Thanks for your take on things. It was interesting, because it's rare to hear profitable discretionary traders speak at length about how they see things. Usually on this forum they just write one sentence posts, without explaining anything. For a second you made me think that maybe I can try again to find a way to make money with discretionary trading (after failing for 12 years), but then I decided against it. The reason is that it's too hard for me to see price moves objectively, blinded as I am by my desire to succeed. So, not only do I pick the wrong exits (as you explained, it's the case for most people), but I also pick the wrong entries. I would have to become an entirely different person, and I don't think I can manage. But I will use this deficiency of mine, which makes it impossible for me to be a discretionary trader, to motivate myself to be an even better and more disciplined automated trader. Even if I temporarily found a good balance and were able to make money with discretionary trading, there's always a high risk that, in moments of stress and depression, my old habits and nature will take over (like for a smoker or a drinker). It's as if I was inflammable and the markets were fire. The two things should be kept as far apart as possible. Maybe a good way to put it, to summarize our points of view and our discussion on discretionary vs automated, is that for some it's easier to succeed with discretionary and for others with automated. I was unable to succeed with discretionary trading, and I was going to say that it's be easier for anyone to succeed with automated trading, but I suppose that other people will disagree with me and say the opposite, so I shouldn't make my opinion be the law. I guess if you are better at checking statistics than emotions, automated trading is the way to go. If you are good at seeing things objectively, despite what's at stake in this game, then you can definitely trade like you would play a videogame, learning as you play. All games can be learned, but trading has the problem that I do not see it as a game, because I am too afraid to fail, and too eager to succeed, and this makes me lose objectivity. And also, even if we could learn trading like we learn a videogame, we all know how some people are great at acing videogames, and others aren't. For example, I am average, but the problem is that I am a sore loser, and I get pissed off if someone is playing better than me, or if someone keeps beating me at risk for example. And I definitely brought that to trading as well, and being a sore loser at trading means that instead of exiting a trade and admit you made a mistake, you double up your losing positions (until you have margin for more future contracts), and often manage to recoup losses (sooner or later it will go up), but the few times that it keeps going against you, you blow out your account. So you get what the sore loser in you actually wanted: to lose few times, and win a majority of times. Only, you keep blowing out your account every few months, because some losers do not come back, and you don't have limitless margin to just keep on doubling up (which is like cheating more or less).
Yeah, it's just two different animals that's all. I would say if it's emotions that you can't get in check then stick with what's making you money. And if you are to trade on your own again I would use small size b/c if you tried for 12 years, unless you're bored and just doing it for fun maybe you should stay away from it. I'm the exact opposite of you. I have wanted to put a box to work but I'm afraid to not have control over my positions. I feel uncomfortable just putting in a program and letting it go on its own b/c I feel as if there is news in a stock I'll get beat up in it. Obviously if I was using small size in it I wouldn't mind but after thinking about it I probably would never feel comfortable putting real money to work on a box. The weird thing is I have large sums of money at work in funds and I know that all of them use black boxes so it doesn't make the most sense that I don't want to use my own but that's just the way I think. As far as posting my opinions, when I joined this site a few weeks ago I thought everyone pretty much just helped eachother out. I don't know who is or isn't experienced on this site b/c I haven't been a member for long, but everyone has questions they need answered as you can see by me replying in detail to your post and then following it up with questions of my own, so I'm glad to help if I can and thanks for that compliment.
I love music. I don't have the talent to do it professionally. But I have been playing all my life and I still love it and have a tremendous amount of fun with it. The point being, just because you love something does not mean you have to adopt it as a career. I think the people who are telling you to trade your own money are on the right track. Don't have enough of your own money to trade? Get some other kind of career together and put some of your earnings aside to trade with. It's okay to love trading, as long as you are in control of it. I love driving at high speed, but keep it reined in because I live in a city full of people and I don't want to hurt them. When I drive across Wyoming or some other isolated place, I can speed without hurting anyone (except possibly myself if a state trooper catches me). In the same way, if you love to trade and get caught up in the excitement, you can do some crazy stuff. You just have to confine it to a tiny fraction of your money, an amount that it wouldn't hurt you to lose. With the rest of your trading capital, follow the speed limit. Experiment until you find some workable rules that you like, and stick to them.
I'm glad I don't work with people like that. Maybe the best traders that YOU know are assholes, but if I were you, I'd be careful not to extrapolate that fact to the rest of the successful trading community -- because it's not true. To have unyielding confidence in your decision-making abilities does not require one to be an asshole. Caring what others think of you versus caring what others think of your trading ideas are two different things.
A lot of losing discretionary traders make exactly the same mistake that you just made in that paragraph, and that's why they lose. You said: "...and being a sore loser at trading means that instead of exiting a trade and admit you made a mistake, you double up your losing positions (until you have margin for more future contracts), and often manage to recoup losses (sooner or later it will go up), but the few times that it keeps going against you, you blow out your account." Do you see the logical fallacy in this statement? You are thinking that being "right" on a single trade is something important, that it reflects on your ability as a trader. That is what is implied when you say "instead of exiting a trade and admit you made a mistake, you double up your losing positions". Don't you realize that it is impossible to predict what any one given trade will do?That essentially, every single trade you make is a crap-shoot? You can't control where the market is going to go. It could go up, it could go down. You could enter a trade perfectly and have it be a loser, and you can enter the worst trade in the world and have it turn to go in your favor to be a massive winner. The point is not to win on any one given trade, but to accept that you can't control what any trade will do, just the overall outcome of a lot of trades. So why in the world would you want to double down to make back money on that one trade, when you never had control over it to begin with? Also, if you look at it objectively, is it realistic to expect that you will always trade perfectly and not make any mistakes? Logically speaking, of course it isn't. So when mistakes happen, why would you get mad? They are a normal part of being a trader. The difference between loser and winners is that winners accept that any one trade is irrelevant, so they don't care if it turns out "right" or "wrong" - only the final result matters over a lot of trades. Also, winners accept the fact that they will be making make mistakes all the time, and don't get angry when they make them... they just try to correct them, but know that they will never succeed 100%. Losers on the other hand are always trying to do the impossible like win on every trade or never make any mistakes, and when of course it doesn't work they jump off the deep end and blow up their accounts. It's really not more complicated than that. When you enter a position and it goes against you, and when you start getting angry about it, you are essentially getting angry at something that was never in your control from the start. The key to winning is to accept this simple fact, and the reason for the anger and the desire to "get back" at the market will naturally go away. In any case, good for you that you have determined that discretionary trading is not for you, and decided to go the automated route - making money in any way is always a good thing.
As far as talent goes, Geoff Colvin has a fantastic book about people of great skill titled "Why talent is over-rated." Very enlightening for those who want achieve a difficult task or level of mastery. I googled an article by the author for anyone interested in scholarship on the subject. Best, C http://money.cnn.com/2008/10/21/magazines/fortune/talent_colvin.fortune/index.htm
I read the article... can't say that I agree. He has a very narrow definition of "talent". Being able to work hard at something for a long time and learn from your mistakes is in and of itself a talent, something that all successful people have in any field. Unsuccessful people generally don't have any great ability to learn from their mistakes, which is why you see them repeating the same errors over and over again. It is also blatantly obvious that you need a certain amount of talent to succeed in a great number of fields, like music, acting, and sports. There are tons of people in all of these fields that have no talent and no chance of making it, but are still working away at it. Talent is not the only thing you need to succeed at the top levels, but it is most definitely a requirement. Just because there were some people who didn't display their talent at an early age and nevertheless became successful, it doesn't mean that they didn't have it, or that it's not necessary. The word "talent" can mean many things, from a natural ability to learn fast, to being able to make people like you, to being able to know how other people think, or how to motivate them. All of these things are hard to quantify and might not be recognized as talent. Also, the author makes a reference to Steve Ballmer as a guy who made it without any great talent - and he's right... Ballmer is nothing but a lucky jackass who attached himself to one of the greatest business minds of the last century (Gates) and rode his coattails up to the top of the corporate world. He has some talent at motivating people I suppose, but he wouldn't be any better than a middle manager somewhere if he hadn't had the incredible good fortune to find Gates at exactly the right time. So yeah, technically you don't need talent to succeed - if you have amazing luck! On a related note, this is an appropriate time to bring back an old favorite: Developers! Developers! Developers! Developers! http://video.google.com/videoplay?docid=6304687408656696643 And of course who can forget the music video: http://www.youtube.com/watch?v=KMU0tzLwhbE&feature=fvst Does this seem like a business genius to you: http://video.google.com/videoplay?docid=1274983729713522403&hl=en He reminds me of a few beer-swilling sales guys that I used to know... decent enough at what they did, but not top management material. He would not be running a multi-billion dollar company like Microsoft without Gates having dragged him there. (And incidentally, even though I think Gates is a genius, the one move I never understood was keeping Ballmer around for so long... that's probably the biggest mistake I've ever seen him make.) Just for good measure, this one is my favorite to illustrate just how stupid Ballmer probably is: http://video.google.com/videoplay?docid=-2992183880068262304&hl=en Without Gates I could have seen him hawking some infomercial product on TV at 3 AM.... "And can you believe it?! Reversi!!!"