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TRADING PSYCHOLOGY
Trading And The Senses
by Adrienne Laris Toghraie
Successful trading requires a mind balanced between intellect and intuition. Here are some ideas toward developing a balanced mental approach to trading.
One of the Market Wizards once told me that he covered his walls with commodity bar charts and went over each chart, bar by bar. Then he would study the waves of each market until he knew them so well that someone could bring out a chart and he could tell you which commodity it was from. This exercise allowed him to feel the probability of market movement in the future.
It was not an intellectual understanding that allowed this great trader to predict future market movement, but one stemming from his senses. He truly understood his subject.
TAKING THE SHORTCUTS
While computers provide us with shortcuts for processing information, the old-fashioned method of handwriting charting methods also provides some benefits. We train our minds, and our nervous systems, by processing material through all of our senses: sight, sound, taste, touch and smell. Physically developing a chart with each daily change in the markets sends a message to our nervous systems through our minds, translating into the sense that we understand our markets.
The comparison of following charts on a computer and physically building them is akin to learning to surf by watching someone else instead of actually surfing the waves yourself. The more senses that are directly involved in your learning process, the more you will have the ability to "feel" the markets. Charting by hand is more time-consuming, but it adds a discretionary intuitive indicator, one that cannot be quantified, to your methodology. My experience with traders has taught me that the traders who trade from a good technical base, adding discretion as a final indicator, are consistently the best traders.
WORKING THE FARM
Troy came from three generations of traders, each with different styles and abilities. Grandpa Harry, who farmed wheat, was one of the first farmers in his region to hedge his crops. He made friends with some of the big-wheel traders from Chicago. Harry used to walk the fields with them, a sprig of wheat between his teeth, spinning tales that stirred the emotions of even the most calculating bankers and traders. What Grandpa Harry did naturally was to create in others the buying state of mind. He was also gifted in developing in others the love of the land and the harvest, and the sustenance the land provided for people.
Harry's son, Jack, followed him on these walks, soaking in the love of the land while learning the art of the trade. By the time Jack was a young man, he had learned to plot the course of his father's own farming fortunes on bar graphs. Then he extended his study to the local farmers. Eventually, he branched out into other agricultural commodities in the region. By the time he graduated from high school, he had begun reading about commodities trading and was placing his own trades. Jack had such an intuitive feel for these agricultural markets that he made enough money to pay for his own college education. In time, Jack became a highly successful trader, moving his family into Chicago to be closer to the markets.
Jack's son, Troy, was eager to begin his own trading career. Bypassing the hands-on work of creating bar charts, which he viewed as boring and useless, Troy went straight to using his computer to trade. Not only did Troy lose touch with the hands-on work of the farm, he lost touch with the hands-on work of trading. Troy, an intelligent and hard-working mathematician, was desperate for a mechanical or mathematical solution to his trading dilemma. However, his background made him a hard-sell for his father.
It may simply have been a coincidence that Troy's trading took a serious turn for the better after his father convinced him to get back to the basics of working with bar charts. After he did so, he became one of the most ardent proponents of this process.
Adrienne Laris Toghraie is founder and head of both Trading on Target and Enriching Life Seminars. She may be reached at Trading on Target, 100 Lavewood Lane, Cary, NC 27511, 919 851-8288, fax 919 851-9979.Excerpted from an article originally published in the June 1998 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 1998, Technical Analysis, Inc.