Enjoyed that. Pragmatic application of chemistry for a practical purpose in the real world. However, he had to have some prior chemistry knowledge or he would not have even conceived the idea. Unless, he just learned it from someone else who employed the knowledge in that manner. My field is training. I have always tried to focus on the pragmatic as I train and teach in concepts that go against what is accepted as traditional. Therefore, I have to attempt to effect "paradigm shifts" in the minds of others. Who would have thought a lemon could be used for something other than lemonade or garnish..etc
That is very important. But many people don't realize that. Should be teached in school too. Too much the attitude that if you know the theory and have graduated you reached success.
Thanks for sharing your thoughts on trading and life. I sense I may be getting inspired to go back and take another look at a more scientific/mathematical method of trading. While a trader can indeed find his "way" of trading in patterns..etc ...trading as an art requires extensive focus and constant decision making along with managing emotions. It can be quite taxing mentally as most trading fails because of mental errors. These errors can be provoked by the emotions or any myriad of things. The mind which is our friend can also be our worst enemy. I am getting too old for all the mental exertion. I just want life to be more simple. On the flip side i do get a measure of enjoyment from the mental challenge. Again thanks. Your posts "ring a bell" with me. You definetly think out of the box!
Speaking of pragmatic. Wouldn't it just be easier to take a roll of toilet paper ..steel wool..and Solar rechargeable battery into the "wilds" than to tote around some lemons ...etc? Unless, they were going to double up for nourishment. Better yet....Easier to perhaps just take 4 bic cig lighters on the trip! 4 in case one gets lost..broke..stolen...etc. Of course, I realize what you were illustrating with the lemon and of course I agree!
Not necessarily disagreeing with you but let me give some counter arguments: 1. If you have a small account, commission and slippage are huge hinderances to your profitability as a trader. For argument's sake, lets say each trade cost $10 in commission, a round trip would be $20. If your account is $1,000 and you make one $1,000 trade a day, the commission will be 2% of your account and if you consistently make 2% profit a day, you barely breakeven. For an account of $100,000 and you make a $100,000 trade, commission will be .02%. If you make 2% a day, your profit will be ~1,660% a year, compounded daily, or you make $1,560,000. So, size does matter. 2. The other argument for a larger size account is drawdown. In the small account drawdown is a bad downward spiral, if your account is reduced to $500, a $20 commission will be 4% of your account. It is very hard to consistently make 4% a day but for that you just breakeven. 3. Limiting your trade to 1% or 2% helps avoiding huge drawdowns. For a large account, trading 1% to 2% makes sense because 1% of $100,000 is $1,000 and you can buy a decent option contract for that amount each trade. For a small account, 1% means $10 hardly enough to pay commission. So, account size matters in keeping the trader's account solvent. 4. In a large account, you can afford to make "conservative" trades and still make a decent profit. For a million dollars account, a 20% annual profit will provide a decent return whereas in a $1,000 account you have to take big risk to make a dent. My view is a minority view here at ET but IMHO, if you just start out, it is better for you to save up enough for a sizable account before you start trading. Regards,
Maybe If you figure that way you may be correct. But i don't. Your number 3 i see controlled simply by stop loss amounts. Drawdowns mean nothing to me as i don't trade that way. I strickly daytrade and scalp 1 to 10 points in Es. SL Can be set at 1 point so if you want to figure that as drawndown well i suppose it could be. sometimes i may extend sl to 1.5 pts. On rare occasion 2 pts. RR is min 1:1 but usually like a 2:1 to 6:1. Win rate has to be high at least 70%. So, for examples sake if i make 10 trades. Lose on three i lose $150.00. But i make 350.00 on 7 winning trades (considering the low end 1 point profit). Comm rt 10 trades 50.00 more or less so i net 150.00 for the day more or less. That is 15% of the 1000.00 next day i have 1150 to trade with. It just keep compounding. Theoretically that is. There are days one may be off the game. ...etc. My point is if i cant trade a small account this way and make it work then i can't trade a large account in the same way and make it work. However, that is not a blanket statement for all types of trading. I suppose i was in my mind linking it to intraday scalping. However, i may say from my point of view an account of 3000 to 5000 could work for trading 1 contract on the eminis. You need the extra just incase you trade drunk or are an emotional wreck and wipe out 1000 in one day. You don't need the extra for drawdown but for stupidity mistakes to keep you alive until you recover...now keep stop losses at 1 pt and 7 winners at RR2:1 and that even improves dramatically. That is all im saying. If you swingtrade for days and hold through huge drawdowns or don't don't have a clue how to trade then one may need more than a large account...perhaps a rich wife LOL.
I agree that chart reading is subjective and maths is objective. My point is trading is a demand supply game of psychology. An art. Chart reading is an art of reading the pulse of mass. Maths can also read the pulse. But the question is how efficient it is ? Is it as efficient as chart reading ? Maths is pure science and objective. Market pulse is definitely not objective. It is mass psychology. And psychology is purely subjective. Is this not a clear mismatch in applying maths to understand market ? If maths can understand market pulse then show me one business in the world which has automated its business decisions.
I believe very strong in “behavioral finance”. Math can analyze and calculate the behavior caused by mass psychology. The basic logic of my system is: the behavior of the mass is measurable and can be used to take advantage from it. I read a lot about the human brain and more specific about the deficiency of it. And I never read any books about indicators, point and figures, and all other free stuff that never works, as it would have spoiled the way I think. I knew a fund in London that only accepted people that never traded before but had the good basic qualifications to become a trader. They gave them the education they were supposed to have (according to the fund). And they did not have to deprogram them before starting, to get all the wrong garbage out of his head. Many times “old knowledge” blocks the way to “new knowledge” as it will always pops up when you start to think. Computers can be reset quickly, human brains need much more time. If a person is struggling a long time with an unsolvable problem he takes a time out to empty his head and starts fresh again. A “human reset”. The most common problem after that is that he starts to think again the same way he did before. This will block any new insight or different approach to solve the problem. Did you never have the following situation: You had a very difficult mathematical problem to solve, but at the end you see that the outcome is wrong. So you start to check, step by step, trying to find the mistake you made. After checking numerous times you still are not able to see the error. Then you ask somebody else to check it and he finds quickly what the issue was. When he explains it to you, you don’t understand how it was possible to overlook the error. All this is caused by the fact that you already had old knowledge that was influencing your subconscious and resulted in becoming “blind” for parts of your calculations. Charts are a result of math too, so if math is not efficient, charts cannot be efficient too as they are a result of math. I measure efficiency in performance, not in visibility. Charts are a graphical representation of math. It was surprising for me that I don’t need volume, S/R,retracements, divergences, break outs,channels, etc… to come to good results. For my trading they are completely useless. I only use incoming ticks and time registration. Market pulse and psychology can be made objective, and should be. Because subjective means unreliable and unpredictable. For trading you need reliable things. That’s why most people have difficulties to have more than 50% of winning trades. Reliability is missing. The real challenge is: what do you need, how should you use it , to make a mathematical model that can be traded? Most people have no clue where to start. And as there are millions of different approaches and possibilities, you need years to find out which way to go. And even then most are not successful. That’s a good try! But I don’t think I will show you the one I know.