# Charting:  Seeing things as they really are



## Gringotts Bank (25 October 2013)

Contemplate this writing, then look at the chart that follows below:

"... this is how you should train yourself: Whenever you see a form, simply see; whenever you hear a sound, simply hear; whenever you taste a flavor, simply taste; whenever you feel a sensation, simply feel; whenever a thought arises, let it be simply a thought. Then 'you' will not exist".  ~some dude from the ancient past.

Look at the chart but refrain from layering on top of the seeing any expectations, hopes, desires, fears, commentary, news, announcements, analysis, projection, labeling.  In particular add no analysis or labels, no internal commentary or visualizations.  Wait for the chart to give up it's secrets rather than forcing a solution.  Just the seeing of the daily candles and no internal monologue.

Then make your bet for next week's action, and write it below.  I've tried to choose a stock that hasn't been commented on in the threads lately.  QAN.


----------



## CanOz (25 October 2013)

Hmmm, the chart doesn't seem to be available for me...


----------



## Gringotts Bank (25 October 2013)

CanOz said:


> Hmmm, the chart doesn't seem to be available for me...




Stop thinking.  Look again.


----------



## CanOz (25 October 2013)

Gringotts Bank said:


> Stop thinking.  Look again.





hmm, ok that was weird.

Well its bearish to me....no matter how much i don't think i can't get past its bearishness...


----------



## Gringotts Bank (25 October 2013)

CanOz said:


> hmm, ok that was weird.
> 
> Well its bearish to me....no matter how much i don't think i can't get past its bearishness...




I'm at high 1.31 and low/close of 1.25


----------



## lindsayf (25 October 2013)

what is the chart timeframe?


----------



## Gringotts Bank (25 October 2013)

lindsayf said:


> what is the chart timeframe?




daily.


----------



## lindsayf (25 October 2013)

I like a move up towards 1.4 next week.  It may go to 1.2 area before moving up


----------



## skyQuake (25 October 2013)

Interesting.

No volume to avoid any 'analysis'?


----------



## tech/a (25 October 2013)

skyQuake said:


> Interesting.
> 
> No volume to avoid any 'analysis'?




There is a short story right there.
On the chart volume or no volume.


----------



## Gringotts Bank (25 October 2013)

skyQuake said:


> Interesting.
> 
> No volume to avoid any 'analysis'?




I didn't do that deliberately.  Price and volume together is probably a good idea.


----------



## So_Cynical (25 October 2013)

You shouldn't of told us its QAN due to that, the fundamentals and my hate of airlines kicks in...based purely on the chart and the fact that i mostly only work off 1, 2 and 3 year charts, ill go double bottom and call it a buy.

EDIT: Daily chart = i have no interest whatsoever.


----------



## Gringotts Bank (25 October 2013)

So_Cynical said:


> You shouldn't of told us its QAN due to that, the fundamentals and my hate of airlines kicks in...based purely on the chart and the fact that i mostly only work off 1, 2 and 3 year charts, ill go double bottom and call it a buy.




I know it's hard not to see any chart without something triggering in the mind.  I picked QAN because it doesn't have any particularly obvious TA things happening.


----------



## CanOz (25 October 2013)

So_Cynical said:


> You shouldn't of told us its QAN due to that, the fundamentals and my hate of airlines kicks in...based purely on the chart and the fact that i mostly only work off 1, 2 and 3 year charts, ill go double bottom and call it a buy.
> 
> EDIT: Daily chart = i have no interest whatsoever.




You have no interest in a daily chart, or a chart?


----------



## cynic (25 October 2013)

tech/a said:


> There is a short story right there.
> On the chart volume or no volume.




Splendid!

I love a good short story!

How does this one go?

No,no don't tell me! Let me guess!

"Once upon a time there was an enterprise that longed for profitability, but the traders shorted it happily ever after."

Is that the long and the short of it?


----------



## So_Cynical (25 October 2013)

CanOz said:


> You have no interest in a daily chart, or a chart?




Daily...what happens over the course of a day or a week or a month is of little to no interest to me, its not how i make my money.


----------



## CanOz (25 October 2013)

So_Cynical said:


> Daily...what happens over the course of a day or a week or a month is of little to no interest to me, its not how i make my money.




So asking for you to form an opinion on a chart is kinda useless then huh?


----------



## Gringotts Bank (25 October 2013)

This is not my main method of trading (just saying, by the way).  I use analysis (TA), but I have a strong suspicion that this style, if mastered, is much more profitable.  I'm relatively new to this, having only practised about a year on and off.

Another way to approach this "no mind" technique is to imagine you are going to die in a month; keep looking at the chart.  Maybe you'd like to make some money for your family.  Now it's down to a week.  Now a day.  Now only minutes before you die.  Now seconds.  Keep looking at the chart, but relax.  Now it's your last second...no time for thinking... just watch.  What's it going to do?   If you really pretend like it's happening, your mind becomes very clear in that last second.  Use that moment.


----------



## galumay (25 October 2013)

No matter how much i squint, its still voodoo to me!


----------



## Shaker (25 October 2013)

Hi

I see .....

Buy at $1.35  resistance at 1.40ish and 1.55 to break into recent highs.

So

Buy 5662 shares at 1.35
Stop @ $1.17
Target $1.90
Stop Loss $1000


R/R around 3 to 1

Oh and this is speculative so risk may drop to 500 less shares same stop but larger risk/reward reward

Shaker


----------



## Caveroute (25 October 2013)

As it stands it's always in short - but it's too close to support so you need to wait.


----------



## payday (25 October 2013)

I'm betting up for next week. Looks oversold to me and the big bearish candle from 2 days ago appears to have been completely retraced so there may be some buying coming back into it.


----------



## So_Cynical (26 October 2013)

CanOz said:


> So asking for you to form an opinion on a chart is kinda useless then huh?




No not at all, just not the time frame that makes me money, and really im only interested in long term support and resistance and long term valuations and price event relationships..comes in handy when determining the one thing im very interested in...determining if XYZ is cheap and the likely hood that i can sell it for more than i paid for it.


----------



## CanOz (26 October 2013)

So_Cynical said:


> No not at all, just not the time frame that makes me money, and really im only interested in long term support and resistance and long term valuations and price event relationships..comes in handy when determining the one thing im very interested in...determining if XYZ is cheap and the likely hood that i can sell it for more than i paid for it.




Fair enough too.

So what your view on QAN as per GB's question?


----------



## Gringotts Bank (26 October 2013)

Advanced neural networks can be pretty good at predicting changes in direction 5 days in advance.   http://www.neuroshell.com/products.asp?task=examples  But to get returns like this you have to input the right data and the data has to be pre-processed, and even supercomputers will struggle with the sheer volume of work involved.

I figure that the human brain is a neural network far more advanced than the biggest supercomputer on the planet.  With one glance of a chart, the deeper layers of the mind will have access to every single bit of information available.  If we can get the conscious mind to switch off for a moment, we might be able to access that store of information and find something useful.

The idea is to willfully prevent one's previous store of knowledge (trendlines, patterns, news and so on) from interfering with that information.  Instead of bringing pre-defined ideas about how charts work, see what the chart can tell you on its own... bare.  If you can do it reliably, maybe you can offer me and the others your method for doing this.  There's many ways to attempt to switch off the conscious mind.


----------



## Gringotts Bank (26 October 2013)

Also remember that future stock prices *can* be predicted by looking at what has happened in the past.  This is because people behave in highly predictable ways, and the market is just a large bunch of people.  

If I have a neighbour who walks up the street at 10am, and has done so _every morning for the past 10 years_, then I can start placing money on him doing the same tomorrow and the day after that, so long as my downside risk is limited.  One day he will miss his walk and that needs to be allowed for.  But my point is people are predictable, and therefore so are markets.

Add your ideas.  Thanks.


----------



## CanOz (26 October 2013)

Gringotts Bank said:


> Also remember that future stock prices *can* be predicted by looking at what has happened in the past.  This is because people behave in highly predictable ways, and the market is just a large bunch of people.
> 
> If I have a neighbour who walks up the street at 10am, and has done so _every morning for the past 10 years_, then I can start placing money on him doing the same tomorrow and the day after that, so long as my downside risk is limited.  One day he will miss his walk and that needs to be allowed for.  But my point is people are predictable, and therefore so are markets.
> 
> Add your ideas.  Thanks.




I understand what you are saying by predictable but i like to think of it more as what will likely happen...so thats the side to bet the risk on.


----------



## Gringotts Bank (26 October 2013)

CanOz said:


> I understand what you are saying by predictable but i like to think of it more as what will likely happen...so thats the side to bet the risk on.




Alright.  The reason I say predictable is because it has a personal feel.  I like to look at the market not as a technical output but as a composite 'person'.  I can't predict a random technical squiggle but i can predict what people might do in a given situation.  My neighbour walking past at 10am will be predictable until something interferes with that pattern.

Will be pretty funny if QAN gets a takeover offer at $5 on Monday.


----------



## Gringotts Bank (31 October 2013)

Gringotts Bank said:


> I'm at _high_ *1.31* and _low/close_ of *1.25*




Currently high = 131.5 low/close = 1.245/1.25.

The week is far from over but this is close enough to be making money if one can be consistent. Obviously sample size of one trade doesn't prove anything but I have done similar before on many occasions without using a method of analysis (TA/FA).  At the moment I still trade better using analysis, but I put that down to practice, and I still want to transition to the pure 'no-mind' approach.  There's no point me posting more trades on the forum for one very good reason that I've found out before:  posting predictions and results adds pressure, and that takes away from one's ability to focus in the way I described above.  The more I got right, the pressure builds.  The more I got wrong, the pressure builds.  Very accomplished traders will manage this pressure (see Trader Girl's live SPI thread), but that's something for me to work on also.  So the idea was just to throw up ideas of how anyone could get into the right frame of mind to assess and take a position using a method other than TA/FA.


----------



## tech/a (31 October 2013)

The true Pro has no emotion to right or wrong.

Right--good
Wrong--do something about it.

Making decisions doesn't have to be stressful.

Take the PAV/Tech Thread.
In drawdown--know how its going to play out so---business as usual.


----------



## Gringotts Bank (31 October 2013)

tech/a said:


> The true Pro has no emotion to right or wrong.
> 
> Right--good
> Wrong--do something about it.
> ...




I agree that a very defined framework does make it easy on the nerves, and that the mechanical robotic approach does have a lot going for it in that sense.  The approach I'm suggesting here has potential benefits and drawbacks. The main benefit would be higher profit potential.  The main drawback, stress.


----------



## tech/a (31 October 2013)

Gringotts Bank said:


> I agree that a very defined framework does make it easy on the nerves, and that the mechanical robotic approach does have a lot going for it in that sense.  The approach I'm suggesting here has potential benefits and drawbacks. The main benefit would be higher profit potential.  The main drawback, stress.




How can you quantify Higher profit when you have nothing with which to measure?

Your assuming you can achieve a higher profit
Yet any form of validation unless after the fact negates your method.

Convenient.

Maybe I'm just not worthy??
ohmmmm


----------



## Gringotts Bank (4 November 2013)

*MarketPsych* is worth a subscription.  Their latest newsletter is a ripper.  Chock full of stuff you need for this style of trading/investing.


INTUITIVE INVESTING

What is it the good managers have? It's a kind of locked in concentration, an intuition, a feel, nothing that can be schooled. The first thing you have to know is yourself.
~ Edward Johnson, Founder of Fidelity Investments

In the quote above Johnson was not entirely correct about one thing. Bad investment managers do not have "locked in concentration, an intuition, a feel" due to the fact that they cannot be learned in school (e.g., in business classes, trainings, etc.). They can be learned, but the problem is that these characteristics have not been properly taught. Although self-knowledge cannot be memorized from a book, skills for developing self-knowledge can be learned.

The goal of today's newsletter is shed some light on the nature of investing intuition.

Feel for the market, trader's intuition, gut instinct, and acting from the zone refer to those times when our investing flows naturally, as if in tune with the market's rhythm. Our thinking is clear. Our reactions to market events are correct. Trading decisions are seamless.

While I'm an empiricist by temperament, intuition is notoriously difficult to study in the context of decision making. We often know when we have an intuitive insight, but when we try to define it specifically, it's an evasive concept. The circularity of intuitive feelings is parodied in this Dilbert comic strip and this one.

Famous intuitives include George Soros and Jack Welch (his 2000 book was titled: "Jack: Straight from the Gut"). Infamous intuitives include Alan Greenspan, who asserted in his 2007 book The Age of Turbulence, "To this day the bathtub is where I get many of my best ideas." Intuitive insights often arrive when we are relaxed, thinking about something completely different from the markets, or perhaps nothing at all. It is in these quiet moments that the collected inputs of the past days and weeks coalesce in our brains, patterns and relationships are recognized, and insights bubble up into our awareness.



DAMASIO'S GAMBLE

The ability to tap into "gut feelings" or what we call intuition is not only a weapon in our investing arsenal, it's the hallmark of some of the world's greatest investors. A study in the early 1990s by neurologist Antonio Damasio, then at the University of Iowa, demonstrates this point well. Damasio took an interest in several patients with unique lesions in his neurology clinics. His patient group had lesions of an area of the brain called the ventromedial prefrontal cortex. These lesion patients retained their basic intelligence, memory, and capabilities for analytical reasoning and for logical thought, but they made poor decisions in risky situations.

Damasio wanted an instrument to detect his patients' problem with risk processing, but no formal tool was available. He designed a card-playing game called the Iowa Gambling Task to measure the responses to risk in these patients. The patients were connected to electrophysiological arousal monitoring devices (as in lie-detector tests) such as a skin conductance response (SCR) monitor. In Damasio's task, four decks of cards were laid out. The subjects then selected cards from any of the four decks of cards with the overall goal of maximizing their financial gain.

Subjects were not told the overall odds or payoffs of the card decks. They were simply told to play the game and to try to make as much money as possible. The two decks on the left, "A" and "B," yielded either cards valued at $100 or -$1,250. The two decks on the right yielded cards valued at either $50 or -$250. The expected value of each card in decks A and B was -$250, while for decks C and D it was $250.

Normal subjects learned to avoid the losing decks. After flipping the first 10 cards, they began to show physiological stress reactions on the SCR measurements when hovering over decks A or B. Although the normal subjects experienced a physiological stress reaction after 10 card flips, they could not confirm a hunch that decks A and B were the money-losing decks until over 50 card flips later. They had physical stress reactions to the losing decks after 10 flips and gradually changed their behavior to prefer decks C and D. Yet they only articulated a hunch about which were the losing decks after 50 card flips. They could explain their hunch with certainty only after 80 flips.

Damasio's research implies that people need subtle feelings to signal when to avoid losses in risky environments. When making risky decisions, there is a gap between what the emotional brain (the limbic system) knows about risk and one's conscious awareness of the actual danger. Intuitive decisions, where "gut feel" drives judgment, arise from recognition of such limbic knowledge.

As investors, we want to shorten the time lag between when our body recognizes danger (after 10 card flips) and the moment we become consciously certain of the danger (after 80 cards flips). For example, George Soros was reported by his son to become aware of danger in his portfolio because he begins experiencing lower back pain. His physical pain is a cue that brings the hidden danger into awareness.



TYPES OF INTUITION

If you can't imagine it, you'll never see it coming.
~ Anonymous fund manager

Even though "market feel" is an emotional concept, it lies underneath the day-to-day emotions most people feel when trading. Anxious investors are not experiencing a nervous intuition, they are feely panicky. Hopeful investors are feeling hope. Exuberant investors feel euphoric. Intuitive feelings are more subtle than these. Intuitions feel like an alignment, a click into place, a shift into the best mental position. Intuitions relieve tension, they don't add to it. When contemplating a, an intuition feels like a subtle clarity, a shift, an "ah-ha" in the mind that leads to a sense of certainty and the thought: "That's going to happen."

Investors typically have one of two types of intuition. When they are invested, they may experience an intuition of danger. Danger intuitions are felt in our bodies (George Soros' back pain) or manifested in our behavior (fitful sleep) before we are consciously aware. When we have an insight about an opportunity, we're more likely to think "that's it" and feel an easing of tension.

There are some obvious potential problems with this two-fold division. Some people are chronically nervous, and every down tick in an investment feels like a crisis. Intuitions of danger are only useful if they arise from a place of mental equanimity. That is, an intuition of danger does not feel scary. It feels factual, like a pain in the gut and recognition of an objective danger. Sometimes we recognize that an intuition means we are positioned incorrectly, and then anxiety arises. In that case, anxiety is a reaction to the intuition. Other times we feel butterflies in the stomach. Butterflies signal arousal and are not an intuition of danger.

Think about and write down your own physical cues of an intuition.



OVERTHINKING INTUITION

Imagination is everything. It is the preview of life's coming attractions.
~ Albert Einstein

When I was in college, a friend of mine lost control of his motorcycle on a sharp bend in the road. He was going fast, as he had done many times before on this corner. Fortunately he was relatively unharmed. Knowing that he was technically an excellent rider, I asked him, "What happened that caused you to go down?" He answered, "I started thinking."

When we start driving a car, we drive slowly and think carefully at every turn. As we gain mastery of driving, the basic behaviors become automatic and flow smoothly. It's not only true of motor behavior - trading with the rhythm of the market becomes automatic and intuitive as well. What ruins the efficiency of this automatic behavior is when we start thinking in the middle of execution.

A colleague of mine kept a detailed trading journal for more than three years when he first started trading. Each day after the equity market close he jotted down his intuitive sense of whether the market would rise or fall over the next day, week, and month, his level of confidence in his forecasts, his state of mind, and a few other other details. At the end of the three-plus years he had over 850 days of data.

After the first four months of using the trading journal, he noticed that his intuitive feel was a reasonable predictor of prices, with 70% weekly accuracy over those 4 months. As a result, he started merging his intuitive feel with systematic trading strategies he had already been using and trading. And the results were startling.

But not in a good way.

Over the course of 850 days of self-collected data, his weekly predictive accuracy averaged 70% on days when he had no bets in the markets and dropped to 30% accurate when he had money on the line. Taking a bet on his intuitive sense ruined his feel for the market. He started overthinking when he had something at stake. He placed too much importance on each and every trade, because he believed that needed to make money. When he pressured himself to get it right, he was wrong. When he didn't worry about outcomes, he was more often right.

Overthinking, pressure, and worry are the most common saboteurs of your intuition. The key is to resisting these saboteurs is to remain alert, focused, balanced, and detached from outcomes in the midst of your trading day. If it sounds like Zen, well that's because meditation is one useful tool for unlocking intuition.



LOSING YOUR MARKET FEEL

Intuition is a sensation that if you aren't focused - if you're multitasking all day - you'll never feel it.
~ Anonymous Fund Manager

It doesn't take much to be knocked out of rhythm with the markets. A few small losses, time pressure to achieve a performance benchmark, unusual price patterns - all can lead to overthinking, trading hard to make back the losses, and a feeling that we're out of tune.

When we're feeling out of tune with the market, our natural urge is to get more information. But be careful. One often overlooked cause of intuition impairment is excessive information. If you find yourself unable to feel the market's rhythm, step back and assess how many data points are you relying on. And ask yourself, "what does this market care about right now?" Then pare down the data you are following to the essential three or four.

In my experience, the best traders see losses as an opportunity to relax, not to work harder. They take smaller position sizes and watch them carefully to get back in tune with the market. Gradually they reestablish their equilibrium.

There is a tendency to use half-assed reasoning that can't be logically justified and call it intuition. That is of course intellectually dishonest, and is a sign of a much bigger problem than we can explore in this letter.



MARKETPSYCH DATA TOOLS FOR BOOSTING INTUITION

Intuitions arise as our brains process and find connections in the wealth of information available to investors. We find that our own data allows us to more rapidly identify news and social media information that moves an asset prices. Our goal is accelerate the process of intuition by analyzing which threads of information have been price drivers historically, and assessing how the current information flow compares. To that end Changjie Liu set up Classification Trees to identify the specific price drivers (sentiments and topics recently in news and social media) that correlate with price action over the following period.

For example, take a look at the image of two classification trees below. We can see that Delays (as seen in lower-than-average values of our Urgency variable) and Uncertainty are most predictive of Boeing's share price over weeks. In weekly periods over the past 78 weeks, when conversations about Delays are high (55% of the weeks), Boeing stock goes up 77% of the following weeks (see the top figure, left branch, in the image below). On the right branch, when Urgency is high, and Volatility is low in conversations, the stock drops the following week 94%(!) of the weeks, accounting for 23% of the sample. This is a very contrarian result that reinforces the intuition that investors overreact to news. Also interesting with Boeing is seeing exactly the memes that have been driving the stock price. On a monthly basis over the past 6 years, when Uncertainty surrounding Boeing rises into its top decile (top 14% of the sampled months), Boeing stock slumps 100% of the following months. In summary, over weekly periods Boeing stock has been driven - in a contrarian fashion - by news about delays and changes at the company (volatility). On a monthly basis, Boeing stock is primarily driven by Uncertainty.

Boeing Stock

Each asset is driven by different threads of information at different times. As we accurately predicted in our newsletter 2 months ago, Violence (war) is an inverse predictor of oil prices when tensions are high. And as we reported in this newsletter projections of price direction are inversely predictive of many asset prices.

We also find that broad themes emerge in our data around stock price drivers. For example, Apple (AAPL) is a stock that has been much loved (and despised) over the past few years.



SHORTING APPLE

The main thing I've learned is intuition.
~ Steve Jobs, after returning home from a youthful trip to India

At MarketPsych our resident quant geniuses - Changjie Liu and Aleksander Fafula - developed tools to identify whether specific sentiments, economic themes, or price action are driving security prices. For Apple stock (AAPL), Aleksander found that over the past three years the stock has largely been driven by Joy. When Joy is rising, the stock rises, when Joy falls, the stock price tends to follow. See the chart below, where the price is the candlestick bars. When short-term Joy about AAPL rises above long-term Joy, there is greed shading, when it falls below, there is pink shading. The colors correlate reasonably well with the price action:

AAPL Joy

A fund manager friend of mine recently recounted the story of when he shorted Apple at $700. "I was at the gym one day and two portfolio managers - in separate conversations - enthusiastically whispered to me ‘Apple is going to $1,000 a share, it's a sure thing!' I got this feeling that I HAD to short Apple as soon as possible." While my friend intellectually knew Apple was valued cheaply, remained fast-growing, and was in a powerful upwards price trend, the enthusiasm of his fellow fund managers triggered an intense feeling that something bad would befall AAPL.

Fortunately, investors don't have to poll the members of their gyms to find overvalued stocks, as you can see above, the consensus is being quantified in social and news media. For you personally, there are a number of exercises available to help you tap your intuition. Try a few or all of these to see which fit you best.



BEHAVIORAL TOOLBOX: TECHNIQUES FOR ACCESSING YOUR INTUITION

The earth has music for those who listen.
~ George Santayana

In a hyper-connected world, the challenge to accessing intuition is creating mental space and quiet. Once that quiet time has been defined or scheduled, then as your brain identifies subtle patterns in data, insights will have a time to bubble up into awareness. In the following lines we suggest a number of simple exercises that have been shown to enhance intutive or creative thinking. Meditation is an excellent tool for willfully quieting the mind. In fact, Rupert Murdoch recently tweeted: "Trying to learn transcendental meditation. Everyone recommends, not that easy to get started, but said to improve everything!"

Do a Meditation. The following is a mindfulness style meditation. Close your eyes, and with your eyes closed, say to yourself (and feel) the following phrases. On the in-breath identify, and on the outbreath let it go.

    Breathing in: "I know my mind,"
    Breathing out: "I am not my mind."
    Breathing in: "I know my thoughts,"
    Breathing out: "I am not my thoughts."
    Breathing in: "I know my emotions,"
    Breathing out: "I am not my emotions."
    Breathing in: "I know my witness,"
    Breathing out: "I am not my witness."

Your witness is also called your "observer" - it's the little you who is constantly watching and observing what you are doing and thinking. When you let it go on the out-breath, you may notice an involuntary sigh, indicating that you've let go of tension. Now your mind will be clearer for a moment. Repeating this a few times opens up mental space for intuitions to emerge. This exercise was adapted from Thich Nat Hahn.

Ask the Market. Each morning, rather than asking yourself, "What should I do in the market today?" Instead reframe the question as, "What is the market telling me to do today?"

Brainstorm for Insights. Sometimes we're paralyzed in our decision making. Have you ever flipped a coin to help you make a decision, and when the coin landed on one option, you immediately realized you wanted the other? Try the following exercise to help you understand your gut inclination:

    Think about an investment or potential investment you are currently struggling with.
    Sit down at a desk with three blank index cards.
    Write three possible actions (or inaction) you could take with it, one on each card.
    Turn the cards blank-side-up, shuffle them around so they are anonymous, and place them face-down on a table.
    Hover your hand over each card and assign a percentage to it based on how powerfully you're drawn to that course of action (but remember, you can't see the action).
    Turn the cards over and take note of your card with the highest percentage. Does that feel right or wrong? Which one feels like it should have been highest rated?

Perform a Sacrifice. In many religious traditions money is given to the temple, or burnt, in sacrifice. We give up something we desire - we burn it in the flames of consciousness - in order to show, both to our self and to the markets, our willingness to follow something other than our own ego. We sacrifice the small for the great, the outward for the inner, worldly things for purity of consciousness. Only by giving up our pursuit of worldly desires - the financial outcomes - can we have the mental quiet needed to hear the market's whispers. In sacrifice we surrender our ideas of comfort, our ideas of our self, and our preconceptions of the market. In return we are given access to the Truth of now.

Do a Handstand. Only do this if you're athletic or with doctor's approval. Propping yourself up against a wall in a handstand will reset your thinking. Could be the exercise, could be the inversion of your perceptions. In any case, it helps to break patterns. I've got clients who swear by it.

Take a Walk in Nature. Studies show that creative problem solving - the integration of multiple inputs - occurs more rapidly after a walk in a natural environment. It is theorized that the complexity of nature, the subtle sounds and sensations, drive our minds away from chewing on the obvious and into a more nuanced awareness.

Ask Good Questions. "What else could I possibly imagine happening?" "What if I didn't do anything right now, what am I afraid of?"

Calm Your Mind. Take a Warm Bath, Hot Shower, or Other Calming Sensory Experience.



Housekeeping and Closing

We’ve got a busy Fall 2013 with speaking engagements in Toronto, Orlando, San Francisco, Berlin, and Warsaw. We look forward to reconnecting with our friends in those cities! Please contact Derek Sweeney to book us for a talk or training at one of your events:
Derek@thesweeneyagency.com, +1-866-727-7555.

Please contact us if you’d like to see into the mind of the market using our Thomson Reuters MarketPsych Indices to monitor market psychology and macroeconomic trends for 30 currencies, 50 commodities, 140 countries, 40 equity sectors and industries, and 6,000 U.S. and global equities extracted in real-time from millions of social and news media articles every day.  Here’s a video by researchers at the Stevens Institute of Technology and Thomson Reuters R&D discussing how our data is helping to solve the “Forward Premium Puzzle” in currencies, answering the question, “why does the carry trade work?”.

We love to chat with our readers about their experience with psychology in the markets and with behavioral economics!  Please also send us feedback on what you’d like to hear more about in this area.

Happy Investing!
Richard L. Peterson, M.D. and the MarketPsych Team



REFERENCES

    Damasio, A. 1999. The Feeling of What Happens: Body and Emotion in the Making of Consciousness . New York: Harcourt Brace.
    Bechara, A., A.R. Damasio, H. Damasio, and S.W. Anderson. 1994. "Insensitivity to Future Consequences Following Damage to Human Prefrontal Cortex. " Cognition 50: 7 - 15.
    Bechara, A., H. Damasio, D. Tranel, and A.R. Damasio. 2005. " The Iowa Gambling Task and the Somatic Marker Hypothesis: Some Questions and Answers. " Trends in Cognitive Sciences 9(4) (April).
    Bechara, A., H. Damasio, D. Tranel, and A.R. Damasio. 1997. " Deciding Advantageously before Knowing the Advantageous Strategy. " Science 275: 1293 - 1295.

http://campaign.r20.constantcontact...huDNXYav9NAvN_Nzq02GIhg91cNQ7Nqlk-mG4VANSgg==


----------



## tech/a (4 November 2013)

Soros and Greenspan would ---individually have access to more economic data and indeed 
qualified counsel than most anyone on the planet.

With that "intuitive" decision making would come pretty naturally.

Personally I think your/he is comparing Apples with Box Girder Bridges.


----------



## Gringotts Bank (4 November 2013)

tech/a said:


> Soros and Greenspan would ---individually have access to more economic data and indeed
> qualified counsel than most anyone on the planet.
> 
> With that "intuitive" decision making would come pretty naturally.
> ...




Of course they have quality information, but if it was just about information then everyone would be a billionaire speculator.  Even quality information is cheap nowadays.

This is from Trading Naked:

*George Soros: How He Knows What He Knows:

Part 2: Combining Theory and Instinct
by: Flavia Cymbalista, Ph.D. with Desmond MacRae*


Identify bodily senses and how to access the knowledge they contain.

Traders have always been told to stick to their trading methods. Success, they�re told, requires discipline, which means overriding your gut. No wonder � gut feelings are notoriously unreliable. Few traders know how to separate them from emotion and turn them into reliable knowledge. Until recently, there has been no method to teach traders how to do that. The advantages of an accurate gut are indisputable. George Soros, arguably the greatest trader of modern times, depends on his gut. �I rely a great deal on animal instincts,� he wrote in his 1995 book, Soros on Soros. �When I was actively running the fund, I suffered from backache. I used the onset of acute pain as a signal that there was something wrong in my portfolio. The backache didn�t tell me what was wrong � you know, lower back for short positions, left shoulder for currencies � but it did prompt me to look for something amiss when I might not have done so
otherwise.�

Last month, in Part I of this series, Soros� chief operating principle was introduced � the belief in fallibility and how it leads him to look for a flaw in every investment thesis. Finding Flaws �It pays to look for the flaws,� he writes in an introduction to the 2003 edition of The Alchemy of Finance, just published by John Wiley & Sons. The fact that a trading hypothesis is flawed doesn�t mean that
Soros won�t commit money to it � as long as he thinks some other people believe in it and that there is a larger group of people who are likely to be convinced of the validity of this thesis. �If we find them (flaws),� he writes, �we are ahead of the game�.� The billion-dollar question is: How do we find them?
Soros finds the flaw by combining theory and instinct. This is puzzling because theory and instinct are usually considered mutually exclusive. This might be one of the few matters on which economists and traders agree. Economists think that gut feelings are irrational. And for most traders, instinct and method contradict each other. When traders do use their instincts, they�re overriding their methodology. But in Soros� method, theory and instinct are inextricably linked. Soros himself, however, could not explain how. This article explains how Soros combines theory and instinct to find flaws. It then shows how you, too, can learn how to think with your gut to stay ahead of the game.

The Puzzle

Last year, I wrote a paper called �How George Soros Knows What He Knows.� (available at: www.marketfocusing.com ). The world long has been mystified by Soros�s successes. So, how did I solve the puzzle? A piece of it was my own organic theory of markets in which I link financial theory and gut feelings. Another piece was the revolutionary work of philosopher Eugene Gendlin at the University of Chicago. Gendlin showed how logical reasoning and bodily experience can work together, an achievement for which he received several awards from the American Psychological Association. Soros himself found my explanation useful. My insights helped him with his new edition of the The Alchemy. Now he, too, speaks of �organic thinking� and can say more about the secrets of his success than ever before.

Reflexivity Revealed

Soros�s theory of how markets operate is based on his philosophy of how thinking and reality affect each other. This contradicts assumptions of traditional economic theory. Traditional economists view markets as �efficient.� In efficient markets, prices are unbiased estimates of fundamental values. A small deviation from rationally expected fundamentals creates a self-correcting movement in another direction. But Soros disagrees. Instead, he sees that there is a feedback loop between market participants� thinking and the reality they observe. He calls this circular relationship �reflexivity.� In this theory of reflexivity, markets are always biased. Prices cannot be unbiased estimates because they actually help shape the fundamentals they are supposed to reflect. Reflexivity introduces uncertainty into the system. As a result, Soros says, market behavior cannot be predicted by the same methods used in the natural sciences. This is why he chose the word �alchemy� for the title of his book.

In his theory of reflexivity, Soros tries to explain how trends form and what makes them reverse. It doesn�t give him rules and indicators for catching those trends or reversals, but it does tell him where to look. In essence, then, it tells him to look at how the market is constructing the reality that the participants are seeing. Case in point, take the example of the collapse of Long Term Capital Management just five years ago. Nobel Prize winners Robert Merton and Myron Scholes, who owned the fund, thought they could scientifically measure their risk � and could not see how their own trades were actually shaping reality in ways that their models could not anticipate.

Profit Opportunities

Soros found his greatest profit opportunities in situations in which a market trend at first supports the �prevailing bias.� The conglomerate boom of the 1960s is a classic example in which the prevailing bias emphasized earnings growth over other fundamentals. The market favored companies that showed above-average growth. Rising stock prices allowed these companies to increase their earnings by using their increasing stock value to buy other companies. This in turn strengthened the prevailing bias, which led to
further stock price increases, and so it went. The trend gained momentum until corporate results could no longer sustain investors� expectations.
The flaw here was that growth was only sustainable as long as acquisitions would continue to advance at an ever-accelerating pace. The turning point was reached when Leasco Corporation failed to take over Chemical Bank. This brought the flaw to public attention. The flaw varies from case to case, as each situation is unique. What the flaw turns out to be depends on the nature of the prevailing bias, the market involved, and much else. There are no rules for finding what the flaw is, but I can tell you where Soros finds it. It is always in
the wider picture.

Organic Thinking

Market action, of course, takes place within an intricate web of interlocking economic processes, not within a vacuum. Any market hypothesis is based only on a �cut� or a piece of a multi-layered web that is continuously developing. There�s no question that market action has a visible side � certainly, the trend is there for everyone to see. Like the conglomerate boom and recent technology boom, the prevailing bias at first is confirmed. But, at the same time, the market is in interaction with a larger and more intricate economic web, causing changes in the broader picture that are not yet visible. The not-yet-visible underlying level is where Soros finds the flaw.
Soros had difficulty showing how this theory played out because once new facts in the wider picture actually emerged publicly, it appeared that they were there all along. In hindsight, it simply looked as if that the public disregarded or overlooked them. In fact, however, at the point where Soros looked for these new facts, they were still in the making. They weren�t overlooked at all; they just weren�t there yet.
In reality, the evolution of the wider picture is never fully captured by any market model. There�s always that gap between our particular cuts of the �real� market and the wider picture. It is in the gap between these developing changes and the prevailing bias that Soros looks for the flaw. The array of interacting influences can�t be grasped by thinking of them one by one, but the body sizes up
every situation. Why? � because our bodies contain a great deal of information that is not readily available to the conscious mind. That�s why Soros� back hurts when there�s something wrong with his portfolio.

SIDEBAR
-----------------------------------------------
Six Steps to Thinking with Your Gut
The risk and expected value of every position is being affected constantly by a multiplicity of interacting influences, which we cannot keep track of one by one. Our quantitative, analytical tools rely on the assumption that things change in the future in the same ways they have changed in the past. Of course we need analysis, but relying on these tools alone can result in a tremendous mismatch between the analysis and the requirements of an actual situation. If you have an uncomfortable feeling about one or more positions,
�Focusing� can help you articulate your sense of each situation. Focusing can be applied to practically any approach to trading. Many people find it easier to learn Focusing through individual instruction than by simply reading about it. There are three stages of proficiency: the ability to find an unclear felt sense, the capacity to stay with it long enough to be able to work with it, and learning moves that can be made at that point. What follows is simply a taste of the process � six basic steps. As you gain experience, you won�t need to think of them as six separate steps of the process. They will merge as a continuum just as serving in tennis or teeing off in golf are continuums.

Step 1. Clearing a Space
Take a moment just to relax. Now, turn your attention inwards � sense how it feels inside your stomach, your chest and your throat. Now see what comes in this �inner space� when you ask, �What is between me and feeling perfectly at ease right now?� Sense yourself within your body, from the inside. Let the answer come slowly from this sensing. You will find your unease about each of the positions you want to focus on, together with some other concerns. When a concern comes, do not engage it. Stand back, say �Yes, that�s there. I can feel that.� Let there be a little space between you and �that.� Then, wait to sense what else you feel.

Step 2. Finding the Felt Sense of Your Position
Notice how each of the different concerns you�ve found has its own quality. Notice how each feels a little bit different from the others. Now, select a position to focus on. Do not engage emotionally with it � stand back. Of course, there are many aspects to that position � too many to think of one-by-one. But, you can feel all of them together. Pay attention to the place where you feel these things. In there, you can get a sense of what the whole situation feels like. At first, this sense is unclear. Let yourself feel the unclear sense of the situation as a whole.

Step 3. Finding a Handle
What is the quality of this unclear felt sense? Let a word, a phrase, or an image come up from the felt sense itself. It might be a quality-word, like tight, sticky, scary, stuck, heavy, jumpy or a phrase, or an image. Stay with the quality of the felt sense until a word, a phrase or an image fits it just right. This is your handle.

Step 4. Resonating
Go back and forth between the felt sense and your handle. Check how they resonate with each other. See if there is a little body signal that lets you know there is a fit. To do this, you have to keep your attention on the felt sense while comparing it to the handle you�ve found. Often, the felt sense will change. If it does, change the word or picture, until they feel just right in capturing the quality of the felt sense.

Step 5. Asking

Now ask, what is it about this whole situation that makes this quality you have just named or pictured? Make sure the quality is sensed again, freshly, vividly, not just remembered from before. When you have it again, tap it, touch it, be with it, asking, �What makes the whole thing so ___ ?� Use your handle; for instance, if your handle is �tight,� you ask: �What makes the whole thing so tight?� Or, ask: �What�s in this __?� What you are doing now is pulling strands or aspects from the felt sense of the whole. If you get a quick answer without a shift in the felt sense, just let that answer go by. Return your attention to your body and find the felt sense again. Then ask again. Stay with the felt sense until an answer comes along with a shift, a slight �give� or release � that will feel just like the relief at remembering a name you had forgotten.

Step 6. Receiving

Give consideration to any answer that comes, even if it sounds absurd, or is a strange image, or makes you feel foolish. When something does come, your body senses change as it comes. If you went through these steps, and something has come, then your body sense changed. Now, go back to Step 2. After a few go-rounds, you will have a much richer picture of the situation. At this point, there are a number of important moves that you can make which I will explain in Part III of �George Soros: How He Knows What He Knows.�

-----------------------------------------------

Body as Barometer

Though Soros� backache is a barometer that tells him the way in which he has �cut� market reality is leaving something crucial out, it doesn�t tell him what is going wrong. He has to search for it in the wider picture. To re-cut his view, he first finds the gap between his original investment hypothesis and his bodily sense of what�s actually happening. It�s not just some physical manifestation that points to the need for a re-cut; it�s actually a bodily sense of the situation. The key is to learn how to find and use the bodily sense of a situation.

How to Think with Your Gut

Soros� bodily knowing of the broader picture isn�t mysterious. Human thinking is constantly being guided by subtle bodily tensions. For example, when we try to remember something we have forgotten, we can sense a tension � a demand by our body. We may think of many possibilities, but our body is satisfied only by the right one. Our body tries to guide us to what needs to be remembered. It lets us know � uncomfortably � that we have not yet thought explicitly about what we need to know, or it tells us � with a certain characteristic tension-release � that we�ve got it. When our thought is guided by this bodily felt demand, we�re thinking with our gut.

Identifying these subtle bodily tensions is tapping subliminal knowledge. What we call a �felt sense� is a non-verbal aura that encompasses a plethora of accumulated knowledge and experience about a situation. Like a single note played on a violin, a felt sense can have many overtones or layers, but it is felt as a complete, unique �thing.� This felt sense is not composed of bits of knowledge that add up in one�s mind; rather the felt sense comes all at once.

Traders who want to know what George Soros knows can learn to identify these bodily senses, and how to access the knowledge they contain. Traders can then have the confidence to act on their bodily senses consistently. Fortunately, Eugene Gendlin has already showed what�s going on inside people who can think with their gut.

Gendlin developed �Focusing,� a systematic way to access this intuitive level. More than 35 years of research have shown that this is a skill that can be learned. Focusing is now taught and practiced all over the world, but only recently has it been applied to trading. (See sidebar in this article.)


----------



## tech/a (4 November 2013)

Sorry GB
but when people start spruiking comparisons with the likes of Soros/Greenspan/Buffett/Larry Williams Et al.

I just glaze over.
Mortals will NEVER emulate these guys no matter how much gut feel--research or luck we have.

The world is *FULL* of dreamers and wanna be's.
Those that do--do.

They don't hypothesize/pontificate or Theorize.
They just get on with it.
No time to ponder ones navel.


----------

