Efficient Trading

[the hare]

Look Socs has said he uses tight stops and high probability entries, both are interlinked, and you cant have one without the other.

What constitutes a tight stop is a different question altogether, it seams that people want Socs to say a tight stop is 12 pips when trading cable on a 15 minute chart, or 33 pips when trading swissy on a 30 minute chart , or possibly even 2.75 x ATR 14 on a 1 minute yen chart or 2 points on the DOW etc etc

Im not claiming anything like the level of experience or success as socs, but it becomes pretty obvious pretty quickly that its not that simple. Changing market conditions are only part of your worries. My mentor for example can use far tighter stops than me, we trade the same system but he has 8 more years experience than me, my stops are currently 2.5 times greater than his. I know HOW he defines stops, and I know HOW he defines entries and exits, but he gets into trades at a better price than me, out at a better price, and has a considerably better RR ratio. Why COS HES A BETTER TRADER THAN ME ! Socs revealing his method is absolutely pointless, unless you are Socs. Im sure that his methods would be as useless as a chocolate fireguard to 99% of readers.

Even more baffling is why Socs would be crazy enough to reveal details of methods and strategies, if Socs view of trading fits in with your overall philosophy listen to what he has to say, if it dosnt nothings ever going to change that viewpoint.

Once we have the initial stop set we then of course open an altogether different can of worms regarding how you manage the damned thing

not sure where this is taking is but just my 2 cents

the hare

 

[frugi]

Jimbo the idea is simply to keep the thread free from unconstructive clutter and from degenerating into the usual insult rallies that help nobody. This applies to everyone. You will see I have deleted several of Socrates' posts as well, but no doubt more unfounded accusations of privileged protection from the mods will follow.

Profitaker I take your point but this is not the market it is a board for civilised discussion and as such a minority of your comments are clearly spoiling this discussion for the majority.

 

[Profitaker]

Profitaker please note I have not deleted your posts concerning volatility etc. merely the inflammtory and off-topic ones (as I have those of others too).

Perhaps you would be kind enough to point me towards any "off topic" posts I've made ? I think you'll find they were rather on topic, depending on your allegance to Soc.

 

[tunnel1x1]

As usual an interesting discussion is is danger of being derailed by the odd sarcastic naysayer and the consequences of this are also the usual unwelcome ones, namely a bunfight. Please keep the thread on topic and let Socrates expand on his recent posts, if he so wishes, and indeed all the others who are sensibly contributing. Those who believe that any trader's skill is limited according to their own frame of reference are welcome to stop reading the thread, but not welcome to spoil it. Thanks. Profitaker please note I have not deleted your posts concerning volatility etc.

Thanks for stepping in. I was finding the discussion from Socrates interesting and of value. It brings a different point of view which is what I was interested in. Hopefully it will continue without malicious disruption.

 

[jimbo57]

Jimbo the idea is simply to keep the thread free from unconstructive clutter and from degenerating into the usual insult rallies that help nobody. This applies to everyone. You will see I have deleted several of Socrates' posts as well, but no doubt more unfounded accusations of privileged protection from the mods will follow.

Profitaker I take your point but this is not the market it is a board for civilised discussion and as such a minority of your comments are clearly spoiling this discussion for the majority.

OK Frugi. I think my point is we have read it all before, with the exception of the fact that Socs is using very tight stops some might say impossibly tight stops for most markets, and had huge long unbroken successions of winning trades.

I have traded succesfully for over twenty years and the only people I have ever known with such stops and such huge runs of success were the pit guys, the good ones, and their risk profile generally had more to do with the guy standing next to them than any great insight.

There is a reason that Socs threads descend in this manner, and again I would guess that it has more to do with the guy standing next to him (or behind him) than anything else

 

[Profitaker]

Profitaker I take your point but this is not the market it is a board for civilised discussion and as such a minority of your comments are clearly spoiling this discussion for the majority.

I wouldn't participate in anything other than civilised discussion.

The "the odd sarcastic naysayer" won't derail any decent thread - it's your friends handling of it that derails it !

May I contribute or not ?

 

[trendie]

As usual an interesting discussion is is danger of being derailed by the odd sarcastic naysayer and the consequences of this are also the usual unwelcome ones, namely a bunfight. Please keep the thread on topic and let Socrates expand on his recent posts, if he so wishes, and indeed all the others who are sensibly contributing. Those who believe that any trader's skill is limited according to their own frame of reference are welcome to stop reading the thread, but not welcome to spoil it. Thanks. Profitaker please note I have not deleted your posts concerning volatility etc. merely the inflammtory and off-topic ones (as I have those of others too).

I am sorry frugi, but that is garbage!

This thread has already been taken off-topic.
It started off as Brett Steenbarger describing how our mind-sets affect the way we percieve ourselves, and how these self-images can undermine/sabotage our capacity to trade the markets.
It is also enlightening in that it describes a simplistic mechanism ( a more detailed and complex description and solution elsewhere ) of how to tackle these issues, namely through a sort of emotional journal, and tackle negative mind-sets.
Funnily enough, wanting to be perfect and always right, being the most common cause of failing to pull the trigger, due to over-analysis.
Genuinely helpful start, which many may seek to explore further.

It has deteriorated into Socrates version of this.
THIS VERSION IS NOT HELPFUL..

It is being conducted by someone whose attitude is "I know whats what, and I am unwilling to give details"
OR only willing to give little bits of detail
OR only willing to give to those "worthy"
- how is that helpful

It is being conducted by someone whose approach to anyone who disagrees is a "return to your rock" - how is that helpful ?

These above attitudes are prima-donn-ish, controlling, and pompous.

Can we have another thread that genuinely remains on-topic by discussing Brett Steenbargers thoughts on tackling Negative Thought Patterns where opinions that may differ are not lambasted or ridiculed, and where any difference is approached thoughtfully and respectfully ?
( where people discuss as peer-to-peer not savant-to-guru )

 

[frugi]

Jimbo thank you for being reasonable. I admit Socrates' trading record is remarkable, but I would not say it is impossible. I have watched a gifted (electronic, solo) trader use 4 or 5 point stops on the Dow and make a multitude of live consecutive trades with such consistent and breathtaking accuracy (exits too) that my whole view of what is possible in the market was fundamentally changed.

You are right that such talents are very few and far between, in the absolute minority.

I would say the reason that threads descend in this manner is because some people simply cannot believe that such things are possible and thus accuse those that claim to be able to do it of outright lying or having an unsavoury hidden agenda. This is what I am trying to avoid. All I ask is that members do not judge others solely according to their own experience in the market.

Trendie I take your point regarding my definition of off-topic. I have to go out now but later I could split this thread into two so as to keep it more focussed on Brett's article.

Edit: Now done the above

It has deteriorated into Socrates version of this.
THIS VERSION IS NOT HELPFUL. [...] It is being conducted by someone whose attitude is "I know what's what, and I am unwilling to give details"
OR only willing to give little bits of detail.

Even the tiniest scrap may have the potential to be helpful to someone.
Clues that can irritate and tantalise some may also help others, perhaps to think for themselves in a new way away from the mainstream.

OR only willing to give to those "worthy"
- how is that helpful

Yes I find Soc's elitist attitude disheartening at times too. Regardless, we should be able to look past the 'attitude' and really scrutinise the message to see if it contains anything of value.

Cripes, it's not even Sunday. Is this a bad omen for Easter?

 

[OpenMind]

I have traded succesfully for over twenty years and the only people I have ever known with such stops and such huge runs of success were the pit guys, the good ones, and their risk profile generally had more to do with the guy standing next to them than any great insight.

There is a reason that Socs threads descend in this manner, and again I would guess that it has more to do with the guy standing next to him (or behind him) than anything else

I know of at least 8 people on T2W (other than Socrates) who are
- full time traders
- have high to very high win ratio
- keep tight stops.

It's certainly not impossible.

 

[jimbo57]

I know of at least 8 people on T2W (other than Socrates) who are
- full time traders
- have high to very high win ratio
- keep tight stops.

It's certainly not impossible.

I don't doubt it.....if anything 8/50000 is a little on the low side

 

[Profitaker]

I would say the reason that threads descend in this manner is because some people simply cannot believe that such things are possible and thus accuse those that are able (or claim to be able) to do it of outright lying or having an unsavoury hidden agenda.

No, that isn't why a thread descends.

My comment in that respect is that he (Soc) is either a walking miracle or a fantasist. It must be one or the other, and I wouldn't deny that miracles do happen. As I'm sure you wouldn't deny that fantasist do exist.

How someone can utilise stops (tight ones at that) without any consideration for volatility is, quite frankly, beyond me.

You might like to review your role as a moderator ?

 

[frugi]

You might like to review your role as a moderator ?

To be honest I often do PT. What makes me qualified to do it instead of any other member, after all?
Nothing whatsoever, except that I am willing to do it and try to do so consistently and with unpredjudiced equanimity. For what it's worth, I resigned temporarily in December, as I doubted my abilities and judgement to do this job. However to my surprise I was very graciously persuaded to return by a number of kind people who thought I was doing it reasonably, so I did.

My comment in that respect is that he (Soc) is either a walking miracle or a fantasist. It must be one or the other, and I wouldn't deny that miracles do happen. As I'm sure you wouldn't deny that fantasist do exist.

If by miracle you mean something that the majority perceive to be physically impossible but actually is possible for a minuscule minority to achieve, then yes, miracles do happen. And of course I am aware that fantasists (i.e in this context, liars) exist too; in fact they likely outnumber the miraculous by a margin only exceeded by the large gas contract.

How someone can utilise stops (tight ones at that) without any consideration for volatility is, quite frankly, beyond me.

Indeed it is amazing. But necessarily impossible? No. And if it's possible I for one want to hear everything I possibly can about how to achieve it. Wouldn't you? As (the original) Charlie Chan said something like: "Mind like parachute, only function when open."

 

[Charlton]

Volatility = inability to predict

To be honest I often do PT. What makes me qualified to do it instead of any other member, after all?
Nothing whatsoever, except that I am willing to do it and try to do so consistently and with unpredjudiced equanimity. For what it's worth, I resigned temporarily in December, as I doubted my abilities and judgement to do this job. However to my surprise I was very graciously persuaded to return by a number of kind people who thought I was doing it reasonably, so I did.

Frugi
A moderator's role is time-consuming and, I should imagine, at times tedious. We should support our mods and I am certainly glad you did not resign, because I think you are doing a great job.

Indeed it is amazing. But necessarily impossible? No. And if it's possible I for one want to hear everything I possibly can about how to achieve it. Wouldn't you? As (the original) Charlie Chan said something like: "Mind like parachute, only function when open."

As I understand it from the remaining parts of the thread, the discussion between DBPhoenix, ProfitTaker and Socrates, is around the question of whether volatility should be taken into account when setting tighter and tighter stops.

For most of use the answer is probably Yes, because volatility is seen as an essentially "random factor" that we cannot control nor predict. Therefore our only option is to leave our stops wide enough to take account of our restricted knowledge, skill and experience.

We may be forced to do this because our predictive powers are not sufficient to know with sufficient degree of accuracy where a market is going. We might have a general idea and, therefore, can only survive suffciently long in a trade to catch that general trend by having a wider stop to ensure we are not stopped out too early. However that brings the commensurate risk of a bigger loss when we find that our deficient powers of prediction results in the market going aagainst us.

If however there is a trader's edge - one that can determine and perceive patterns beneath the apparent randomness of volatility, then perhaps the stops can be very tight. They can be so, because our predictive powers are highly tuned to what the market is really doing.

Volatility really means inability to predict and, not simply, fast-moving and wide-ranging prices.

If Socrates can enligten us a little as to how we could develop these skills then it would make most interesting reading.

Charlton

 

[jimbo57]

Frugi
A moderator's role is time-consuming and, I should imagine, at times tedious. We should support our mods and I am certainly glad you did not resign, because I think you are doing a great job.

As I understand it from the remaining parts of the thread, the discussion between DBPhoenix, ProfitTaker and Socrates, is around the question of whether volatility should be taken into account when setting tighter and tighter stops.

For most of use the answer is probably Yes, because volatility is seen as an essentially "random factor" that we cannot control nor predict. Therefore our only option is to leave our stops wide enough to take account of our restricted knowledge, skill and experience.

We may be forced to do this because our predictive powers are not sufficient to know with sufficient degree of accuracy where a market is going. We might have a general idea and, therefore, can only survive suffciently long in a trade to catch that general trend by having a wider stop to ensure we are not stopped out too early. However that brings the commensurate risk of a bigger loss when we find that our deficient powers of prediction results in the market going aagainst us.

If however there is a trader's edge - one that can determine and perceive patterns beneath the apparent randomness of volatility, then perhaps the stops can be very tight. They can be so, because our predictive powers are highly tuned to what the market is really doing.

Volatility really means inability to predict and, not simply, fast-moving and wide-ranging prices.

If Socrates can enligten us a little as to how we could develop these skills then it would make most interesting reading.

Charlton

Re Volatility.

It is not some "random factor" but a mathemtically measureable function both on an historical basis (from past data) and on a future basis (from that implied by the options prices). Indeed the spread between these two calcs can often offer insight.

To talk about 'gyrations' as was pointed out earlier is merely to verbalise something that is mathematically calculable.

To 'wing' the gyrations is perhaps not great trading but is almost certainly down to an extended lucky streak and no more. To understand something is a step towards its mastery...to merely accept it is likely forever to remain in the dark.

 

[jimbo57]

I would further add, we are after all on the sideline thread here, that Socco is the last person to enlighten us on 'volatility' - I suspect his understanding of such a maths formulae is stopped at the analogue age

 

[Charlton]

Like a wheel within a wheel

Re Volatility.

It is not some "random factor" but a mathemtically measureable function both on an historical basis (from past data) and on a future basis (from that implied by the options prices). Indeed the spread between these two calcs can often offer insight.

To talk about 'gyrations' as was pointed out earlier is merely to verbalise something that is mathematically calculable.

To 'wing' the gyrations is perhaps not great trading but is almost certainly down to an extended lucky streak and no more. To understand something is a step towards its mastery...to merely accept it is likely forever to remain in the dark.

Jimbo57

Exactly - the gyrations should be mathematically calculable and we should be aim to reduce them to calculable values thereby tightening our stops. A roulette wheel might appear random, but if we were to truly study its nature and all the forces acting upon it we would perhaps be able to predict the number based upon dynamics.

Is this not what Socrates is saying - skill and experience will lead to a mastery of the gyrations ?

Charlton

 

[jimbo57]

Jimbo57

Exactly - the gyrations should be mathematically calculable and we should be aim to reduce them to calculable values thereby tightening our stops. A roulette wheel might appear random, but if we were to truly study its nature and all the forces acting upon it we would perhaps be able to predict the number based upon dynamics.

Is this not what Socrates is saying - skill and experience will lead to a mastery of the gyrations ?

Charlton

Sry Charlton, a roulette wheel is indeed random, at least in most casinos.

The markets are most definitely not a replication of a roulette wheel - more a blackjack table if the analogy is worth continuing.

Now maybe that is what is he is saying, but to be honest its so darned obscure as to be deliberately opaque, if you are with me. And it is the deliberateness of the opaqueness that gives me a problem!

 

[frugi]

Thank you for your kind comments Charlton. Your understanding of the situation is typically acute and correct.

If one can truly understand context and motive then price action often gives massive clues as to the nature of the next move. Useful footsteps are continually imprinted in the soil of price action and if one has the skill to understand what they mean, in different situations, then a sharp edge may present itself. At this level of proficiency you can defenestrate your systems, statistics, historical quant analysis and implied volatilities and simply wait for the market to present a near perfect opportunity then cash in with pinpoint accuracy. This cannot, as Socrates said, be mechanised as each moment in the market is paradoxically unique yet still conforms to a sort of blueprint to those that can read it.

Reducing the market to a series of equations or implied statistical probabilities may give you a reasonable edge and consistent profitability (if so, that's wonderful - I'm not knocking it for a second - damn it you're ahead of the 90% or whatever) but it is surely ultimately more rewarding to look directly inside the market as opposed to reading it in fuzzy translation. It is an organic, artistic approach that scientists, engineers and mathematicians may find hard to swallow as they are too busy running numbers through fixed filters, their brains trained and almost hard-wired to a certain way of thinking that serves them marvellously in other disciplines but only imperfectly in the market.

Socrates has mentioned "visual mathematics" before and perhaps that describes the meeting of past and present transactions, eye, brain, calculations, adaptation, empathy, art, science and strategy rather well, though it is a modus operandi far above where I am and probably ever will be, though fwiw I've got a bit of a handle on exhaustion (LOL ... only 7497 pieces to go). Perhaps if we understood the workings of the human brain in more depth then these mental calculations could be broken down into something a computer could deal with effectively, but at the moment there is still a divide, such as the one that prevents AI robots from being convincingly human. Like you said Charlton we use wider stops because even when we have a pretty good idea of direction our accuracy and skill are not sufficient to plunge in with almost total certainty that a 4 pip stop will not be in danger for a second. For this reason (my obvious lack of proficency) my attempt to explain is excessively vague, frustrating (to me, too) and misguided, but I hope that there is something worthwhile in the essence. Of course one will rarely hear how people learn to do this as we are, unfortunately, the enemy and also it is probably impossible to explain mechanically. But seeds are sometimes planted by the generous - it is up to us to do the thinking.

Incidentally if someone had claimed the above was possible to me a year or too ago I would have dismissed it as fantasy, but having seen a lot of evidence in support of it my view has changed considerably. Even the pathetic development of my ability has allowed me to cut stops down to a third of what they used to be and this is encouraging. Now just the small matter of fully letting go and truly seeing, not just looking.

Regarding the roulette wheel I think machines have been invented that view the wheel and run a lot of Newtonian physics / chaos calculations to predict where the ball will end up. There is another thread mentioning this somewhere. I believe they have been shown to offer a small edge (obviously not accurate every time) since once can bet while the wheel is spinning (before being hauled out of the casino by large men) . There's lots about this on Google, though most of it seems to be the usual charlatans flogging rehashed ineffective versions. Food for thought anyway.

 

[JumpOff]

I don't remember Socrates saying that he doesn't consider volatility when placing his stops, rather that he uses it to his advantage when deciding when and how to enter. And as for volatility being complete random, -that is not my experience. Pressure builds, is unleashed, and then builds again.

Like Frugi, I have had my eyes opened to what is possible by watching live traders who rarely miss. Once I got over the humiliation of being outclassed by a factor of 20, then I was able to set aside disbelief for a while and pry my brain open a crack. The first thing I noticed was that these traders have a complete lack of fear - There is no waiting for confirmation. By the time the confirmation comes (triggering a rush of entries by other people that move the market even further in the anticipated direction), these folks are already in profit with the stop at b.e. or better.

143 profitable trades in a row. Wow. I want some of that. Is it possible? Let's see if I can pry my brain open another crack. I am a novice (mostly self taught), and last week I had 10 trades in a row go in my favor in the e-mini dow (YM), None of them went more than 5 points negative before going in the anticipated direction. Not all went like I thought they might, but all were closed above costs, and later when I calculated the risk:reward average on these trades it was 1:2. Now that was a rare and happy event for me, but I expect it is well below 'the norm' for an average professional. How did it happen - dang! If I knew that, I'd do it all the time, wouldn't I? One thing I do know, is that in intra-day trading, one good trade leads to the next. Start off wrong footed, and it' s best for me just to go walk the dog or something, and then come back and look with fresh eyes. The pleasure and relaxation that come from taking the sweet meat out of a move, enables me to 'see' the next entry much more clearly. So crank that up by a factor of 20 and yes, I think the crack in my brain may be big enough to stuff in that concept of a stellar run of winning trades.

JO

 

[charliechan]

....... As (the original) Charlie Chan said something like: "Mind like parachute, only function when open."

are you calling me a fake?

:cheesy: