Tag: Pulling the trigger

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 find a good trading system”

Posted on by Anatoliy Schneider

I cannot find a good trading system. The signals my system is giving me are really poor.

How do you act, what do you feel when you believe this?

  1. Frustrated – “No matter how hard I try, I cannot be successful with such a poor trading system”
  2. Depressed – “I don’t even want to trade anymore, I have tried so many systems and all them don’t work! The Market must be purely random after all.”
  3. Apathetic – “It’s not worth it, there is no point to continue. I must be a complete failure!”
  4. Lost – “What do I do now? No matter how many systems I try, the signals are still poor!”
  5. Disorganized – “I might as well just take random trades”
  6. (after a couple random losses) Hesitant – “I am not sure I should take this next trade…”

While it is true that a trading method is still necessary in order to be successful on the market, it will be of no use while you have so many conflicting beliefs about trading. After all, how many trading methods have you tested properly? By that, I mean taking 30-50 trades, without hesitation, in real account (demo just doesn’t cut it – better open cent account and risk $0.50 per trade), precisely following one method, not adjust any rules whatsoever?

In my experience, we are often impatient to get the positive results and so we cannot even stand a couple losses in a row, thinking that something must be wrong with our trading method. Of course, this is interrelated with our refusal to believe in uncertainty – we want to know what the outcome will be before we place the trade.

So let’s try and turn this around and see what happens:

The trading system I have right now is good enough for all practical purposes. I will not judge it until I collect live track record of at least 50 trades following this method.

How do you feel now?

  1. Liberated – “I can concentrate on the Market instead of constantly reading forums in the search of the next Holy Grail”
  2. Calm – “All I have to do is take the next opportunity, as defined by my trading method”
  3. Confident – “I know that the next trading opportunity will be provided by the Market. I know that whatever its outcome might be, it will take me a step further on my path towards trading success”
  4. Interested – “I wonder what the next trading opportunity will be? What lesson will it teach me?”

As was already mentioned before, when you have a proper trading mindset you might not become profitable in an instant. But you will be open to progress in your endeavors freely, without any internal resistant. The Market will teach you how to trade, it will become your friend, not an enemy – but you must take the first step.

“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.