Simon Gordon
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I always try to visualise the probable loss I could make on a trade, as well as the profit.
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Dao of Trading
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SOCRATES once said on here, "It's about getting it right". My signature is, "It's up to you". I don't want to sound arrogant, because i am not, far from it. These two statements are the 'raw' essence of the market. You need to understand them both in thier most basic form. The markets are about 'reducing' not 'introducing', it's the basis of science. I am obviously open to criticism here, but that's the way it is! Rudie.
martyschwartz
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RUDEBOY said:
Hi Rudeboy,
Actually I am not sure I am getting it. Can you expand on it? Thanks.
martyschwartz
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RUDEBOY said:
We change all the time... I would argue it would be hard for us not to change. The difficulties perceived for change are due to our fixations and habits. It becomes even harder if we fixate on the difficulties and failures. But I think one can do a lot to work around most of one's weaknesses instead of hoping for some kind of personal transformation. More clarity needed... yes... Altered ego... maybe not.
martyschwartz
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RUDEBOY said:
Trust me... I am changing all the time. I am older, fatter, dumber every day. Hopefully happier... and happiness has everything to do with enlightenment and not genetics. Happiness is definitely my basic measure of success.
martyschwartz
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Chapter 8. The Best Are Like Water
The best are like water.
Water benefits all things and does not compete with them.
It flows to the lowest level.
In this it comes near to the Way.
In their dwellings, they love the earth.
In their hearts, they love what is profound.
In their friendship, they love humanity.
In their words, they love sincerity.
In government, they love peace.
In business, they love ability.
In their actions, they love timeliness.
It is because they do not compete
that there is no resentment.
Water does not compete and it is equally happy in low places.
In business, they focus on their ability and skill sets. In actions, they do not hesitate and go with the flow. It is because they do not compete with others or themselves so that there is no resentment or fear of resentment... hence they do not hesitate.
In trading, internal conflicts cause hesitations in actions. These conflicts come from our attachment to our expectation when there is a difference between perceived reality and the expectation. Hope is THE four letter words that blind us from reality with emotions... It will be hard trading blindfolded and distracted.
About the only thing to do is making sure there is a proven edge in the method and keep taking the same trades the same way. Focus on developing the skill sets, learn how to take losses and expect drawdowns. Winners are not special nor are the losers. People tends to tamper with the process by introducing new elements with unknown effects at exactly the worst time in hoping to "improve" the process.
Blair Hull interviewed by Jack Schwager in the book "The New Market Wizards":
Jack: "What element of the blackjack playing experience do you believe contributed to your success as a trader?"
Blair: "The experience of going through extensive losing periods and having the faith to stick with the system because I knew that I had the edge was something that helped me a great deal when I went into the pit. Also, the risk control experience was very beneficial. In blackjack, even if you have the edge, there are going to be periods of significant losses. When that happens, you have to cut back your bet size in order to avoid the possibility of ruin. If you lose half your stake, you have to cut your bet size in half. That's a difficult thing to do when you're down significantly, but it's essential to surviving."
The best are like water.
Water benefits all things and does not compete with them.
It flows to the lowest level.
In this it comes near to the Way.
In their dwellings, they love the earth.
In their hearts, they love what is profound.
In their friendship, they love humanity.
In their words, they love sincerity.
In government, they love peace.
In business, they love ability.
In their actions, they love timeliness.
It is because they do not compete
that there is no resentment.
Water does not compete and it is equally happy in low places.
In business, they focus on their ability and skill sets. In actions, they do not hesitate and go with the flow. It is because they do not compete with others or themselves so that there is no resentment or fear of resentment... hence they do not hesitate.
In trading, internal conflicts cause hesitations in actions. These conflicts come from our attachment to our expectation when there is a difference between perceived reality and the expectation. Hope is THE four letter words that blind us from reality with emotions... It will be hard trading blindfolded and distracted.
About the only thing to do is making sure there is a proven edge in the method and keep taking the same trades the same way. Focus on developing the skill sets, learn how to take losses and expect drawdowns. Winners are not special nor are the losers. People tends to tamper with the process by introducing new elements with unknown effects at exactly the worst time in hoping to "improve" the process.
Blair Hull interviewed by Jack Schwager in the book "The New Market Wizards":
Jack: "What element of the blackjack playing experience do you believe contributed to your success as a trader?"
Blair: "The experience of going through extensive losing periods and having the faith to stick with the system because I knew that I had the edge was something that helped me a great deal when I went into the pit. Also, the risk control experience was very beneficial. In blackjack, even if you have the edge, there are going to be periods of significant losses. When that happens, you have to cut back your bet size in order to avoid the possibility of ruin. If you lose half your stake, you have to cut your bet size in half. That's a difficult thing to do when you're down significantly, but it's essential to surviving."
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martyschwartz
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RUDEBOY said:
What do you mean?
Hello, Marty. Mmm, one thing i will say is that trading can become quite arguementitive to say the least, but thats the nature of the beast. I read your post (109), water! My post (110) was agreeing with this, but, it's not that simple though. I agree with a lot of what you have posted, although it may be a bit too idealistic. To be at one with an ever changing medium is probably impossible, but to understand it is not so impossible. 'Understanding' maybe the 'water' aspect of trading/investing. To 'understand' and 'application' maybe your 'water' theory? Water could not settle on the markets, it would have constant ripples, and that would be a 'nice' period? Humans......are we all just gamblers? If the market(s) were to be so straight forward, everybody would be at it. The size of the stock market and who is involved tells you everything you need to know about it, and the niche we all need is there for the taking. Don't be like water, be like price? RUDEBOY.
martyschwartz
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Hi Rudeboy,
Yes, some of the stuff are definitely idealistic. Trading is never and will never be clean.
Actually I think price is like water in other ways... It does not have bias being too high or too low. The waves hitting the beach, retreats as soon as the water runs out. Just like the last "have-to" participant was taken out and the market reverses. :?:
Yes, some of the stuff are definitely idealistic. Trading is never and will never be clean.
Actually I think price is like water in other ways... It does not have bias being too high or too low. The waves hitting the beach, retreats as soon as the water runs out. Just like the last "have-to" participant was taken out and the market reverses. :?:
martyschwartz
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Chapter 9. Moderation
"Stretch a bow to the very full,
and you will wish you had stopped in time.
Temper a sword-edge to its very sharpest,
and the edge will not last long.
When gold and jade fill your hall,
you will not be able to keep them safe.
To be proud with honor and wealth
is to cause one's own downfall.
Withdraw as soon as your work is done.
Such is heaven's way."
Do not let the cup overflow. Avoid pushing things to the extreme because they tend to have counter-intuitive effects.
Do not overstay a position (liquidity dries up). Yet being overprotective and unable to take "proper" risk guarantee small profit now and drawdown over time (as the winners unable to cover the losers). Withdraw as soon as the trade is DONE.
This month proves to be a tough period for me as my system was down almost 10% but I am encouraged to see a little bounce in equity at the end. I am not particularly proud of the fact that I tamper with my system on a few occasions (with mixed results). That is not OK and I have to watch my fat fingers.
"Stretch a bow to the very full,
and you will wish you had stopped in time.
Temper a sword-edge to its very sharpest,
and the edge will not last long.
When gold and jade fill your hall,
you will not be able to keep them safe.
To be proud with honor and wealth
is to cause one's own downfall.
Withdraw as soon as your work is done.
Such is heaven's way."
Do not let the cup overflow. Avoid pushing things to the extreme because they tend to have counter-intuitive effects.
Do not overstay a position (liquidity dries up). Yet being overprotective and unable to take "proper" risk guarantee small profit now and drawdown over time (as the winners unable to cover the losers). Withdraw as soon as the trade is DONE.
This month proves to be a tough period for me as my system was down almost 10% but I am encouraged to see a little bounce in equity at the end. I am not particularly proud of the fact that I tamper with my system on a few occasions (with mixed results). That is not OK and I have to watch my fat fingers.
martyschwartz
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I actually paid for a copy of Lao Tzu's TaoTeChing translated by Red Pine. It's pretty good with various commentaries by the ancients even including some esoteric meanings such as "breathing should be relaxed". I will try to finish what I have started and this will motivate me to finish the book.
Chapter 7:
"Heaven is eternal and Earth is immortal
the reason they're eternal and immortal
is because they don't live for themselves
hence they can live forever
thus the sage pulls himself back
but ends up in front
he lets himself go
but ends up safe
selflessness must be the reason
whatever he seeks he finds."
Heaven and Earth's vital energies are inexhaustible because they don't fixate on themselves.
Whenever appropriate, the sage conserves his energy by pulling himself back.
When there is no good setup, a trader should not trade. This will put him ahead when others get chopped. From backtesting, one can see that a very few trades a day can be very profitable in theory. It is OK to let go of suboptimal trades.
Whenever appropriate, the sage gives up himself but ends up safe.
A trader should accept the risks of good setups and let the trades reach their potential (assuming the methodology does work).
I don't think there is a choice here. I don't think one can be profitable unless one accepts the risk of the trade and let it reach its target. Trading on egg shells is not the answer either. I think people trading on egg shells (including myself) because either their setups do not really work or they have not accepted the risks. One cannot grow and the equity curve will just go back and forth. You got to be there! Do not limit or fixate your ability as a trader and let the market tell you how much you can make.
Risk your ego when opportunity is indeed present. Profits will be there over time.
Chapter 7:
"Heaven is eternal and Earth is immortal
the reason they're eternal and immortal
is because they don't live for themselves
hence they can live forever
thus the sage pulls himself back
but ends up in front
he lets himself go
but ends up safe
selflessness must be the reason
whatever he seeks he finds."
Heaven and Earth's vital energies are inexhaustible because they don't fixate on themselves.
Whenever appropriate, the sage conserves his energy by pulling himself back.
When there is no good setup, a trader should not trade. This will put him ahead when others get chopped. From backtesting, one can see that a very few trades a day can be very profitable in theory. It is OK to let go of suboptimal trades.
Whenever appropriate, the sage gives up himself but ends up safe.
A trader should accept the risks of good setups and let the trades reach their potential (assuming the methodology does work).
I don't think there is a choice here. I don't think one can be profitable unless one accepts the risk of the trade and let it reach its target. Trading on egg shells is not the answer either. I think people trading on egg shells (including myself) because either their setups do not really work or they have not accepted the risks. One cannot grow and the equity curve will just go back and forth. You got to be there! Do not limit or fixate your ability as a trader and let the market tell you how much you can make.
Risk your ego when opportunity is indeed present. Profits will be there over time.
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martyschwartz
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Sorry, I should have started on Chapter 10... my mistake.
This "cut losses quickly and let profits run" IMO only works for certain setups trading S&P intraday. If your entry is not superior, you might need a bigger stop or it would whipsaw someone's college fund out of you. If you have no idea about the potential of your trades, you cannot execute the "let profits run" part effectively. Actually the guy who helped me out flatly stated that the adage does not work for intraday S&P trading. He scales into a pullback up to a point (averaging losers) and take profits quickly. I have evolved beyond that after a long struggle and came back to this "cut losses quickly and let profit run." It is not a generalization!
If your setup does not work for you, you will find taking profits quickly and closing down shop early when ahead help stop the bleeding initially. But it was very hard for me at least to grow something out of it (I know another trader who does this successfully). I read somewhere that the entry is not important but the trade management is, I have to disagree. I think the type of trade management is a function of the entry.
:?:
This is the new translation I am using:
http://www.amazon.com/exec/obidos/t...102-5989514-6046518?v=glance&s=books&n=507846
This "cut losses quickly and let profits run" IMO only works for certain setups trading S&P intraday. If your entry is not superior, you might need a bigger stop or it would whipsaw someone's college fund out of you. If you have no idea about the potential of your trades, you cannot execute the "let profits run" part effectively. Actually the guy who helped me out flatly stated that the adage does not work for intraday S&P trading. He scales into a pullback up to a point (averaging losers) and take profits quickly. I have evolved beyond that after a long struggle and came back to this "cut losses quickly and let profit run." It is not a generalization!
If your setup does not work for you, you will find taking profits quickly and closing down shop early when ahead help stop the bleeding initially. But it was very hard for me at least to grow something out of it (I know another trader who does this successfully). I read somewhere that the entry is not important but the trade management is, I have to disagree. I think the type of trade management is a function of the entry.
:?:
This is the new translation I am using:
http://www.amazon.com/exec/obidos/t...102-5989514-6046518?v=glance&s=books&n=507846
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Mindfulness
Hello,
I am very surprised to see a thread on Eastern thought. The following is from a teaching session of Thich Nhat Hanh; it very much captures my internal state when I am trading well. It's an unusual feeling--a bit distanced from things and standing apart from myself, realizing, "Here's a place where I used to place bad trades." I still feel something of the urge to put on the bad trade, but the part of me that stands apart from the habitual trader is stronger and keeps me as the observer of my tendencies.
I lose that observing capacity when I trade badly; I am no longer mindful in trading. The feeling after a bad trade is regret, but not so much the regret of losing money. It's almost a kind of guilt--a recognition that I lost something greater: my awareness of self. Despite many years as a trader and psychologist, I have only recently learned to embrace that guilt and accept it as a motivator. For years I have observed markets. At my best, however, I observe myself observing markets. As I am writing this, I am wondering why, amidst all the writing I do for websites (including this one and my own), I have not written more on this topic. Perhaps I have not sufficiently embraced my guilt, after all... :idea:
Brett Steenbarger
http://www.plumvillage.org/teaching...st 6 Transforming Negative Habit Energies.htm
"Our joy, our peace, our happiness depend very much on our practice of recognizing and transforming our habit energies. There are positive habit energies that we have to cultivate, there are negative habit energies that we have to recognize, embrace and transform. The energy with which we do these things is mindfulness. Mindfulness is a kind of energy that helps us to be aware of what is going on. Therefore, when the habit energy shows itself, we know right away. "Hello, my little habit energy, I know you are there. I will take good care of you." In recognizing it as it is, you are in control of the situation. You don’t have to fight it; in fact the Buddha does not recommend that you fight it, because that habit energy is you, and you should not fight against yourself. You have to generate the energy of mindfulness, which is also you, and that positive energy will do the work of recognizing and embracing. Every time you embrace your habit energy, you can help it to transform a little bit. The habit energy is a kind of seed within your consciousness, and when it becomes a source of energy, you have to recognize it. You have to bring your mindfulness into the present moment, and you just embrace that negative energy: "Hello, my negative habit energy. I know you are there. I am here for you." After maybe one or two or three minutes, that energy will go back into the form of a seed, in order to re-manifest itself later on. You have to be very alert."
Hello,
I am very surprised to see a thread on Eastern thought. The following is from a teaching session of Thich Nhat Hanh; it very much captures my internal state when I am trading well. It's an unusual feeling--a bit distanced from things and standing apart from myself, realizing, "Here's a place where I used to place bad trades." I still feel something of the urge to put on the bad trade, but the part of me that stands apart from the habitual trader is stronger and keeps me as the observer of my tendencies.
I lose that observing capacity when I trade badly; I am no longer mindful in trading. The feeling after a bad trade is regret, but not so much the regret of losing money. It's almost a kind of guilt--a recognition that I lost something greater: my awareness of self. Despite many years as a trader and psychologist, I have only recently learned to embrace that guilt and accept it as a motivator. For years I have observed markets. At my best, however, I observe myself observing markets. As I am writing this, I am wondering why, amidst all the writing I do for websites (including this one and my own), I have not written more on this topic. Perhaps I have not sufficiently embraced my guilt, after all... :idea:
Brett Steenbarger
http://www.plumvillage.org/teaching...st 6 Transforming Negative Habit Energies.htm
"Our joy, our peace, our happiness depend very much on our practice of recognizing and transforming our habit energies. There are positive habit energies that we have to cultivate, there are negative habit energies that we have to recognize, embrace and transform. The energy with which we do these things is mindfulness. Mindfulness is a kind of energy that helps us to be aware of what is going on. Therefore, when the habit energy shows itself, we know right away. "Hello, my little habit energy, I know you are there. I will take good care of you." In recognizing it as it is, you are in control of the situation. You don’t have to fight it; in fact the Buddha does not recommend that you fight it, because that habit energy is you, and you should not fight against yourself. You have to generate the energy of mindfulness, which is also you, and that positive energy will do the work of recognizing and embracing. Every time you embrace your habit energy, you can help it to transform a little bit. The habit energy is a kind of seed within your consciousness, and when it becomes a source of energy, you have to recognize it. You have to bring your mindfulness into the present moment, and you just embrace that negative energy: "Hello, my negative habit energy. I know you are there. I am here for you." After maybe one or two or three minutes, that energy will go back into the form of a seed, in order to re-manifest itself later on. You have to be very alert."
martyschwartz
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Hi Brett,
I enjoyed many of your posts. I guess we tends to revert to our ingrained old habit when under stress. I have tried applying meditation ( = awareness) to my trading but my mind is too weak and not trained enough. I found slowing down the breathing do more in my case. As Buddhist tantra stated that the body is really mind. If you lose your head, take control of your body (breathing in this case). Regarding guilt, Buddhism suggests different levels of approaches:
1) Leave it alone; DON'T PUSH IT AWAY; don't play with the content.
2) Recognize it is no different from any other thoughts or feelings in its nature. It's our fixation in the content that taints it.
3) Recognize it is no different from the nature of mind itself. Assuming we know the nature of our own mind.
To a true Buddhist practitioner, more the guilt the better because they add fuel to the fire of his/her wisdom. To a mere mortal like me, please leave me alone!
Regards,
William
I enjoyed many of your posts. I guess we tends to revert to our ingrained old habit when under stress. I have tried applying meditation ( = awareness) to my trading but my mind is too weak and not trained enough. I found slowing down the breathing do more in my case. As Buddhist tantra stated that the body is really mind. If you lose your head, take control of your body (breathing in this case). Regarding guilt, Buddhism suggests different levels of approaches:
1) Leave it alone; DON'T PUSH IT AWAY; don't play with the content.
2) Recognize it is no different from any other thoughts or feelings in its nature. It's our fixation in the content that taints it.
3) Recognize it is no different from the nature of mind itself. Assuming we know the nature of our own mind.
To a true Buddhist practitioner, more the guilt the better because they add fuel to the fire of his/her wisdom. To a mere mortal like me, please leave me alone!
Regards,
William
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