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Technically Speaking, January 2010

Technically Speaking, January 2010 - 2023Letter from the Editor

Technical analysts depict price action as charts. You can argue that at their core, charts actually depict the emotional struggles within investors and traders. The psychology of the marketplace is seen in the ebb and flow of prices, as greed and fear alternate as the primary emotion drive price changes.

This aspect of technical analysis was briefly mentioned in The New York Times when psychiatrist Ari Kiev passed away in November. His obituary noted:

After meeting several Olympic athletes at a gym where his sons worked out in the 1970s, he became interested in the psychology of sports performance and was appointed to the United States Olympic Committee’s sports medicine committee. His work with basketball players, bobsledders, archers and scullers and his articles on the subject caught the attention of Mr. [Steven] Cohen, who saw parallels between the challenges faced by top athletes and Wall Street traders and hired Mr. Kiev in 1992 to coach his employees. [Cohen is founder of the hedge fund SAC Capital Advisors.]

Dr. Kiev helped traders develop techniques to shift abruptly from moments of extreme exertion to relaxation, as he had done with athletes, and to manage the stress that comes with uncertainty — or, rather the certainty that even good traders can expect to be right only a little more than half the time.

He also zeroed in on behavior patterns and subconscious fears that limited or even subverted investment goals. Part of his work, he often said, was to force traders to see their tendency toward denial and rationalization.

“An athlete who wants to run a four-minute mile can work backward and establish a regimen to attain that,” said Matt Grossman, who worked with Mr. Kiev at SAC and now runs his own hedge fund, Plural Investments. “Ari applied this concept to investing: set a target, then design an approach that gives you a high probability of achieving that target.”

Kiev was among the pioneers in studying how to improve trading performance through psychology. He wrote several books on the subject, including “Trading to Win,”, “Trading in the Zone,” and “Hedge Fund Masters.” His last book, “The Mental Strategies of Top Traders,” was released in December.

In this issue of Technically Speaking, we look at the work of other noted experts and offer several articles on the psychology of trading. We hope this will help you become a better trader.

Sincerely,
Mike Carr, CMT

What's Inside...

Personality Type and Trading

by Van K. Tharp, Ph.D.

Editor’s Note: This is a long, interactive article designed to help you learn more about your trading style. The path toward becoming a better trader is usually a path toward wholeness, and no two...

Having Forgotten To Doubt, "Modern Finance" Drove Us Insane

by Élise Payzan, PhD

This article was originally published on December 8, 2008 at The ReThink Group Inc. The original article may be found at http://www.traderpsyches.com/documents/Elise_Payzan_Whitepaper_120808.pdf and...

The Right Fix

by Adrienne Toghraie, MNLP, MCH

This article was originally published at http://www.tradingontarget.com/articles2.html. Many traders begin looking for the wrong fix when something is amiss in their trading. The result is that they...

Trading Psychology: Top Ten Trading Psychology Myths

by Gary Dayton, Psy.D.

Editor’s note: These short articles offer ideas that may be useful to traders and are reprinted from Trading Psychology Edge (http://www.tradingpsychologyedge.com/) with the permission of the...

MTA Announcements

MTA Board of Directors Nominations For the fiscal year commencing July 1, 2010, four (4) Officer positions are up for consideration for a 2-year term, and two (2) At-large Board positions are up for...

Personality Type and Trading

Personality Type and Trading

Editor’s Note: This is a long, interactive article designed to help you learn more about your trading style. The path toward becoming a better trader is usually a path toward wholeness, and no two paths are identical. Each of us has to begin where we are in our own life situation. No matter what your path, you must first determine where you are. What are the patterns in your life that block you in your trading, your relationships, etc.? Those patterns can be available to you right now because they show up in your trading and in every other aspect of your life as well. Unfortunately, in most cases, people are not aware of them. Thus, the transformation journey often begins with a crisis. For it is only when an obvious crisis begins that we wake up to the fact that something is wrong in our lives. This article, the first in a

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Van K. Tharp, Ph.D.

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Having Forgotten To Doubt,

Having Forgotten To Doubt, "Modern Finance" Drove Us Insane

This article was originally published on December 8, 2008 at The ReThink Group Inc. The original article may be found at http://www.traderpsyches.com/documents/Elise_Payzan_Whitepaper_120808.pdf and it is reprinted here with the permission of the author. Portfolio selection: Let’s exhume the buried man! In his milestone paper “Portfolio Selection” published in the Journal of Finance in 1952, Harry Markowitz, the pioneer of “modern finance,” recommends to use the Expected return-Variance (E-V) rule, both as a working hypothesis to explain investment behavior and as a guide to “investment” – as distinguished from speculative behavior. This rule implies that an actor who considers yield to be good, risk to be bad, and speculation to be banned, should diversify in such a way that his portfolio lies in the “efficient frontier.” The idea is very simple. When building your portfolio, combine the securities in such a way that for a given expected return (E) of your portfolio,

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Élise Payzan, PhD

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The Right Fix

The Right Fix

This article was originally published at http://www.tradingontarget.com/articles2.html. Many traders begin looking for the wrong fix when something is amiss in their trading. The result is that they often try to fix things that are not broken while missing completely the one thing that is. Recently, I worked with a trader who started our session by telling me all about his personal problems with his spouse, his family, his associates, and even his pets. One by one, we worked out solutions for these problems. Finally, he said, “Now, let’s talk about the problems I’m having with my trading.” To which I responded, “If you followed your rules, would you be making money?” “Of course,” was his reply. As you can see, he was attempting to fix what was not broken. At that point, I said, “You know, you are anchored to a very high level of peak performance in your trading which, in turn,

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Adrienne Toghraie, MNLP, MCH

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Trading Psychology: Top Ten Trading Psychology Myths

Trading Psychology: Top Ten Trading Psychology Myths

Editor’s note: These short articles offer ideas that may be useful to traders and are reprinted from Trading Psychology Edge (http://www.tradingpsychologyedge.com/) with the permission of the author. People are born traders. While it is true that certain personal characteristics make it easier to trade, no one is born a trader. One of the main themes of the Market Wizards books written by Jack Schwager is that almost none of the market wizards were successful from the start. They all worked hard at it. You have to have a high IQ to trade. Just not true. In some ways, an above average IQ may be a hindrance. Trading is a human performance activity where strong intellectual abilities are unnecessary.   Top traders are successful because they have the “right trading personality.” There is no such thing as the ―right trading personality.ǁ Researches have been unable to find a strong correlation between personality type and trading

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Gary Dayton, Psy.D.

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MTA Announcements

MTA Announcements

MTA Board of Directors Nominations For the fiscal year commencing July 1, 2010, four (4) Officer positions are up for consideration for a 2-year term, and two (2) At-large Board positions are up for consideration for a 3-year term. Over the next two months, we are encouraging any Member, Honorary Member or Emeritus  Member in good standing to submit your name for consideration to nominations@mta.org. The nominating committee will then seek out your completion of a tailored questionnaire as part of its review process. In addition, if you do not wish to serve but have suggestions on who might be willing/able to do so, we would encourage you to write us on that as well. Nominations may also be made by petition signed by not fewer than ten (10) percent of the Members, Honorary Members and/or Emeritus Members in good standing. Affiliates, Academic Affiliates and Student Affiliates are not eligible to

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

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New Educational Content This Month

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