Monday, March 24, 2008

Quiet Mind and Expanded Vision: Reflections on the Day's Trade


I'm pretty much going to let the above annotated chart of today's ES futures (click for greater detail) speak for itself. Notice how we began the day with strong buying volume, which then tailed off as the morning wore on, which led to sector non-confirmations at the late morning price highs, and which led sellers to press their advantage early in the afternoon.

Volume, TICK, price, the action of various sectors--all of these things are interrelated and tell a story.

So much opportunity is lost when traders become tunnel visioned, seeing only the market they are trading, focusing only on price.

It's about the ebb and flow of supply and demand, and only an expanded field of vision can capture those shifts.

Anxiety, frustration, greed: these narrow our field of vision. It's when we let markets speak to us that we can best appreciate their patterns. It's difficult to truly see the markets, however, when we're filling our heads with images of success and failure.

Quiet minds make for expanded vision.

RELEVANT POST:

Underconfidence, Overconfidence, and Emotion in Trading
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2 comments:

Ryan said...

You write, "Anxiety, frustration, greed: these narrow our field of vision. It's when we let markets speak to us that we can best appreciate their patterns. It's difficult to truly see the markets, however, when we're filling our heads with images of success and failure."

Could you describe some ways one might recognize these emotions as one is evaluating a trade? It is much easier to look in retrospect and say, "I made that trade with too much emotion," than recognizing emotional bias in advance.

Thanks,
-Ryan

Brett Steenbarger, Ph.D. said...

Hi Ryan,

By taking short breaks from trading, it becomes much easier to identify one's state of mind and body. I sometimes have traders fill out simple mood checklists during the trading day as a way of staying on top of biasing factors. It doesn't take much time and can provide very useful information.

Brett