comagnum, I totally disagree with the above you wrote because all that does not matter if the trading system or strategy does not make money. All that risk management/emotion etc etc doesn't mean anything if the trader strategy/system/method does not make money consistently. If it was that easy then all the automated trading systems would be making alot of money all the times cause 90% of its trading removes human emotion and manually trading and all the things in the pie chart. FYI, Steve Cohen was cheater in trading and made alot of money cause he had inside information, whatever he says doesn't mean anything at all. He had a true edge by know key information about stocks. And he became a billionaire and never went to jail. I can make money too if someone told me key information about a stock before it popped. Edge is knowing your system will make money. Period.
I agree with you when it comes to super short term trading where you have to over come trading costs and use tight stops... but for longer term position trading in stocks / stock index's which have an upward bias over the last 100+ years, I can see how Risk and trade management is pretty much everything.
I totally disagree with the above you wrote Discipline before vision. The most important thing is how good you are at risk control. Trading is competitive and you have to be able to handle getting your ass beat. The key is to learn how NOT to lose (i.e. over-levered, trading too frequently, tight stops, hope), not how to get into a trade. People spend way too much time on the latter, especially in the beginning.
Can you make a living trading with just random entries...as long as risk control is solid?? If yes...I applaud you. If not...please explain.
I don’t think so, but that’s not what I said or implied. Finding a profitable system isn’t particularly difficult. If you initiate a position, the entry isn’t random. That is unless you’re undisciplined (which goes back to discipline being most important). Read a book,it’s good for your brain.
Finding a profitable system isn't difficult? Then why is it so DIFFICULT for so many to find? There are many reasons, but it's difficult nonetheless. Anyway, making 5-10k (for example) a year is considered profitable, but who wants to settle for that year after year? Don't people want to make something more substantial...something that allows them to hang up the 9-5 for example? All of you traders who say discipline is the key can make something substantial year after year with just risk and mind control? You people can get excellent results just playing the math game of trading...losers smaller than winners and collect money from the ATM? For the record I'm strictly talking about short term trading. I learned how to be a disciplined trader a long time ago and back then it gave me a modest income from trading, but it didn't make me a living from trading. Edge is what I needed more than anything. I'll say this once again. Just because you couldn't find high probability entries doesn't mean they don't exist. By the way, if you enter at 11:30 a.m. every day with no other criteria and no matter what the situation...that's random...whether you "initiated" the position or not. Read a book? Trying to be a wise ass are you?
Treeman...you say "handle getting your ass beat", but that sounds like terrible risk control to me...getting one's ass beat in the market means something's wrong...like letting positions blow through one's stop level frequently. You also say "learn to not lose", but that sounds like having high probability entries...that would help to not lose...wouldn't it? You probably mean "learn to not lose much"?
Certainly a discretionary trader and a systematic trader will have a different perspective on 'edge'. For the systematic trader discipline and risk/trade management are already built into their trading system, along with the best possible entry level. I would suggest if someone is a discretionary trader to take the time and 'discipline' to systemize your 'gut feel' and get rid of the 90,80,60,50%, etc mental aspect if it is requiring so much of your time and energy, and certainly if it is adversely affecting your trading. Trading does not favor the overly emotional. I have found whether one is a systematic trader or discretionary trader - successful traders have very opinionated personalities. That's what makes ET so entertaining - kind of the Asperger robots vs All over the place fueled by whatever meds or poison one is taking, and everything in between.
I think you mix up a lot of things. For instance: “Discipline before vision.” For me discipline is part of a vision. Vision is the general idea you have of how to trade and includes discipline as just one element of that vision. “The most important thing is how good you are at risk control.” Same remark here. Risk control is just one element of that vision. “The key is to learn how NOT to lose (i.e. over-levered, trading too frequently, tight stops, hope), not how to get into a trade.” There is no key, there are a lot of elements that are part of the global plan; the vision. All these elements are essential in trading. If you know how not to lose you need to know how to get in a trade. If you don’t know how to get in a trade and always take horrible entries you will never make any money. “Trading too frequently”. The best way to avoid that is to make very good entries. In that case you will not trade too frequently. So if you tell that “trading too frequently” is important and good entries not, you are contradicting your own statements. You trade too frequently because you don’t take the good entries. Over leveraged: you should backtest what the optimal leverage is. Tight stops: you should backtest what the optimal stop is. What is tight for trader A can be detrimental for trader B as tight stops might throw him out of a lot of trades that finally end profitable. I always try to find the optimal stops, not the tight ones. Gives better performance and R/R ratio is much better. “How to get into a trade” is very important as it is the starting position from where you should control risk. If you manage to buy the bottoms and sell the tops, you will always have the perfect risk control system. I know this is an extreme and not realistic scenario, but it shows clearly what the advantages are. So good entries are VERY IMPORTANT. If you would on the contrary always make horrible entries, your leverage, frequency of trading and risk control can never make up for the losses you take because of these horrible entries. The moment you enter horribly you always give away a huge chunk of the potential profits, and you can never recover that loss in anyway for that trade anymore. I invested most of my time in finding perfect entries. As a result I had less problems with leverage, frequency of trading, tight stops . And with these good entries I had less losses; losses that I did not have to recover from before making profits. If a salesman sells products, what’s the most important thing he should do? Buy at the best price. Traders buy and sell the whole time.
Old Chinese Proverb He who always depend on quoting other people does not have the ability to think for himself. For he is always the student and will never ascend to be the master. Hehe