Brain Hacks For Traders: Hijack Your Mind Skyrocket Your Profits

127 Pages·2015·0.99 MB·English

by  Harvey Walsh

BRAIN HACKS FOR TRADERS
Hijack Your Mind & Skyrocket Your Profits
HARVEY WALSH
CONTENTS
Risk Disclosure Statement
Introduction
The History of You
Cognitive Bias
Learned Behaviour
More Brain Hacks
Also by Harvey Walsh
Copyright
Risk Disclosure Statement
Day trading has large potential rewards, and also large potential risk. You must
be aware of the risks and be willing to accept them in order to invest in the
financial markets. Do not trade with money that you cannot afford to lose. The
contents of this book is for general information purposes only. Although every
attempt has been made to assure accuracy, we assume no responsibility for
errors or omissions. Examples are provided for illustrative purposes and should
not be construed as investment advice or strategy. Hypothetical or simulated
performance results have certain inherent limitations; unlike an actual
performance record, simulated results do not represent actual trading. Also, since
the trades have not actually been executed, the results may have under or over
compensated for the impact, if any, of certain market factors, such as lack of
liquidity. Past performance is not indicative of future results.
Introduction
The Secret of Success
Imagine two traders. We’ll call them Ashley and Casey, because then I don’t
have to decide if they’re men or women. Ashley and Casey pick up a book on
their favourite subject, read it, and learn a new strategy for day trading futures
contracts.
Both of them have been trading for about a year. If someone persuaded them to
take an IQ test, their results would be within a point of each other. They had a
similar education, got about the same grades at school, and graduated with
equivalent qualifications.
A day after reading the trading book, both of our heroes take to the market. They
apply the strategy they have just acquired to the best of their ability.
They’re trading the same contract, on the same days. They’re looking for the
same entry and exit signals, which means they should be buying and selling at
the same times.
Ashley and Casey are clients of the same broker. They use the same software,
running on identical computers, with internet connections that — by incredible
coincidence — provide exactly the same speed and latency. Their charting
software is the same, their orders are routed the same way, and they both
experience identical slippage. Neither of them have any distractions in their
trading environment, they’re both in good health, and they both sleep well every
night.
After a week of following the new strategy, they arrange to meet up to compare
their results.
Ashley arrives early and downs a couple of drinks before Casey arrives.
Casey eventually turns up in a brand new car. “Sorry I’m late,” Casey says.
“Had to pick this baby up from the dealership. What do you think? Pretty cool,
huh?”
Ashley is stunned. “How could you afford that?”
“With the money I made on the markets this week,” replies Casey. “Best week
ever! That new strategy is killer, don’t you think?”
Ashley isn’t sure if Casey is being serious. “Are you having a laugh? That
strategy was a pile of tosh. I lost money every single day!”
Casey pulls out a broker statement and proves that great sums of money have
indeed flowed inwards.
Thoroughly depressed, Ashley returns to the bar and orders something stronger.
Casey pays.
Okay, you get the idea. You might even have been there yourself. I know I have.
It might be a book, or a new thread on a trading forum, a blogpost from someone
I respect, or a video shared somewhere. The medium doesn’t matter, it’s the
message.
A new strategy. A great idea. A surefire way to beat the market!
Except when I try it out, I don’t get the results that were promised.
How can this be? Is the person who wrote the blog post or forum thread or video
lying to me? Are they making up their results for a laugh? How can they succeed
where I cannot? How can a strategy that works so well for Casey completely and
utterly fail for Ashley? After all, they are as smart as each other, and they have
equal opportunities to execute. Neither is at a disadvantage.
It’s a question I used to ask myself daily, back when I started out trading. I think
deep down I always knew the answer, but admitting it was hard. And therein lies
the exact problem. The difficulty in seeing the difference between Ashley and
Casey is the difference between them.
Seeing facts for how they truly are is at the heart of the issue.
Casey has no technical or environmental benefit over Ashley. But Casey does
have one advantage. Casey has an ability to see the truth, and to act on it without
hesitation. Casey has bridged the chasm between knowing what to do, and
actually doing it.
In other words, Casey can execute.
If there is a secret of success in trading, it’s this: execution is everything. The
question then, is why is it that some traders can execute but others can’t? By the
end of this book, you’ll know the answer to that question.
Trading Is Hard
Trading is one of the toughest professions I know of. It is also one of the easiest.
How can both of those statements be true? Anyone who has already tried trading
probably knows the answer intuitively.
Trading is easy in the same way that giving up smoking is easy. You just stop
smoking.
Trading is easy in the same way that losing weight is easy. You just eat less and
exercise more.
Trading is easy in the same way that winning a Formula One Grand Prix is easy.
You just drive faster than everyone else on the grid.
Trading is easy in the same way that learning another language is easy. You just
memorise a lot of words, grammatical rules, and exceptions.
Trading is easy in the same way that building a skyscraper is easy… You see
where I’m going with this, right?
All of these activities are easy, but they are also incredibly tough, and only a tiny
minority of people succeed. In the case of Formula One racing, only one person
can win any given race. At least with trading, everyone can be a winner (yes,
really).
The problem, of course, is one of mental fortitude. It’s what I call head stuff.
Knowing what to do and actually doing it are not the same thing.
Execution is everything.
If you’re trying to lose weight, you know that eating the big cream doughnut is
wrong, and that eating an apple instead is the better choice. That’s easy.
Everyone knows that. Choosing the apple over the sticky, sweet doughnut when
both are sitting in front of you on the counter? That’s tough. The little voice in
your head says ‘Go on, just this once. Look at all that creamy goodness. Imagine
how delicious that will be! The apple will still be there tomorrow. Have the
doughnut!’ Then another little voice says ‘That doughnut is a really bad idea.