Tag: Hesitation

Marble Jar

Posted on by Anatoliy Schneider

In the example with 60 white/40 black marbles in a jar, most traders will agree that it does not make any sense to hesitate pulling the marbles out (provided, the bet on each trade/marble is small enough). Each time there is a signal, it must be taken, being excited that it slowly but surely increases one’s profits.

In “marble jar” trading system the signal is very simple:

  1. See the jar – take the marble
  2. Replace the marble, mix the jar
  3. Repeat

Very high frequency trading – as fast as can be done manually.

In any real trading system the signals are understandably complex. However, anyone trading a system is assumed to know that it has an edge. It is assumed that the system has been tested and proved to be working.

No matter how complex the signal is, it must be defined clearly enough to be identified consistently, without question. After it is identified, it must be taken.

Why would anyone want to dismiss the trading signal? The reason is very simple – not having any idea if the system has any edge.

We know that the marble jar has a clear edge – we know exactly how many black and white marbles there are. But in your real system you might not have done your homework well enough in order to identify your edge.

Now imagine that you are given a non-transparent jar with marbles. There is no way for you to know how many black and white marbles there are in the jar. In addition, you’ve no idea what is the profit upon grabbing white marble or the cost upon choosing the black one.

Would you trade this system with the same amount of confidence? Probably not. One could go as far as saying that it would be stupid even approach such literal “black box”. What if all the marbles are black? What if the cost of taking a black marble is all your life savings?

And yet, in essence it is exactly what majority of traders are doing every single day. They have no idea where the next trade is coming from, what odds are attached to it and what is their worst case scenario.

No wonder they hesitate to reach out for a marble!

Uncertainty

Posted on by Anatoliy Schneider

When you look at the chart about to take a trade, you are still hesitating, still unsure whether this is the right one. You are still uncertain about pulling the trigger.

Remember – it will always be like this!

No matter how much you trade, this feeling of uncertainty for the outcome of any one trade is not only to be expected, but to be desired. This is the feeling that tells you – you perceive the Market correctly.

Recognize the uncertainty, accept it with a smile. The nature of trading lies in this everlasting uncertainty, never being sure about the outcome of any given trade. Having accepted the uncertainty – pull the trigger, take the trade.

If you already have a solid system, then over the next 20 trades you will turn a profit, of which you can be certain. If you are still in the process of fine-tuning your system, it is only possible to fine-tune through placing these trades amidst all the uncertainty the Market throws at you.

Be comfortable with ambiguity. Take the fear out of equation by accepting that losses are needed to turn a profit, by accepting the uncertainty as the core part of the game. You are only afraid of something you try to avoid. Fear dissipates as soon as you embrace that which you are afraid of.

“I cannot Accept the Losses”

Posted on by Anatoliy Schneider

I cannot accept the losses

One of the biggest problems of any trader is accepting this essential part of trading business.

So how do you feel and behave when you believe this about yourself?

  1. Scared – “I cannot pull the trigger because it could end up being a loss!”
  2. Powerless – “It seems there is nothing I can do to remove the possibility of losing”
  3. Hesitated – “Something must be wrong with this trade, let’s wait another day, the Market just does not feel right”
  4. Annoyed/Frustrated – “I am trying as hard as I can, and yet here is another loss!”
  5. Angry – “Damn this Market and its stupid rules!”
  6. Reckless – “I am sure this trade is right, I will not let the Market play against me and stop me out with another spike, I will just put this trade on without a stop loss…”
  7. Inconsistent – “My trading system is just not working, I must change the rules to avoid such stupid trade in the future”
  8. Depressed – “It is all hopeless – how can I ever win if I keep allowing these losses?”
  9. Disgusted – “I swear I’ll never trade as long as I live!”
  10. Foolish/Embarrased – “I was so sure about this trade, I kept telling everyone how much money I’ll make in this one!”

Notice when you allow your brain to enter into any of these patterns of thinking. Take a look through the list, see what applies to you personally.

It is a great thing if we are able to catch ourselves breaking predefined trading rules, such as our Risk Management or Entry rules. However, it is our thinking patterns that lead to breaking the rules or to any other problems in our trading. Consider for a moment, have you ever caught yourself thinking any of the above thoughts?

Being aware of our thinking is much harder than being aware of the fact that we did not put a stop loss in a trade. If you learn catching the moment when you talk yourself into not putting the stop loss you will start working with the cause of the problem, not the effect.

So let’s reverse the original statement:

I can easily accept the losses

Now, this may not be true for you at the moment, but try to imagine how you would feel, behave and trade if this thought would be your reality.

  1. I am confident – the losses do not frighten me.
  2. I am comfortable with my trading system – I accept all parts of it
  3. I am at peace with anything the Market will do – I allow it to behave in any way it needs to.
  4. I am grateful for every opportunity to place a trade – whatever the outcome of that trade might be.
  5. I find all the circumstances helpful – any outcome is completely acceptable to me and therefore I am making myself available to learn from it.
  6. I am looking forward to getting a loss – it is the greatest signal the Market could possible offer to me.

Consider the last point – isn’t it really the greatest feedback the Market could ever possibly offer to you? The Market is not against you, it is simply there to teach. It is clearly telling you, from its perspective, that your view of the circumstances was not correct at the moment when you placed the trade. What did you believe about the current market situation just before you pulled the trigger? Take that belief, reverse it and you have the corrected point of view, available to you with Market’s help.

I you are serious about working with your beliefs, consider trying this method – Katie Byron’s “The Work”.

“I do not understand the Market”

Posted on by Anatoliy Schneider

I do not understand the Market.

How do you feel when you believe this about yourself? Examine the following statements and see which ones cause the biggest emotional reaction – these are the ones you want to work on.

  1. Powerless
  2. Hopeless
  3. Stupid
  4. Like I am wasting time
  5. Frustrated
  6. Tired
  7. Angry
  8. Afraid of losing the money
  9. Afraid of looking stupid when I open a “wrong” trade
  10. Hesitated

Whatever you believe about yourself is what you are. So how do you think you would be feeling if this believe did not exist for you, if it would have completely disappeared?

  1. Free
  2. liberated
  3. Empowered
  4. Willing to pull the trigger on my trades
  5. Willing to explore the Market without resistance

Is it possible to understand the Market at all? Once again, the main question here is what do you believe “understanding” to be. Depending on how you define “understanding” it might be possible to understand the Market or it might be not.

What is understanding?

  1. Knowing where the Market will go
  2. Knowing why the price moves on the Market
    OR
  3. Knowing what the possible outcome of my trades could be

Consider which one is easier to understand about the Market. When you need to know where the Market will go, you are bound to be frustrated most of the time in your trading. If you simply need to know what could the outcome of your trades be, you will bring clarity to your trading.

If you really want to understand the Market in terms of knowing where it will go, why is that?

  1. Do you want to avoid losses?
  2. Do you want to prove that you are right?
  3. Do you want your trades to be ideal, absolutely perfect?
  4. Do you want to have confidence in your actions?

Remember, that each of the above questions must be broken down into aspects. Your belief system is extremely complicated and the answers are not likely to be found by scratching the surface.

The most important belief

Posted on by Anatoliy Schneider

By far the most important belief on the Market is in myself.

Throughout the years I’ve been always trying to perfect my trading system, analyzing each losing trade and trying to figure out what went wrong. I always assumed that any loss means that I didn’t recognize some obvious hint the Market was giving me. I assumed I made a mistake that must be fixed before I take the next trade. That kept me going in circles for many years.

The problem with that attitude is that I was believing that it is possible to be always right. I wanted to be always right. In essence, I didn’t have any belief in myself so I was trying to build an ideal trading system that I could believe in.

A breakthrough was the realization that some trades are simply not working out. There is nothing wrong with them whatsoever. They were taken at the right time and at the right price in the right direction. And yet, the Market did not go in that direction.

When I define “the right trade” or “the right direction” in terms whether the trade made profit I am in for trouble. Basically, I am making sure that any loss will make me “wrong”. A different attitude is to define “the right trade” as the trade that has been taken according to my trading system, without any anxiety or hesitation. The trade might still lose me money, but it is “right” because it wins in the long term. Even when the trading system is not good enough to give me a winning edge, the trade is still “right”, because by following my rules I will soon find out the problems in my system and improve it.

On the other hand, when I judge every losing trade as “wrong”, I will experience emotional pain. If a trade is capable of causing me pain, disturbing my emotional balance, I will soon develop a fear of taking a trade. When I start hesitating pulling the trigger, my belief in myself is further diminished. Before I know it, I am trying to improve my trading system again, trying to make sure it will never lose and become the Holy Grail I can believe in.

Until we can fully believe in what we are doing we can never become consistent in trading. If there are no rules in your trading, you are going nowhere. If there are rules in your trading, which you constantly adjust to make sure the Market does not cause you emotional pain, you are going in circles still. We have to change what’s inside before we can start seeing what’s outside clearly.