Financial Trading

Absolutely true about overtrading, without a shadow of a doubt. It is extremelly important not to overtrade.

Overtrading (typically seen on forex scalping) is the sure way to say goodbye to your bank (and if not careful to your car and house!)

One of the best ways (if not using a Robot) is too seek out true fundamentals that do affect the market (these can be read in my section on the forum – still in the process of finishing them presently but will be soon) Taking the time to analyse and placing strategic wagers in line with strict money management rules should be foremost on any traders mind.

Alan

Yes overtrading with too much risk is a biggy. People should just learn to walk away occassionally. If you are in a position where you *need* to trade for the excitment then you are in the wrong business.

Hi Alex,

My email address is financial@laytheodds.com

Looking forward to seeing what you send, thank you very much ideed!

Alan

Hi Alan

Whats your email address. I would like to send you something that you may find interesting and useful. email me at poker@laytheodds.com

Take care

Alex

Came across this interesting article:

A couple of the biggest challenges for traders is taking losses and over trading. I was contemplating these challenges over the last few weeks and was reminded of a stress and decision related study.

For those that have attended previous Larry Williams seminars, you may have heard him mention the Executive Monkey study and how it relates to trading.

That study has always interested me. It taught me how we can become better traders and how it relates to our own behavior as traders. Before moving ahead, let me explain that monkey study.

In 1958 James Brady and Robert Porter published an article titled “Ulcers in Executive Monkeys” in The Scientific American. The experiment placed two monkeys in separate cages. These cages were constructed so that both monkeys were randomly shocked with electrical current. (Before anyone writes and complains about me not being sensitive, let me assure you that I do not condone this treatment). A red light signaled that the shock period was commencing. One monkey could stop the electrical current for both monkeys if it pushed a lever. The second monkey had no control over the electrical shock at all.

According to the second monkey’s point of reference, it was being randomly shocked, but had no control over it and had no decisions to make. The monkey trying to stop the electrical shock (making decisions) ultimately developed ulcers and died. The monkey not controlling the shock or making decisions about being shocked (although being randomly shocked) remained healthy.

I should note that up until that time, there was no real proof that anything besides bacteria or viruses could cause diseases. This was one of the first experimental results that showed the impact of stress. There were finally actual “numbers” to describe the effect of decisions and stress upon one’s health.

This was the general opinion until a study in 1970 by Jay Weiss put a new light on decision making and stress. This study was considered a more complete study that showed under most circumstances, making decisions is actually good for us! “Wait, I thought you just said that making decisions was bad for us, bad for our health, stressful?” I did. However, I learned something new. I gained a better insight about how you can make decisions as traders and still be healthy, not stressed and possibly even more profitable.

The main difference between the Brady and the Weiss study was that the Weiss monkeys were given a warning alarm that a shock was coming. When alerted, the monkeys could push a lever that not only prevented the electrical shock but also silenced the alarm. They were given feedback to their decisions.

The monkeys involved in the Weiss study were able to cope with the stress and did not develop the ulcers or declining health that the Brady monkeys did. The Weiss monkeys learned they could control their situation. The Brady monkeys on the other hand felt little to no control.

What we can conclude from this is that pressure to perform with little to no feedback or feeling, no control, was the probable cause of the health problems that developed.

Weiss later repeated the monkey experiment utilizing rats in place of the monkeys. These animals had to respond approximately every 20 seconds. These animals developed large stomach ulcers just like the Brady monkeys did, despite the fact that they were warned.

Weiss varied the experiment where he spaced the decisions to 1 minute or greater. Weiss found that when the rats had to make fewer decisions, the number of ulcers the rats developed was reduced.

What can we learn from this as traders?

A lot if you take time to think about it.

These studies show that being in control of the decisions is a good thing if we can reduce the number of decision points, (take time off in between our decisions).

How might this apply to us as traders?

First we need to recognize that our trading environment in many ways is very similar to the conditions created for the rats and monkeys. We know that a challenge is coming in the next trade (coming electrical shock). We are making a decision based on our system, we trade, and we get immediate feed back on our decision. Sometimes we experience either a positive or painful result.

Brady’s monkeys didn’t know if their decisions were correct or not. The Weiss monkeys received close to immediate feedback, quickly confirming the outcome of their decisions. Remember, the animals that received and acted upon feedback, remained healthy.

We too may be unknowingly creating trading conditions like the Brady stress study or the Weiss stress study and getting similar outcomes!

What do I mean?

Consider these two points. The Weiss experiments show us that time is a key to controlling stress along with getting and following immediate feedback. Brady showed rapid decisions, little time between decisions and little feedback caused massive health problems for the animals.

If you’ve been feeling burned out from trading, stomach acid problems, feeling overwhelmed, depressed with your trading, you might just have created these experimental conditions and not even realized it. You may be experiencing the same results as the monkeys did!

So, you have to ask yourself, as a trader, are you creating the Brady study conditions by:

* High frequency day trading, in and out of the market all day.

* Not following any clear, consistent rules or trading system.

*Randomly following your gut, randomly over riding your system due to “whatever”.

* You enter a trade and immediately suffer a loss but you ignore your stops and let it ride.

*You’re suffering losses yet never review your trades.

*Hoping this trade is in the right place, the right time and guessing?

*Ignoring money management guidelines and rules.

Do you see how much this trading behavior looks like the Brady study where the monkeys developed ulcers and died?

So what would the Weiss study conditions be for a trader? Pretty much the opposite of what I’ve listed. Yes, I know you probably already know that you should get a system, trade that system, use stops and review your trades, probably reduce the amount of your trades, but are you doing it?

As the saying goes, “We know what to do, but are we doing what we know?”

At the end of the day, we all need to look at our trading to determine if our trading conditions are creating a Brady study or a Weiss study. Hopefully, you’ll realize that making trading decisions is great for you under the right conditions. Under the wrong conditions it could be a setup for failure, stress related illness, even possible death.

We will never eliminate loosing trades, never eliminate the shocks. We need to understand that we will continue to experience these “electrical shocks”-losses. But we won’t experience much harm to our systems if we take time between shocks to monitor ourselves, respond to the feedback we receive and act accordingly. We can and should apply this to our whole lifestyles, not just trading.

Remember, being in control and making informed decisions is what makes healthy rats, monkey’s AND traders.

Good Trading and Good Health

Excellent, thanks for the heads up on this course BrasilNut. I will take a good long look at it and see if the course can be given to me to review it for Laytheodds.

If anyone, like BrasilNut, has any courses, systems, automated products of any kind that are related to financial sector, wether it be forex, stocks & shares, options, futures etc etc then please let me know and I will contact the people who made it and give you my honest professional opinion.

Thanks again BrasilNut!

Alan

Knowledge to Action is a decent course

Hi Douglas,

It has to be said there are indeed many ways to trade financial markets on betfair and some of the heavy weights on betfair have made their money trading financials so that certainly has to say something!

There is one way that you most certainly should not trade and thats just to jump in, hoping to get a few ticks here and there. The financials have a tendancy to be very rapid movements.

I personally trade only in the last 15 minutes of intraday (every hour) I use the FTSE100 top 20 companies to gauge how the FTSE is performing, I make an analysis on how those companies are performing over the past 45 minutes and make my decision based on the odds/money at those odds are shown. If I like the odds I take the money, if not then I place money at the odds I believe to show true market value. If I am as sure as I can be I will place the odds at better value for those who are taking the opposite side to me. This sounds as though as its going against the grain but it works for me, human greed from the other side you see! I am one of the lucky ones as I have Reuters 3000 xtra and bloomberg as well as CNBC at my fingertips (im a stockbroker).

Above all, there are several things you absolutely must have and they are:-
a service that provides live prices. There is one service that does provide live prices for up to 1 hour free per day so it can serve as having half a day trading on the FTSE. Its easy to get the equivalent of a full days free live prices…just sign up twice using different emails!

You need access to the top 20 companies of the FTSE100

You must be absolutely focused and I really do mean focused, eyes on data for the time you are trading.

You also need to watch how the US is performing as this can have an effect on some of the top 20 FTSE100 companies.

All this may sound overkill but if you consistently hone your strategy and not be greedy you can indeed succeed. By taking your time to master the speed at which the odds move according to the data from the live FTSE price and the news feeds you will see patterns emerging.

Two more things; you absolutely must have a reliable trading platform, i use fairbot, it serves my purposes extremelly well and lastly never ever ever let a bet ride, the FTSE has tendancies to get very very close to the previous hours opening. In the early days this made me lose a huge amount of money! So the key is to always green up, regardless.

Hope this helps in some way…

Alan

How do you bet the financial markets?