06032013

Nifty opened above PDH. and refused to move up further. My expectation was a drift down to PDH. Did not short as PDH was too close for a FTC trade.. Went long on the BPB of IR High Scratched this trade later.Did not attempt the BOF of Range High as there was no room for the price to move below MC. Further the rejection was too weak. Long on BOF of IRH. Another scratch.

05032013

Nifty gaped up above PDH and spiked. My expectation was a channel move. But it did not give a meaningful pullback to enter. Finally it made a cigarette pattern and I went long on its break TP at BRN. Day ended as a type one trend day. Thanks to SS for early warning

04032013

Nifty opened at PDL and got trapped between PDL and BRN for a while. Shorted when it broke below the MC.Covered the short when price refused to move below Budget day low. Missed this long trade because I hesitated for a while to take this CT trade. Another short below BRN on TST of PDL failed to move. Scratched.BPB of PDL came very late. So skipped.

The Checklist

We live in a world of increasing complexity. Even the most expert professionals in their respective fields struggle to master the tasks. Longer training and use of advanced technology fails to prevent the errors.

While dealing with complex tasks, two types of errors can occur. “Errors of Ignorance” and “Errors of Ineptitude”. Errors of ignorance are errors we make as we do not know enough. On the other hand errors of ineptitude are errors happening when we fail to make use of what we know. Errors of ineptitude are a real problem especially among professionals.

Acclaimed surgeon and writer Atul Gawande conducted extensive research on this subject in Health Care He found and adapted the humblest and simplest solution from Aviation industry, “The Checklist”. He published a book on this subject titled “The Checklist Manifesto” which became a Best Seller. (Read Summary)

 

As you know trading is also a very complex and complicated task. Mistakes are virtually inevitable: It is too easy for a trader to miss a clue, or overlook a prominent level in the stress and pressure of the moment. Failing to notice a small stuff is failing to plan properly for the eventuality

Can’t we, traders, make use of Checklists?

01032013

Nifty opened within previous day range.Narrow IR formed.  Went long on the strong rejection of price below IRL. Closed the trade when price fell below IRH.. Another long trade on TST of Range low. TP at range high.. Short on BOF of HOD.I was expecting this trade to move well. It did not.

Functional Fixedness

In an experiment a group of people were asked to fasten together two steel rings. They were given a long candle and a match box. All the people failed to do it as the melted wax was not strong enough to bond the rings

Now stop reading and think. Do you have any other idea to do it?    Do not cheat.

The solution is to remember that a candle contains wicks. Wicks are threads which can be used for tying the steel rings together.

There is an old saying that when you have got a hammer in your hand, everything looks like a nail. Further we are reluctant to use some other tools, other than hammer, to nail. People get stuck thinking in habitual ways.

In psychology, this phenomenon is called “Functional Fixedness” .Functional Fixedness is a cognitive bias  that limits a person to using an object only in the way it is traditionally used. This is the number one creativity blocker. If you need creative solutions, you need to escape from the established way of thinking. Most of the time the pieces of the puzzle are just in front of you, but you just can’t see it and put them together.

Trading is not different. It is a complex problem that can be very difficult to solve. Break it down to small manageable components and find ways to tackle it. Think different and use your imagination to find alternative tools and new ways to use existing well known tools.

People on board of the “Titanic” could have used the ice berg as their life boat for nearly four hours within which help arrived. Titanic was navigable for awhile and could have pulled aside the iceberg.