my journal

[Yamato]

I will comment as I read, because it's long and I would forget:

Hi Travis,

As before, you yourself know the answers to your problem better than any of us here (notwithstanding all the good advice given above). The problem is putting the solutions into effect.

For example, you said that for a whole year while you were developing automated systems, you didn't try trading in a discretionary way. You clearly get a buzz from programming (can relate to that), and it might be an even bigger buzz than you get from discretionary trading (and we should return to exactly what _you_ mean by that phrase below).

I don't know how I conveyed that, but I get the biggest "buzz" from discretionary trading

It seems to me that what you shouldn't be doing is trading, but writing systems for other people to trade, either with their own money, or (under very strict conditions, and of course, only the right people) your money.

Yeah, unfortunately just yesterday a friend whom I offered to help by giving him money to discretionary trading once he will show me he's profitable, now wants more - my money and my systems. I am kind of upset about it. That's what I get for being friendly. On the other hand, his efforts and ideas are giving me ideas for new systems, which I knew from the start would have been the case. But I hope he'll be able to learn what I couldn't learn (discretionary trading), rather than ask me to build systems for him.

In an ideal world, you would never even trade your own automated system, let along your discretionary one, so you may be able to uninstall the appropriate software from computers in your immediate vicinity, and have some distance from temptation.

I don't know how realistic this is in your particular situation, but maybe it will give you food for thought.

Yes, I thought about having my systems run on a remote server, and then connecting to it once a day.

Quite frankly, I'd be damned prouder of having successfully written an automated system that worked, than being able to trade manually day in, day out, hour after hour. Any fool can work.

Maybe like others, and definitely like myself, I tend to want what I don't have. As I said, I tend to push my limits further, by (my) nature. Even if sometimes what I am reaching is useless and doesn't interest me anymore once I reach it.

Discretionary systems: I wonder exactly what you mean by this phrase. You haven't defined it, and I don't think anyone else has asked.

I haven't defined it? No, no, I have defined it. I wrote many posts about what I mean by "discretionary methods/systems". But I thank you even for reading just one of my posts, because I don't have the patience of reading anyone's posts. What I mean is this. I believe first of all that unlike what I might have implied by quoting and agreeing with tenbobtrader and his quote of Brett (the whole talk about discretionary traders being like machines), there are no univocal rules in discretionary trading, and, by definition, there must be some part played by "discretion". Which in turn causes our inability to back-test and have future expectations based on such discretionary methods, which by the way we shouldn't even call "systems" (if I used the term "discretionary systems" I made a mistake). If a method has nothing but fixed and univocal rules and no room for discretion / intuition / instinct / improvisation / interpretation / flexibility, then that is not a "discretionary method" in my opinion.

From reading far more experienced traders than myself, I gather that they very often have strict rules, but these rules don't define every possible situation; they are just a framework. Sometimes a setup can be perfect on paper, but the experienced trader doesn't feel that it's right somehow, and passes it up. That's one example of a discretionary (non)-trade, but it doesn't mean there were no rules involved.

I hadn't read it yet, when I wrote the above, but of course I agree with you.

I think that what I am getting it is that you seem to be posing automated trading and discretionary trading as two extremes of a spectrum, and I believe that may be a false dichotomy.

Well, I don't know what dichotomy means, but if it's false, I have nothing to do with it, because I always tell the truth, even when I lie, like Tony Montana says. Now, seriously, those two things are in my opinion two extremes of a spectrum. With AT I can be at the beach all day, with DT I have to be at home all day, stressed out and on an emotional roller coaster. With AT I could let it run without looking at the markets nor making one decision for a whole week, with DT I have to make decisions and look at the markets throughout my trades.

The hardest thing to program into any system is what we normally call "common sense". That's the discretion that a human trader brings to the act of trading, or should do.

Yeah, I agree. I don't even have that common sense that I should program into my systems. And in fact my systems didn't come from my common sense, but from my interpretation of statistical data. Most of the time I wanted to build a different system, but then accepted what the data was telling me, and often built a system that was doing the opposite of what I originally had thought would work.

 

[Yamato]

All quiet today. No trading because it's saturday. I will have to test 9 volatility breakout systems - they work. Unfortunately that friend of mine is now hoping that I will give him the systems once I automate them, just because he came up with the idea. It was his idea, yes. It took him 5 minutes to tell me. By the end of everything I'll have worked on it for 200 hours, and he wants me to deliver the systems to him. True, I am the one who told him: "You can have these systems once I'll be done, because it was your idea". But... well **** me. Now my promise is like a debt - he immediately expects me to deliver everything I ever offer (like children do), plus all the things he asks. Now it's like I'll have to work for him, implement it entirely - he knows nothing about computers, and may even have to implement new ideas he has - if he starts relying on this as a source of income. It's not enough that I offered to give him the money to start discretionary trading on his own - thanks to which proposal he started to paper trade and now he's giving me plenty of good ideas. He's an honest person, very intelligent, even though with little formal education, BUT: I don't know what I got myself into. I've known him for almost 20 years. However, I am afraid that now - he's unemployed - his family will rely on my systems for future survival - which would really really be bad. I mean - the initial proposal was "get consistently profitable with paper trading and I'll give you the money to start", and in return he would have told me what worked. Now, after paper trading for almost 2 months and reasoning with me on trading, he's more like someone who remotely thinks that if he doesn't get profitable I will still give him the money (a few thousands) AND the systems that I developed "thanks" to his ideas (which actually I could have gotten myself, but I am letting him think it's all his merit). But this is not the case. Because then he'd be relying entirely on me for the rest of his life, and then he would try to convince me to give him all my other systems to him as well. I'd have to work for him for free, after giving him my money to invest. This is totally ridiculous. I am going to write him an email stating clearly that if he doesn't get profitable, I will still give him the systems I created from his ideas, but not the money, because that was not the deal. I don't want him to rely entirely on automated trading because he knows nothing about it, and I'd end up having to work for him for free, and maybe even give him more systems. Years of work given to him for free. This is way too generous and I may even do it, but on my free will, not because you ask me repeatedly and insist, because you want it really badly. I am sorry to disappoint you and I know you need money desperately but as we say in Italy "I offered you a hand and now you're taking my arm". You're getting too needy, and I am not ok with it anymore. You either limit your expectations of me or we forget about everything. One thing is to say "you get me started, you give me the capital, and then I'm on my own", and another is "you get me started, you give me the capital, and then you keep on doing everything for me". What the hell. I feel like never offering any help to him, ever again. It's not even that fair that he comes up with an idea that he thinks might work, spends 5 minutes to tell me what it is, then I spend a whole month back-testing it and automating it, and then we split the profits 50-50. If things were so easy, all he'd have to do is get a technical analysis manual and start throwing ideas at me, until, after working my ass off, I find that one of them works, and then we split 50-50. Not fair. Nice life it would be... I might as well make an agreement with somebody so that I give him my money and he accepts it in return.

 

[tenbobtrader]

from your own profile ~

"I can't do discretionary trading also because I actually enjoy breaking rules. I go to work late, I go to bed late, I bend most social rules, being an anti-conformist. I think I'm similar to other unprofitable traders, who fail and quit. Yet, together with all my deficiencies, I have one clear quality: I am not superficial. I obsessively kept at it until I found a way to make it work.

With automated trading, the only problem is to let my system run without interfering. It was not easy, but necessary - as a discretionary trader I lost money every month for 12 years, whereas as an automated trader I made money every month ever since I started."


"Remember this: The house doesn't beat the player. It just gives him the opportunity to beat himself."
Nicholas (Nick the Greek) Dandalos

“When we play, we must realize, before anything else, that we are out to make money.”
David Sklansky

you win Travis, that all there is to it .......... nothing else

except it, go gambling small change at the track

later

Andy

 

[Splitlink]

I thought you'd spend this weekend working on a method that would make you wealthy, but I see that you have a morality problem, as well. Remember that behind every fortune there is a moral or criminal act. I would say that there are more immoral acts than criminal ones. What you must think about is whether you have a conscience, or not. If you have, will it, always, nag at you?

In the UK, we have just had a political furor over expense accounts. The accused always fall back on the argument that "it's within the rules"

Personally, I would wonder about how good a friend your friend is. If he is a good one, he will be reasonable about your arguments and want to share. If he isn't, forget him. But you have to decide that for yourself.

 

[Yamato]

Yeah, everybody makes sense here: a lot of wise people. Thank you for your comments and advice. You all make sense, what can I say. I'll keep writing to keep tracking my development, and to see if I'll start acting more in the direction of my own self-interest, without being constantly harassed by my conscience and my upbringing. Damn, am I in control, or am I just acting according to how I was planned by my parents? I want to start being in control a little more.

That friend is a friend, but when things are too unbalanced that's what happens: one asks, and the other one gives. If you have two friends, and one doesn't have financial concerns, while the other one is unemployed, with a wife and two children, and is having trouble paying his bills, it's pretty normal that he's going to try to ask for help. It's already a miracle that he never asked me for money (I offered it if he ever becomes profitable, but that was two months ago, and he's had financial problems for years).

 

[Splitlink]

Yeah, everybody makes sense here: a bunch of wise people. You all make sense, what can I say. I'll keep writing to keep tracking my development, and to see if I'll start acting more in the direction of my own self-interest, without being constantly harassed by my conscience and my upbringing. Damn, am I in control, or am I just acting according to how I was planned by my parents? I want to start being in control a little more.

Unfortunately, you are going to have a job. What your parents taught you, if you were close to them, will be part of your conscience. I'm 77. That's getting on. I am still influenced by my parents and what they taught me. Sometimes I laugh and tell myself that I will never be rich! That is one of the good things about trading, you don't know who the other side is. That helps somewhat.

 

[Yamato]

Tenbobtrader, the quote master. You convey much meaning by simply quoting what others say - with great precision.

Splitlink, your insight brings up psychological issues, and now philosophical: morality. But it will be a very long discussion if we get into morality.

To simplify my journal, and to come up with a few points, out of the thousands of lines I've been writing, here's another one of those recapitulations: what I want and possible solution in parentheses. I want to do these things (for which I already received a lot of advice, so thank you all):

1) Make money (solution: quit discretionary and just do automated)
2) Quit job (wait patiently till it's safe to do so)
3) Not help others so much that I feel anxious (must start saying "no" to my friend, whose expectations of me are growing out of control - reasonable since he's in dire straits)

Further details about each point:
1) Must make a habit out of not being near my computer during trading hours, and like all healthy habits it will stick to me, effortlessly, once acquired.
2) Easiest than the other two points.
3) My friend calls me and talks me into doing stuff for him, by insisting, so I must talk to him less often. I'll do that by not calling him when he asks me to call him (because naturally he never calls me, to save money - which is reasonable, too).

 

[Yamato]

I just realized an interesting thing. "Quitting" has two connotations, a positive and a negative one, and they both apply to my discretionary trading.

I feel like I have to "quit" my addiction (positive connotation) to discretionary trading because it just makes me lose money. At the same time, it's not merely an addiction, as I put some brains into it over the years (which lead to my successful automated trading), and, with a good feeling of "quitting" this addiction, would also come a bad feeling of "quitting" the task/challenge before succeeding at it. Interesting, huh?

On the other hand, in trading, things are practical, and not ideal, and connotations change radically. "Cut your losses", the trading motto, encourages you to "quit" a race that you are losing, to be a "quitter". And if you don't cut your losses, you're not called "courageous" but "stupid".

Acting extremely prudent is not called "being a coward", but "good money management". And someone like me, who keeps trying to succeed at something that made him lose money for 12 years, is not "persevering" and "persistent", but rather "stubborn", "bullheaded", "rigid".

Stubborn Synonym | Synonym of Stubborn and Antonym of Stubborn at Thesaurus.com

 

[Yamato]

That's it. About that friend of mine - I told him via email and sms that I am only going to do so much for him. He's just very hungry and good at talking me into doing stuff for him. All I'll have to do is not call him for a while. Besides, even if he talks me into doing stuff, I'll change my mind as soon as we hang up, so, too bad for him, but I won't be doing so much for him that I'll feel used - I am putting a stop to it.

Despite appearances, he's not using me - the simple fact is that when people are really in trouble they'll grab you and pull you underwater, too. I'll just give him as much as I feel comfortable with. And if he talks me into stuff, I'll later write him an email saying "I changed my mind as usual". Not my fault if he insists so much that each time he forces me to say yes. Obviously he wants to get rich like everyone else, and it's hard to slow him down.

I got "morality problems", just like Splitlink said... and even though I am saying "no" to my friend and "I can only do so much", deep down inside me I know that I could do more. But the discomfort for feeling used and manipulated overrides my feeling of sympathy for my friend. I mean, what the hell, I am only human and by all standards I am being generous to him, so I don't see why I should feel bad for not handing him also my work of 12 years, just because he's poorer than me. I volunteered to give him money and tools for discretionary trading, I call him when he asks me to, I assist him, and here I am - feeling bad because he's expecting more and more, and I am not feeling comfortable with it. I feel suffocated. It's more than enough to make me say "no" and if necessary to block his email. If anything, it's hard to make me do stuff. This is one good thing about being such a rebel.

 

[GladiatorX]

That's it. About that friend of mine - I told him via email and sms that I am only going to do so much for him. He's just very hungry and good at talking me into doing stuff for him. All I'll have to do is not call him for a while. Besides, even if he talks me into doing stuff, I'll change my mind as soon as we hang up, so, too bad for him, but I won't be doing so much for him that I'll feel used - I am putting a stop to it.

Despite appearances, he's not using me - the simple fact is that when people are really in trouble they'll grab you and pull you underwater, too. I'll just give him as much as I feel comfortable with. And if he talks me into stuff, I'll later write him an email saying "I changed my mind as usual". Not my fault if he insists so much that each time he forces me to say yes. Obviously he wants to get rich like everyone else, and it's hard to slow him down.

I got "morality problems", just like Splitlink said... and even though I am saying "no" to my friend and "I can only do so much", deep down inside me I know that I could do more. But the discomfort for feeling used and manipulated overrides my feeling of sympathy for my friend. I mean, what the hell, I am only human and by all standards I am being generous to him, so I don't see why I should feel bad for not handing him also my work of 12 years, just because he's poorer than me. I volunteered to give him money and tools for discretionary trading, I call him when he asks me to, I assist him, and here I am - feeling bad because he's expecting more and more, and I am not feeling comfortable with it. I feel suffocated. It's more than enough to make me say "no" and if necessary to block his email. If anything, it's hard to make me do stuff. This is one good thing about being such a rebel.

I think individuals who trade take lots of risks; in many areas of life... Careers, relationships, monetarily - To avoid the risk becomming a reality, large quantities of hard work must be done and even then reward is a questionable outcome... Traders take huge risks; When you make it, don't consider yourself lucky or blessed - You earnt it and those that didn't don't deserve the rewards you get; Because they didn't take them risks;
They took the salary, they took the easy-job, they seeked free time... Those that trade devote themeselves 100% and the risks are massive, so you don't have to share your rewards with anyone...

If they didn't take the risks; They don't deserve it.

P.s. I'm a pretty young guy, so my life experience is limited - I was kindof just trying to portray my thoughts in that paragraph to explain to myself better how i feel about MY FRIENDS asking me to trade their money because i'm being selfish supposedly So don't take anything i say for 'serious' XD

 

[Yamato]

Well, yeah, I agree with you on everything you said. I am not going to give him anything easy. I will give him the funds (as a gift) as soon as he'll manage to be consistently profitable for three straight months, but then he will be on his own. What he instead would like me to do, and he said so already, is me giving him my systems and the consequence would be - besides the feeling of exploitation - that I will have to assist him forever, since he knows nothing about computers.

That's what's so good about these traders' forums - we can relate to one another and open up as much as we want without having to say our real names and expose ourselves. In real life it would be best to do the opposite of what we do here: shut up and not even tell anyone what you are doing. I still don't have any money, but I can see a lot of problems coming my way if I'll have it and if people will know about it.

 

[GladiatorX]

Well, yeah, I agree with you on everything you said. I am not going to give him anything easy. I will give him the funds (as a gift) as soon as he'll manage to be consistently profitable for three straight months, but then he will be on his own. What he instead would like me to do, and he said so already, is me giving him my systems and the consequence would be - besides the feeling of exploitation - that I will have to assist him forever, since he knows nothing about computers.

That's what's so good about these traders' forums - we can relate to one another and open up as much as we want without having to say our real names and expose ourselves. In real life it would be best to do the opposite of what we do here: shut up and not even tell anyone what you are doing. I still don't have any money, but I can see a lot of problems coming my way if I'll have it and if people will know about it.

I really respect your honesty in this journal!
I enjoy reading it and relating to it; I'm not very good at conveying my feelings through writing but you do it well, so i'm always like 'Couldn't have said it better myself'

Just wanted to mention something contrary to some of your earlier journal statements;
You said 'Paper trade until you have a succesful methodology'
I know this is going to sound crazy, hence i don't talk about it often - To anyone really. But i've often put my success down to me, my intuition - What i think will happen, my understanding... I've never quite had a methodology - I use to read about needing strict rules and it use to really disturb me because i didn't have any and i couldn't quite pin-point my methodology...
I guess my methodology is making trading decisions based on the current context and all the information i have, without emotions of greed being involved.

I am talking short-term ofcourse (E-mini S&P500) but when i started trading, i just almost knew what would happen next from reading Time and Sales and just watching the chart - I couldn't at the time really lable my analysis or tell others what i was looking at, it was all just so natural to me... At the time i couldn't make any money because i didn't trust my intuition as anything of value so i was forcing myself to trade methodologies strictly or systems in some instances...

I use to totally fail at paper trading; I didn't have the focus or commitment when there were no money involved... I couldn't watch all the information and make decisions because i would just find myself wondering about other things. For me, live trading was always significantly more profitable than paper trading to the extent that even now i think i would struggle to profit through paper-trading...

I know this all sounds taboo and rubbish but seriously this is how i trade.

In terms of trading stocks, i've always put my success down to volatility; Markets are volatile and so if i enter a position; I probably haven't entered long @ the high... I don't quite have a stock trading methodology, nor do i have intuition; I've always said that i can predict short-term direction but not magnitude, the longer the 'term' the less accurate my trades became....

When i enter a position, i study the chart technically - Again this was very natural for me, i didn't really need to be taught Charts, it just made sense to me intuitively... I use to draw support and resistance on charts before knowing it existed 'for the masses' - I never really liked indicators telling me the trend because by looking at a chart i could figure it all out and through being able to sepparate my emotions from these thoughts i was able to say what i think would happen rather than what i want to happen...

Even then, when i win in stocks, i think the reasons are literally that markets move up and down and aren't entirely directional the entire time...
I'm sure all this sounds like a load of rubbish to you; but was just presenting my contrary opinion from experience from some of the things you said...

Hope this isn't too laughable

 

[Splitlink]

You have to convey the impression that you are always broke and go to them for money. You'd be surprised how quickly you find out who your friends are!

If you did that, Travis, he would get the impression that your systems are better left alone.

 

[Yamato]

I really respect your honesty in this journal!
I enjoy reading it and relating to it; I'm not very good at conveying my feelings through writing but you do it well, so i'm always like 'Couldn't have said it better myself'

Just wanted to mention something contrary to some of your earlier journal statements;
You said 'Paper trade until you have a succesful methodology'
I know this is going to sound crazy, hence i don't talk about it often - To anyone really. But i've often put my success down to me, my intuition - What i think will happen, my understanding... I've never quite had a methodology - I use to read about needing strict rules and it use to really disturb me because i didn't have any and i couldn't quite pin-point my methodology...
I guess my methodology is making trading decisions based on the current context and all the information i have, without emotions of greed being involved.

I am talking short-term ofcourse (E-mini S&P500) but when i started trading, i just almost knew what would happen next from reading Time and Sales and just watching the chart - I couldn't at the time really lable my analysis or tell others what i was looking at, it was all just so natural to me... At the time i couldn't make any money because i didn't trust my intuition as anything of value so i was forcing myself to trade methodologies strictly or systems in some instances...

I use to totally fail at paper trading; I didn't have the focus or commitment when there were no money involved... I couldn't watch all the information and make decisions because i would just find myself wondering about other things. For me, live trading was always significantly more profitable than paper trading to the extent that even now i think i would struggle to profit through paper-trading...

I know this all sounds taboo and rubbish but seriously this is how i trade.

In terms of trading stocks, i've always put my success down to volatility; Markets are volatile and so if i enter a position; I probably haven't entered long @ the high... I don't quite have a stock trading methodology, nor do i have intuition; I've always said that i can predict short-term direction but not magnitude, the longer the 'term' the less accurate my trades became....

When i enter a position, i study the chart technically - Again this was very natural for me, i didn't really need to be taught Charts, it just made sense to me intuitively... I use to draw support and resistance on charts before knowing it existed 'for the masses' - I never really liked indicators telling me the trend because by looking at a chart i could figure it all out and through being able to sepparate my emotions from these thoughts i was able to say what i think would happen rather than what i want to happen...

Even then, when i win in stocks, i think the reasons are literally that markets move up and down and aren't entirely directional the entire time...
I'm sure all this sounds like a load of rubbish to you; but was just presenting my contrary opinion from experience from some of the things you said...

Hope this isn't too laughable

I will comment as I read. By the way, what you wrote of course is not laughable, but very interesting. You see, sincerity makes our writing good - because it's a way to knock off the bull**** and get to the point. Also, it seems like nobody's superficial here, so we don't run the risk of seeing quick replies with smileys, dismissing our posts with some insults. Superficial readers just don't make it to the "journals" section somehow.

Thanks for your compliments.

Well, but paper trading is meant for those who do not have a successful methodology. If you find out that you can make money from the start with real money trading, then nothing's stopping you from doing it. But my assumption was that it's very rare that people will make money consistently from the start, so I didn't even think about that case. My case is that after 12 years of trading with real money, I still haven't figured out a profitable discretionary method - so you can understand where my advice is coming from.

Charts seemed to make sense to me from the start, just like it was for you. And everything about the market seemed clear and easy to understand. Only problem: I never made any money, month after month, and I almost blew out my account on a monthly basis.

As long as your impression of clarity in the markets matches the success of your trades, I don't think you have any problems. You are profitable? Keep doing it. You're not? Paper-trade. I've lost money consistently for 12 years, so now I definitely know what one should not do. And that is, trading real money and losing it, month after month and year after year, thinking profitability is just around the corner.

It might be useful to add, that, unlike you, I definitely was never able to separate my emotions from my analysis. Got really frustrated about losing, was rarely able to take losses. Got really high on myself if I made money. I am not a balanced person, and I took that into trading. I have a narcissistic personality disorder. I have an immoderate and excessive need for success, approval, being right. I can't really take criticism, contradictions, dissent, disapproval, without them throwing me off balance emotionally. This comes from receiving too much criticism as a child and teenager from my father. For him I had to be the best of the world - it was impossible to satisfy him and to gain his approval. He ruined my life. But he made me a precise person. Was it worth it? Living a sad life and doing things right, or happy life and being sloppy person? He didn't use the reward and punishment method, he used punishment and punishment, or at best punishment and lack of punishment. When I did things perfectly, as a reward, he told me "don't rejoice, because trouble is around the corner". I still strongly resent him.

 

[Yamato]

You have to convey the impression that you are always broke and go to them for money. You'd be surprised how quickly you find out who your friends are!

If you did that, Travis, he would get the impression that your systems are better left alone.

Yeah, the problem is, that, out of the things my parents taught me, and that I retained, there is telling the truth as much as possible, and this doesn't qualify for being an exception. I can't deceive anyone, unless absolutely necessary. For example, I am confident that I didn't say any lies in this whole journal.

 

[Yamato]

Some more thoughts before going to bed. Tomorrow I have work. I was falling asleep earlier, but I didn't go to bed and decided to stay up a little longer. Had I gone to bed, I would have slept perfectly for tomorrow. For some reason, I couldn't do it. Why can't I go to bed on time, even when I am tired, and I have nothing to do? There's something blocking me. Is it because:

1) I am getting back at my parents who told me so often to go to bed on time?
2) I'd feel guilty about feeling perfectly rested? (My parents taught me it's not ok to be too happy, to not have problems, and when I sleep well, I feel perfectly fine).
3) Is it because I don't like to put my mind to sleep (being sleep in some ways close to death)?
4) other reasons?

I think I follow the same mechanisms into discretionary trading, and somehow don't want to do things that will cause a positive outcome, or maybe I lose for the reasons I listed at length in all my previous posts (impatience, taking losses personally, not accepting to be wrong, etc.). A perfectly reasonable explanation could be wrong. I have to watch out with my explanation. I am good at giving reasonable explanations but that turn out to be wrong.

Whatever is the case, trading (in my case automated) has been forcing me to somehow do my own good. Or at least it has opened my eyes to the fact that I am hurting myself. Or at least to the fact that I don't conceive "losing money" as hurting myself. This has been very clear lately, when I was making money with automated systems but at the same time losing even more with discretionary trading. This opens your eyes and makes you say "wait a minute: what the hell am I doing?" and "am I even trading to make money then?". If I don't get a woman or if I lose her, I can find many explanations justifying what happens, and I can pretend it's not a defeat. But if I am out to make money, and my balance shows losses, I can only admit that I'm failing and that I'm doing something wrong, and then wonder what that is. Immediate and clear feedback is what trading gives you. But I don't want to get too theoretical and academic, because that ruins always my points.

What I wanted to say I think is that trading tells you how your mind works. And it lets you find out that your mind is good at deceiving itself. We all possess minds that deceive us. Not completely - mostly they tell us what goes on. But for a small part they see things in varying ways. They tell us one thing, and later they tell us another thing. And we often forget it, or we don't even realize it. But I am sure we all do. The more we are balanced the less they deceive us. The bigger our ego, the more they deceive us, because we lose objectivity. In the sense, that I have a big ego and unconsciously that means I think "I am always right". But then if my mind changes how it perceives things according to the time of the day (for example at night I want to stay up, and in the morning I regret not having slept enough) then I must be wrong at least part of the time, so the people who are wrong the most are the people who think they are always right - those with a big ego. How did I find this out through trading?

For example, the market always seemed easy to figure out, with success around the corner, but for 12 years so far I haven't figured it out. It's a clear sign that I have been deceived. How could I go on for 12 years and still believe that my feeling it was easy was not an illusion? It was. I finally realized it after 12 years. I realized that I am doing something wrong, and that, until I'll have figured it out, I'll keep on losing.

Also I realized that, amazingly, my systems trade profitably, whereas I, who created them, cannot do it. They are simpler than me. But they always remember in an objective way what statistics say. They do not get mad at the market for proving them wrong, and do not get excited when they win. They wait for the statistically most probably successful moment to enter and to exit.

I can't do that. My desire to succeed will make me anticipate that entry and exit. That desire to succeed is so strong that it will push me to anticipate. And to trade when there are no opportunities. That confidence I'll get from winning will affect my assessment of the markets. That anger I get from losing will make me want to get back at the market. That surprise from being wrong will make me stay longer than I should. Then also a negative role in my objectivity will be played by a natural impatience, incapability of staring at the chart for hours without doing anything. Another problem is my inability to go with the flow and to do things that are easy, like following the trend. I have to do things that are challenging. And I tend to go against the trend, when statistical tests say a reversal is unlikely. I do it invariably, even after having discovered when it's most likely to happen. The chart to me always seems like it's near to a bottom or to a top, but it's usually a deception. So I am deceived by the charts first of all. Then I am deceived by myself. I say that I won't do a thing and then I do it.

Without the markets this would have been hard to realize, because in my daily life it never has consequences that are so clear like a positive versus negative balance. The markets provide like a laboratory setting. You do something, you lose money. When you go and find out why you lost money, then you have to look for the cause, and that's when you find out that you didn't do what you said you were going to do. So I found out that I am two different people. The person when markets are closed, and the person that is staring at a chart. One is rational, and the other one is like a drug addict. And so on. I don't want to construe more theories because I tend to do that, even without enough material to do so.

Why, with all this insight, can't I find a way to trade discretionary and be profitable? Because understanding the limits I have that interfere with my objectivity doesn't get rid of them. I know when I can go against the trend and I know when I can go with the trend, when that behaviour is most likely rewarded. But, once I am in front of the chart, I won't wait for hours - I will get bored sooner and act. And when I'll have to cut losses, I'll be so upset at the market, that I will not want to get out with a loss. I will say "you ****er, now you're going to go my way". I mean, obviously I created the automated systems so I know exactly what's likely to work and what isn't. But if I trade manually not only I won't execute them, but I will even do things differently trying to gain some extra edge, which will not happen overall.

So once again the lesson is: understanding my limits, doesn't mean I got rid of them. Understanding that the mind deceives itself, doesn't mean the mind won't do it again. Final conclusion: if your mind is not fit to do discretionary trading, you're better off working on automated trading.

 

[Splitlink]

Yeah, the problem is, that, out of the things my parents taught me, and that I retained, there is telling the truth as much as possible, and this doesn't qualify for being an exception. I can't deceive anyone, unless absolutely necessary. For example, I am confident that I didn't say any lies in this whole journal.

I appreciate the fact that what I suggested is dishonest but, if you feel like that, then speaking as you feel is the only alternative. Which probably means, of course. "Adios amigo". The lesson learned is that you must keep your business to yourself, in future.

 

[Yamato]

"Lesson learned"... yeah, but on the other hand I can't do that either because I feel the need to open up. Sorry, I seem to go on and on and never to be happy with any solutions proposed, but this is precisely one of the purposes of this journal - I write here so I can keep my business to myself as much as possible in the "real" world. I will keep on opening myself up here in future, not because I am looking for solutions, but because writing here partly solves my problem. On top of it, it's a section created on purpose, and I enjoy being read and the feedback I get, so this place is just perfect for me.

 

[Yamato]

It's funny: another person has contacted me to learn how to day-trade forex. Once again, I don't know how to trade discretionary profitably, but once again (like for my other friend) I will teach him most of the things that I know, that might be 80% of what is needed to be profitable: finding the right securities, the right broker, and knowing the statistics of markets. What's missing is the ability to apply that knowledge, plus something more that I don't know. Hopefully I'll find out once he has learned. If he ever does, because usually it's not the case.

I'll write an outline of what I'll tell him.


1) premise: whatever you do, paper trade until you find a consistently profitable method.

2) Then you need to answer these two questions: how much money do you have and how much money do you want/need to make?

Depending on the answer you may do one of the following:

a) trade end-of-day on many stocks, to diversify (if you have a lot of money, but no need to make money fast)
b) trade end-of-day on many futures (if you have a lot of money, and need to make money fast)
c) focus on one future intraday (if you have little money and need to make money fast)

Automated systems is out of the question for a beginner or anyone who doesn't get to it by himself, because they won't have what it takes to keep doing it for years. I will mention it and say it's the best, but I won't tell him "you should do this", because then, like the other guy, he'll want me to do it for him. And I'll tell him that as well, and that I won't be doing it for him.

 

[montmorencyt2w]

Hi Travis,

I now feel slightly guilty for mentioning the idea of your writing systems for other people, and/or have other people trade for you, with or without using your money. It opened a whole can of worms which of course I had no idea about.

Just to be clear, the sort of thing I had in mind was along the lines of one or more of the following:

- you become a professional writer of trading software, either for a firm or your own business
- You use the systems you have already developed and / or will develop to go into partnership with someone you trust. Ideally, it should be an equal partnership, e.g. you contributing the techie skills, him contributing the business, financial, money-management, etc, skills, but also to some extent he could act as your "agent" when investing your money in the automated trading, e.g. for a share of the profits, and/or the right to trade the same systems with his own money.

In the latter case, it would clearly have to be an utterly reliable person, with proven business prowess, and another income - not a "needy" person. It could be quite hard to find such a person.