Tomorrow: I shall monitor several proprietary indicators. When those tell me a reversal in the Accumulation /Distribution is imminent I shall reverse [duh]... I shall do that for awhile, watching for volatility traps whereupon I shall trade across the narrow range... the psychology part will be in staying awake because all that s%^t is not exactly exciting... fortunately for me it's not worth doing after 9am Pacific so I shall quit and go get some coffee and a fantastic two egg veggie omelet made with free range eggs and spinach, plus cheese and mushrooms with salsa, catsup, tomatoes, and A1 Sauce plus orange juice on the side, all prepared by a wonderful French lady and her helpers. I'll chat with my favorite waitresses while I absorb USA Today... then I'll call my buddy and we will go to the Senior Center and shoot pool and try not to take too much money from the locals... it's a tough job but somebody has got to do it...
Alex: You opened the thread with: Then you asked RN for his opinion: "Thanks for your reaction, and we most certainly respect your opinion as well. Could I ask you to tell where you stopped agreeing with me in my initial post? (put differently, where do you think my reasonning is flawed?)" He may not have responded in terms of your original post. You and your colleague make money following the Conventional Wisdom; so does RN for that matter. Most successful followers of the CW have performance objectives and performance results that cluster at the levels required to stay in business. Recently two people posted briefly in ET and they do not use the CW. You were quoting and angered, as you say, by one of their comments. Your acknowledged anger is a "reaction" to a message you have been getting for quite a while. You do know what the market is offering and you and your colleague could, if you wished make a comparison to the market's offer and to your bottom line. Instead, you do a familiar and common "loop" that allows you to stay in business. You state your "loop" and you also say something very different as well. These two contradictory things are the source of your anger and also the place where the flaws in your thinking come into the picture over and over. As RN says what anyone does is what they do and who is to say it could be flawed. Your suggestion that your thinking is flawed is correct. Your colleague has the same suspicions as well. What you call testing is an inductive process (See Boyd's OODA, CW type model). It is initiated by you and from your mind to examine what you, as RN would say, "thunk up". You feel you validate it by a means of some sort. See if you thought that up too of if it is a conventional method of the industry. Then you trade the approach until you spend enough money to replace it by doing the "loop" you have been in for decades. This decades old thing you do is learned and has been in your mind for a long time. The person you quoted is the opposite of you and your colleague. He calls himself correctly a "descretionary trader". He reads the market and acts (behaves accordingly). The other person like him did similarly. Both, in comparison to the market's offer, did quite well. I avoid doing what you do and what the person you quoted does. I use the standard of the market's offer to determine my performance. I am much more risk adverse than are you or the one you quoted. I am most certainly more risk adverse than RN. All of you have DD's as all of you have stated. The standard of consistently making money comes from the consistency of the market's offer. It is rarely argued that the market is not offering all of the time. Since the market IS offering all the time, there is a constant "taking" as a consequence of the choice of participants to do "taking" to some extent or another. In the limiting case, a continual "taking" is the norm. Because this is true, is it not necessary and prudent to perform all the time as a "taker"? You, your colleague, the person quoted, and RN do not do this. Instead, you make another choice to let DD's occur. Your model: testing>>validating>>> trading is not very close to taking the market's offer. It is only consistently profitable over decades. What does the curve look like for an approach that is different than yours? Or RN's? Or the person you quoted? It looks psychologically connected to the markets and it performs in such a way to TAKE the offer the market is offering. What it takes to take the market's offer is understanding and synchronicity. As you look at what you do, you get to see that most often the market is doing something else. Over the long run, the market has offered according to the Power Laws cummulatively. This is NOT measured by indexes, obviously. Nor is is measured by just volatility. So far you have not, from your mind's (your team's collective efforts) tested what the market does; this is demonstrated by your results (See above limited commentary of yours). I am glad you are angry and growing suspicious; you have every right to be in this state. Steenbarger is a guy to run the other direction from; but there are many other viewpoints. Give a shot to learning how the mind works. Then the writings of Bass, Lowenstein, Fox and others will read like comedies.
Maxpi Proprietary indicators to reflect market sediment (psychology of buying / selling â accumulation / distribution) â and the imminent change thereof â Bully for you Sir ⦠And youâve wonderfully captured the essence of why we like this business so much â Among other benefits it provides us the autonomy to set our own schedules â Excellent With regard to you culinary expose â Bon Appétit Regards RN ETA â On completely different note â anyone care to decipher jackâs hokum for meâ¦. on second thought never mindâ¦. Talk about Psychological BS (Bordering on mental masturbation possibly) jack â Tara is still waiting your response to her trading challenge..... Whatâs the hold up??? A simple yes / no will suffice
In my view, maintaining proper money management and implementing ones analysis require a healthy psychological foundation. At least for discretionary traders. If you have a black box, then thats different. I worked with a trading coach for almost a year and it helped me tremendously. Not just in trading but other areas of life as well. That said, having psychological tools without a valid trading edge won't help you trade better. Though it might help you realize that what you are doing isn't working and begin asking yourself what can work. -qwik
Hey, this is very good. You understood and stressed some very important points, and I couldn't agree more. The reason people look for psychological reasons for failure (and I did, it, too for many years) is that - not having a winning method - they say "why didn't I apply the stoploss?", thinking not applying the stoploss is the reason for their failure. But it is not true, since if you always applied that same stoploss, you probably would still have a negative balance. The truth, as you said, is that if you knew what type of a stoploss gives you an overall positive balance, you would always apply it, but you don't because you are not sure which stoploss level is the right one. So you mistakenly look for psychological reasons for your failure at trading, whereas what you don't realize is that you don't know what works and that is why you're not consistently using a stoploss (which you don't know if it works). So if anything the psychological question you should be asking is "why am I trading while I don't know a sure method of winning?". Now comes the second part of the problem though, which still makes me come to this psych forum here, and ask myself psychological questions. And it is as follows. If I have a winning method (automated system), why am I still trying to make "more" money with discretionary trading, where instead I do not have a winning method, and where I always end up losing? I have tried answering, too. Maybe I find it hard to believe that, having created the winning automated system, I am unable to do things right by myself. I am starting to accept this limit, though, and rather than reasoning on "why" do I trade discretionary and lose, when I have an automated system that wins, I now ask myself "since it's a fact that I am not as good as my system (I lose and he wins), why is it that I am not as good since I created it?". This makes me come on this forum, to see if others have answers, or also it makes me go on the automated trading forum, to see if others have had the same problems and questions. Right now the answers to this question (why am I worse than the system I created?) seem to be, in random order: 1) The system has infinite patience and waits long enough to pick the right entries, whereas I am impatient and I anticipate 2) The system knows (from backtests and forward tests) what really happens in the markets - it weighs everything perfectly (as well as it can, enough to have probability on its side), whereas I tend to expect the market to bounce much more than it does in reality (I tend to do too much top and bottom picking). Also, for the same reason, the system stays in trades longer than I would, and it makes more money as a consequence. 3) Besides letting winners run (which I don't), the system cuts losses short - which is definitely my biggest problem, as I feel paralyzed every time I'm losing as little as commission costs (I can't get out of a trade unless I see a profit). So, in summary, the system is patient and at the same time alert and quick, it is wise, it has self-control both in good and bad times, and it doesn't lose its balance in the face of adversity. So I'll just have to remember these 3 qualities, into my head - qualities which I will never have. That is why I am trying very hard to stay away as much as possible from the screen, I don't even want to look at quotes, until markets are already closed. I've been losing for months whatever the system made (and more). As you said, if you have a method that works, you will definitely use it. The question - psychological - that still makes sense to ask for all of us is "why are some of us (including me) using methods that they don't know if they work, or even that have not worked in the past?". Maybe because we don't care about money, maybe because we see as a game? Many answers are possible. So psychologicaly won't help us trade - we can't learn to trade because of psychology. But thanks to it, we can learn to stop trading when we don't have a method that does not work. Then, once we have stopped trading, we can work on finding a method that works. But the first step is to stop trading unless you have a method that's proven to work. Psychology won't make us winners, but it will stop us from being losers. It will make us understand (if we are lucky, I still don't know if I will be lucky) that trading is not a game, that we are not infallible, and that we will not win unless we have a method that's proven to work, and finally that we should not waste our money if we don't have a method. Psychology will help you to stop trading and losing, just like it will stop you from cutting your wrists, or injuring yourself - because the real question for those of us out there losing money consistently because of discretionary trading is - why are we hurting ourselves? Why did I lose money with discretionary trading, year after year, month after month for 12 straight years? Despite having created in the meanwhile an automated trading system that makes money? Why have I been trading on the side (discretionary) on my own, losing whatever the system made? Do I wish to not ever succeed? Did I really think I would help the system make more money? Sometimes I don't know which one is the answer. Right now I have a new rule that I won't even look at the markets all day long, until after close I will have to collect data, turn off programs and so on. Now, if I won't respect this rule, after losing as much as I lost recently because of my discretionary trading, then it will mean that something inside me wants to lose, or at least wants to break even. If I let it run, instead, it will have meant that I actually thought I was going to figure out a way to be as good as the system I created (or better). But now that I realize that I will never have its qualities (patience, alertness and self-control) there are no excuses anymore, all other reasons are discarded. If I still trade discretionary, it will mean that I want to lose.
There are a lot of old wives tales or market myth still floating around and the "90 % psych and 10% money management" or that it's 99% method rules are amongst the tall tales. First of all, everybody is different and trader psychology may have more importance with one trader and less importance with another trader depending upon what's occuring in their trading or personal lives on any given trading day. In addition, there are too many well documented trade journals (real trades), trading blogs (real trades) or whatever splatter all over the internet to argue against one or the other about which is important. My point is that you shouldn't be getting angry nor worry about which is important. Instead, if you trading method works or fails...you are responsible. Yet, if you were or were not properly prepared to trade on a given trading day...you are responsible. Just remember this...if two traders are trading the exact same trading instrument via the exact same trading method...one trader is profitable while the other trader is not... Something is wrong with one trader which implies trader psychology has more of an impact with one guy while the other guy saids it has very little impact. By the way, I once shared office space with several other traders and we often would take positions about the same time in a particular trade. I remember one time we were all Long about the same time with the difference between a few by 1 tick only. The markets took off northward on surprising economic data about 3 points... One guy dumped everything and cashed in with +3 point profits while another guy happen to be reviewing some court documents from his lawyer about his divorce (nasty divorce) and when the futures retrace back to a few ticks below his entry but not reaching the initial stop of - 2 points... He dumped his position for a tiny loss while others hanged on (stops not hit) to see the futures power back upwards +10 points where we began dumping our position. My point is that at a given moment in time for one trader...it was all about his soon to be ex-wife, legal documents, distraction, loss of discipline to stick to the method or anything else... Trading Psychology was important to one trader while someone else that nailed +10 points saids the psych stuff is mumbo jumbo. Mark
Everyone, Thanks for your inputs. First of all, on a grammatical note (way too few grammar issues on ET if you ask me), I must say that my use of the term "angry" was not appropriate. "Tired of"/"fed up with" would have been more accurate. Also, forgive the overal poor quality of my english. Travis, that is a fantastic way of putting things "The reason people look for psychological reasons for failure (and I did, it, too for many years) is that - not having a winning method - they say "why didn't I apply the stoploss?", thinking not applying the stoploss is the reason for their failure. But it is not true, since if you always applied that same stoploss, you probably would still have a negative balance. The truth, as you said, is that if you knew what type of a stoploss gives you an overall positive balance, you would always apply it, but you don't because you are not sure which stoploss level is the right one. So you mistakenly look for psychological reasons for your failure at trading, whereas what you don't realize is that you don't know what works and that is why you're not consistently using a stoploss (which you don't know if it works). So if anything the psychological question you should be asking is "why am I trading while I don't know a sure method of winning?".