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Mechanical trading systems - Weissman R.L.

Weissman R.L. Mechanical trading systems - Wiley publishing , 2005 . - 240 p.
ISBN 0-471-65435-3
Download (direct link): mechanicaltradingsystems2005.pdf
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Although the obstacles to single-mindedness are virtually infinite, I also believe every single internal psychological block to our success stems from a single issue: self-worth. Whether we deny ourselves success because we erroneously think money is evil2 or because our success would result in the enrichment of undeserving others, these are all reflections of the more basic internal conflict: We do not believe ourselves worthy. Although outwardly it
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was true that my trader friend sabotaged himself so that his spouse would suffer, why did he marry someone who was incapable of loving him in the first place? Because he did not feel he deserved a loving relationship. Why do some people believe money is evil? Because they do not think they deserve it. What prevents our recognition and embracing of the divinity within? Lack of self-worth.
Because these blocks to single-mindedness are usually unconscious, how do we know whether we as traders are conflicted in terms of our desire to succeed? We can objectively determine the answer by examining how well we adhere to rules of entry, exit, and money management. Any deviation from these rules means we need to examine why we feel unworthy of success, Then we must embrace and honor these feelings and finally release them as old programming that is inconsistent with our new self-image.
How do we transform our self-image and begin to feel worthy of success? Although this is an ever-changing process, the first and most important step is to surround ourselves with like-minded people. If a tuning fork that is oscillating at a particular frequency is placed next to one that is still, soon they both oscillate at the same frequency. If we surround ourselves with loving and supportive people, we become more loving, both of ourselves and of others.
INTUITION VERSUS THE PSYCHIC TRADER SYNDROME

Many well-respected books on trading techniques advocate the use of intuition as an adjunct to various techniques, such as fundamental and/or technical analysis. Chapter 3 specifically identified one of the potential psychological pitfalls of trend trading as an unwillingness to relinquish a portion of unrealized gains and stated that this weakness was linked with an unrealistic belief in our psychic ability to predict future market behavior. Obviously these two concepts—intuition and the psychic trader syndrome—are contradictory in nature. This is why I have purposely avoided the issue of intuition in trading decisions until I had laid the foundation of the multidimensional nature of markets and trader psychology.
Now I can provide readers with a complete exposition of my beliefs in this regard. Yes, I do feel that intuition has a place in the world of successful trading and freely acknowledge that certain traders successfully utilize this tool to enhance trading performance. Unfortunately, I also feel that a much larger number of traders use this belief in the power of intuition as an excuse to abandon their discipline in the markets.
I cannot resolve this conflict between true intuition and the delusional psychological pitfall that I describe as the psychic trader syndrome. Instead, I simply acknowledge the virtually infinite manifestations of successful
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trading in the markets and admit that in order for me personally to succeed as a trader, I must practice disciplined adherence to my systems, which are based on the laws of probability. Yes, I admit that certain traders are able to distinguish between intuition and imagination consistently, but, unfortunately, I do not consistently count myself among them.
If we have unyielding confidence in our ability to consistently distinguish between intuition and imagination, and if this confidence can be substantiated through documented records of successful past market forecasts, then and only then should we consider abandoning disciplined adherence to strategies and the laws of probability. The good news is that until that day arrives, as long as we can religiously adhere to sound principles of price risk management, we have a better than average probability of enjoying considerable success with a wide variety of strategies.
TRANSFORMATION VIA ADHERENCE TO MECHANICAL TRADING SYSTEMS
The personality traits that sabotage trader success are manifold but generally can be categorized in this way:
• Lack of discipline and/or inconsistency. The key to transformation of this trait is elimination of blocks to single-mindedness, and review of how (in general) the markets reward us for following and punish us for deviating from the rules of entry, exit, and money management.
• Euphoria and/or greed. Here our discipline breaks down as profits accumulate. We break the rules of exit or of money management due to impatience and a lack of respect for the market’s ability to turn profits into losses. Transformation of this personality flaw is linked with our ability to practice even-mindedness. If we can reprogram ourselves to act the same way when the market generates profits as when it produces losses, then we will not abandon discipline during a large win or winning streak.
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