Info!! Parallel Processing Inwards Trading: Finding Meaningful Patterns

In yesterday's post, I described a procedure of reading inward parallel:  reading many books at a fourth dimension too gaining insight into a topic past times juxtaposing the views of many authors.  Parallel thinking is key to designing recognition:  inward simultaneously processing multiple events, nosotros are able to discern meaningful patterns connecting those events.

Take a expect at Rob Smith from T3 describing his 8 concealment trading station layout.  There are many charts on each screen, grouped past times sector, stock type, etc.  He therefore tin refresh all the screens instantly to persuasion many other stock groups based upon screening criteria.  Each stock tin last viewed across multiple fourth dimension frames.  As Rob points out, he monitors all of these screens throughout the twenty-four lx minutes menses to larn a feel for when opportunities are "lining up".  Then Rob volition dice "around the horn", looking at every stock inward the SPX to discover emerging trends or moves out of the ordinary.

What is noteworthy inward the video is that Rob is processing much to a greater extent than information much to a greater extent than speedily than the average trader.  He is reading the marketplace much similar I am reading books:  finding themes past times processing multiple sources inward parallel.  Instead of examining ane stock inward detail, consulting myriad indicators too nautical chart perspectives, Rob considers many stocks too finds patterns that cutting across them. 

If you lot jump over to SMB, you'll notice that their traders are utilizing tools that filter stocks based on liquidity too majority too therefore rails promising candidates tick past times tick to discover odd majority or gild stream patterns.  The applied scientific discipline acts equally an extension of the traders' parallel processing, reducing an impossibly large array of intraday information across stocks to a manageable universe of "in play" opportunities. 

Serial processing is mutual alongside investors:  excavation deeply into exceptional discipline areas to brand it at unique analyses that dice trading opportunities.  An illustration would last scouring the wording of Fed statements too speeches of Fed officials to discern shifts inward policy.  Parallel processing is less nearly deep analysis too to a greater extent than nearly rapid synthesis.  It is to a greater extent than mutual alongside high speed traders:  finding patterns inward marketplace activeness that give away shifts inward provide too demand.

Most of us receive thinking styles that are our unique blend of parallel too series processing.  An of import origin of failure for traders is attempting to adopt trading styles that produce non brand optimal role of our cognitive strengths.  An of import origin of failure for trading firms is failing to assess cognitive strengths equally constituent of the hiring process.  The myth continues that trading success is a constituent of personality, piece testify strongly suggests that personality tin hit lilliputian inward markets if the correct encephalon wiring isn't inward place. 

Emotions are a work inward trading entirely insofar equally they may nudge us from our cognitive strengths.  When trading becomes challenging, higher frequency traders should force themselves to expect at to a greater extent than things too feed their designing recognition; lower frequency investors should force themselves to recall to a greater extent than deeply nearly what they're doing too why.  Bad things hap when active daytraders reply to challenge past times slowing their thinking too when investors dice to a greater extent than speedy.

But of course, nosotros don't ask heed nearly whatsoever of that from would-be trading mentors too coaches.  They tell us to "trade our plan".  

Whatever.

Oil was weak most the twenty-four lx minutes menses on Friday.  High yield bonds underperformed stocks too therefore saw decent selling belatedly inward the session, equally sell programs took stocks off their highs.  That was a slice of designing recognition from yesterday's trading.  When all that began to unfold, my long ES seat came off the table.  Not all patterns are meaningful, exactly that was a motion painting we've seen earlier too I wasn't inward the mood to replay.  If you're entirely looking at the nautical chart of what you're trading, it's tough to meet those intermarket patterns inward existent time.  Markets are ever talking to each other; it tin last rattling helpful to bring together their conversation. 

Further Reading:  Data Rich, Information Poor
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Info!! Trading Psychology Challenges - 6: Distraction

Traditional trading psychology has tended to focus on the emotional side of human nature every bit a source of functioning success:  both controlling emotions in addition to maintaining plain of report in addition to using our feelings every bit intuitive sources of information.  Both are essential; indeed, it is entirely past times becoming observers to our emotions that nosotros tin sack larn from them.

Still, the query I've undertaken to position the characteristics of successful traders has consistently shown that cognitive traits, in addition to non exactly emotional ones, are essential to superior performance.  This is why, for example, I receive got emphasized the construction of the learning procedure every bit a source of mastery inwards the Enhancing Trader Performance book in addition to why I devoted a large department of the Trading Psychology 2.0 book to the evolution of inventiveness in addition to the tillage of our cognitive strengths.  Show me a successful trader, in addition to I'll demo y'all someone who displays odd talents inwards processing information.

The close basic of these cognitive strengths is focus.  Indeed, the powerfulness to sustain focused attending is seen (albeit inwards dissimilar ways) amid both successful daytraders in addition to successful investors.  In the daytrader, nosotros run into the powerfulness to sustain intense concentration on a number of variables simultaneously.  It is this parallel processing science that enables the daytrader to human activity apace on shifts inwards buying in addition to selling flows.  Conversely, the skilled investor maintains a depth of concentration over fourth dimension that allows for a deeper agreement of fundamentals in addition to the supply/demand changes that number from monetary in addition to geopolitical sources.

The challenge faced past times these marketplace position participants is distraction.  Distraction interferes alongside focus in addition to hence reduces the character of our information processing.  Distractions tin sack last emotional inwards nature, but tin sack number from environmental sources every bit well.  Indeed, I've consistently establish that both habitation environments in addition to trading flooring environments are poorly suited for the optimization of focus.  This is why many of the successful traders I've known receive got made it a practise to buy the farm away from their screens for periods of fourth dimension during the hateful solar daytime to both renew their concentration in addition to to increase their focus on the bigger motion-picture demo of what they are doing.

All of this is of import because the character of our focus mediates the character of our access to intuition in addition to prior learning.  When nosotros receive got superior focus, nosotros literally receive got greater access to a larger library of information.  In a highly distracted state, nosotros lose whatsoever border nosotros powerfulness otherwise possess, because nosotros exactly cannot access the sources of that edge.  Indeed, it is entirely through focused immersion inwards information that we, over time, develop a keen capacity for intuitive designing recognition.  Without that immersion, nosotros never really internalize our learning.

This is why in addition to so many successful traders value slumber in addition to physical exercise every bit purpose of their daily routines.  They realize that fatigue in addition to burnout increase our susceptibility to distraction: to optimize our focus, nosotros receive got to buy the farm on ourselves inwards an energized in addition to rested state, renewing our willpower.  

So what tin sack nosotros create to create our focus in addition to trim back distraction?  Several steps stand upward out inwards my experience:

1)  Optimizing our physical environment - Surrounding ourselves alongside the people who contribute to our decision-making in addition to tuning out others.  Creating a trading station that is comfortable in addition to good set out, alongside the correct lighting, temperature, in addition to audio level.  

2)  Optimizing our cognitive environment - Making certain nosotros receive got cook access to the information essential to our conclusion making, but non to a greater extent than than that.  Laying out screens for cook comprehension in addition to activity in addition to avoiding a cluttering of our information environment.  Controlling when in addition to how nosotros access chat, email, in addition to telephone calls to minimize external noise.

3)  Optimizing our capacity for focus - I've written extensively on the theme of biofeedback every bit a tool for improving focus.  Indeed, biofeedback is a major handling modality for children who endure from attending deficits.  In biofeedback, nosotros larn to sustain frontal encephalon activation over time, literally training ourselves to create our attending muscles.  This helps us filter out distractions in addition to keep focus for longer stream of time.

4)  Optimizing our personal lives - In improver to maintaining a high character of slumber in addition to exercise, many people break that how they swallow in addition to receive got inwards caffeine in addition to saccharide impacts their grade of focus.  Quite a few traders I've known receive got made utilisation of coaching, non to operate on their trading per se, but to form out challenges inwards their personal lives (relationship issues, household unit of measurement matters, fiscal challenges) that tin sack last distracting to their trading.  It is by in addition to large a error to seek to lay such issues out of your mind.  Finding fourth dimension in addition to a proper forum for addressing the issues direct helps preclude them from intruding on trading time.

As the quote at the caput of the post suggests, it is real hard to hand neat things if we're distracting past times petty things.  Building our focus from hateful solar daytime to hateful solar daytime is helpful inwards sustaining a greater life focus, where we're non entirely doing things right, but doing the correct things.

Further Reading:  The Importance of Trading With Focus

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Info!! Best Practices Inwards Trading: Preparation Yourself Inwards Designing Recognition

One of the themes of my upcoming book, Trading Psychology 2.0, is that inventiveness is the novel trading discipline.  Success inwards markets is non together with then much a business office every bit rigidly adhering to a single, unchanging border every bit continually finding fresh sources of border inwards ever-changing markets.  But how create yous come upwards up amongst fresh trading ideas together with sources of edge?

Reader, author, together with blogger Ivaylo Ivanov (@ivanhoff) offers a best usage that tin feed our creativity.  Here's what he suggests:

Studying your ain by trades is a must, only it provides a express perspective of chance cost--it alone helps to analyze the trades yous took; it tells yous naught nearly the trades yous did non take.  One of the most practical habits that has helped me every bit a trader is going through the daily charts of the best performing stocks on a daily, monthly, quarterly, together with 6-month fourth dimension frame.

Here are or together with then of the benefits of this daily exercise:

*  It has substantially improved my setup recognition skills;

*  It has given me ideas for novel ways to approach the market;

*  It provides an unbiased thought of what is currently working inwards the market; which industries are nether accumulation.  Recognizing manufacture momentum is of utmost importance for swing traders every bit it helps to focus on setups that don't alone direct maintain higher probability to interruption out or interruption down, only are also probable to deliver bigger gains;

*  The mere going through the screens provides me amongst a constant catamenia of neat anticipation swing setups--stocks that are setting upwards for a potential breakout.

Readers volition recognize this every bit a structured usage inwards designing recognition.  In his book, Ivaylo outlines his "perfect setup" for swing trades.  His best usage above, additionally enables him to larn novel setups.  It also allows him to position sectors that are most probable to yield skillful setup candidates.  Indeed, the patterns that emerge from such review could lend themselves to backtesting together with possible systematic inputs into discretionary trading.

I also suspect that Ivaylo's best usage helps him position marketplace position themes early--for instance, the breakdown inwards unloose energy stocks inwards the wake of crude weakness or the rising inwards utility shares resulting from declining global rates.  It's non such a bound to acquire from his usage to a review of patterns across global markets to position the macro themes that mightiness last attracting the involvement of institutional investors.

Interested readers tin cheque out Ivaylo's website, every bit good every bit his majority together with Twitter feed linked above.  He's a neat illustration of savvy traders sharing worthwhile ideas via StockTwits.

Further Reading:  Parallel Processing together with Pattern Recognition
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