Thursday, 13 July 2017

Bad Bias Blues - Blog Post 17 by T-Model Trader


Hello Traders.
 T-Model Trader is back and I have to say this is one of my favourite posts I have read of his. It touches on something I see a lot of in trading - 'Prediction Goons' as I call them. People who rant and rave about what a market is definitely going to do. They're always silent when they are incorrect, but scream from the rooftops when they are correct. Unfortunately, a lot of beginners get suckered in by this. As I always  say, let the market tell you what it is going to do and ride its coattails. Leave the prediction to clairvoyants.
 James Orr




Blog 17 - T-Model Trader


Prior to starting up with Decisive Trading, I had joined up with two other trading businesses. The first one was akin to a snake oil salesman experience, which required the cancelling of credit cards in order to remove myself from the “quit at any time” trading site.
Being philosophical about it all, I chalked it up as experience (with a few quiet grumblings on the side).
The second was an Australian based trader whose methods are based upon longer timeframes, mainly the daily and 4 hour. As my first snake oil learning was like a passing shower, I was still very much in my infancy as I made my way around the lessons, articles and forum postings on the 2nd attempt of the trading learning curve.
My time spent reading and following the postings on the forum was of great interest as everything was just so new and fascinating. The more time has passed, the more I tend to have snippets of memories of comments regarding trades pop into mind.
It was a very active site, with many participating traders posting comments, observations and of course their trades. In reflection, there were two traders that I can now recall more vividly than others. They did in hindsight encapsulate two very different personalities in and around trading that I didn’t really see clearly at the time.
The first guy came to my attention within the first week of being in the forum as his way of writing was hard to miss. All his comments seem to be so “in the know”. I was in retrospect, feeling so inadequate regarding everything to do with trade assessment and trade placement that I hung off these comments as gospel.
This was my first major trading reality check.
Forum Guy 1.
One day he posted a screenshot of a forex pair, with a few squiggles drawn pointing in a southerly direction. It was though the comment that he wrote that is the one that really grabbed my attention.
He had written with the chart….. “This baby is going to sink like a stone”.
In my naivety, I saw these words and attached them visually to the big arrow on the chart that he had drawn. In my imagination, I could only perceive how many pips that arrow was covering and how fast that stone was going to go, putting together a “wooooooo”, this guy is so in the know and about to make a fortune.
Given my general bee line for impatient trading, I am in reflection amazed I didn’t jump on board with his great enthusiasm and place a trade on his knowing. I do recall making sure I follow this currency pair to watch with admiration as this “baby” did its plunging and with this conformation I could then trade along with him into the future and bucket the big ones.
As you may well have guessed, this “baby” actually took off like a missile launch and nothing like the Titanic. Strangely, although I missed the realization at the time, there was no follow up from this guy about that trade. Not a word.
A few weeks went by and then he reappeared with another …..“This sucker is going thru the roof”. Sadly for him, that trade was the stone he wanted in the first one and so this pattern was repeated over and over.
Forum Guy 2.
The first thing about this person that was notable was that he was from Kyrgyzstan, a place that doesn’t come on to my radar screen at all really. His comments thou were the opposite of the first guy. He would post something like…. “Bear pin at structure in line with trend”.  That was basically all he would write. At first I read these and would think…. “Yep….what about it”.
A few days later he would post a comment that would say something like….. “Closed for + 2.5 R/R”. And so, this pattern repeated over and over.
At that point of time in my trading, Guy 1 was so appealing, simply because of the language being used. As I was at the time a trading weakling, it was all bravado and very addictive.
Guy 2 was abstract. I didn’t really understand what he was writing. Were they trade suggestions? Was he merely pointing something out? What was interesting in hindsight is that he wasn’t making any suggestion to what price was going to do and that was highly challenging for me. I so needed to have someone just tell me!
Although Guy 1 was writing in a particular way, it was me who was reading, processing and giving meaning to those words. The reality was that this person wasn’t actually doing anything to me and it was my own personal psychology that was placing a value judgment upon it. When I placed the value of “certainty” as an overlay to his language in the postings, for a brief moment I fell into the belief that these trade suggestions were defying the reality of probabilities.
Even though I was seeing the repeated pattern of trade failures from Guy 1, the notion of fear within me was sufficient enough to fall into the belief that this guy knew and hence would bring safety to my trading.
Likewise, I was watching Guy 2 post these short comments and constantly having wins. He baffled me simply because there was no predictive language.
One day, another person responded to a Guy 1 comment when he posted yet another… “This mother is going to explode”.
The comment was…. “Trade what you see”. That was it.
I clearly remember sitting there and reading that over and over, as thou I was somehow missing the intended meaning, yet simultaneously sensing something quite profound.
Interestingly, Guy 1 was never to post again after that comment whilst I was there.
It was in retrospect, a really significant learning, but one that has taken a long time to truly understand. Guy 2 was just posting what he saw and had no prediction attached. It was short and simple and often successful from a trade placement perspective.
Guy 1, I speculate was infatuated by his own self- belief in knowing the trading future and needed to show off this perceived power of being right.

One of the many challenges I have faced is related to this scenario. I have coined the term “Bias blindness” in order to give me a point of reference in order to tackle this. I have it printed off and pinned up on a notice board in front of me, reminding that it is an issue that I need to be aware of.
It shows up in two ways.
Firstly, when I look at a chart, there is that part within me that is still in the grip of fear of being wrong about a trade entry. As such, my internal mechanisms are always seeking security and subconsciously making assessments to assist in gaining that illusional safety.
I have often (unconsciously) looked at a chart and imprinted a belief of what it is going to do. Like Guy 1, I want to be right and have swallowed a bias without really knowing. Fundamentally from there on, I am not taking in what I am seeing.
The 2nd part of this bias is whilst being in a trade and completely being oblivious to multiple signals that price is showing signs of moving against me. This is why I call it “bias blindness”. I am really not trading what I am seeing and locked into trading what I desire. My desire for the outcome is overwhelming any ability to respond as it unfolds.  I have lost count the number of times I have watched the review videos and gone… “Why did I not see that”?

This all came crashing home from a comment by James in the interviews a while back. He stated about setting alarms on zones and fundamentally detuning from a candle by candle engagement. He said that he knew what he wanted to see at a particular zone and simply waited for that to unfold.
I remember reading that and thinking how uncluttered and peaceful that seemed to be. How free of the constant analysis, anxiety, tension and stress and so on that I seem to have accompanying me in my trading.
It was when I read that, my memories of the two forum guys came back to me. In my understanding, Guy 2 was responding to the reality unfolding in front of him and had such a simple clear approach. I see the same thing when watching the live trade videos that James posts, in that it always seems so uncluttered.  
I have this disturbing feeling within me as I sit here and reflect upon this notion, as I can sense my mind wanting to fight this concept of simplicity, to continually make this way more complex than it need be.
It appears to me that this default within me to complexity within trading is in many ways like Guy1. If it is complex and by extension I am the one who “knows”, then I must be a genius hey! In the meantime whilst this is happening, trade after trade, elegant in their inherent simplicity continue to unfold.
Interesting!

Till next time…
T-model

2 comments:

  1. Excellent blog, I can totally identify with "bias blindness" I too have been in a trade where it is glaringly obvious that it is going against me ( the signals would be a perfect entry for a long for example and I am short ) but no, my subconscious is telling me otherwise, ignore it, it's not right, then I wonder why I am so frustrated when it is a loosing trade, it is a very complex thing is the mind :) I have really enjoyed your blogs T-model, great work :)

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  2. Thanks Jane. I relate to that frustration you mention....and yes....tricky little bugger that thing called "mind"!!!!

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