When The Market Fails…

  • October 29, 2002
  • Timothy Chan

What
comes to your mind after a large drawdown in a trade?



 For
me, several thoughts emerge:

  • Why
    has the market gone the wrong way several times in a row?
    (    This time it was supposed to go where my technical indictors
    suggested!)

  • Hmm…
    Maybe my trading system isn’t working any more?

  • Exactly
    what caused the drawdown? Was it the market, my system, or…?

Well, I’m going
to share my little secret on how I handle frustrating situations like this.
As soon as I notice these thoughts getting into my mind,  I pull out
this graphic:





You
will probably ask: I see blinking black and white dots…how is this animated
GIF related to mental frustration?



Well
if you calm down, relax, and then observe it again, you will find the blinking
pattern above is not really following a particular order.
In fact, the dots are blinking according to YOUR
MIND!!!  Wow! Now the black
dots turn white whenever your eyes (directed by your mind) fix on them. What’s
going on?!?



For
those of you have basic web graphics experience, you can easily see that the
above file is NOT an animated GIF, but only a static
JPG. This graphic does not change a bit,
but my changing mind perceives it as blinking dots. 
From this graphic, I again confirm that it is not the market that has
changed, not my system that has failed, but my mind that has wandered away from
being focused on my own trading management.



This
is my little secret to set myself free from mental frustration after an
unexpectedly large capital drawdown. I hope this helps other TM members as well. 
I would like to conclude this commentary with an ancient story:



In
the backyard of a temple, two student monks were practicing mediation with their
master. The junior monk was distracted by
the noise from the flipping leaves on the trees and said, “I can’t
concentrate anymore, the LEAVES are moving and making noises!” 
The senior monk shook his head, saying, “The leaves aren’t moving,
the WIND is.”

For
us traders
most of the time, neither the market nor our system fails. It’s OUR MINDS that
fail to implement our trading management properly and consistently.



Best
wishes,



Timothy
ChanTimothy Chan lives
in Vancouver, B.C., Canada. He started trading three years ago while still at
university. He then worked for the government as an IT/Web specialist, and quit
his position in 2001 to become a full-time daytrader.