I'm posting this here for future reference. I've been going through @KDASFTG's posts and there are some brilliant words of wisdom contained within his 'missives' Particularly with regards to achieving MD's mindset of thinking in probabilities. I hope I haven't come across as being overconfident or arrogant regarding the progress I'm making recently. This post was a kick in the butt when I read it just now, and a timely one at that.... This is great: * Seeing the lesson is good, but it doesn't mean that you know it. * Knowing the lesson is better, but it doesn't mean that you understand it. * Understanding the lesson is infinitely better than knowing, but it doesn't mean you own it. * Its only when you OWN IT, that you can BELIEVE IT,...... at a level where you can CONSISTENTLY ACT ON IT.
Came across this article on a Golf website, It goes on about how difficult it is to change neural pathways in the brain in order to make a simple change to the golf swing. Neural Pathways The guy in the video has a bike which has been engineered to reverse the steering, so left is now right etc. At any rate it took him 8 months to become proficient at riding this backwards bike. Once he did that and went back to a normal bike, he initially had massive issues - basically he couldn't do it. But then after 20 minutes his old programming switched on. Now to the point: It is an interesting view into the traders mindset and how difficult it is to change behavioural responses to a given stimuli. ie the learned behavioural response gets in the way and the brain engages automatically in an activity which is counter to ones best interests. It's about the Fight or Flight response. Most of us learnt as children how to ride a bike. But hereditary instinct of the flight or fight response has been integral to our species survival from time immemorial. So if it takes 8 months to relearn riding a bike, how much effort is required to reprogram the fight or flight response? An interesting note is that it only took his child a few weeks to achieve the ability to ride a backwards bike. The way out? Consistency of application and practice. Mark Douglas was right! Back to my 20 trades... Fin/
I haven't updated this journal for a while, but it seems a shame to shut up shop because of the actions of others. At any rate I came across another brilliant article on nautilus about ego and why we fail to see the world as it is. This lens effect explains a lot imo - in terms of mentors, the market and why we as traders struggle to do what is required rather than what is easy. http://nautil.us/issue/27/dark-matter/why-we-cant-get-over-ourselves
On a personal note I've been live for a while now. So here is the update. My equity curve is pointing in the right direction, and my live stats are encouraging. I haven't traded this week due to the volatility - I simply don't have the flexibility in position sizing to absorb the greater stop sizing. It falls out of my risk tolerance. The size and speed of the swings has been phenomenal. What has been most rewarding however is the realisation of how robust the trading plan I have developed has been this past week. That my trade plan and guide has survived the test of the last week has given me so much more confidence. The biggest change for me is that I have cut myself off from all other influences. I have ceased actively seeking advice from others. I came to the realisation that I was on a 'hamster wheel' of perpetual learning; or to put it better I was caught on that wheel thinking that I always needed more study, more knowledge, more feedback and more approval. This is bunkum. I had the answers inside me all along.
part deux. So I sat down one Sunday night and wrote down what it was I truly believed in terms of the market and my trading. I refined my trade plan to the absolute basics and wrote a 'trade guide'. Why was it important to move from a trade plan to a trade guide? For me they are two different beasts. My trade plan outlines my broker info, support numbers, markets I trade etc. It defines the concrete details of what I do. My trade guide details the process I use to assess a fluid market. It details my understanding of the market dynamics behind these moves, and provides appropriate responses. At its core, this trade guide outlines a process to assess market state, understand the context and dynamics behind market events, different market states and specific scenarios. It also defines my response to each scenario that provides a trade opportunity for me. This all follows on from reading about John Boyd and the OODA loop. What I have come up with is surely a gross bastardisation of the conceptual framework that Boyd created but it has helped me greatly. The one characteristic that I always saw in experienced traders and found lacking in my own trading was an understanding of the importance of market events and a way of responding appropriately. This OODA loop approach short circuits that shortfall and provides me with both of those characteristics - comprehension and appropriate response. The benefit of having outlined the market dynamics (supply / demand etc) behind say a range breakout or reversal or a trending move is speed. I know the importance behind what I see unfolding straight away and my reaction time is reduced accordingly and importantly the conviction behind my responses has improved. Anyway - there it is. These are the technical details of what I have done. Fin/
Final part... What is left unsaid above is detailing in endless paragraphs the psychological work I've done. This is without doubt the biggest component part of what I've done over the last 6 months or so. I know there are countless profitable traders here on ET. There are people who have never battled with psychological issues regarding trading and that everyone was profitable from the get go. But I wasn't. I was crippled by this stuff, so much so that I couldn't bring myself to trade live for ages. What I am annoyed at is how long I persisted thinking that the answer to all my psychological issues was embedded deep in a forum. There was a mythical forum post somewhere that would cure all. Seriously I should have come to this point a lot sooner. The technicals behind what I do are so simple and so quick to integrate. I lost so much time working on the wrong things..... It all boils down to 2 things for me, Mark Douglas and the OODA loop as I outlined in my trade guide post. The combination of the two helped bring the focus of what I was doing internally rather than looking for answers externally. With the right psychology anyone could trade any halfway decent system and make money. Of that I am sure. The technicals of trading comprise such a small part of the whole. Psychology is everything. Fin/
Hi all - I'm asking for some advice if that's ok? I am a bit torn at present as I have been staying out of this market during this recent volatility. Despite the wild swings and thinner liquidity my 'system' is still working - albeit with far greater stops. The width of my stops has exploded from 2-3pts to 10+ on some occasions, and my usual worst case scenario is a 5pt stop. So historically that is the absolute MAX loss. This has basically forced me out of the market. To take a 3X increase in my usual risk is outside of my tolerances. Wayyyy outside... I am only trading 1x contract whist I take my first 100 trades, so I can't drop down from say 2-3 contracts down to 1 and absorb the greater risk with less contracts. So here is my question to any old hands out there. At what point do you refine, change, modify an existing tested approach to the market? We are experiencing a vastly different market recently, I get that. I am sure that others with greater experience are able to make changes and adapt to this market. My feelings have been that I am doing the prudent thing and not modifying an approach that is tested, and performant live in prior market conditions. But yet here I am still on the sidelines. I follow my process each day, and review the day as per usual. My entries are still valid, as are the targets, Yet the size of the risk has exploded. What have others done in prior periods of increased volatility? I haven't adjusted my stops to ATR (either daily or individual bar) before hand, but it seems that I need to do this. However, even taking that into account the Danger Point stop is still greater than my risk tolerance at present....
Greetings Dp, You asked: “At what point do you refine, change, or modify an existing tested approach to the market?” Response: In my opinion the answer to that question is simple;…..in market conditions such as we are currently experiencing,....rarely if ever! If you modify your current approach, you now have a “New Method”, because you’re introducing “random variables” into your current trading mix to accommodate a temporary market condition. You thereby would have to start another round of testing to verify and validate this new approach. Your current method has its own reason for being, and current level of efficacy, and I assume it works,…as you say. An option is to still monitor and continue to trade your current approach in Sim to engender trust, but by no means ever step into this fray live trading. That is a prescription for disaster at your current good level of professional development. It is never wise to ever change a winning strategy and game, only a losing one. Give yourself time to develop a "deeper sense" of trust in your current method, or the good solid reasoning's and research data to support creating another. Trust comes before confidence, because confidence requires trust. So I suggest in the interim you give yourself time to make the "mental adjustments" to your personal risk profile,…"inside of your head", and continue to play your game (Sim), taking copious notes and making observations, until this volatility changes and is more within your limits. This is a time for you time maintain a cool head, and just observe market conditions, taking your notes to see if something develops. I believe this is the way of the professional. Knee jerk reactions may lead to regret, while cooler heads may prevail in this instance. Remember, as you’re now learning…this game is played inside of your head. Hope this helps. KDASFTG
Thanks for that response KDASFTG. I feel I'm doing the right thing, but a little reassurance is always a good thing! The fact that my way of viewing the market, my process and my system has withstood these current conditions has given me a fair amount of confidence. But at present the risk is too great. Hopefully that comes with time and account size. Your point is well taken - no need to introduce random variables to my efforts. I realise I am still early in this whole process. This market falls far outside my level of experience. It's been a rough time personally to go live. Good for the experience, but staying on the sidelines is sometimes quite tough. If the system is robust then that means there is an issue with the grey matter!
HI.... Typically, the markets get a little more choppy during the summer and it looks like you did what I do during the summer.... that is reduce your trading risk by reducing the number of contracts that you trade. The other option that I use is trade different futures. It does somewhat depend on your trading process. I trade mostly pullbacks from trend moves so I haven't traded index futures and grains much this summer. But I have traded futures for currencies, crude, natural gas, gold, silver, copper and T notes/bonds.... some of these can be volatile/choppy at times, but there are some good opportunities at times. I wouldn't change your trading process unless you are sure the market conditions have changed permanently or that your process is not working. What futures are you trading.... good luck toucan