One Good Idea Turns Into Reality. What’s Next?

lightbulbi15Earlier this week I prototype an idea called Emini S&P500 Battleplan as suggested by many premium members. It has been very well received. The idea is to post what I see from my charts instead of just describing it in the real-time commentaries before market open. Although it is still very simplistic so far, feedbacks from my members is telling me that they love the idea and it is very helpful for them. Very glad I took the plunge and just made it happen first without worrying about how difficult or how time consuming it can be.

Emini S&P Daily Battleplan

This experience has taught me two things.

First, I need to test out new ideas without worrying too much. I hesitated to do this for months just because I worried too much – like it would take up too much time and that my charts could be too messy to show people. Now that I took a leap of faith to start the project first and see if it can work out, the obstacles are not as big as I first thought. The key is to actually doing it first so that I learn from the process on what the actual requirements are.

Second, listen to my members is very important. They may not know exactly what they need for their trading but when many of them telling me something similar the pattern emerges. My role is to find a way to fulfill what they need and paying attention to what they are asking for is key to achieve this goal.

Having a chart or two makes it much easier to explain what I have in mind. Yes it is actually difficult to post the charts because some of the charts I use actually reside in remote servers. It took some coding magic to allow me to take screenshot from them and now it is as easy as working with charts on my desktop computer.

There are various drawbacks of posting my morning summary before market open in real-time commentaries. For example, people who login after market open may not be able to see my morning summary once many messages have been added.

Now both issues are resolved with the battleplan idea, I have setup a home page for the battleplan posts so that premium members can refer to them when they study the historical charts themselves. This should be very useful in helping traders to understand and develop the thought process in formulating their own plan before the start of a trading day.

Real-Time Custom Market Breadth Chart

Thank you everyone who emailed me to sign up for the alpha testing of the real-time custom market breadth chart. Once it is ready I will email you all with the access information. We are still working out some technical glitches before the alpha release. I will keep you all posted on the progress.

In the meantime, I will write up several articles explaining what these custom market breadth indices can do.

I have already revised the titles to two of my older articles and included them into the Trading with Tick Index series. The two articles, S&P 500 Tick16 and Tick1K and Its Divergence Signals were written long before I started the series hence I never thought of them being part of the series. Now that I am making the custom breadth indices available to our members, it is a good time to add them to the series so that everyone will get a proper introduction on custom tick indices.

Hopefully the real-time custom market breadth chart will be another good idea turning into reality.

Mental and Emotional Maturity

taking_selfieI was talking to several beginner traders at my friend’s trading firm the other day. The topic of high probability trades came up several times as these young traders like to get some trading tips from their boss and me. We both told them high probability setups are overrated. You can guess that our point of view confuses these traders a lot. I promised to write about it this week and here is the explanation why one should not obsess with high probability trading setups.

The Psychological Need of High Probability Trades

The reason why traders and in particular, day traders, having the psychological dependency on high probability trades is that it feels good naturally after winning and feels bad after losing. It is normal to have such feelings. But many people do not realize that the accumulation of such emotions are not in equal weighting.

I have posted a video by Shawn Achor earlier this year on exactly this topic. In short, we need about 5 times of happy or feel good events a day to offset one upsetting event in the same day to keep us in a balanced mood. Now think about the number of trades a day trader may make on a single trading day. Just 3 losses, no matter how small they are, as long as upsetting feeling were triggered, the trader will need 15 feel good events to offset the emotional imbalance.

Hence traders tend to look for high probability setups so that they can feel good with their trading. After reading what I wrote above, it should be clear that usual high probability setups at 70 to 80 percent are just not good enough for anyone to really feel good with their trading. Winning rate above 90% is needed to make a normal person to feel comfortable with their trading.

Mental and Emotional Maturity Matters

Even if you have a very high probability trading setup, it is not going to stay at such high level all the time. What if the winning rate dipped down to 70% for several days a month? The emotional upset resulted from the dip can be disastrous as the trader will easily be lured to trade madly. As we all know, one mismanaged trade can wipe out all the gains and more if the trader fails to exercise proper money management. Higher the dependency on high probability trading setups, the more likely the trader will have these very bad trading days from time to time.

Thus depending on high probability trading setups is not as good as learning to deal with the emotional imbalance caused directly by trading. Having the mental maturity to understand that trading is psychologically challenging in nature, a trader can focus on improving their own emotional maturity so that they are not affected as much by their trading activities. In other words, learning to forget about high probability trading setups all together and focus on the better execution of the complete trading plan only.

Same Principle Is Applicable In Life

Not surprisingly, mental maturity and emotional maturity are strong indicators for people who are successful in life and in fields outside of trading. I choose to use the term mental maturity over mental toughness because it is not just toughness one need to do better. Mental toughness can carry you through difficult times but you also need mental maturity to find solutions to solve various kinds of problems with work and in life.

Emotional maturity gives us the ability to better handle relationships in our social circle. It also entails better mental health in general, allowing us to live relatively stress free. But most important of all, it allows us to maximize our ability to utilize our knowledge and skills. If there is something called destiny, emotional maturity is the key to get a better one.