Vocal Jazz Journal

It is said that trading is 90% psychological and 10% methodological. Does this then imply that regardless of trading method, a trader that has control over their emotional issues will thus be a profitable trader, or will it be impossible to ever control emotions without the proficient implementation of method? The trading method viewpoint will suggest that not only are these statistics not the case - trading psychology does not exist. Trading method will be the determinant of profitability, and this will be done through: (1) the ability to understand the method’s inherent strengths and weaknesses (2) the ability to maximize these strengths and minimize the weaknesses.

The Trading Method Viewpoint

Trading psychology has become so widely discussed and promoted through books and consultants that it has become a very convenient rationalization and excuse for losing. Why take the responsibility for a lack of work ethic and trading without any concept of plan, an honest assessment which would be a ‘hit’ on the trader’s self-esteem – when you can just blame it on trading psychology instead?

Trading psychology is ‘something’ that a trader creates from existing personality traits that are not initially related to trading, but surface from trading without method understanding. The outcome of course is fear, but wouldn’t this be the case when doing anything that was perceived as ‘dangerous’, and which was being done without the necessary understanding and skills? Trading, with its inherent characteristic of accepting financial risk while participating in unknown outcomes, is certainly ‘dangerous’, and thus the more preparation and understanding that is needed.

Trading Scenario

Consider the a trading plan which has the following three setup types: (1) initial which your intended trade entry (2) first continuation which is used to enter a trade in case you have either missed your initial entry, or you decided that you wanted more confirmation because it was a counter direction trade (3) second continuation which is intended as a trade addon setup, but is also one ‘last’ chance to enter a trade.

You get an initial sell setup that triggers, but you do not take the trade = trade1. The trade breaks cleanly and goes to what would have resulted in a partial profit, and then before price goes down further, it retraces back to the area where the sell was done. This price holds so the swing remains short, and from this hold of what is now resistance, you get the trigger of your first continuation setup BUT you don’t take this trade either = trade2. Why wasn’t the trade taken? You decide that after missing the initial entry that you have missed the trade; your emotions and biases tell you that the ‘move’ has gone too far. Again, this trade breaks cleanly, not only adding to the gains of trade1, but also giving a partial profit on trade2.

Price now consolidates between the lows and the price resistance that you would typically be using to stay short if you had taken either the initial trade, or the first continuation trade. Instead of the swing reversing after consolidating, it continues down again, and with this continuation your second continuation setup triggers = trade3. AND AGAIN - you don’t take the trade. After all, if you didn’t take either of the first two trades, how can you possibly take this trade; maybe you were wrong when you thought that the move had gone too far to take trade2, but certainly that’s the case for trader3.

Like trade1 and trade2, trade3 is a profitable trade. This swing has really turned into a great directional move, with each break holding on weak retests – a textbook example of the strengths of your trading method, but YOU have never entered a trade. You are going nuts! You are getting into this damn swing - you just can’t take it any more. Another retrace holds as a lower high. You don’t have an entry setup, but that doesn’t matter, the other three trades were profitable after a lower high. Isn’t it interesting, the same emotions which wouldn’t let you enter your plan trades, are now ‘forcing’ you to take a non-plan trade.

Instead of YOUR trade going to a lower low and to a profit, it instead goes to a higher low and then reverses into an initial buy. Bad just got worse, you also don’t exit when the swing goes into buy. After what you went through to finally get into the trade, you have to try and make it work, and after all the trend is down – right? TraderA uses this initial buy to exit their profitable sell and sell addon; they decide that they want more confirmation of swing reverse before trading the counter direction. A first continuation setup triggers and they go long, the swing has reversed, and this trade reaches its first profit target.

TraderB finally ‘gives up’ and exits THEIR short, although with a two point loss instead of the intended one point, and without any consideration of taking their next plan trade, the first continuation buy. This trader is done for the day, but at least they were ‘right’ all along; the swing had gone too far to enter, and their fears had been warranted – this was a losing trade that they should not enter.

Is this a trading method or trading psychology issue? What ‘message’ is TraderB going to take from what has just happened. Will they take the attitude that they should not be blamed, they just can’t trade because of trading psychology? Or, will they acknowledge that the method did win, that the resulting loss was not a method trade, and even if it was, the loss would have been offset by the prior winners. Will they acknowledge that THEY made their worst fears come true and not only turned this into a losing trade, they also increased he size of that loss, and then avoiding another method winning trade.

Granted, psychology was involved with what has happened in the described trading scenario, but that is a function of the individual’s ‘core’ personality, and would most probably be an issue regardless of what was being done; if there is ‘risk’ involved, there will be an ‘emotional’ response. Thus, it is first necessary to separate personal psychology from trading psychology, and the use of this concept as an excuse for trading actions. Then, if trading psychology is going to be controlled, this will be done through the development and implementation of a tested plan that the trader is willing to follow. Do not trade with ‘built-in’ excuses for failing, you will have lost before you begin, and will continue to do so with a continued ‘snowballing’ of emotion to the extent where trading will no longer be possible.

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Like electronic identity theft, computer viruses, and the spread of other computer crimes, software piracy is on the rise. The problem with software piracy is that software costs make this illegal activity appealing to the end user. After all, who is it going to hurt? Rich software companies?? This article investigates software piracy as a whole and the impact that it has on the computer using industry.

The most vulnerable victims of software piracy are software businesses or independent programmers who create and distribute commercial software or shareware. We described shareware in another article, but because both commercial software and shareware require payment, they’re the target of pirates who seek to make these kinds of programs free to use.

Depending on their binding legal agreements, licensing typically allows the use of a single program on a single computer. This set up is usually fine for a user who uses software at home on one computer. But in an environment where there are five, ten, twenty or more computers, buying a license for each computer can be down-right costly. So costly that the temptation to pirate a little software here and there can be pretty tempting.

Co-workers are familiar with this temptation and they’re often the ones who “share” purchased software among those who need it. However the same temptation also prompts others to knowingly or unknowingly buy bootleg copies of commercial software or registered shareware.

As tempting as it is, it’s still illegal and the punishments/fines for sharing commercial or registered software is too much for one to bear. In recent news, “Yahoo China loses music piracy case (AP via Yahoo! News) A court has ordered Yahoo Inc.’s China subsidiary to pay $27,000 for aiding music piracy, the company and a music industry group said Tuesday.”1 Additionally, “EU lawmakers approve prison terms, fines for major commercial piracy (International Herald Tribune) EU lawmakers voted Wednesday for legislation that would set prison sentences and fines for large-scale commercial piracy, but exempt patents and copying carried out for personal use.” 2

Fortunately, there are alternatives. Schools can research student versions of commercial software or ask for a school discount. Just because school rates aren’t advertised, it doesn’t mean that they aren’t available. Freeware or open source software (also described in another one of our articles) is another alternative to pirating commercial-ware, as well as shareware. And using older versions of programs could additionally reduce the costs associated with commercial versions.

Up until recently, public opinion held little faith in freeware or open source software - often regarding it as low-quality knock-off’s of better known commercial products. But if you take a good look at what’s being offered at no cost, you may be in for a big surprise. The quality of today’s freeware and open source software created a strong rift among the commercial community and it’s literally driving the competition bananas! So much so, that even some well known software development corporations have joined the cause and built a few freeware open source products of their own!

If you can remember that there are hoards of alternatives to costly commercial software (and you make the effort to get it), you’ll discover that you can keep up with the rest of the computer industry at a significantly cheaper cost than if you attempted to pay your way down the software aisle. Software piracy just isn’t the answer.

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