As of 03/27/2020
  Indus: 21,637 -915.39 -4.1%  
  Trans: 7,699 -346.29 -4.3%  
  Utils: 759 +1.01 +0.1%  
  Nasdaq: 7,502 -295.16 -3.8%  
  S&P 500: 2,541 -88.60 -3.4%  
YTD
-24.2%  
-29.4%  
-13.7%  
-16.4%  
-21.3%  
  Targets    Overview: 03/15/2020  
  Down arrow19,000 or 25,600 by 04/15/2020
  Down arrow6,700 or 9,000 by 04/15/2020
  Down arrow600 or 800 by 04/15/2020
  Down arrow7,000 or 8,400 by 04/15/2020
  Down arrow2,300 or 2,900 by 04/15/2020
CPI (updated daily): Arrows on 3/27/20
As of 03/27/2020
  Indus: 21,637 -915.39 -4.1%  
  Trans: 7,699 -346.29 -4.3%  
  Utils: 759 +1.01 +0.1%  
  Nasdaq: 7,502 -295.16 -3.8%  
  S&P 500: 2,541 -88.60 -3.4%  
YTD
-24.2%  
-29.4%  
-13.7%  
-16.4%  
-21.3%  
  Targets    Overview: 03/15/2020  
  Down arrow19,000 or 25,600 by 04/15/2020
  Down arrow6,700 or 9,000 by 04/15/2020
  Down arrow600 or 800 by 04/15/2020
  Down arrow7,000 or 8,400 by 04/15/2020
  Down arrow2,300 or 2,900 by 04/15/2020
CPI (updated daily): Arrows on 3/27/20

Bulkowski on Trading in the Now

 

 

Now Trading: Opening Position

In some of the trading psychology articles I wrote, it's useful to imagine what will happen in a trade. That's important to keep your spirits up, your confidence high, but it can also cause problems if you get carried away. If you imagine that this trade is going to make you a million, it just might, but that type of thinking could blind you to what the charts are saying.

The flip side of this is the negative expectation: Every trade I make is going to lose. Such pessimistic thinking can lead to disaster when you subconsciously sabotage your trades to make it come true.

Trading in the now, then, involves having a positive attitude and a realistic expectation. Here are some examples that could cause problems.

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Picture of a toad

Now Trading: The Pessimists

Many traders that speculate about what will happen in the future become burdened with anxiety.

Basket Case Bob is an example. As a child, Bob lived in a rough neighborhood in which robbery, muggings, theft, and even shootings occurred frequently. Those too weak to defend themselves were often the target of such attacks. His outlook on life took on a paranoid flavor, as if the next step would be his last.

When he started trading, his life experience influenced his behavior in the markets. He was always worried about the big boys taking him out by moving price against him. Each trade he placed was like an expectation that he would be robbed. The more he perceived the treat of loss, the closer he placed his stop loss orders until they hugged price so closely that he was stopped out for small losses and small profits. The trade couldn't gain traction.

This negative thinking prevented him from following his own trading plan for very long. By reviewing his trades, they showed his trading plan would have led to large gains, but he just couldn't get over his negative expectations of the future.

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Now Trading: Curing Basket Case Bob

For Bob, being overly cautious, pessimistic, and even paranoid was a way for him to feel comfortable, even happy, certainly safe. Breaking that habit was a challenge because it involved changing unconscious beliefs and his world shaped by experiences of a lifetime.

The cure was to change some of his associations. It's a lot like saying to a dog, "Come here!" and when it does, you slap it. Soon, it learns to stay away.

How do you change that behavior? Replace negative associations with positive ones. For a dog, say "Come here!" in a cheery, welcoming voice, and give him a treat when he does. Soon, he'll be wagging his tail when you call.

The key to changing Bob from a paranoid pessimist was to have him focus on something more important to him than the safe and comfortable feelings his negative thinking aroused. That something was the memory of his mother. She didn't want a life of luxury, rather, she wanted only the best for Bob. Her dream was to see him become confident, successful, and happy.

Bob only needed to associate his optimistic success with the fulfillment of her dream: that of him becoming happy and successful instead of worrying about traders lurking around dark corners, waiting to ambush him and steal his lunch money.

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Picture of a dog snarling

Now Trading: The Optimists

On the opposite side of the scale are the optimists, those traders who believe that every trade is going to be a big winner. They are the ones counting their millions as soon as the trade begins.

Belief in a positive outcome is necessary for success, but it has to have a firm foundation, such as a well-tested system, years of experience, or knowledge gleamed from hard work.

Now Trading: Solutions

If you are pessimistic, feeling that every trade is destined to fail, or overly optimistic as if every trade will add to your millions, here are some steps you can take to become better grounded.

  1. Surround yourself with optimistic people and traders, then try to share their beliefs.
  2. Write down the benefits of negative thinking (for Bob, this would be comfort, happiness, and safety), and contrast them to the benefits of positive thinking (such as wealth, status, happiness, safety, and so on). Writing them down helps your unconscious mind recognize the benefits of positive thinking, as well as clarifying them for you, too.
  3. Imagine that you are making a film about your life. How would you rewrite the script to change it from a pessimistic tone to an optimistic one?
  4. Think about the dreams, the stories, the lies you tell yourself and be willing to give them up, and be willing to change your perception of reality.
  5. What motivates you? Attach positive thinking to that motivation. In other words, if becoming a good trader or making money is your primary motivation, then construct positive ways and positive thinking to achieve your goals.

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Now Trading: Closing Position

Negative thinking sabotages your trading as does the unrealistic belief that every trade is going to make you millions. Being optimistic about your trading is the best approach, but only in moderation. You have to make the effort to become successful. The markets will not hand it to you.

-- Thomas Bulkowski

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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