Refreshing, yet nothing new

Discussion in 'Psychology' started by alexandercho, Sep 6, 2009.

  1. I agree, experience is a huge factor to your success in the markets. It's highly doubtful that any trader can really succeed by following a pure technical or pure fundamental approach. Eventually you find that your analysis proves to be wrong 90% of the time in the fullness of time.

    Why is that? Why do you think most people suggest throwing your money at 100 mutual funds? It's because markets move, companies go bankrupt, some pull fraud, economic cycles put influxes on companies and many other factors make some of the biggest companies in the US fail. E.G. US Rubber, Lehman Brothers, General Motors, and etc.

    Circumstances change, that's why we day traders are at an advantage because we only have to be right momentarily. That's the kicker, if your right for the duration of the time in your trade none of these factors matter.

    That's why most people will never achieve the level of Warren Buffet, because Warren Buffet doesn't try to jump 10 ft bars he walks over 1ft bars. simply speaking he invests into the most predictable investments, with little debt, and consistent growth that usually outpaces the market average.

    That leads me back to my original point, why is our decision regarding companies wrong 90% of the time in the fullness of time, it can be summarized in a simple statistic 9/10 companies fail in the first 5 years, of the remaining companies in the next 5 years 9/10 of those will fail to. So within 10 years 99% of businesses will fail.

    The Dow Jones has also been subject to such fluctuations that is why a lot of companies have been taken off the market index. For instance, AIG, US Rubber, and General Motors. I cringe every time someone says the market will return a trader 10% compounded a year based upon the Dow index because it clearly isn't true because even the most selectively chosen companies to represent the most popular index that a lot of investors worship, also falls prey to the 99% failure rule. Thus the 10% is inflated making it look appealing to the novice who wants an easy shot at retirement but fails because it turns out that reality is harsh, and the financial industry is full of lies to bring in a fresh crop of losers just like the kings of Egypt needed a fresh pair of workers to build the old pyramids when the current workers were to old and weak to work.

    This summarizes why flexibility in the markets is absolutely necessary. A trading system should never be fully technical. Trading should also never be full fundamental. Eventually you get wiped out. You've got to keep a close eye on your trading in a fundamental, technical, and economical aspect. Simplify but leave as much detail in to make an educated trading decision. Experience is what will leverage your flexibility in trading and in the markets.

    If you do not pay attention to 6 month charts because your trading 10 day charts you will make a mistake. Likewise if you only pay attention to charts and not to fundamentals like earnings, GDP, consumer spending, loan modification, manufacturing, and unemployment reports. You will either lose money or potential profits. A system is necessary to keep your consistency but a system is not always going to guarantee your success in the markets. Having specific criteria may work for a while but when things change so must your criteria for a trade.

    For instance a trading system in a bull market should have a major difference than a trading system in a bear market. Your trading system should always be on the side of the stronger side. Your trading system should always be fine tuned to the circumstance your in.

    For instance it would make no sense for a trader to design a daily trading system that only works in evenings when that very trader has a day job to work at. All trading systems should be fine tuned to a traders own specific circumstance.

    A trader should always have an unbiased view point, and if your viewpoint is starting to become skewered, unrealistic, and flat out egotistical it is up the the intelligent trader to stop trading to avoid losses, due to ego.

    A trader must be self-contained and reduce emotions and have realistic expectations for what might work out, a trading system is a general guideline however a trader must look at the specific trade and see whether or not he may be wrong regardless of what the trading system may dictate. The system can go wrong; so it's best to keep your eyes open and if you have profits but some other factor is making your trade susceptible to other factors not covered in your system it is wise to pull out of a trade. Especially when your trading system was designed in mind to trade during times of higher volume, yet your trading at a time when theirs low volume for e.g. August to September.

    A trader, must remain flexible, use their trading system as a guideline but never call it full proof, a system can be designed for different circumstances, never use one system and call it all encompassing, you won't make money by using the same system in every circumstance. Systems must be designed for specific market conditions in mind.

    -Design Trading Systems for different circumstances
    -Reduce Risk by factoring in factors during a trade that may have not been considered in your trading system and react accordingly based upon these assumptions systems are guideline however the trading world is not static it's fluid
    -Have a realistic expectations for trades, do not be greedy, however let your profits run but not to long because those profits can run away from you especially if their volatile trades
    -Have an unbiased viewpoint while trading
    -Always know that your decisions will be wrong 90% in the fullness of time, when your day trading your here to be right for a short period of time and then leave. Whining about lost profit is unprofessional. It's unrealistic to expect perfect timing, understand that your chances of a perfect trade is less than 10% because your decisions are going to be wrong 90% of the time in the fullness of time. Understand that your here to be right for a short moment, then you dump your trades; Not to pick perfect tops and bottoms. What matters most is your bottom line and the fact that your trades are profitable most of the time. Like the old wall street axiom pigs get fed hogs get slaughtered.

    Theirs much more to trading, and I haven't even covered fundamentals, technical analysis, economical outlook, finding relationships between the three.

    Trading is the worlds most elaborate casino, the biggest, the wildest, and by far the most profitable when you can get it right. All of this will come with experience. No matter how pretty of a painting you paint over trading. Your here to make money and make your opponent lose. It's just like a casino a zero sum game. In zero sum game's you should be flexible and willing to do things others aren't in order to have things others won't have.
  2. zdreg


    you are impatient.and too quick to make a judgment. mr. cho is likely to add his commentary.
  3. Why do you think general wisdom is not useful information?
  4. anyhow, I'm glad you guys are taking this information seriously. If you have any input I'm all open ears.
  5. zdreg was talking to a troll whose posts you can no longer see, alexandercho, because the hard working moderators got rid of his unwanted ass.

    He was not talking to you.

    Good trading
  6. oh, woops my bad
  7. LOL, no problem. :D


    You actually make some very good points, and I'm sure we would all like to hear more about them.

    I see good trading as ultimately being a method where you design a method for identifying opportunities in the market where you take trades and you have a >50% (some even >75%) chance of success.

    Those opportunities don't come along very often, so a trader tends to spend most of their time sitting around and waiting.

    Designing other systems to take advantage of different opportunites in the market kinda comes along naturally. :)
  8. Eight


    At whatever bar interval you are looking at you can find patterns and trading methods that will get you profits equaling one to two bars worth of price movement at the very least and if you cherry pick you can catch very many bars worth of price movement... If I wanted to compete with Warren Buffett I'd put up charts of 10 year bar intervals on an index and buy when the index was depressed according to some measure, maybe price being below the lower Bollinger Band and momentum leveling off... some use the 200 week SMA on indexes and buy when price is below that.. they buy companies that are solid and paying dividends... as you shorten the bar interval you can drop the fundamentals like "solid and paying dividends" and replace it with "enough money is trading this thing so that I can get in and out".... and as you get to a very short bar interval you might stop using bars at all, sort of like in physics where you start going into quantum mechanics. You'd be looking at some averages of size in both directions away from the inside or something... same shit different interval...

    I'm jumping over one foot hurdles every day.. what a workout I'm getting, it's killing me.... NOT!!!

  9. Thanks for your inputs I appreciate it, I like how you guys have a realistic expectation and explanation for your trading :)
  10. MandelbrotSet, what kind of trading do you do? Forex, stocks, or Futures?
    #10     Sep 7, 2009