Uncertainty and Risk in Short-Term Trading

Discussion in 'Psychology' started by Joe Ross, Mar 16, 2007.

  1. Trading and risk go together. Short-term trading denies the trader the strategy of minimizing risk by holding a position over a longer time period. Short-term traders must learn to use momentum and volatility. Volatility can force short-term traders to become scalpers. I know; often I am one of them. However, the scalping, in turn, causes a lot of "noise" in the market. When enough people are scalping short-term, the market becomes full of noise. At that point, prices begin to fluctuate rapidly and risk is increased. In that respect, scalping can work against short-term trading.

    All of us have a built-in aversion to risk. Traders, if they can still pull the trigger, have no problem entering into what seems to be a sure win — but when it comes to a trade with a clear possibility of loss, they hesitate. Traders in general don't like taking losses, and will do anything to avoid taking them. They will take even greater risk in the hopes of avoiding a loss. We see it all the time: a trader holds onto a trade while the losses continue to mount. They will pretend that the losses aren't really there. Rather than realizing a loss, they stay in the market and hope they will not be wiped out. The ultimate manifestation of this is seen in the dead accounts; accounts that don't trade, which amount to money in the billions held by brokers, simply because the trader leaves the money rather than close out the account and admit defeat. There is always the "hope" that some day, sometime, they will trade again. The State of Illinois gets rich from those accounts, because after a certain number of years they have the right to confiscate them.

    If you are going to be a professional trader, you cannot avoid risk and losses. They are simply a part of the business of trading. You don't have to learn to love them, but you do have to learn to accept the fact that they are a reality of trading, and work at disciplining yourself to keep them to a minimum.
  2. joe what are your emotions while in the market?

    What are your emotions when you are sidelined for some reason?

    What are the emotions that you have that result from your uncertainty?

    From the risk you have in trading?

    What are your psychological feelings?
  3. virgin



    Don't take this Jack too seriously, he claims to always be in the market without ever a single loss and to capture 3 times the daily range.
  4. Thanks for your post, Joe. It inspired an epifanny in me. In all the time I have been here, I have failed to make the connection between what I tell my trading therapy clients and what is wrong with ET: BE QUANTITATIVE! I see words that imply quantity: risk, time, momo, volatility....but no fucking NUMBERS. Adjectival writing makes for pretty prose, but it's hard to apply in practice.
  5. bighog

    bighog Guest

    Joe Ross

    I am assuming you are not the Joe Ross that i read about about 10 years ago and spent approx $700 on his overprised but very worthwhile books. (these books are mostly about daytrading before electronic order entry.) Am i Correct?


    PS, these books might still have value for traders looking to become more profitable with short time trading, but i say it is also all "out there" a lot less cheaper. One of Joe Ross main points about trading was avoiding risk. Joe was about making sure the trader realized there always has been losing trades and always will be losers. I have not looked at his latest stuff because i am past the days of books and rereading the same books. Gee, sooner or later we either "GET IT" or end up broke.

    A main concept about understanding trading is that losses are part and parcel of the game, always have been always will be. Anyone that says you will be emotionless and free of the natural human feelings of fear and greed are trying to sell you something.
  6. All but one of my books (Trading by the Book) has been updated for electronic trading and today’s markets.

  7. In case any of you are interested there are CURRENTLY 7 JOE ROSS trading manuals or courses, listed on Ebay at a NICE Discount!







    7) ELECTRONIC TRADING ‘TNT’ IV Tips Tricks and Other Trading Stuff
  8. Rocko1


    With all due respect Joe, I'm not sure if that's correct. I could be wrong here, please correct me if I am.
    When you understand the exact probabilities of each trade, average size of winners and losers in term of %, and potential outliers; then wouldn't the risk taken per trade not differ between positions that take a week or a year?
  9. Exactly, he lost in me in that first sentence already.
    Joe, please explain, how do you minimize risk by holding a position for a longer time period? I would say the exact opposite.

  10. Joe turns out to be incorrect.

    The statement he is making is to direct a person to a particular style of trading he advocates.

    He does a thing he calls trending and consolidating in an 15 to 85% proportion.

    If anyone remembers the wharton school graduate "Mr. Market" you will see the strategy applied.

    If you enter and a trade is not making money, you hold for a period of time and then it may make money. Over a long time the market (during hours it is closed, it tends to go up). Joe finds "hope" in this and ignores the time value of money, mostly.

    Mr. Market employed anther technique. He kept losers and when his portfolio filled with losers, he simply started a new portfolio and screwed it up over time yet once again.

    The alternative to Joe's approach is to just trade stocks that have high money velocities and be on the right side of the trend only.

    Joe does not answer questions often and his threads pop up when someone is trying to unload stuff they have bought from Joe.
    #10     May 20, 2007