Calling all "Senior Members T2W" Experienced traders! Help Newbies?

[dbphoenix]

I see your point and agree that the answer is to have no emotions, with no emotions to hinder your trading you can progress providing your development of your method is actually correct. There is far more chance it is if it has been produced without emotions.

In the point above I was trying to illustrate some people just cannot be bothered to work for something, they want a quick fix. A friend of mine was impressed with some profit I obtained recently and wanted to be shown how I went about my trading. After this his response was could I trade for him. he did not wish to do it himself because he could see it involved a commitment on time and effort which he did not wish to give. Easier to try and get someone else to do it. No commitment.

However, the response you describe is not the sort of emotional response that is triggered when being stopped out or failing to use a stop or losing money on a trade etc etc. This discussion could easily go far afield. Try to focus on the emotional issues that are directly related to trading, e.g., fear of failure or loss, greed that nullifies a trading plan, etc. Lack of commitment is a detachment and is therefore unemotional.

 

[dbphoenix]

DBP,
we may simply have a language problem here ,but for clarity when you say "let go" what process do you envisage someone goes through for that action to occur ?

For one, include failure in the trading plan. For another, accept the unavoidable fact that there will be losses. Lip service alone won't do it. If one can't accept the fact of failure and loss and can't resolve whatever issues are preventing him from accepting the fact of failure and loss, he needs to quit. Today.

 

[JumpOff]

1. Study price movement.

2. Develop a set of preliminary hypotheses which take advantage of these movement and test them according to standard methodology.

3. Decide what strategy will best take advantage of what you think you've found.

4. Decide what tactics you're going to employ to implement it.

5. Carefully define the setups which put these tactics in play.

6. Develop a trading plan around this strategy, these tactics, and these setups.

Add to these steps a number 7 sort of like barjon said. (he said go back and confirm). I prefer the word evaluate (which indicates you don't expect to confirm your original hypothesis). Then start back in at #1.

When people in lab coats do this in their chosen field - they call it "science."

JO

 

[kevin546]

dbphoenix

Fair enough, it is an issue not an emotion.

With regard to post 473, are you not also describing in 'failure in a trading plan' and not being able to let it go an aspect of unlearning.

Fear and Greed, what other emotions do you consider hinder trading.

 

[kevin546]

7. Continue to evaluate

 

[dbphoenix]

dpb

hear, hear ( have I said that before )

There is a 7 which makes it a continual loop. ie: Go back to 1 regularly and confirm (and re-confirm) 2 to 6.

Correct. "2", of course, includes such a loop, if one knows the steps in the scientific method. And the plan must of course must be continually re-evaluated.

Which is one reason why I try to avoid making specific remarks about strategy. I commented recently that I was trading only lower highs and higher lows and retracements these days, and more than one person got all upset because I said a year ago that I was trading breakouts. Well, that was a year ago. I'm not even doing what I was doing three months ago. If I were unable to adapt, I'd be broke.

 

[Gardan]

DaveJB

Gardan,
ref your #447 - my apologies, I seem to have been mistakenly identified as Zenda somehow, in the past... I'm actually on holiday currently, and launching a new program etc so whilst I'm on here quite frequently it is for a few minutes at a time, which means the flow of discussion on a thread gets a bit disjointed and in this case I overlooked your question.

I am not Zenda. Looking back at 31/32 I see what you mean - I didn't actually twig the first time around, but it does indeed look like Chartman was suggesting that I was Zenda... he started that post by saying 'well Zenda' so I assumed that is who it was aimed at... I DID wonder at the time about it, as I couldn't see a post from Zenda, but assumed it was just one of those things.
Chartman being a mod I'd have thought he could check identities like that - Skim does, so if Chartman actually is at the root of this Dave/Zenda confusion I wish he'd have checked a bit more first.

"Teddy" - that was a reference to how the Basement thread ended, Socrates posted in a manner I found somewhat immature, phrases referring to throwing teddy/dummies out of cots/prams etc seemed appropriate.

There is no need to apologise, if posts by others have led you to assume I am using multiple nics, and resortting to subterfuge to make invalid points then that is hardly your fault - neither do I blame Chartman, or anyone else for it, it is the fault of the board setup that this is possible... it may be that T2W is technically unable to prevent it, so even that isn't a criticism, just an observation.

As for vague - I did post earlier that I was definitely against multiple nics, and I was not doing that myself , what exactly is vague about that I'm, err, a little vague? <g>

Dave

Dave thank you for your kind reply, since as you have pointed it was a technical hitch, I apologise for any confusion I may of instigated.
My point about being vague was directed to the question which you said above you did not twig and not to your view on multiple nik's, which is very clear, which I applaud you on.

Now you have cleared this up in a very understanding and professional manner.
There is no more to say except , if you accept my apologies, I would be extremely grateful

Kind Regards Gary

 

[dod]

fowkesp

Thanks for the link. I read that original Sunday Times article too, and even wrote to AL at the time. How fascinating to discover that the source of learning for all these traders is the same.

 

[JumpOff]

Tools of the trade

If we look at the science of trading, one of the first things that pop into my head is - what kinds of situations and tools do I need in order to complete step 1 (observing prices) for the first round.

A Chemist needs a smooth non-reactive surface, beakers, burners, elements, compounds, goggles, shower station, sink, computer, note book, pens..

A limnologist needs waders, nets, a boat, microscope, gps and depth finder, sample bottles, shovel, computer, notebook, pens..

Well, I could go on - but I'll save the screen real estate and suggest that one of the most important "tools" for a new trader is a journal. This is where you record what you see and your thoughts about it. It's wonderful (and embarrasing too) to see how differently I am thinking now, than I was when I embarked upon the adventure of learning how to read a chart.
JO

 

[dbphoenix]

Well, I could go on - but I'll save the screen real estate and suggest that one of the most important "tools" for a new trader is a journal. This is where you record what you see and your thoughts about it. It's wonderful (and embarrasing too) to see how differently I am thinking now, than I was when I embarked upon the adventure of learning how to read a chart.
JO

It also helps to know just what it is that one is looking at:

 

[fowkesp]

fowkesp

Thanks for the link. I read that original Sunday Times article too, and even wrote to AL at the time. How fascinating to discover that the source of learning for all these traders is the same.

dod,

I've got the original AL article in my cuttings file somewhere, and amazingly, afer having a quick look, I find i've still got his phone number in my Outlook contacts

Not sure about the FTS mention - that was Peter Hall, wasn't it, down in Porlock?

Paul

Added later: this post refers to an earlier post I made, which has since been "disappeared", presumably by a moderator, with no explanation. The post referred to a Sunday Times article from 1998 which mentions some well-known traders, including Socrates. As this ST article is in the public domain, I see no problem in referring to it.

Added even later:

It seems T2W has been here before on all this, see: http://www.trade2win.com/boards/showthread.php?t=10833

 

[bracke]

dbphoenix

Your 6/7 point plan will be of interest to new and maybe not so new traders.

Some will be thinking how they develop the 6/7 points further.
Are you able to suggest a suitable book which will help.
There are hundreds of books on trading/TA so it would be very useful if you could point in the right direction which will provide the practical help required

Regards

bracke

 

[DaveJB]

Gary,
no apology is required at all, I only expect them from those I think have deliberately wronged me and you haven't done that. You were working from the information supplied, in your place I might well have drawn the same inferences, only a miserable git would be offended by that.

The only real blame lies at the door of those who hide behind nics to spread damage on often the flimisest of evidence or pretext, and with 21,000 members it's obvious that at least a few of them will be nuts.

Dave

 

[dbphoenix]

dbphoenix

Your 6/7 point plan will be of interest to new and maybe not so new traders.

Some will be thinking how they develop the 6/7 points further.
Are you able to suggest a suitable book which will help.
There are hundreds of books on trading/TA so it would be very useful if you could point in the right direction which will provide the practical help required

Regards

bracke

I'm understandably prejudiced toward what I've written myself (otherwise, I wouldn't have written it). The pdf below will provide you with more information:

 

[dbphoenix]

The following was recently posted elsewhere. It may help as a refresher:

The essential elements of the scientific method are traditionally described as follows:

- Observe: Observe or read about a phenomenon.

- Hypothesize: Wonder about your observations, and invent a hypothesis, (sometimes one's hypothesis is initially nothing more than a "guess"), which could explain the phenomenon or set of facts that you have observed.

- Test a hypothesis

- Predict: Use the logical consequences of your hypothesis to predict results (e.g., measurable experimental values) that must be found if the hypothesis is to be judged correct -- whether it is 'complete' or not.

- Experiment: Perform experiments to test those predictions. (Note that great precision regarding a negative result might not be required to falsify a hypothesis.)

- Conclude: Failure to see the predicted results from a well designed and implemented experiment is clear indication that the hypothesis is defective. Try again. Seeing the predicted results is an indication that the hypothesis is acceptable though not 'confirmation' or 'proof' of its correctness.

- Evaluate: Search for other possible explanations of the result until you can propose no better account of your data. Formulate a new hypothesis which may better explain the experimental data and the original observation.

- Repeat

 

[tradesmart]

With reference to post http://www.trade2win.com/boards/showpost.php?p=133954&postcount=432 - should the green dot under TheBrambles avatar now read –

TheBramble is now on Route 66……..?!?

Cor………. :-0

 

[stevespray]

Evening…..

Some more meandering thoughts based on my own experiences and observations.

It was mentioned in a post earlier that the hardest part of trading is i) cutting loses quickly, and ii) letting profits run. I brushed over this point in my earlier post this afternoon. (Post #458). The basic reasons why this is difficult I feel I have already outlined in that post. What I would like to expand on is how a traders inability to handle profits and losses ultimately stacks the odds against him in most cases. There are also a few side issues which I personally feel are relevant to these points which I would also like to introduce. These side issues are purely observations that I have personally made and I would enjoy further discussion on any points which other may feel are relevant.

Firstly, if we imagine that we can deal equally with profit and loss then we are generally going to be somewhere around breakeven on our scale of overall success. Our profits are simply wiped out by our losses. Somewhere along the line there will be dealing costs and data fees etc. Generally we will not make any meaningful money.

With that in mind we need to consider why it is so ‘easy’ to lose money in the markets. Obviously, due to the amounts that we lost as new players we know that it is not simply dealing costs. The losses where down to bad trading, not much doubt about that. Therefore is it possible to suggest that if we had simply done the reverse then we would have made a lot ? This is where it starts to get even more confusing. The answer is both ‘yes’ and ‘no’. It is ‘yes’ because, in the case of individual trades, the big losers would have been big winners. However, in the context of the longer term, your trading strategy would still cause you problems because of the lack of money management and hence the answer is also ‘no’.

Let us analyse this situation still further. I have found that many people perceive that there are very simple choices which dictate between success and failure and that, if you failed, then you’d of succeeded if you’d done everything the other way around. This is most certainly not the case. This is because, put simply, your account balance is stacked against everyone else’s added together. Therefore it is impossible for you to reverse everything but only the things that you control. You do not have unlimited resources with which to follow your dream and you certainly don’t have everyone else’s account balance under your control. Your resources are limited to your account balance and the flexibility that balance provides (or not as the case may be). The basic argument is that you account balance is nearer to zero than it is to infinity – in order to do everything in reverse you would also need to reverse that fact which is completely impossible.

Having said all that there are a number of these ‘side issues’ which I would now like to introduce. As I said, these are my experiences and should in no way be considered to be facts but just purely my interpretations of what I have observed.

When I go away on holiday, which is normally several times a year, I like to take a couple of well recommended trading related books with me. Trading is really my hobby and I enjoy studying it a length. I do not consider trading to be my job or my occupation. Having said that I confess that I do make quite a lot of money from trading which does probably drive my interest.
Anyhow, these books, I tend to sit by the pool or on the balcony and read away when I have a spare 10 minutes or more. I like to really get into what I am reading so generally if I am disturbed or feel that I haven’t given a particular chapter enough concentration I will re-read it when I next pick the book up. Many years ago (I’m only 34 mind), when I first started reading these books, I used to think that each and every book was going to instantly make me a fantastic trader. Needless to say, it didn't take me long to dispel the myth. Now, when I read a book, I seem to get far more enjoyment from it than I used to. This is because I actually try to immerse myself in the character which is being written about. I see the book as less factual but more about getting a feel for a particular trader. Of course this is not always possible because some books are written in such a manner as to attempt to be half way to teaching. I do look at these books but find less value in them. I tend to scan read and pick out stuff which jumps out at me.

There are a few points which I have noticed about many of the successful traders which have been covered. The main one is that most are ‘self taught’. There is rarely a reference to someone else’s methods having an effect on the trader being covered. I feel that this is of key importance. Many people seem to be looking for a ‘grail’ of some kind and expect this grail to be presented by someone at some point. This never happens. You will need to start your own research and develop methods and systems which suit you and you alone. If this is daunting then take your time exploring all possible avenues. Don’t be disappointed by long blind allies.
Secondly, and almost as importantly, and in fact some may judge more importantly, is that fact that most successful traders slowly commit to positions. They are prepared to ‘cost average’ winners once they suspect a trend maybe forming. This is of course extremely difficult to comprehend if you are struggling still with simply cutting losses and running winners. Now, not only are you being asked to run winners but also to add positions which effectively means that the market has to reverse considerably less before you will lose all your profit and suffer a loss. This is the opposite of the rookie who cost averages a losing trades and then goes on to lose half his account balance. My personal guess is that we all recognise the power of adding to positions but this recognition is more likely to be through bad experiences than through successful ones.
In my opinion, no matter what time frame you are trading, you must be prepared to add to winning trades. Unless you are trading a very big time frame (in which case you would be an investor rather than a trader) you are unlikely to be anything more than a breakeven trader unless you are prepared to add to your positions. There are obviously exceptions to this but the concept is to train the many rather than except the few.
In my opinion, the most successful traders in history where those who joined a trend early and then backed it increasingly more heavily as the trends unfolded. This is the correct way to get leverage with your money.
The problem, from a psychological point of view, with this system is that you may get quite a few false dawns. This can be very bad for your confidence especially if a small trend has developed over a space of time only for the market to reverse and take out all your positions in a very small space of time. With systems like this operators find that their percentage of actual winning trades is very low, sometimes less that 30%. The upside is that you only need a few winners to more than wipe out the losses.

This brings me onto the next point which is regularity of earnings. As I just pointed out, a system which produces a low percentage of winning trades is likely to lead to sporadic earnings. Human nature does not like this. It much prefers that your daily bread is exactly that….’daily’. This is another point which certain traders have clearly dealt with. Some of them not only go months without a good winner, but also continue to finance the small but regular losers as well. That has to effect all but the strongest of people surely ?

To sum up. It is my belief that the investigation of mathematics is essential to deal with many of the problems and reasons listed above. It is only by having a firm belief that people can possible continue trading over the longer term. A large part of that belief must be drawn from clear factual evidence which has to be understood. Surely mathematics is the only gateway to such evidence.

Steve.

 

[ChartMan]

I don't recall Bramble saying that. What we do know is that there are a few on this BB with multiple nicks. To the best of my knowledge, Soc is not one of them. Neither is Bramble.

I stand corrected.Socratees does not have multiple nicks.

 

[chump]

Just to draw a few points together that I have alluded to in this thread here it is but in the words of someone who has clarified the issues better than I have......

"Unfortunately according to the findings of a number of clinical studies , overconfidence seems to be a cognitive bias (I called this bullish predominance) . In other words ,the mind is proabably designed to extract as much information as possible from what is available, but does not realize that the available information is only a small part of the total necessary to build an accurate forecast ( could be called hypothesis) in uncertain conditions. Under conditions of anxiety and uncertainty , with a vast interacting web of information the market becomes a giant Rorschach test (this I think I alluded to by referring to the issue of relevancy). The trader sees any pattern he or she wishes to see ( I called perceptual bias) . In fact Traders can find patterns that are not there , says recent research - a phenomenon called illusion perception " ...well that should be enough for pause for thought ( but of course this does not describe you does it )

Steve, I appreciate your posts...

 

[JumpOff]

Just in case there are some complete newbies lurking about:

Why is it so hard to "let your winner's run?"

Well if you enter a position, and it takes off like a rocket in the direction you want, and never had a pullback, and then just sort of fizzled out and went nicely horizontal, - why of course everyone would "let them run.."

Markets rarely do this, they have a kind of 2 steps forward, 1 and 1/2 step back kind of pace that at first makes it difficult to know when to get out. It is very common for new traders to recognize a move in a delayed manner, and get in late. -Just about the time the 1 1/2 steps back are occurring. After a maximum amount of pain, the position is finally closed at a loss and then - lo and behold, the market reverses and zooms off in the original direction. After about 10 times in a row, the newbie says, "I must need to widen my stops," when the correct response is, " I need to learn to pick a better entry point."

The other thing that happens after consistently getting in late (or early) is that the new trader becomes so accustomed to losing (nearly every time), that any small gain is seen as a successful trade. This leads to the ridiculous pattern of risking a 10 point spread and commission, and then feeling satisfied with gaining 5 points net on a trade. - Well that kind of risk reward ratio will eat you alive in no time!

All of this can be worked out with zero risk by using a simulator. All the brokers/dealers have them for a very low monthly fee - or free. The purpose of it is to learn how to pick an entry, where to set a stop, how to know when to get out, and most importantly - how to sit on your hands and just watch when there is no clear setup. Success at paper trading does not guarantee success at trading live - there is the added complexity of emotional response when real money is on the line. But I think I can safely say that if you can't paper trade on a simulator with consistent performance, the real market is not for you.

JO