Well, as before, we're discussing about the terms we use and semantics here. It's unavoidable. But since we acknowledge each other's good faith, we can keep on debating this. (I mean: I am glad you didn't say that I am "lying" or similar). As you know, I gave up as a discretionary trader and became an automated trader. And I started making money the day I became an automated trader - on day one. Whereas, on the other hand, twelve years as a discretionary trader for me were not enough to become profitable. (In my opinion) this happened because with automated trading, in order to start, you must first find a univocal set of rules that makes money. With discretionary trading, instead, you could fool yourself for years (I did for 12 years), thinking you have a profitable "method" and yet never back-testing it, because, since the method is "discretionary" and therefore not a univocal set of rules, you can't back-test it. Now, if you have a perfectly clear and univocal set of rules that are profitable (as is the case with automated trading), what room is there for your decisions? Zero. And if there is no room for decisions, then also all doubts are gone. So in my case it couldn't be clearer that psychology is not an issue. So I subscribe once again to: "If you trust your strategies, there is no room for thinking or doubts". But I am now reminded that most people are NOT automated traders, and this may be the cause of our misunderstanding - that I was just speaking for myself (from an automated trader's point of view), rather than for everyone. And at the same time I made it sound like I was describing rules that apply to everyone - I apologize for this mistake. For discretionary traders, it is different. Initially, I was thinking that also for discretionary traders, once they have a proven profitable method - what room is there for doubts? But then one wonders: how can a discretionary method be "proven to be profitable" if it is discretionary and therefore subject to improvisation? It's not actually even a "method". This raises some doubts, and the whole problem is this - if a discretionary trader does not have a univocal set of rules to follow at all times, then psychology becomes important. So let's state and summarize everything all over again, because I changed my mind as I was writing this post. For automated trading psychology basically IS NOT needed, because the rules to follow are univocal. For discretionary trading, psychology IS needed, because the rules to follow are flexible, subject to interpretation. However, if you put paper trading into the picture (using it until you become profitable as a discretionary trader), then the psychological stress decreases very much even on the discretionary trader. And, regarding this, as I said days ago, one good psychological question to ask ourselves is: "why do we trade with real money when we are not yet profitable as discretionary traders?". Indeed, I am still wondering why I traded for so many years with real money when the past spoke clearly and said "you don't have a profitable method yet". I felt like the profitable method was always around the corner, like the mistake I had just made was the last one. Maybe that's why.
travis, what kind of software to do you use to program your strategies? Does your routine give you signals that you execute manually or is the entire process automated?
This sounds very clean cut but I think it's not so simple an issue. Let me come out and say that yes, I am a discretionary trader. However, discretion does not mean I am guessing at every trade nor jumping from one strategy to the next. The best trades I make often have all the same elements -- they just cannot in any way be formulated or programmed into a black box. Psychology has little to do with whether I am profitable or not, because once you are certain of what to look for, psychology becomes moot. On the other side of the coin, just because you are automated doesn't mean you have an ATM that will print money forever, because markets eventually change, and anything that is easily automated will eventually be wiped out as the crowd catches on. Let me ask the automated traders this: when your profitability starts to decrease, how can you tell if the cause is just a temporary market condition, or if instead your "univocal" rules just don't apply anymore? How long will you keep using a system that was once profitable, now not so much? And if it starts generating random results at best, which element will you alter? Backtesting doesn't guarantee anything in the future -- you can show a chartist a chart of anything and he will tell you surely how he would make money. Wouldn't you think a bit of psychology and interpretation would begin to play into things now? Okay, so the above was just a bit of devil's advocate. Returning to the subject, I really don't think PERSONAL psychology has anything to do with overall success. Even personal "issues" such as when to increase size or getting used to certain P/L levels MAY be a matter of psychology -- but even then, you would need to be careful. Perhaps you are trading thinner markets where a simple doubling of size will not translate smoothly and may even degrade your results; the point being, don't be so quick to blame some "mental barrier" for a lack of success.
I have an account with IB, and I use their TWS + Excel. That's all. Yes, the whole process is entirely automated. I just have to turn on those two programs, and restart them once a day.
Would you mind sharing what coding language you use and what markets you trade? I am not asking you to reveal your secrets, however this info could add to the discussion. (btw, ignore the a**holes on this thread).
It sounds interesting... I would say that overall this is a case in which a discretionary trader says psychology is NOT needed (overall, and I am aware I am oversimplifying), or at least not needed more than in most other human activities. This would seem to prove Alexis's case one hundred percent: "If you trust your strategies, there is no room for thinking or doubts". As for your first question, "when your profitability starts to decrease, how can you tell if the cause is just a temporary market condition, or if instead your "univocal" rules just don't apply anymore?" Well, in my opinion, you have a "maximum drawdown" from back-tests (on many years of historical data), and if the forward-tested drawdown exceeds that back-tested drawdown, it's probably because the system doesn't work anymore, or because it never worked and it was over-optimized (too many rules that only work for a given set of combination in the past, "curvefitting", "bruteforcing"). I can't reply in-depth to all of your worthwhile questions. I can only synthesize that I believe automated trading works. I believed that it worked from the beginning, and I have seen it work in the past year and a half. I should add that in my opinion on automated trading I was influenced by other traders I met online and who told me how great automated trading was, just like I am doing now. One important thing to say is that automated trading is not enough if the systems are not back-tested. And back-testing is not enough if the systems are not automated. In my opinion you should do both, but then again I shouldn't say it like it applies to everyone.
The coding language I use is VBA, for programming (macros) on excel. For back-testing, I use easylanguage, on Tradestation. I kept it as simple as possible, because I am not a programmer (I'm a self-taught programmer, and not advanced). I trade gold, oil, forex, bond and index futures. Yeah, thanks for the advice: I am using the ignore list for all disrespectful posts.
Interesting. WealthLab uses C# which I can code, however, this seems a bit over-kill for such a linear application. Scripting languages should do the trick. Sorry if this question sounds dumb, however, I don't understand how the code is linked to TWS to execute the orders
RN: How can one find the truth that one does not yet know? Edit: Or maybe I should simplify by saying what techniques do you use to help yourself learn?