My now "not" so secret philosophy to trading successfully.

Discussion in 'Trading' started by ChartingMarkets, Jan 21, 2004.

  1. Hey guys and gals I had a few beers tonight. So after 15 years from when I first started playing around with game theory and evolved in to the person I am today that focuses on trading in the stock market I feel its time to share some thoughts on what keeps me focused when I am trading.

    I used to be told all the time and still am by those who ask what I do for a living that "isn't that gambling"? I say why yes it is! Its called professional gambling and I don't recommend it to the closed minded and stupid (LOL). Seriously folks people all over the world who will never trade have the belief that trading is just another form of gambling. Now anybody can make the case, that for the majority of people who trade it is just another outlet for the emotional highs of winning quick money and getting that adrenaline rush. For me its something different it's a business, but, moreover here is what drew me to it years ago and still to this day I utilize it as a cornerstone philosophy.

    It started when I was in College back in 87 when like my other college friends we would all bet on Football, Basketball, Baseball. I wasn't a major gambler, I was always looking for the statistical edge, I did my research. I looked at teams that had statistical edges Against The Spread (ATS) in many different areas and would look for the most confluence on any one game and bet that side. You know what happened...with that strategy the best I could do was breakeven and pay my vig to the bookie. My friends would lose overall but I was breaking even and danm it if I was not researching for 3 hours a day before game time I could not get better than breakeven.

    I majored in Finance at University of Buffalo, I would read books on the stock market on my own, not required by my University but because I was fascinated with the stock market.
    One day like Peanut butter and Chocolate I had an epiphany while watching a football game I had bet on.

    My epiphany: I was getting +5 points on a road team that I was sure had the statistical edge to cover the game. However at half time the other team was up by 35 points! I had a rather large bet on that game and I was thinking to myself wouldn't it be great if I could just call my bookie and say to him "hey Fat Tony its half time I would like to take only half a loss on my bet and pull the rest out". That way I could take my remaining half of the bet and try to win it back by making it work for me on a better opportunity aka a 4pm game. Wouldn't that be wonderful in fantasy land! Unfortunately in sports betting as in other forms of gambling you keep the wager on for an all or nothing expectation even when you know the resulting outcome is going to be a loss far in advance of the ending.

    Right there I finally stopped betting. That was it for me. It was the best loss I ever took in my life. It opened my mind to what the stock market was all about. In the stock market if your in a losing trade, you don't have to sit their as a passive loser to zero, you can simply call it an ending when you see the trade is not going your way. More importantly the flip side is when your in a trade that is going your way and you see that your up and its unfolding to become an absolute layup of a trade you can add to your bet and win even more. Wait a second you cant do that in sports gambling. You can do that in blackjack they call it doubling down but even thats not as close to being as superior as what the stock market allows your to do. Its complete independence in the stock market.

    I knew right there that trading was going to be my future. I knew that with just this cornerstone philosophy to build upon I would one day obtain financial abundance and a method that virtually allows me to extract money on a consistent basis, almost at will when seen through the eyes of disbelief from the naysayers. All the while those same naysayers would whisper in my ears its gambling you cant win its rigged! I would say to them yes its gambling for you for me its paradise.

    Thanks for allowing me to share this with you ET. Now back to my drinking.
     
  2. nkhoi

    nkhoi Moderator

    what brand :confused:
     
  3. CHEERS:)
     
  4. i think the markets are one of the best things ever created.
     
  5. Thanks steelhead. :)
     
  6. Cheers :)

    Why do you believe that you can be consistently profitable in your trading (I assume you have been profitable so far)? What gives you the edge? We all look at the same thing (charts, market data) and use the same methods (mainly technical analysis)... I was looking at my equity curve lately and was wondering what do I do differently than any other trader out there, am I lucky, is it the nice trending market (I am swing trading stocks), or is it my risk tolerance... what is my edge... :cool: Hence my question to you.
     
  7. nice post :).. but um.. you were keeping this a secret?

    -qwik
     
  8. rgelite

    rgelite

    Good post.

    I've often had discussions with folks re: the differences between traditional gambling and trading. What seems to turn most around is what you cite: That we can pick entries AND exits to mitigate risk, as well as vary bet size even while play is unfolding. The claim that it's gambling because the outcome is uncertain is, imho, bogus or, at best, without distinction to most activities in life; even driving to work is, in fact, uncertain. And surely many employees these days are fully aware that they can pour their time, their hearts, and souls into a job for years just to come into work one morning to find their job has been shipped overseas, or their company is being bought out, or the financial "team members" (ah ha ha) of the company were cooking the books and its been actually bankrupt for years.

    Trading and beer. And now with the advent of low-carb (Atkins friendly, hey, I'm not immune!) beer, it is truly paradise. :cool:
     
  9. Neurtino we both know that to come up with what is my edge or your edge for that matter could take up my more pages on ET then anybody would want to read in one sitting. Heck I can say broadly though that I use traditional TA. I use candlestick charts, bar charts, line charts. I watch for the H&S, inverted H&S, cups and handles, Triangles. I watch for simple breaks of support or breaks of resistance (usually on a daily frame for swing trading). I trade for multiple days at a time when I am at my best. I know and have a good feel for the stocks that I have on my watchlist and know just through good old fashioned tape reading where a stock's demand zone and supply zone is as well. I watch the market indices and have learned when to increase size in a favorable market and visa versa. I trade with the overall market trend and never against it. Aka 90% of my positions are long in an up market and visa versa. I don't short run away trains I short stocks that are breaking down out of topping patterns. I don't buy stocks where I have missed the breakout to such a point that it has the chance of being susceptible to profit taking at that point. I wait for entries where I can place a mental stop since I watching in realtime, and that allows me the best reward/risk ratio possible for making good money probability. I have learned how to look at a chart and in less then 2 seconds see an opportunity and get aboard or see nothing but a 50/50 shot and pass it on by. I am disciplined and willing to wait for the market to come to me. I trade light when I have drawdowns as a fail safety and get back a few small winners under my belt to restore confidence. I trade with confidence as though I am the "best" out there and I am coming to get you. Thats the key, confidence in yourself and your trust in your ability because the market presents endless opportunities and you can only take so much out of it.

    The market for me is like being thrown in a Kings Treasure room full of gold coin and precious gems. You can go on in and fill up your pockets with as much as you can. However, you have to be careful not to fill up with too much in one day or else you wont be able to leave the room as you will be weighed down. So a little at a time is my motto.
     
  10. Follow the trend. Keep it simple and don't mess up with complications which are created to get you in the light of greed and fear.

    100% up room to go.
     
    #10     Jan 22, 2004