. Steenbarger. He offers some terrific ideas on what a trading journal should and should not include to help you make the most of this exercise!

From Kirk Report

A choppy (boring?) market trading day with not much opportunity to make a decent setup.

Guess the participants are gauging each others throat looking first who's going to swallow the unpredictable market thrust.

And from there, they're going to take the market rewards.

Are You Setting Yourself Up For Failure?

by: Bill Zimmer

Friday, March 9th, 2012 at 9:39 am

I’m quite sure many of you have been confused and frustrated by the markets in recent times. During these times we need to avoid the big pipe dream, the pure hope, the thinking we have to make money today. Many if not all of you have a plan, a goal in mind on where you wish your trading to take you. Be careful how you define your goal. Perhaps your goal is to make $100,000 this year in the markets and that’s wonderful, however if you break it down into too finite a goal you will defeat yourself. Breaking down the $100,000 into roughly 250 trading days per year equals $400 per day or $2,000 per week, approximately $8,333 per month. Sounds great and easy, doesn’t it? However, there is a flaw in this thinking?

Setting a goal based on earnings every day (or week or month) and you will feel compelled to trade. What if the markets don’t move very much? What if everything is quiet waiting for a piece of news? It may be better to stay out of the market completely rather than fail at what could be a low probability trade. Another problem – what if you fail to make your $400 today due to a lack of opportunity (let’s not even consider a losing day). Now the next day you will feel compelled to attempt to make $800 to make up for your no profit day, then $1200 and so on. Your stress level will be elevated and you may well begin a never-ending cycle of frustration and disappointment.

Setting a more appropriate goal will probably relieve the frustration. It’s great to have a rough idea of how much money you want to make, but setting a specific dollar amount that you must achieve on any given day (week or month) is very often a hindrance. If you are new to trading and the most you have made is $15,000 in a year, then setting a goal of $100,000 is probably very unrealistic. You are setting yourself up for failure? Perhaps, an increase of 20% is more appropriate. Because if you fail to reach your goal, you’ll feel frustration and disappointment, and may start trading based on your emotions, the death Nell of many a good trader.

Professional’s know how to patiently wait for the opportunities to come to them. They don’t impose their will on the market. And that’s what traders are doing when they set a performance goal in terms of a specific dollar value over a specific period of time. Winning traders patiently wait for market conditions where they know they can excel. They understand that the same quiet market will handsomely reward them if they are patient. It’s also useful to remember that all that really matters is performance across a series of trades. Many traders can lose 60% of the time, then happen upon a winner of many thousands that offsets previous losses accrued across a series of trades.

When you are setting goals, it’s vital that you keep them in perspective. Set goals that are equal to your skill level. As your skill level improves then reset your goal. Shooting for goals that are beyond your skills will frustrate you more than motivate you.

And please remember that you can’t impose your will on the market. You don’t know what market conditions will be until you see what they are. And if optimal conditions aren’t there, you can’t do much about it. You must accept what the market is willing to give you, which may mean patiently waiting for conditions to change. By doing so, you may not profit every single day, but over the long run, you’ll be a consistently profitable trader.

The market made an initial surge in the open but bow down early noon till the close.

Lack of bullish conviction from the participants.

Probably it's Friday, a profit taking day.

Two trades are probable here, buying in the open and close it around 11:00 am. ET.

And the second is to short the market after the first long trade and cover it in the close.

Simple trade setup but it's not easy, don't you think so?

I guess it is, but proper concentration and using multiple time frames will help to catch the trade.

The market finish high today and it formed a saucer pan? pattern.

Looks like it might fail two hours before the close but went up vertically afterwards.

Nice setup if you were able to enter at 12880 level and close it at 12930.

The market is back on track again after dropping 200 points plus last last Tuesday.

The market gap up in the open then drops after an hour or so to make room for the profiteers.

It is forming a (little) cup with a handle as of this posting in the futures market.

Buying at the consolidation is the most appropriate to enter as far as I can see.

Futures markets are on the rise from this overnight session.

The market gap down when it opened late in the afternoon and continues its upward momentum as of this posting.

Let's see if its going to maintain its upward trend in the regular open.

The market made a dramatic revenge today from yesterday's tumultuous pounding by the bears.

This time the bulls are always ready to counter any attack the bears they are trying to bring in the table.

One good trade today is at the consolidation level 12780 that leaps vertically from thereon.

Buying at that level and selling at the close is the trade for today.

The market made a stunning surprise reversal today when it sank yesterday from the deep hole.

A sign that the bulls can easily? turn the tide against the bears.

The market was not able to make a reversal when it drops hard due to European and world economic concerns.

Not much opportunities to trade in this kind of market environment.

The market drops hard due to European and world economic concerns.

The biggest drop in the market from the bull trend the past three months as reported.

I don't see any possible trade (as of this moment and till the close) from this chart.

Might as well watch the market and stay on the sidelines.

Face Regret Head On

by: Bill Zimmer

Friday, March 2nd, 2012 at 9:47 am

If you are not in the habit of following sound money management principles and risk analysis then you face actual harm. For example, you commit too many dollars into a single trade and it goes awry - you lose much more than you should have, and it’s painful. More than being painful, you come to regret having made the trade in the first place. A very normal human instinct is to not only avoid pain, but to avoid pain at all costs. Regret can be incredibly painful and will make otherwise good traders avoid even putting on a trade for fearing the regret of another loss.

If we put too much ego on the line with any decision, the hurt and the regret intensifies. If we put a lot of work into a trade we have also then put a lot of self-identity on the line along with our money. With all this work into this particular trade we really become convinced we are right. If it turns out that we are wrong it suggests to us that we are just not as good as we thought we were. Nothing could be further from the truth.

The easiest way to avoid feelings of regret is to avoid making decisions. If we do not make a decision then we can’t be wrong and we won’t feel regret. However, if you do not make decisions you also cannot make profits, which is our goal. It is better to learn to face regret head-on.

The best way to cope with regret is to accept the fact that it is an emotion. An emotion that you will be facing as a good trader. If you have a written business plan (trading is a business) you know that losses are part of this business, as they are in every business. If you take the proper precautions however, you will keep those losses small enough that being able to deal with regret should be somewhat easier. As time goes on and you see your plan working; regret will become easier and easier to face. A useful thinking strategy is to remind yourself, “I’m making more out of the potential loss than it deserves; it is not going to be as unpleasant as I’m thinking it will be.”

Another way to minimize regret is to try impersonalizing the trade. Think in terms of probabilities, “This is just one of many trades. The outcome of this single trade means nothing. The big picture is all that counts.” By reminding yourself of this simple fact, you’ll minimize the potential regret, should you lose. Also it’s important to remember that a single losing trade (or even a few losing trades) doesn’t mean that you have poor trading skills; it may just be a run of bad luck. What is the point in making the outcome of a trade symbolic of your skills as a trader? It’s Not! And, most importantly, never put your self-worth on the line with your money. You’re a professional. The outcome of the trade should not influence the positive view you have of yourself as a person. Don’t try to avoid regret. Face it head-on. You’ll feel more free and powerful.

The market went down in the open yesterday and made a slow reversal to finish barely below its open price.

A sign that a bearish reversal is now on the move?

I guess that's what the sentiments of most participants.

The chart below was a relatively familiar formation.

After the market drops from the open it climbed up slowly in the ladder type fashion.

Buying at the consolidation at the bottom and selling at the close was the best trade I can see.

Using multiple time frames plus kind of reading the market minds will help you make that kind of trade during this market turbulent moves.

Otherwise, you will get clobbered if you just trade for the sake of trading.

BENTLEY EXP 9F

“Traders who continue to spend their money looking for the holy grail, the best indicator, or that secret winning method unfortunately miss the secret of winning. The secret lies in your own ability to understand the market that you choose to trade and your own ability to develop the strategy to capitalize on the opportunities that you have learned to identify.” – Dr. Keppler

Trade Your Own Way

Trading is not all about practice (live trading), you also need to be emotionally balance.

When we mentioned emotionally balance, you should be ready to put trades with reasons and purpose.

Not trades that are impulsive and no clear understanding in reference with the current market environments.

Putting unnecessary trades will affect you emotionally when at the end of the day you notice the summary of your account is on the negative side.

And you cannot refrain basing from your P&L because trading is all about making a profit.

And as you go along with your journey in trading, the problem of trading technique is not the issue anymore.

Whereas, initially while you are still on the learning stage you are looking for the shortcut to make money.

But after a while, you will realize that putting trades is not the issue.

It's all about the whole picture that includes market environments, minds of the participants, and your own psychology about the market.

It will take years to learn all of these, but through patience and perseverance - nothing is impossible.

Trading is like building a house in an earthquake prone areas, you should have a trading foundation that is solid and strong.

To sum it all, trading is all about your own understanding about the market and your own way of making trades.

It cannot be imposed on you, you have to find your niche and own way to trade.

No one can help you to make money in trading because other traders too are busy making money in their own way.

They cannot (and will never?) tell that to you, even to their love ones?

That's for sure!

The market did not make any positive move today except that it stays/plays below its previous close.

It formed a small cup with a handle early but it failed.

Then it formed a big cup with a handle around noon time to finish where it opened in the close.

If you're just patient enough to wait for the pattern to emerge, you can make a good trade in the latter.

The market did not make any big move today, almost similar from yesterday's range.

It surge early in the open and made some slight predictable patterns from thereon.

A saucer pan/cup with a handle at around 11:00 am. ET.

And a little head and shoulder between 1:00 pm. to 2:00 pm ET.

If you are basing on a multiple time frame, you can easily figure it out the formation.

Sold YM (Futures) at 13000 for a gain of 15 points.

Target price was met and the pattern succeeded, cup with a handle.

The market is forming a cup with a handle pattern.

Bought YM at 12985 with a target at 12996.

Let's see how it goes.