Articles of Interest for Obsessed Traders

Yes well I guess I have to admit.. I AM an Obsessed Trader! After one year of trading I am still here!! Whoohoo!

I don't know if it is a good thing.. or a bad thing.. but its hard for me to stop thinking and talking about the damn business... even at weekends.. crazy I know, and I am sure some would say that I should get a life! But then, what the feck, this IS my life right now! And I am in my mid 40's, I have done plenty partying in my time.. I LIKE trading. And I am fortunate to have a wife who shares this madness.. so we BOTH spend the weekend rattling on about it.. analysing the previous weeks efforts and planning and plotting towards the next.. so there!

Anyway.. was just looking in SI at a good thread started by Susan G which is an archive of seemingly interesting trading articles and links.. http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=52196
looks like some good reading for those.. like me.. who need a regular fix of trading stuff.. I am not registered there but if anyone else is let her know she has started a good thread please.

Would not be a bad thing if anyone who finds interesting articles etc posted links here on elite perhaps.. I know the posts here are often as informative and helpful as anywhere else.. but more can't hurt.. can it? lol

I shall follow this post..before it gets too long.. with an extract or two from a article posted within that thread in the 'other place'

Neil

 

Thanks to Susan G and due credit to the author

Aiming for the Right Target in Trading
By Walter T. Downs

When trading goes right, it can be a great feeling. When trading goes
wrong it can be a nightmare. Fortunes are made in a matter of weeks
and lost in a matter of minutes. This pattern repeats itself as each
new generation of traders hit the market. They hurl themselves out of
the night like insane insects against some sort of karmic bug-light;
all thought and all existence extinguished in one final cosmic
"zzzzzzt". Obviously, for a trader to be successful he must
acknowledge this pattern and then break it. This can be accomplished
by asking the right questions and finding the correct answers by
rational observation and logical conclusion.

This article will attempt to address one question:

"What is the difference between a winning trader and a losing trader?"

What follows are eleven observations and conclusions that I use in my
own trading to help keep me on the right track. You can put these
ideas into table form, and use them as a template
to determine the probability of a trader being successfull.

OBSERVATION # 1

The greatest number of losing traders is found in the short-term and
intraday ranks. This has less to do with the time frame and more to do
with the fact that many of these traders lack proper preparation and a
well thought-out game plan. By trading in the time frame most
unforgiving of even minute error and most vulnerable to floor
manipulation and general costs of trading, losses due to lack of
knowledge and lack of preparedness are exponential. These traders are
often undercapitalized as well. Winning traders often trade in
mid-term to long-term time frames. Often they carry greater initial
levels of equity as well.

CONCLUSION:

Trading in mid-term and long-term time frames offers greater
probability of success from a statistical point of view. The same can
be said for level of capitalization. The greater the initial equity,
the greater the probability of survival.

OBSERVATION # 2

Losing traders often use complex systems or methodologies or rely
entirely on outside recommendations from gurus or black boxes. Winning
traders often use very simple techniques. Invariably they use either a
highly modified version of an existing technique or else they have
invented their own.

CONCLUSION:

This seems to fit in with the mistaken belief that "complex" is
synonymous with "better". Such is not necessarily the case. Logically
one could argue that simplistic market approaches tend to be more
practical and less prone to false interpretation. In truth, even the
terms "simple" or "complex" have no relevance. All that really matters
is what makes money and what doesn't. From the observations, we might
also conclude that maintaining a major stake in the trading process
via our own thoughts and analyses is important to being successful as
a trader. This may also explain why a trader who possesses no other
qualities than patience and persistence often outperforms those with
advanced education, superior intellect or even true genius.

If one single person asks I shall post a bit more...

Neil

 

Neil - please post more

 

Ok.. since you asked.. lol

Credits as above

OBSERVATION # 3

Losing traders often rely heavily on computer-generated systems and
indicators. They do not take the time to study the mathematical
construction of such tools nor do they consider variable usage other
than the most popular interpretation. Winning traders often take
advantage of the use of computers because of their speed in analyzing
large amounts of data and many markets. However, they also tend to be
accomplished chartists who are quite happy to sit down with a paper
chart, a pencil, protractor and calculator. Very often you will find
that they have taken the time to learn the actual mathematical
construction of averages and oscillators and can construct them
manually if need be. They have taken the time to understand the
mechanics of market machinery right down to the last nut and bolt.

CONCLUSION:

If you want to be successful at anything, you need to have a strong
understanding of the tools involved. Using a hammer to drive a nut in
to a threaded hole might work, but it isn't pretty or practical.

OBSERVATION # 4

Losing traders spend a great deal of time forecasting where the market
will be tomorrow. Winning traders spend most of their time thinking
about how traders will react to what the market is doing now, and they
plan their strategy accordingly.

CONCLUSION:

Success of a trade is much more likely to occur if a trader can
predict what type of crowd reaction a particular market event will
incur. Being able to respond to irrational buying or selling with a
rational and well thought out plan of attack will always increase your
probability of success. It can also be concluded that being a
successful trader is easier than being a successful analyst since
analysts must in effect forecast ultimate outcome and project ultimate
profit. If one were to ask a successful trader where he thought a
particular market was going to be tomorrow, the most likely response
would be a shrug of the shoulders and a simple comment that he would
follow the market wherever it wanted to go. By the time we have
reached the end of our observations and conclusions, what may have
seemed like a rather inane response may be reconsidered as a very
prescient view of the market.

Lots of good debatable points in this article

Neil

 

You teaser

Take off the panties.

 

Very interesting articles. Thanks!

 

"This may also explain why a trader who possesses no other
qualities than patience and persistence often outperforms those with advanced education, superior intellect or even true genius"

hmmm - since I'm not a genius - I guess the reasons for my losses
is that I have not been "patient" - while trading in small timeframes

 

Almost every minute of every day I am thinking about or doing something connected to trading. I really dont want to be this obsessed with it but its been going on for two years and I dont see any letup in the future. Thanks for the link and the article. I love the bug light analogy.

 

hrumph.. I was enjoying that now.. I was serialising that.. my mini-series is not wanted! Oh well...

Macal.. haha... I see you know your internet! lol

oh what the hell, maybe some people can't be bothered to go all the way down the road to silicon investor.. heres a bit more anyway!

OBSERVATION # 5

Losing traders focus on winning trades and high percentages of
winners. Winning traders focus on losing trades, solid returns and
good risk to reward ratios.

CONCLUSION:

The observation implies that it is much more important to focus on
overall risk versus overall profit, rather than "wins" or "losses".
The successful trader focuses on possible money gained versus possible
money lost, and cares little about the mental highs and lows
associated with being "right" or "wrong".

OBSERVATION # 6

Losing traders often fail to acknowledge and control their emotive
processes during a trade. Winning traders acknowledge their emotions
and then examine the market. If the state of the market has not
changed, the emotion is ignored. If the state of the market has
changed, the emotion has relevance and the trade is exited.

CONCLUSION:

If a trader enters or exits a trade based purely on emotion then his
market approach is neither practical nor rational. Strangely, much
damage can also be done if the trader ignores his emotions. In extreme
cases this can cause physical illness due to psychological stress. In
addition, valuable subconscious trading skills that the trader
possesses but has no conscious awareness of may be lost. It is best to
acknowledge each emotion as it is experienced and to view the market
at these points to see if the original reasons we took the trade are
still present. Further proof that this conclusion may have validity
can be seen in even highly systematic traders exiting a trade for no
apparent reason, and pegging a profitable move almost to the tick.
Commonly, this is referred
to as being "lucky" or being "in the zone".

OBSERVATION # 7

Losing traders care a great deal about being right. They love the
adrenaline and endorphin rushes that trading can produce. They must be
in touch with the markets almost twenty-four hours a day. A friend of
mine once joked that a new trader won't enter a room unless there is a
quote machine in it. Winning traders recognize the emotions but do not
let it become a governing factor in the trading process. They may go
days without looking at a quote screen. To them, trading is a
business. They don't care about being right. They focus on what makes
money and what doesn't. They enjoy the intellectual challenge of
finding the best odds in the game. If those odds aren't present they
don't play.

CONLUSION:

It is important to stay in synch with the markets, but it is also
important to have a life outside of trading. It is a rare individual
who can do anything to excess without suffering some form of
psychological or physical degradation. Successful traders keep active
enough to stay sharp but also realize that it is a business not an
addiction.

I am definitely degraded... or is that decadent.. never quite sure..

Neil