How To Think Correctly

[dbphoenix]

Because "the collective wisdom gathered throughout the years" is something totally different than the interpretation of knowledge you were implying (meaning knowledge based on studying and learning from books and teachers).

Well, I will leave the readers work this one out for themselves -books and teachers, hmm!

I suspect he's referring to your confusing information, knowledge, and wisdom.

 

[dlpirl]

It's no secret I have a book. I did not elect the tag, but now that I have it, I've put back my website link.

As for explaining things, you've explained a great deal in your last few posts.

Db

I'll call you an honest and industrious man, Db. Sorry about that.

You 1) have come to the point where you know you have something of value to contribute, and 2) are industrious enough to find a way to sell it, and 3) honest enough to be open about doing so.

 

[CYOF]

.

Example of Position sizing…..a) stock trading at 525 with a 20% volatility and long 300 shares or b) stock trading at 300 with a 40% volatility and long 300 shares. Which position is more risky ? Not obvious unless you know how to run the calcs. But (and this is my entire point) that isn’t psychology, it’s defined methodology and technique. Just like card counting - Nothing mystical at all.

Soc

You are T2W’s largest empty vessel. You have so much to learn, yet are impossible to teach. One of life’s basket cases.

But you have made a major mistake - you have changed the parameters that you should not change in testing the position sizing.

Position sizing testing, for max gains, is based on a live sample set with a positive Expectancy number.

The only thing you will be changing is the SIZE - everything else stays the same.

You are looking for max returns, with a similar sample set that has proven to be consistent, by varying the SIZE and exit prices at various levels to lock in profits.

This is general -so I may not have it 100% (I admit, see) but since I am not at this level yet, then it really is just a discussion point for me.

You will have to verify further yourself - I do not have enough experience with position sizing techniques, maybe someone else can enlighten us?

 

[Profitaker]

But you have made a major mistake - you have changed the parameters that you should not change in testing the position sizing.

Position sizing testing, for max gains, is based on a live sample set with a positive Expectancy

I don't know what you mean by "live sample set with a positive Expectancy" ?

But to size a position is to size and quantify a risk. Which is a function of volatility.

But again, perhaps you're missing my point.....which is that what we are discussing has NOTHING to do with physcology and NOTHING to do with "thinking correctly". It's well trodden best practice, nothing more than that.

 

[dlpirl]

Salesmen are very good at knowing when to move on quickly, for time is money!

I am disqualified, then, CY. I have invested much more time in developing a trading system that works for me than I have in trying to market it. I have decided to charge for aspects of what I've learned because I know it has value, and chose not to devalue myself and some aspects my methods by giving them away.

 

[rossored]

You're also selling something, CY, just like bertie.

Db

DBP, I did not attach the 'vendor' tag for you to try to cause trouble, which, quite frankly, is very much what it looks like.

CYOF is not selling anything as far as I am aware. Nor is Socrates, who has always said as much and as far as I am aware is the case. However if you know or have proof of different then by all means let me know. I have not been terrible active on the boards lately so it may be that I have missed something?

This is the second time in a few days that you have been the subject of reported posts, and I can't say I'm particularly happy with it. So, as you might expect, this is a warning to please calm down, don't take things so personally, and just chill out a bit for me, eh? It really is not a big deal.

 

[dbphoenix]

DBP, I did not attach the 'vendor' tag for you to try to cause trouble, which, quite frankly, is very much what it looks like.

CYOF is not selling anything as far as I am aware. Nor is Socrates, who has always said as much and as far as I am aware is the case. However if you know or have proof of different then by all means let me know. I have not been terrible active on the boards lately so it may be that I have missed something?

This is the second time in a few days that you have been the subject of reported posts, and I can't say I'm particularly happy with it. So, as you might expect, this is a warning to please calm down, don't take things so personally, and just chill out a bit for me, eh? It really is not a big deal.

Given that CY began his attacks as soon as the vendor tag materialized, I have some reason to take his remarks personally.

As for "selling something", I wasn't referring to anything tangible.

But, you're right, none of it is a big deal.

Db

 

[CYOF]

Socrates,

I have read what you have said, and even though I have far less experience than yourself, details of which I have been able to source on the Internet, I am taking you advice and stopping the foolishness of journals, etc.

I will now concentrate on moving to the next level - which I know is very hard - but as I already have a plan in place for next year, it will only require some minor adjustments.

Your words have been inspirational, and hopefully others will see through the time wasting activities that others generate.

I will post as I see fit, time permitting.

I have learnt a good bit here, and I must also make a correction to one of my earlier statements - one Vendor did actually supply me with information of value, and it was free of charge, and that was Mr Charts in relation to his article on Tape Reading - which I duly acknowledged and thanked him for.

Till later - my stomach is starting to rumble and I feel like a pint of Uncle Arthur

 

[firewalker99]

The facts do not support this - there are very few master traders here, and from the replies I am seeing, very few actually know how to trade for big returns - show me otherwise!!!

If that's what you believe then why would those "few master traders" bother to enlighten you (or anybody else of us)? As Socrates and yourself confirmed, those are standing on the sidelines and laughing at our efforts. I'm sure they have better things to do with their time. Like... spend some money perhaps :cheesy:

 

[CYOF]

Well, that's quite an authoritative pronouncement, CY. Actaully I am hoping that this thread can get on track. How have you learned to "think correctly", CY? What can you offer in that area?

For my part, I will say that I've learned at this stage that I only want to depend on a trading system that I can back test. That's how I can have confidence to go through the draw downs. I require a lot of historical data to have confidence in the moment. Not all are wired this way, however.

How about you?

Dl,
Are you serious!

Backtesting to determine how much you can lose, so that you can work out if you can stay in the game long enough to see if you can make it.

Backtesting means piddly p**s.

Why don't you try getting a positive Expectancy figure -based on a live sample set - but then again, as I say, you do not show that you know much about trading -sorry, but I speak the facts!

As I keep saying - not many professional traders around, but then again, yeh, I keep forgetting, they don't want to give away their edge.

Well, they can still talk about trading, can't they?

Guys, I really must go - have a nice evening all - slan abhaile.

 

[firewalker99]

Well, that's quite an authoritative pronouncement, CY. Actaully I am hoping that this thread can get on track. How have you learned to "think correctly", CY? What can you offer in that area?

For my part, I will say that I've learned at this stage that I only want to depend on a trading system that I can back test. That's how I can have confidence to go through the draw downs. I require a lot of historical data to have confidence in the moment. Not all are wired this way, however.

How about you?

At least somebody is back on topic.

I have only built confidence after trading imy system live. To be honest backtesting showed promising results, but it's still backtesting and -just as papertrading- it was a different experience for me then to trade live. I have noticed subtle changes in how I perceive the market when I'm putting real money on the line as opposed to paper money. Suddenly I am seeing (or looking to see) elements which I otherwise wouldn't notice, that make me second guess my system.

After some time off, I discovered that the reasons I tried to do that, were the lack of confidence in the viability of my edge. That confidence only came after testing my system with real money on the line and trying very hard to be disciplined. At the time it felt like a Catch-22. I am fortunate enough to have escaped that loophole. This is what made me develop a more objective state of mind when trading live. This is what (amongst other things) made me think and act correctly.

 

[firewalker99]

Dl,
Are you serious!

Backtesting to determine how much you can lose, so that you can work out if you can stay in the game long enough to see if you can make it.

Backtesting means piddly p**s.

I can see why you would say that. You rather put real money on the line and time after time lose it testing out ten different strategies. But as you said in your journal you could afford to lose a couple of k's. Unfortunately those who start off aren't always able to make that sacrifice, let alone willing to.

 

[starspacer]

The title of this thread is “How to Think Correctly”. I venture that few are truly THINKING, correctly or otherwise. There has been a morass of criticism, bad-mouthing, animadversion and idle chatter. In short, not much constructive thinking. You might do well to remember the advice of (the real ) Socrates:

“False words are not only evil in themselves, but they infect the soul with evil.”
Socrates

So you do yourselves an injustice and infect your own souls with a creeping malice by your impurity of thought.

This is the sacred sanctuary of worldly knowledge, not gaudy, like fresh air to the familiar intimacy of discreet people. You may succeed by your ‘clever’ boldness, reaching the favour of the masses, but you will never truly live and achieve the sublime mastery you seek.

 

[dbphoenix]

Unfortunately those who start off aren't always able to make that sacrifice, let alone willing to.

Nor should they be willing to. Losses are most often the result of inadequate preparation. So, one has to prepare.

Db

 

[dlpirl]

Dl,
Backtesting to determine how much you can lose, so that you can work out if you can stay in the game long enough to see if you can make it.

Backtesting means piddly p**s.

Why don't you try getting a positive Expectancy figure -based on a live sample set - but then again, as I say, you do not show that you know much about trading -sorry, but I speak the facts!

Well, throw out the deragatory comments and that's actually an intersting reply, CY.

IMO, the most important thing to know about any trading system is how much draw down you can whether, NOT what the positive expectancy is. Reality is that most people get shaken out of a good system because they are not prepared for draw down which is infact historical. It is *so* important to know whether your system just broke because the market "changed" or whether, you encounted draw down well within the historical range.

How would one know this without backtesting? Maybe you are of the opinion that one can never know the direction of the market. Some do believe this, but I sure don't. Trend Following works, but attempts fail because "trend" when major characteristics of a trend are not defined.

 

[dlpirl]

At least somebody is back on topic.

I have only built confidence after trading imy system live. To be honest backtesting showed promising results, but it's still backtesting and -just as papertrading- it was a different experience for me then to trade live. I have noticed subtle changes in how I perceive the market when I'm putting real money on the line as opposed to paper money. Suddenly I am seeing (or looking to see) elements which I otherwise wouldn't notice, that make me second guess my system.

After some time off, I discovered that the reasons I tried to do that, were the lack of confidence in the viability of my edge. That confidence only came after testing my system with real money on the line and trying very hard to be disciplined. At the time it felt like a Catch-22. I am fortunate enough to have escaped that loophole. This is what made me develop a more objective state of mind when trading live. This is what (amongst other things) made me think and act correctly.

That's a very good description of what we all go through, firewalker. Once real money is on the line *and* (not often appreciated) we have longer real time to live with the consequces of trading decisions (assuming you use automated fast backtesting), there is so much opportunity to second guess yourself.

Measurabilty of factors within your system is so important, because that's the only way you will know whether you are playing mind games with yourself, or if the components of your system are out or the expected range. One of the major lessions of Risk Mangement is knowing that even systems with a great edge can have string of losses, just due to randomness inherent in the market. You've got to know that going in. That will keep you from redesigning your system during a string of random losses.

My system did much better real time in 2005 than it has done this year. So I needed to take a look at elements of the system. I determined after extensive analysis that none of them were 'broken', and that designing my system at this time (based on histroical data) actually could well set me up for *much* bigger draw downs in the future. That's the plague of "over-optimization".

 

[starspacer]

I’ll say it again. Trading mastery (aka correct thinking because one must be a prelude to the other) is not a matter of luck but of diligence and skill, patience and perseverance, vigour and assiduity. This is the true reality. Take shortcuts if you wish, but therein lies certain failure.

If the fool were to compare the single trade, with the ultimate goal, he would be overwhelmed by the sense of their disproportion; yet those individual trades (learning experiences), persistently continued, in time overcome the greatest challenges, and therein trading mastery is achieved.

 

[CYOF]

If that's what you believe then why would those "few master traders" bother to enlighten you (or anybody else of us)? As Socrates and yourself confirmed, those are standing on the sidelines and laughing at our efforts. I'm sure they have better things to do with their time. Like... spend some money perhaps :cheesy:

Who said anything about wanting enlightenment?

I have clearly stated my intentions.

I am trying to point out that no master traders are coming forward on this site - why? - because maybe none exist!

 

[barjon]

hey, come on guys - all i did was to go and do some seasonal shopping and come back to another mass of reported posts and a continuation of the custard pie slinging and wildly off-topic posts. I've done another load of housekeeping - sorry if a few relatively inoffensive or nearly on-topic posts have suffered, but time is pressing

good trading

jon

 

[CYOF]

I can see why you would say that. You rather put real money on the line and time after time lose it testing out ten different strategies. But as you said in your journal you could afford to lose a couple of k's. Unfortunately those who start off aren't always able to make that sacrifice, let alone willing to.

Firstly, my losing of a mere $500 was due to a challenge that I decided to take on, to see if I could win with many odds against me - and I mean many. I stopped when I saw it was a futile effort. I was able to test various charting layouts during these trades - and again, experience has shown me that indicators are worth piddly p**s.

But, I did learn something from it, and that is all that matters to me.

If someone is not willing to loose a couple of $K - which does in no way imply that they have to lose it - then they should not be trading - full stop.