Spencer Li

The Quest for the Holy Grail: Secrets, Gurus & Software

The Quest for the Holy Grail Secrets Gurus Software

Another big danger to new traders is the idea of the holy grail of trading.

To many, the holy grail of trading is deemed to be the ultimate solution to all their trading problems, the magic bullet that will allow them to profit without effort, the secret trading method or tool that will allow them to predict the market and win on every trade. However, far from being the solution, this mentality often acts as a stumbling block to all traders, if not a brick wall.

Many people hop from tip to tip, from guru to guru, from one software to another, attending every seminar and learning from every guru, but they will never be contented, and they will never become good traders, because they are too busy finding the holy grail to put their knowledge into practice. So what is the holy grail?

 

The Quest for the Holy Grail

 

The holy grail can appear in many forms – a “sure-win” indicators, a “100% win rate” trading system, a “legendary” guru, or a “unique proprietary” software guaranteed to make you rich overnight.

They all hold the same promise – to make you rich quickly with little effort.

Unfortunately, there is no shortcut to success, no magic bullet that will make you a super trader overnight.

To them, the answer is always so near, yet always slightly out of reach. Every time they see a new method, they think “this must be it, this must be the missing ingredient.” They test it out for a few days, realise that it’s not perfect, then skip off to find the next new toy. Many don’t realise that no method is 100%.

Many people also mistake sophistication for perfection, opting to fork out money for automated systems that will print money for them as they sleep at night. However, when the system stops printing money, as all do eventually, they are once again off to find the next holy grail.

It took me many years to realise it, and I have been through at least 200 books and tried almost every method or tool available, before I finally realised that to find the holy grail, one has to look within. So if you want to start learning the skills to make consistent money on your own, you need to first get rid of this stumbling block.

Many people in trading start off with the wrong ideas, and after sacrificing a lot of time and spending a lot of money, they wonder why they still cannot get the results they desire. Others think that hard work can solve everything, and given enough time, they will naturally pick up the skills themselves. Not many succeed in re-inventing the wheel. As a world-class tennis coach used to say, “Practise makes perfect, nut make sure you are not practising the wrong thing.”

“It’s not the method or system, it’s the trader.”

So, my advice to new traders is to stop jumping from system to system, hoping to find the holy grail (which does not exist).

Instead, start learning as much as you can, then find a good system and work with it until you find success.

 

thumbnail beginner guide to trading and TA

If you would like to learn how to get started in trading, also check out: “The Beginner’s Guide to Trading & Technical Analysis”

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Spencer Li

Hindsight Bias – When People Say “I Knew It All Along!”

Described in simple terms, hindsight bias is the impulse that insists: “I knew it all along!” Once an event has elapsed, people afflicted with hindsight bias tend to perceive that the event was predictable – even if it wasn’t. This behaviour is precipitated by the fact that actual outcomes are more readily grasped by people’s minds than the infinite array of outcomes that could have but didn’t materialize.

Therefore, people tend to overestimate the accuracy of their own predictions. This is not to say, obviously, that people cannot make accurate predictions, merely that people may believe that they made an accurate prediction in hindsight.

 

Hindsight Bias

 

This affects future forecasting, because a person subject to hindsight bias assumes that the outcome he or she ultimately observes is, in fact, the only outcome that was ever possible. Thus, he or she underestimates the uncertainty preceding the event in question and underrates the outcomes that could have materialized but did not.

One detriment of hindsight bias is that it can prevent learning from mistakes. People with hindsight bias connected to another psychological bias, anchoring, find it difficult to reconstruct an unbiased state of mind, simply because it leads people to exaggerate the quality of their foresight.

When hindsight-biased traders have a winning trade, they tend to rewrite their own memories to portray the positive developments as if they were predictable. Over time, this rationale can inspire excessive risk-taking, because they believe they have superior predictive abilities.

Hindsight-biased traders also “rewrite history” when they fare poorly and block out recollections of prior, incorrect trades in order to alleviate embarrassment. This form of self-deception, in some ways similar to cognitive dissonance, prevents traders from learning from their mistakes.

What is the best solution for this?

In order to overcome hindsight bias, it is necessary, as with most biases, for the trader to understand and admit their susceptibility. One way to face the facts is to keep a trading journal, and use it to record your analysis and reasons for every trade, as well as the thought-process and emotional swings that went with the whole trade. This will be useful when you look back to the past after the event, and will prevent any disillusioned thinking.

“You didn’t know it all long; you just think you did.”

– James Montier

 

complete guide to investing and trading psychology cover

If you would like to learn more about trading psychology, also check out: “The Complete Guide to Investing & Trading Psychology”

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Spencer Li

Private Trading Workshop | Guest Speaker at TRT (Traders Round Table)

Today, we gave an exclusive seminar to the members of TRT (Traders Round Table), where we focused more on trading psychology since the audience consisted of mostly experienced traders. We also had time to go through some candlestick patterns from a psychological perspective, and some examples to illustrate the limitations of candlesticks in price action trading.

Due to time contraints (the talk stretched over 2.5 hrs) , we did not have much time to discuss the markets, but below is a snippet of the Singapore markets.

Private Trading Workshop

Ascending triangle spotted on the Straits Times Index. Is it going to be “sell in May and go away”, or a breakout to new highs? Let’s keep a close watch on that key level, and watch for a major pivot which could start the new big move.

Thanks for the support, and stay tuned for our future seminars!

Sign up for our mailing list to keep updated of the latest workshops and seminars!
For program enquiries, please email info@synapsetrading.com

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Spencer Li

The Synapse Program Q2 2012 – Pioneer Batch!

A warm welcome to the new members of our community!

Over the past weekend, you have learnt the tools of price action, volume and psychology, as well as a variety of setups for different market conditions. We hope everyone has gained insights and knowledge to take your trading to the next level.

Based on the feedback we got, we will be making minor modifications to the program structure to improve the flow, and will be adding in more practical sessions and chart examples in the Synapse Workbook.

Pioneer Batch

 

Pioneer Batch 2

 

Pioneer Batch 3

 

This weekend marks the start of your trading journey. Hence, we urge all new traders to participate actively in the forum to improve their skills, and at the same time benefit by helping one another.

Feedback

“Very satisfied. Definitely improve my knowledge on price action and decision-making.”
– Alvin Lim

“Syllabus is good and easy for beginners to follow. Trainer Spencer is young but very knowledgeable and experienced in price action analysis.”
– Mr. Ang

“The techniques taught are very flexible and can work for all markets, like stocks, forex, etc. I am very impressed.”
– Justin Cheong

To see more testimonials, click here.
https://synapsetrading.com/testimonials/

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Spencer Li

Loss Aversion Bias – Why a Loss Has Twice the Psychological Impact

trading loss

Loss aversion bias was developed by Daniel Kahneman and Amos Tversky in 1979 as part of the original prospect theory. Basically, it suggests that psychologically, the possibility of a loss is on average twice as powerful a motivator as the possibility of making a gain of equal magnitude.

In short, it suggests that people woud prefer to avoid a loss to realizing a gain.

Loss Aversion Bias

Loss aversion can prevent people from cutting losing trades, even when they see no prospect of a turnaround. Some industry veterans have coined a diagnosis of “get-even-itis” to describe this widespread affliction, whereby a person waits too long for a trade to rebound instead of cutting their losses. This is dangerous because the best response to a loss is to cut it fast and move on to a better trade.

Similarly, loss aversion bias can make traders dwell excessively on risk avoidance when evaluating possible gains, since dodging a loss is a more urgent concern than seeking a profit. When their trades start to show a profit, loss-averse traders hasten to lock in profits, fearing that, the market might reverse itself and rescind their profits.

The problem here is that exiting too early to protect gains severely limits upside potential. This prevents traders from catching the big moves.

What is the best solution for this?

This is where the importance of the stoploss comes in. If a trader is disciplined, and has a preset stoploss point, the trader will exit a losing trade once the stoploss point is breached. This removes any blind hope of a rebound, and by squaring off positions, it puts the trader in a neutral frame of mind to enter the next trade, and at the same time frees up the capital for it.

“Win as though you were used it to, lose as if you enjoyed it for a change.” – Ralph Waldo Emerson

 

complete guide to investing and trading psychology cover

If you would like to learn more about trading psychology, also check out: “The Complete Guide to Investing & Trading Psychology”

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