ACT Final

BarroMetrics Views: ACT Final

As the final post in the series, I had planned to give an example of how ACT had changed my trading. Well, Friday’s trading provided such an opportunity, but not quite in the way I had in mind!

Friday saw a reversion to trading governed by the 3-Fs with the result that I lost 1.7% (largest loss of the year in one day!). Still, that’s better than blowing my account. Those of you who have heard me tell the story of that eventual night’s trading many, many years ago will know what I mean.

I have recorded a video about Friday’s trading. You can find it here:

 https://dl.dropboxusercontent.com/u/10422981/Blog%202015-10-01.mp4

ACT IV

BarroMetrics Views:  ACT IV

Ryan asked:

Two related questions

I) whilst in a trade how do you distinguish between new information and a FFF type emotion? Is it possible that the uncertainly and discomfort simply forces an FFF to be rationalised as new information?

II)The values and committed actions are also integral – could you explain further his you integrate these concepts as part of the application of ACT?

————-

I) There is no one-size fits all answer to this question. I can only share my experiences. 

My 3 Fs have peculiar characteristics:

  1. There is an overwhelming feeling that ‘I must act NOW’; 
  2. I less my sense of context because I focus only the timeframe I am watching. 

Let me explain. In my trading, I seek to take trades where:

  • the structure and zones of the higher timeframes 
  • line up with the structure and trigger of the lower timeframes.  

When my 3Fs come into play all I focus on is the entry timeframe – totally losing sight of the structure and zones of the higher timeframes.II) The science of goal achievement is as relevant to trading as in any other field. We need to set goals (Long-term, medium-term and short-term), plan our strategies to get to our goals, taken action, review the results and re-orientate i.e. change what is not working.

ACT suggests that is goals and actions are in line with our values, we take effortless action. To that, I would add, that by the conscious creation of value based habits, we attain our goals with less conscious effort.

ACT III

BarroMetrics Views: ACT III

I received an email stating that the coverage I gave ACT was superficial.

I agree. The blogs are intended as an introduction, In ACT, I provided a link for an in-depth introduction. And, you can always ‘Google’ Acceptance & Commitment Therapy (also Acceptance & Commitment Training) for books and courses on the subject. 

Today, I want to look at an example of ACT’s positive influence on my trading.

For many years now, I have sought to overcome the ‘ebb-flow’ volatility of my results. Periods of ‘flow’ (when I could do no wrong) were inevitably followed by periods of ‘ebb’ (when nothing I did was right). In the ‘ebb’ phase, I gave back too much. For example following a ‘flow’ period that ended in Jan 2014, I experienced a 15% drawdown that took the best part of nine months to recover.

My thinking was if I could reduce the drawdown, then I would not have to ‘chase my tail’ to recover the drawdown losses.  This year I may have found the solution. I say ‘may’ because the measuring period has been only nine months – too short to draw any firm conclusions. But, the signs are very positive.

So, what has made a difference? I’d love to say I found a brand new TA tool – that way it would be an easy fix for everyone. Unfortunately, the answer lies in my psyche.

As a trader of over 30 years, I ‘knew’ that ‘leaving money on the table’,  and ‘missing out’ are part and parcel of our profession. In the ‘flow’ phase, neither issue arises or if they do, arise rarely and are quickly forgotten because I am onto another ‘great’ trade. When the evitable ‘ebb’ stage occurred, both would occur with greater frequency. The way I initially responded was to reduce position size and hold onto to the position until stopped out.

The feelings I would experience – disappointment, regret – I would ‘force’ down by reminding myself of the nature of markets. And in that response lay the error.

ACT suggests that we allow ourselves to experience the feelings fully rather than suppress them. Opening ourselves to the feelings without fusion and judgment dissipates their effect. The ACT tools in the ‘acceptance process’ (Figure 1) were also used to experience and then dampen and remove the residuary, adverse effects of disappointment, etc. In doing so, I was open to the solution of exiting a trade if it did not behave in a manner I expected.

This did mean that on some trades I would miss out and leave money on the table –  trades that would have been profitable had I waited for the stop to be hit.

It also meant that:

* I had to prepare diligently for the likely scenarios that could occur after I took the trade, and

* It also meant that the only way I’d stay in a trade during ‘ebb’ stage would be if it were an expected, positive (or neutral) response.

But,  I can’t argue with the results. Since I adopted the approach, ‘ebb’ results are breakeven or a small loss. This means that when I move into ‘flow’ or ‘normal’, the profits don’t chase past losses.

I am curious to see if 2015 will prove to be a watershed year.  It would be amazing if it were, and will go to show that old horses can still learn new tricks.

act-hexagon-4.png

FIGURE 1

ACT II

BarroMetrics Views: ACT II

HK is on an August Moon Hols. Wishing all my HK readers a fab hols!

Figures 1 and 2 are different versions of the ACT Hexagon. Figure 1 provides a detailed description; Figure 2 shows the two processes.

Most of the ideas are self-explanatory – except perhaps ‘self as context’. ACT takes the view that we are composed of three selves:

  1. Self as concept. This is the idea that we have of ourselves – our self-concept. It comes from our beliefs, thoughts, memories, judgments and facts. It is also the self that houses the ‘ego’. It is the self with which we tend to ‘fuse’ e.g. taking a loss is not just a financial loss but a judgment of our self-worth. 
  2. Self as awareness. This is the process of observing without judgment i.e. with defusion.
  3. Self as context.  This is the ‘3rd-party’ observer. The one who views our actions and results with dispassion and without judgment (i.e. also with defusion).

Our job as traders is to work as far as is it possible for us to do so with the areas of awareness and context.

The two processes complement one another:

1)  The acceptance process leads us to view the results of our trading without ‘attaching meaning or judgment’ apart from the fact that we have lost money.

2) The commitment process leads us formulate goals and take action to attain them. It also leads us to focus on what market information is telling us rather than viewing market information from the perspective of what we would like the market to be telling us.

(more tomorrow)

act-hexagon-10.png

FIGURE 1

act-hexagon-4.png

FIGURE 2

ACT

BarroMetrics Views: ACT

I received a few emails asking me to expand on how ACT can help trading. I am happy oblige.

How about helping traders attain their goals? There has been no research in this area. But, speaking for myself, ACT has enabled me to raise my trading to the next level. My most volatile account is the one I use to fund my month-to-month cash flow. Pre-ACT, it was also the account that has the most volatile equity curve. But this year, I am either in a prolonged flow phase, or ACT has enabled me to trade more consistently. I believe the latter is the true explanation.

For all my accounts, my average annual return over the past 25 or so years has been in the 23% to 26% range. The cash flow account has experienced some double digit draw downs (maximum being 28.3%). For example in the first quarter of 2014,  I had a 15% draw down that took till Sept 2014 to recover.

This year? Well, Figure 1 shows the results for 2015 (with Sept 2015 taking yesterday’s result into account). You’ll see that I have had two losing months, -.79% and -.92%, with the latter being the largest draw down for the year. That is a substantial improvement over past performance.

So, how did ACT help?

Figure 2 shows the basic tenets of ACT. Tomorrow I’ll consider the two fundamental barriers to success in any field, and on Monday, I’ll show how ACT overcomes  the barriers.

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FIGURE 1 2015 Results

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FIGUE 2 Tenets of ACT

All Well Now! BrightWin

BarroMetrics Views: All Well Now! BrightWin

At last I can say I have fully recovered from the spill I had (what felt like) an eternity ago. All of last week, I sat before my computer and nary a twinge in sight. Hopefully that’s the last long-term injury I’ll have for a while. Still when you are a septuagenarian injuries are part of the life.

The great thing is my trading has never been better. Because of the injury, I traded only my own account; so, I am hoping that the run in 2015 is because I have taken the trading to the next level rather than just being in the flow.

And, if I have moved the trading up a notch, I know where the kudos rest: with Acceptance Commitment Therapy – by far the best tool traders have to improve.

Speaking of ‘improvement’, my first Singaporean friend, put me onto BrightWin. BrightWin is a New Zealand broker with a couple of interesting innovations:

  1.  BrightWing will chart your equity curve based on your trading with it. What I call ‘an equity journal’ is an essential upkeep if we want to improve. Based on the 20-years of teaching experience, I formed the view that keeping a psych and equity journal things most unsuccessful traders are loath to do. Well now the broker will do it for you. No more excuses guys and gals!
  2. The other innovation is a twist to a wrinkle quite a few brokers are offering. BrightWin will post the chart of its best traders. You can elect to automatically place the same trades. However, unlike the rest, BrightWin monitors your equity so that you take the same percentage risk as the mentor. I thought this an excellent twist.

I had a look a BrightWin. It seems to be an ECN (i.e. it will charge you a brokerage fee);  its spreads are competitive; and it covers most FX pairs , some in indices, and some commodities (CFDs).

BrightWin also an interesting rebate structure. If you want to open an account with it (and receive some benefit for any referral), you can open an account at:

http://affiliate.brightwinsecurities.com/signup/Riovest.aspx?AI=1427

When you do that, you are placed  under my Jeff Tie’s group. This means if you have any questions, do drop him a line at:  Jeffery Tie <jefftie@gmail.com>.

Or if you are like me, who prefers to just open an account (i.e. no associate account), drop Jeff a line and he’ll tell you how to do that.

Ohh! Before I forget. I have two attachments:

  • One is Jeff’s equity curve since starting with BrightWin.  It shows the win rate, average P&L, best and worst returns on margin and Jeff’s max drawdown to date. It also shows the number following Jeff at the time of the snapshot (28).
  • The six steps you need to follow to start trading with BrightWin (assuming you want the rebate)

jeff-equity-curve.png

Jeff Tie’s Equity Curve

birghtwin.doc

6 Steps

New Series II

BarroMetrics Views: New Series II

I was preparing for the series on the weekend. It looks like to cover the topic as well as I would like means it will be a bigger project than I envisaged.

That being the case, I am seeking your input in two ways:

  • what would you like to see covered (see below)? And,
  • how many of you would have an interest in the material? 

If I am going to spend as much time as I envisage, I’d like to have an indication that someone will be interested enough to read the writings!

(Thanks Wenda for the first indication).

I see success in trading as the composite of knowledge (know what to do) and skill (do what you know). I won’t be writing about ‘knowledge’ – mind, money, method – there is enough excellent material about on the three.

I do want to write about skill acquisition:

  • what stops traders from becoming successful? 
  • what habits do traders need to form to attain success etc? 

There are treasures just waiting to be uncovered –  perhaps unbeknown to many market participants, there have been numerous breakthroughs that would assist our trading quest……and these areas I want to cover. So, within this context, what would you like to see the series spotlight?

The sad fact is that despite the advances in learning and trading, the success rate for traders remains at least as dismal as it has ever been.

Let’s see if together we can produce insights to help all attain their dreams. 

Being Fully Present II

BarrosMetrics Views: Being Fully Present II

At the airport lounge with an hour to kill – enough time to write a short follow-up to yesterday’s blog.

Subscribers to my free video newsletter know I am keen to sell the NZDUSD. I believe it is offering a low-risk, high probability opportunity not often seen.

Figure 1 shows my preferred zone for the trade.  I felt we should see that price early this week as the 3-d swing corrected to retest the breakdown zone.

Yesterday we saw a weak attempt at a rally.

The pair barely nudged into the lowest boundary of the retest zone and sold off.  What to do?

If I were not fully present, I’d just sell or perhaps just walk away. But, by being open to market info, I can create at least two scenarios:

  1. Figure 2 shows the stats for a 60-min 18-period swing. We see that the move up (73 points and 16 bars) did not make a ‘normal correction in points, and only just scrapped in for time.   
  2. On that basis, my preferred scenario would be that the 18-p correction is not over: we’ll see another shot at the 0.7150 and perhaps give us a negative development sell signal. 
  3. Alternatively, this is a very weak market, and we shall see a strong breakdown.
  4. The bull counter to the bear is the argument that if the NZDUSD is unable to mount a follow-through to yesterday’s strong selling, we’ll see a new uptrend start in the 60-min 18-p swing.

To prepare for today, I’d need to tailor a response to each of the scenarios above. If entering a trade, I need to consider:

  • entry, 
  • initial stop, 
  • target and 
  • reward:risk assessment.

nzdusd-d-18p.png

FIGURE 1 Daily NZDUSD

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FIGURE 2 60-min NZDUSD

Being Fully Present

BarrosMetrics Views: Being Fully Present 

Daniel asked: can you explain what is mean “Being fully present”? I heard about that, so when you are in a trade, you need to live in the “NOW”,to let back the past, to forget about losing and winning trades, and to not think about the future, to not let your expectations to rule your present trade. But for me is only some intellectual, what is mean practically to be “fully in present”? Do I feel this,and how is this feeling? What can I do to be “fully present”? Thanks and regards, Daniel” 

(see http://tradingsuccess.com/blog/achieve-a-breakthrough-3393.html#comment-98139 )

My answer would be of interest to all, I think.

Daniel, the question implies a split between intellect and feeling when, in fact, they both need to be present. Like making an optimal decision, ‘being fully present’ requires both, because what you are doing is accepting the information the market is providing each moment to moment and making a decision.

All traders experience this trait – the tendency to block out ‘painful data’ traders, but successful traders do a better job of assimilating the data into their decision-making process.

I have prepared a short video giving an example of what I mean: Being Fully  Present

I have also included in the blog, the recent piece by Denise Shull. It’s relevant to the present discussion in that it explains that our need for certainty is another reason we block information.

uncertainty-shull-2015-05-31.pdf

Achieve A Breakthrough

BarroMetrics Views; Achieve A Breakthrough

I’ll continue with the ‘Inflection Point’ series  tomorrow.

Today, a quick review of a 2-day seminar I attended in Singapore last week.

On my last trip I was flicking through the Strait Times and came across an ad for ‘Master Class Series: Achieve a Breakthrough in Sales Performance’. I enrolled for it – not expecting too much. In fact, I had told my business partner, Peter Ow, that I may see on the scheduled second day, if the first showed I would not add to my store of knowledge. The fact I stayed for the two days provides a clue about how beneficial I found the class.

So what does a self-described ‘sales seminar’ have to do with trading?

Actually the seminar was only indirectly linked to selling. The first day dealt with the Psychology of Performance – what it is, the mental strategies of top performers and motivation. The materials applies to any field of endeavor. The second day dealt with communication. Sure the examples were slanted towards sales but the subject matter applies to any communication:

  • Being fully present
  • Reading the conscious and unconscious communication patterns of others
  • Establishing rapport
  • Use of language for clarify another’s objectives

Long-time readers of this blog know that I see ACT (Acceptance and Commitment Therapy) as the key to improving our trading performance in particular,  and living happier lives in general. The material over the two days slotted nicely into the ACT Hexagon. (Figure 1)

Finally a comment on Jensen Siaw the presenter. Excellent. On a rating from 0-10 (where 10 is the best), a 10. He is knowledgeable, entertaining and is able to get his message across. My biggest fear was I’d have to sit through two days of droning lectures. I needn’t have worried – he gave a good show that transferred knowledge.

His website:  www.jensensiaw.com

As always the disclaimer: I receive no benefit from posting this review. I am passing on what I experienced as a worthwhile experience.

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FIGURE 1 ACT Hexagon