Illusions of The Stock Market

[Modest]

imo traders need to be careful to not to blame everything on psychology, did that to myself and seen others do it too. This emotional turmoil is caused because of a lack of understanding how markets really work but we backward rationalise after our mistakes that it was just a emotional mistake, is it really?

 

[Gringotts Bank]

imo traders need to be careful to not to blame everything on psychology, did that to myself and seen others do it too. This emotional turmoil is caused because of a lack of understanding how markets really work but we backward rationalise after our mistakes that it was just a emotional mistake, is it really?

That video you posted of Greg Riba is the most highly condensed manual I've ever seen on trading, but it needs interpreting. Every word in it is rich with meaning. Livermore's story is another, but spread over many pages. Rags to riches to rags to riches over and over. Did his understanding of markets ever differ that much from the first round of riches?

"Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes". (wikipedia)

So if he knew it, and it was so obvious, why did he keep on doing it? Same reason Riba did. Same reason we all do.

The subconscious craves consistency, and whatever you are feeling will strongly seek confirmation in the external world. If one day you feel like ****, your mind will only be able to see bad trades... even if they are the correct set up according to backtests, they will still go badly. If you feel great, you almost need no system because everything just works. Mood is the single biggest determinant of decision-making ability, which is why I always enjoyed the humour on your thread. Serious attitudes wreck the vibe. Talk like "where's your stop?" need to be worked out offline, imo.

 

[Gringotts Bank]

This paper indicates you don't necessarily need to feel good to trade well, it's just that it's easier to know what you feel when you feel good. So for all intents and purposes, most people trade better when they feel great. Blocking negative feelings causes you to block perception of what's really hapening on the chart in front of you.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2361392/

And don't eat.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4207792/

 

[RickyY]

There are extensive psychology and self eval exercises in books from the likes of Dayton and Elder but perhaps none more practical than as a stop loss held with the broker. Right , wrong who cares, who knows. How much you make when right and how much you dont lose when wrong= priceless

How practical is stop loss? You'll find out how 'practical' it really is when there's no buy side liquidity.

 

[RickyY]

I think what's largely misunderstood here is that many assume avoiding psychology bias is about being rational, avoiding fear etc. As I wrote in Commune with the dead, the opposite of fear is fearless, being fearless in the market is like trying to be Rambo. You'll be the first to get killed. And understanding psychology is more than just avoiding bias, but to understand probability as well. Psychology and probability are joint at the hip. Thinking in probability, which falls under the field of math is all about clear thinking. And as I wrote in Bullish but Bearish, the inability to think probabilistically is what create fuzzy thinking and bad decisions.

 

[MacDizzle]

Practical from the sense that you have some sort of plan in place and you follow it as a beginner. If you think a lack of liquidity is expensive try ignorance.

 

[RickyY]

Ignorance as in not reading the post