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Our Decision-Making Processes III

Published in December 2nd, 2009
Posted by ray in Psychology

BarroMetrics Views: Our Decision-Making Processes III

Given what we have said so far, the research suggests the following to be optimum conditions for our trading analysis.

First we do it early in the day and write down our trading outcome for the day. Then we engage the limbic system through a process of going to alpha and visualizing the trading outcome. In this process, it is important to engage our emotions. (’Going to alpha’ merely means moving into the meditative state see Alpha Brain Waves)

When we turn to the analysis,  it’s best we print out the charts we will be using. Printing is important because it saves prefrontal cortex resources. To maximise analysis efficiency, we prioritize the importance of each element. In short, at each stage of the analysis,  we know the important elements and have a process for evaluating each. Then we create a written checklist of the prioritized elements before we start the analysis process. A mindmap is an ideal tool for this.

I would create the list daily because we will find that each day emphasizes/requires a different combination of the variables. It is important we start the day with ‘fresh eyes’ to prevent a mental mindset producing myopia.

I start the day’s view of an instrument with clean charts and always consider at least three scenarios: up, down and sideways, always asking: “What does the market have to do for me to say my scenario is probably right? What does the market have to do for me to say my scenario is probably wrong?”.

Once that is done, I return to the previous charts to see what I had been thinking. I do this because once I have ‘fresh eyes analysis’, I find the previous analysis sometimes provides new insights.

Finally the language we employ is important. Because the brain looks for patterns and because it easily creates mindsets, by using language that suggests probability rather than certainty, we reduce the probability of being blindsided.