Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FOREX Trading > IP Lesson 2 > Flashcards

IP Lesson 2 Flashcards

1
Q

BIG IDEA : How does compounded growth over time produce the best results in terms of wealth AND security?

A

Compounded returns over time have the capacity to exponentially multiply those returns, and the emphasis on consistency leads to strategies which are also relatively conservative, systematic, and secure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the general goal of the IP strategy?

A

Consistent, compounded returns over time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the mathematical function that makes compound interest so powerful over time?

A

Exponential growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

BIG IDEA : Explain the role of personal psychology in trading success.

A

The key to consistent, exponential returns over time is self-management and refinement of my own psyche. The success of the strategy is built in mathematically, so the most sublime results come from my capacity to think and act with tranquility, and recognize the ups and downs as part of the process which generates the ultimate result.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

BIG IDEA : Why is psychology the most essential element in trading success?

A

Because the success of the strategy is built in mathematically, but a trader’s ability to see the patterns & opportunities accurately, maintain the strategy’s edge, originates in the mind, attitude and psyche of the trader. Trading reflects and develops character.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the key factor in consistent profits over time?

A

My own psychology.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the key behaviour that allows me to play my edge to my advantage?

A

Strict adherence to my system’s rules.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does Rule #1 say?

A

Trade ONLY what you SEE.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does Rule #1 tell you NOT to do?

A

Do NOT trade what you think.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What part of the brain filters incoming information?

A

The reticular activating system.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the significance of the reticular activating system to trading?

A

It can omit or highlight information from conscious awareness, a vital ability to recognize trading patterns and opportunities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Why is it so essential to stick to your system’s rules whether you feel it is a good trade or not?

A

Because maintaining an edge requires maximum consistency.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Do fears and the threat of loss arise from the market or from your perceptions about the market?

A

From my perceptions about the market.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What kind of perspective is needed to perceive opportunities in the market?

A

A neutral perspective.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is needed psychologically to maintain a neutral focus on market opportunities?

A

Clear understanding that perceived threats and fears come from my own psychology, not the market itself.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

BIG IDEA : Explain the difference between probability and prediction as it applies to trading.

A

Probability recognizes that it is the nature of the market to fluctuate according to patterns which are consistent and repetitive over time. Individual market moves cannot be predicted, but strong possibilities can.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is it that causes the patterns in the market to repeat and maintain a consistent, probabilistic nature?

A

The consistently repeated behaviours of mass human psychology.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

BIG IDEA : What is the role of probability in making vast profits over time with compound interest?

A

Probability based on repetitive mass human psychology is what makes a mathematical edge possible, and the edge is what makes consistent, compounding of interest possible.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Why does your system’s effectiveness depend upon adhering to the rules, even if individual trades lose?

A

Because it is based upon a probability model, not absolute prediction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a probability model?

A

A system that describes the likelihood of patterns recurring in the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

True or false : The market displays unbiased information about the buying and selling activities of other traders and economic forces.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

True or false : The market is against you.

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

True or false : the market displays a constant stream of opportunities to make money.

A

True.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Example : You have lost 5 trades in a row, and your system identifies an opportunity to buy. You should :

A

A. Double check your system to identify possible errors
B. Seek additional information to check if it is actually a correct signal
C. Wait to see what happens, to see if your signal is actually correct.
D. Breathe deep, and place your order.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Identify the good trade :

A. You followed your strategy to the letter and flawlessly executed the trade without any emotional interference, but lost money.
B. You deviated from your strategy on a hunch, and banked a winning trade!

A

Answer : A!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Identify the good trade :

A. You deviated from your strategy on a hunch but lost money

B. You followed your strategy to the letter, and flawlessly executed the trade without any emotional interference, and banked a winning trade!

A

Answer : B.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Which trading strategies have no losing trades or losing streaks?

A

None!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

When trading, is your primary objective to trade your strategy or make a short term profit?

A

To trade my strategy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

You are trading your strategy to the letter, but hit a losing streak:
A. it’s time to take a break
B. it’s time to calm your emotional reaction and keep to your strategy
C. it’s time to try a different strategy

A

B.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

You are following your strategy to the letter and hit a winning streak :
A. You can now afford to take greater risks and go for bigger profits because you can better anticipate the market.
B. You can now modify your strategy to suit your increasing skills as a trader
C. You can calm your emotional reaction and keep to your strategy.

A

C.

31
Q

What does Rule #2 state about good trades?

A

They don’t always make money.

32
Q

What does Rule #2 state about bad trades?

A

They don’t always lose money.

33
Q 
Who is responsible for keeping you accountable to your strategy and results?
A. Lewis and Amy
B. Your Mom
C. Yourself only
D. All of the above
A

C.

34
Q

What is Rule #3?

A

Be honest with yourself.

35
Q

If you notice you are not thinking / speaking / living up to your stated goals and expectations, you should :
A. Find ways to punish yourself
B. Have a good, stiff drink
C. Forget about trading and go live in a cave.
D. Calm your emotional reaction and take practical steps to live in the way you intend.

A

D.

36
Q

Your ability to stay calm, focused and operate from a non-biased state of mind depends on what kind of self-control?

A

My ability to manage my fears.

37
Q

What is the source of the vast majority of errors d trader might make?

A

Their ATTITUDE towards their fears.

38
Q

What is the main challenge in managing your fears?

A

Recognizing that you are experiencing them.

39
Q

if you hate losing trades, and feel like your intelligence has been insulted, you are experiencing which of the 4 major fears?

A

Being wrong.

40
Q

If you experienced financial hardship, especially as a child, which of the 4 fears are you likely experiencing?

A

Fear of losing money.

41
Q

If you feel upset when there is a large market movement that your strategy did not catch, you are experiencing which of the 4 fears?

A

Fear of missing out ( greed )

42
Q

If you feel upset that the market keeps moving in a favourable direction after you have closed your trade at a profit, you are experiencing which of the 4 fears.

A

Fear of being wrong.

43
Q

If you are temped to stop trading a particular strategy after a losing streak which of the 4 fears are you experiencing?

A

Fear of losing money.

44
Q

If you feel angered when your strategy is not making as much profit as it could do, and feel tempered to start taking more trades than you have signals for, which of the 4 fears are you experiencing?

A

Fear of missing out ( greed )

45
Q

If you feel temped to let your trades run longer than your strategy indicates, you are experiencing which of the 4 fears?

A

Fear of leaving money on the table ( greed )

46
Q

If you notice that you are experiencing a fear of being wrong, what can you do to calm your emotions and trade with clarity and precision?

A

Recognize that all trading strategies will be wrong about particular trades and this does no reflect my intelligence at all.

47
Q

If you notice that you are experiencing the fear of losing money, what can you do to calm your emotions and trade with clarity and precision?

A

Recognize that losing money on particular trades is just a cost of doing business in the market, and that my risks are predetermined and limited by stop loss orders.

48
Q

If you notice that you are experiencing the fear of missing out, what can you do to calm your emotions and trade with clarity and precision?

A

Recognize that there is no perfect system, and that I will benefit more by improving my attitude towards missed opportunities.

49
Q

If you notice that you are experiencing the fear of leaving money on the table, that your trades are not capturing everything, what can you do to calm your emotions and trade with clarity and precision?

A

Recognize that no strategy can enter at the bottom and close at the top of every run, every time.

50
Q

When a trader’s account falls away from it’s all-time high value, after one or more losses, it is called:

A

Drawdown.

51
Q

What types of trading strategies go through periods of drawdown?

A

All of them!

52
Q 
Example : You are trading a trending strategy and the market begins to range sideways, causing the strategy to enter a period of drawdown, what are the key factors in keeping your account strong enough to boom again when the market begins to trend again?
A. Sound trading strategy
B. Sound risk management
C. Self discipline
D. Emotional calm
E. All of the above.
A

E.

53
Q

Should you continue to trade your strategy during periods of drawdown or pull out of the market?

A

Continue to trade my strategy.

54
Q

Why is it necessary to continue trading your strategy during periods of drawdown?

A

So that the strategy can play out it’s edge over time.

55
Q

Why is it so critical to control, and regulate your own emotions, even if you know how to, and have the skills to trade an edge over time.

A

Because my emotions can distort or AMPLIFY my ability to use my skills and knowledge effectively.

56
Q

Why is it essential to know and understand the nature of the emotional rollercoaster of the market, apart from regulating your own emotional state?

A

Because the market itself represents the emotional rollercoaster that most other traders are motivated by. My profits come from their buying and selling!

57
Q

How do you as a professional trader capitalize upon the mass psychology of the market?

A

By my ability to react in the opposite way. ( to sell when everyone else is buying , and buy when everyone else is selling )

58
Q

In general, what does a peak of euphoria and increase in the market indicate?

A

That a bull market has possibly reached it’s limit, and may reverse.

59
Q

In general, what does a low of despair and declining prices in a market indicate?

A

That a bear market has possibly reached it’s limit, and may reverse.

60
Q

What is the most efficient way to interact with the market?

A

Like a robot!

61
Q

After a period of high profits, you as a professional trader understand that :

A

There will probably be a period of decline afterwards.

62
Q

After a period of decline, you as a professional trader understand that :

A

There will probably be a period of high profit afterwards.

63
Q

True or false : John enters a trade, and has two consecutive days of losses. However, it reverses in his favor and he banks $1000 profit. How John’s emotions alter his perception of his system?

A

He will probably over rate it.

64
Q

True or false : When trading, your emotional state is proportional to your profits or losses.

A

False, losses are felt more acutely than gains ( generally )

65
Q

Jack enters a trade and has 3 consecutive days of moderate gains, closing with $1000 profit. How will Jack’s emotions alter his perceptions of his system?

A

He will probably feel generally positive about it.

66
Q

Kyle enters a trade and has 2 consecutive days of impressive gains, but then suffers a dramatic reversal and only banks $1000 profit. How will Kyle’s emotions alter his perception of his system?

A

He will probably feel quite negative about it.

67
Q

What should your attitude be towards your default emotional response to individual trading outcomes?

A

With calm and equanimity.

68
Q

How should you respond ( in terms of what actions to take ) when you experience emotionally jarring changes in the market?

A

I will focus on my routine of trading my edge.

69
Q

How should you respond emotionally to huge profits?

A

By calming myself, dwelling in tranquility :)

70
Q

How should you respond to a string of losses? ( they’re all little ones because you correctly used stop loss orders )

A

By calming myself and dwelling in tranquility.

71
Q

Why is it so critical that professional traders learn to predict what the market will do next?

A

Haha! trick question! they don’t!

72
Q

Why is consistency considered the best way to create sustainable wealth?

A

Because the compounding effect of conservative strategies makes them stable AND LUCRATIVE.

73
Q

BIG IDEA : Explain the rationale for the IP emphasis on Consistency.

A

Consistency of compounded returns over time is what generates the most wealth, through exponential, compounding growth.

FOREX Trading (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions