How To Think Correctly

[henry766]

i find dbp easy to get along with , quite reasonable , actually i wanted to ask , do you trade support resistance lines dbp?

 

[henry766]

thats a good point dlpirl , however painfull we should be honest with ourselves , but some comments arn't insightfull bullying ( quite happy to be bullied if it's honest) but muddled stuff of no real value!! it's not the vitriol we mind , but the lack of integrity and intelligence.

 

[CYOF]

The Well Planned Trade

It's not whether you win or lose but how you play the game. This old adage is especially relevant to trading. Many novice traders assume that winning is the only thing that matters, but what they soon find out is that profiting over the long-term requires discipline and trading well developed trading plans. Sure, you can capitalize on chance and make a few winning trades here and there, but you can only win in the long run by developing a trading plan and following it.


It is important to distinguish justified wins from unjustified wins. A justified win is when a trader makes a very detailed trading plan and follows the plan. A win that results from following a trading plan is justified and reinforces discipline. An unjustified win occurs when a trader doesn't make a plan or drifts from the plan. He or she may be rewarded, but the outcome occurred by chance. The win is unjustified and can reinforce undisciplined trading.

For example, suppose you go long on a stock, expecting it to go up $1, but it went down. If you followed your plan, you might close the trade. Suppose out of frustration, though, you hold out and hope against hope that the trade will turn around. Now suppose that it does, and you end up profiting. You have ended up with a profit, but you may have reinforced an impulsive trading style.

You might think that profits are all that matter. "All is well that ends well," right? Well, maybe not. You may make a big profit, but at what psychological cost? Unexpected wins may provide short-term pleasure, but they can adversely influence discipline in the long term. Rather than developing a well-defined trading plan, following it, and getting rewarded by trading it, a trader puts on a trade haphazardly and is coincidently rewarded. In this case, a lack of discipline is rewarded, and this unjustified reward may increase a trader's tendency to abandon trading plans in the future because he or she has been rewarded for doing so in the past. However, the positive outcomes are usually short-lived, and a lack of discipline ultimately produces trading losses.

Cultivating discipline is vital for consistent and profitable trading. One implements proven trading strategies, over and over, so that across a series of trades, the strategies work enough to produce an overall profit. It's like making shot after shot on the basketball court so as to accumulate a winning number of points. The more shots you take, the more likely you will amass points. But the winning player is the person who first develops the skill to make the shot consistently, so that at every possible opportunity, the ball is likely to go through the basket. To a great extent, consistency is key. If the player uses one approach one time, and a different approach at another time, performance is haphazard. It's the same for trading. One must trade consistently, following a specific trading plan on each and every single trade. This allows the law of averages to work in your favor, so that across the series of trades, you will make an overall profit. If you follow the plan sometimes and abandon it at other times, you throw off the probabilities. Suppose you used a strategy that had a track record of 80%. Under the best-case scenario, you could only expect to win 80% of the time. But since history doesn't always repeat itself, it's likely that you will win less than 80% of the time. If you don't execute the trading strategy the same way each time, you will decrease your winning odds. And fewer winning trades may mean an overall loss. That's why discipline is so important.

With discipline comes profitability. Don't let unjustified wins interfere with your ability to maintain discipline. Follow your trading plan, and reinforce the idea that if you follow your plan, you will end up with profits in the long run. If you abandon your trading plan, and get an unjustified win, you may feel good in the short term, but you'll pay a long term price when it comes to your ability to maintain discipline. So clearly define your trades, and stick with your trading plan. The justified wins you receive from following your plan with help you develop an unwavering pattern of disciplined trading.

from Innerworth.com

Of the Education of Children (1580)

Let him make him examine and thoroughly sift everything he reads, and lodge nothing in his fancy upon simple authority and upon trust. Aristotle's principles will then be no more principles to him, than those of Epicurus and the Stoics: let this. diversity of opinions be propounded to, and laid before him; he will himself choose, if he be able; if not, he will remain in doubt.

"Che, non men che saper, dubbiar m' aggrata,"

for, if he embrace the opinions of Xenophon and Plato, by his own reason, they will no more be theirs, but become his own. Who follows another, follows nothing, finds nothing, nay, is inquisitive after nothing. "Non sumus sub rege; sibi quisque se vindicet." Let him at least, know that he knows. It will be necessary that he imbibe their knowledge, not that he be corrupted with their precepts; and no matter if he forgot where he had his learning, provided he know how to apply it to his own use. Truth and reason are common to every one, and are no more his who spake them first, than his who speaks them after: 'tis no more according to Plato, than according to me, since both he and I equally see and understand them. Bees cull their several sweets from this flower and that blossom, here and there where they find them, but themselves afterward make the honey, which is all and purely their own, and no more thyme and marjoram: so the several fragments he borrows from others, he will transform and shuffle together to compile a work that shall be absolutely his own; that is to say, his judgment: his instruction, labor and study, tend to nothing else but to form that. He is not obliged to discover whence he got the materials that have assisted him, but only to produce what he has himself done with them. Men that live upon pillage and borrowing, expose their purchases and buildings to every one's view: but do not proclaim how they came by the money. We do not see the fees and perquisites of a gentleman of the long robe; but we see the alliances wherewith he fortifies himself and his family, and the titles and honors he has obtained for him and his. No man divulges his revenue; or at least, which way it comes in: but every one publishes his acquisitions. The advantages of our study are to become better and more wise. 'Tis, says Epicharmus, the understanding that sees and hears, 'tis the understanding that improves everything, that orders everything, and that acts, rules, and reigns: all other faculties are blind, and deaf, and without soul. And certainly we render it timorous and servile, in not allowing it the liberty and privilege to do anything of itself. Whoever asked his pupil what he thought of grammar or rhetoric, and of such and such a sentence of Cicero? Our masters stick them, full feathered, in our memories, and there establish them like oracles, of which the letters and syllables are of the substance of the thing. To know by rote, is no knowledge, and signifies no more but only to retain what one has intrusted to our memory. That which a man rightly knows and understands, he is the free disposer of at his own full liberty, without any regard to the author from whence he had it or fumbling over the leaves of his book. A mere bookish learning is a poor, paltry learning; it may serve for ornament, but there is yet no foundation for any superstructure to be built upon it, according to the opinion of Plato, who says that constancy, faith, and sincerity, are the true philosophy, and the other sciences, that are directed to other ends, mere adulterate paint. I could wish that Paluel or Pompey, those two noted dancers of my time, could have taught us to cut capers, by only seeing them do it, without stirring from our places, as these men pretend to inform the understanding, without ever setting it to work; or that we could learn to ride, handle a pike, touch a lute, or sing, without the trouble of practice, as these attempt to make us judge and speak well, without exercising us in judging or speaking. Now in this initiation of our studies and in their progress, whatsoever presents itself before us is book sufficient; a roguish trick of a page, a sottish mistake of a servant, a jest at the table, are so many new subjects.

Michel Eyquem de Montaigne, 1533 - 1592

 

[FXSCALPER2]

That is absolutely brilliant!

You really want to know ?

Here is a super simpified version.

1. Abandon ego when you are in front of a screen and the market is running.

2. Step outside yourself and examine yourself in front of it to question yourself why you are thinking what you are thnking.

3.Keep your hands off the keys if you do not understand what is happening.

4. Press the correct buttons if you do understand and are absouletely certain you do.

5. Make provision to get out if you turn out to be wrong, quickly. Use a stop.

6. In the event you are right, remain there whilst you are right, and exit immediately when conditions change, which no longer makes you right.

....and all of this at a very basic level.

 

[dlpirl]

That is absolutely brilliant!

Oh, I thought it was very basic and the sort of trading wisdom mentioned many places. Sure its true adn should be continually in the forefront of awareness, but I think we need to be stimulated to go deeper, asking ourselves questions beyond these.

For example, Ken Fisher's book called "The Only Three Questions that Matter" says when he heard something about investing that he disagreed with he used to immediately begin an internal proof showing how it was wrong and he was right. Now he says he does something very different. When he hears something he agrees with, he assumes that it is false and begins to work out why he believes it, thus changing his beliefs about the matter. This is is the kind of thinking that really can change us and our trading/investing.

 

[SOCRATES]

Oh, I thought it was very basic and the sort of trading wisdom mentioned many places. Sure its true adn should be continually in the forefront of awareness, but I think we need to be stimulated to go deeper, asking ourselves questions beyond these.

For example, Ken Fisher's book called "The Only Three Questions that Matter" says when he heard something about investing that he disagreed with he used to immediately begin an internal proof showing how it was wrong and he was right. Now he says he does something very different. When he hears something he agrees with, he assumes that it is false and begins to work out why he believes it, thus changing his beliefs about the matter. This is is the kind of thinking that really can change us and our trading/investing.

No, wrong...that is just contrarian thinking, and for the sake of it, nothing more nothing less.

But if you like it and it does not work carry on doing it.

 

[dlpirl]

No, wrong...that is just contrarian thinking, and for the sake of it, nothing more nothing less.

But if you like it and it does not work carry on doing it.

No, bertie, its a subtil difference but very important, Contrarian thinking as it is normally understood is purrely reactive, not reflective. What Fisher si describing is a process in which you present yourself with opportunities to change your thinking. You have to prove your contrarian case before you adopt it, not just take the opposite position because you know that statistically most investors are wrong. The key thing is to catch yourself when you agree with some one, rather than when you disagree as we usually do. That's the point to begin the questioning process, but you don't cahnge your position unless you are actaully able to prove yourself wrong.

 

[SOCRATES]

No, bertie, its a subtil difference but very important, Contrarian thinking as it is normally understood is purrely reactive, not reflective. What Fisher si describing is a process in which you present yourself with opportunities to change your thinking. You have to prove your contrarian case before you adopt it, not just take the opposite position because you know that statistically most investors are wrong. The key thing is to catch yourself when you agree with some one, rather than when you disagree as we usually do. That's the point to begin the questioning process, but you don't cahnge your position unless you are actaully able to prove yourself wrong.

That is beginners' stuff.
Beginners, absolute beginners have to come at it from whatever angle they can dream of because they must.
But beginners are beginners, nothing more, nothing less, just fumbling in the dark.

 

[dlpirl]

That is beginners' stuff.
Beginners, absolute beginners have to come at it from whatever angle they can dream of because they must.
But beginners are beginners, nothing more, nothing less, just fumbling in the dark.

Soooo, you are calling Ken Fisher a beginner, bertie?

 

[SOCRATES]

Soooo, you are calling Ken Fisher a beginner, bertie?

I have no idea who he is and frankly I am not interested.

But that kind of thinking is beginners's stuff whether it is the idea of a beginner or for beginners does not alter the fact.

 

[dbphoenix]

I have no idea who he is and frankly I am not interested.

 

[Atilla]

Who is Ken Fisher?

Ken Fisher is a leading market forecaster based on the accuracy of his published past predictions according to an independent third-party.

I didn't know who he was.

I still don't know who he is.

Good reputations are difficult to come by hence, I'd guess his pretty good at forecasting.

 

[dlpirl]

I have no idea who he is and frankly I am not interested.

But that kind of thinking is beginners's stuff whether it is the idea of a beginner or for beginners does not alter the fact.

Well, I'll tell you anyway. He was recently rated at top of the Financial Guru heap by CXOAG Advisory Group. See http://www.cxoadvisory.com/gurus/ and http://www.cxoadvisory.com/gurus/Fisher/. He has his own company, and has been in the financial advisor/investment business for his entire career. I think he is Forbes longest running columnist, etc. etc.

 

[SOCRATES]

Ken Fisher is a leading market forecaster based on the accuracy of his published past predictions according to an independent third-party.

I didn't know who he was.

I still don't know who he is.

Good reputations are difficult to come by hence, I'd guess his pretty good at forecasting.

So ? What's that got to do with it ?

Supposing you go to a Magic Show....does the magician performing tricks for the audience take you aside to explain how he does it ? NO

Same here.

The audience is just "given".

The giver chooses what to "give".

....And he gives according to the audience...according to what he as a performer considers appropriate for the audience.

If the audience is a matinee perfromance (for children) he will perform for children.

And if the audience is an evening performance, in a club, or a theatre, he will perform for adults.

And if he performs for other magicians at a magicians' convention, he will perform for his magician friends and equals.

All are performances.

But the three are very different.

Simple.

 

[SOCRATES]

Well, I'll tell you anyway. He was recently rated at top of the Financial Guru heap by CXOAG Advisory Group. See http://www.cxoadvisory.com/gurus/ and http://www.cxoadvisory.com/gurus/Fisher/. He has his own company, and has been in the financial advisor/investment business for his entire career. I think he is Forbes longest running columnist, etc. etc.

....NOT INTERESTED...because it is NOT RELEVANT....read what I explain above about the performance of magic for different audiences. I cannot explain it more clearly than that....ARROGANT as you say I am.,...you said this yesterday...and you don't even know me.

 

[SOCRATES]

And to follow on from my post above I will now give you my world view.

It is because of Neanderthals like this one that it is inevitable, with the strategy presently followed by the Bush administration using all kinds of excuses to invade oil rich territories and countries in a race to contrlol the world's oil resources, that when China and the far east really get going and their demands for oil escalate, we are all going to be plunged into a 3rd World War. Inevitable it is.

If no one else will tell you, I will.

Chilling it is.

 

[Splitlink]

Soooo, you are calling Ken Fisher a beginner, bertie?

So now you know who you are dealing with!

Socrates didn't like that story because those who agree with him might start having second thoughts!

Split

 

[Atilla]

So ? What's that got to do with it ?

Supposing you go to a Magic Show....does the magician performing tricks for the audience take you aside to explain how he does it ? NO

Same here.

The audience is just "given".

The giver chooses what to "give".

....And he gives according to the audience...according to what he as a performer considers appropriate for the audience.

If the audience is a matinee perfromance (for children) he will perform for children.

And if the audience is an evening performance, in a club, or a theatre, he will perform for adults.

And if he performs for other magicians at a magicians' convention, he will perform for his magician friends and equals.

All are performances.

But the three are very different.

Simple.

Apples and pears are not the same.

Proof of the pudding is in the eating.

I'm sorry but I don't see the relationship between forecasting / estimating and magic.

A magicians knows the expectation and outcome of his art before he performs...

A forecaster expects he knows the outcome of his art but surely not with 100% certainty.

 

[CYOF]

Surely you guys can't be serious!!!!

http://www.fi.com/investment-portfolio-seminars/Default.aspx

You might as well put your money in a managed fund!

This is more of the crap that the big boys want you to believe - remember what we said about History, and how those in power kept the masses where they wanted them throughout the ages. Why do you think that it is any different now?

Remember, we are mostly talking about self improving for trading fulltime as a profession - or at least I am - not about long term investing.

There is a big difference!

 

[CYOF]

Apples and pears are not the same.

Proof of the pudding is in the eating.

I'm sorry but I don't see the relationship between forecasting / estimating and magic.

A magicians knows the expectation and outcome of his art before he performs...

A forecaster expects he knows the outcome of his art but surely not with 100% certainty.

A forecaster's art is to draw a 6 figure salary - not trade!