Whats more important- Following the rules VS Making consistent profit each week/month

[Firey6]

What is more important, and who would you class as a more sucessful trader?

A trader who follows all the rules of using tight stoplosses, only risking 2% of their capital per trading, waiting until a clear trend is already in place before placing a trade,
but after a few years they have only made small profits/losses at the end of each month.

OR

A trader who averages-in to all their trades, who trades against the trend by trading top & bottom formations and so uses very wide stoplosses, where if the market did ever hit their emergency stoploss they would lose 30%+ of their capital,
but after a few years they have consistently made very large profits at the end of each month.

 

[Brumby]

What is more important, and who would you class as a more sucessful trader?

A trader who follows all the rules of using tight stoplosses, only risking 2% of their capital per trading, waiting until a clear trend is already in place before placing a trade,
but after a few years they have only made small profits/losses at the end of each month.

OR

A trader who averages-in to all their trades, who trades against the trend by trading top & bottom formations and so uses very wide stoplosses, where if the market did ever hit their emergency stoploss they would lose 30%+ of their capital,
but after a few years they have consistently made very large profits at the end of each month.

I think you have got the parameters the wrong way round. When trading trends, stops are invariably larger to avoid premature stop out when attempting to ride a trend. DD's are typically higher with trend traders.

When catching tops or bottoms, one should know the right conditions to trade - either you are right or you get stopped out. Having a wide stop is just a cop out for attempting something that should be avoided unless you know what you are doing.

 

[Firey6]

I think you have got the parameters the wrong way round. When trading trends, stops are invariably larger to avoid premature stop out when attempting to ride a trend. DD's are typically higher with trend traders.

When catching tops or bottoms, one should know the right conditions to trade - either you are right or you get stopped out. Having a wide stop is just a cop out for attempting something that should be avoided unless you know what you are doing.

I was referring to when thats combined with averaging-in though.

For example if someone wanted to short the dow with 3 contracts, but so they added 1st contract in at 14,800, added 2nd contract if went to 14,900, and 3rd contract if went to 15,000.
(And then entered their emergency stoploss at maybe 15,300)

Since if you average-in to trades you wouldn't enter your stoploss before you had even finished entering all the contracts that you were going to enter.

 

[Firey6]

For example its this like this post from 1 of the mods on this site which really confuse me and makes me feel that a large number of people are focusing on completely the wrong thing.
(www.trade2win.com/boards/home-trader/88382-zulutrade-216.html#post2112624)

He basically says that ''Without money-management anyone can easily make a few thousand pips''.
Which really stuns me as to how anyone can actually believe that, especially someone whos a mod and so who you would expect to have abit more experience.

Since the 1 and only purpose of trading is to consistently make lots of money every week/month right?
Its not to try impressing everyone with how discliplined you are, how amazing you money-management skills are, how strictly you follow the standard rules,
its to consistently make lots of money every month.
But so if not using MM means that you can easily make thousands of pips profit per month, wheras using MM means that you will either only make/lose a few hundred, why would anyone whos trading to try making money choose the latter?


Someone who doesn't use money-management and instead relies completely on their own skill and analysis of trade entries to be their MM, but yet is consistently extremely profitable and sucessful every week/month, even after many many years,
is loathed hated looked-down-on and thought to be inferior in skill.
Whilst people who use strict MM but yet still have lots of losing trades and lose money or only make small/medium returns each month, are for some wierd reason considered to be 'more skillfull', even though they are less sucessful.

But how can you regard yourself as more 'skillfull' than someone else who is consistently more 'sucessfull' than you after multiple months/years?
As surely you would judge how skillfull someone is at trading by looking at their performance over a number of years and seeing how sucessfull (in points and/or profit % returns) they have been each month during all of those years?

 

[Brumby]

I was referring to when thats combined with averaging-in though.

For example if someone wanted to short the dow with 3 contracts, but so they added 1st contract in at 14,800, added 2nd contract if went to 14,900, and 3rd contract if went to 15,000.
(And then entered their emergency stoploss at maybe 15,300)

Since if you average-in to trades you wouldn't enter your stoploss before you had even finished entering all the contracts that you were going to enter.

There is generally a difference between averaging-in and scaling-in even though both in theory are attempting to secure a better trade location within the boundaries of a reversal zone. The differentiation in my view has to be within the context of a trade plan and an understanding of the market structure within which these attempts are made. Averaging-in approach for lack of a definition is generally a hope for the best approach without regard to the overall trade equation, probabilities and market structure.

The other thing I would comment is that personally for me, scaling-in is something I would do if I am buying retracement with the aim of positioning for a trend continuation because the odds are in my favour and so i am prepared to have a wider structural stop as opposed to a wider hard stop.

If I am attempting to pick a bottom or a top i.e. a trend reversal, my approach would be go in with one entry because my parameters are tighter i.e. either I am right or I am wrong rather than allowing a poistion to go against me on the basis of hope recognising it is a lower probability trade. A low probability trade multiply against a wide hard stop equates to a high negative expectancy - this is not something you want to do long term.

 

[Brumby]

For example its this like this post from 1 of the mods on this site which really confuse me and makes me feel that a large number of people are focusing on completely the wrong thing.
(www.trade2win.com/boards/home-trader/88382-zulutrade-216.html#post2112624)

He basically says that ''Without money-management anyone can easily make a few thousand pips''.
Which really stuns me as to how anyone can actually believe that, especially someone whos a mod and so who you would expect to have abit more experience.

Since the 1 and only purpose of trading is to consistently make lots of money every week/month right?
Its not to try impressing everyone with how discliplined you are, how amazing you money-management skills are, how strictly you follow the standard rules,
its to consistently make lots of money every month.
But so if not using MM means that you can easily make thousands of pips profit per month, wheras using MM means that you will either only make/lose a few hundred, why would anyone whos trading to try making money choose the latter?


Someone who doesn't use money-management and instead relies completely on their own skill and analysis of trade entries to be their MM, but yet is consistently extremely profitable and sucessful every week/month, even after many many years,
is loathed hated looked-down-on and thought to be inferior in skill.
Whilst people who use strict MM but yet still have lots of losing trades and lose money or only make small/medium returns each month, are for some wierd reason considered to be 'more skillfull', even though they are less sucessful.

But how can you regard yourself as more 'skillfull' than someone else who is consistently more 'sucessfull' than you after multiple months/years?
As surely you would judge how skillfull someone is at trading by looking at their performance over a number of years and seeing how sucessfull (in points and/or profit % returns) they have been each month during all of those years?

I am relying on your interpretation of what was said rather than what was posted by the mod. because I understand where the mod. is coming from and so I understand the context of what is being said.

Trading is hard because in order to generate long term positive expectancy we need to achieve it in the context of :
(i) Exploiting an edge in the market which is fleeting and constantly offset by market randomness. It is the reason why there are a lot of trade wash outs which don't move the account along. Within the limited instance where an edge is present, MM is key in managing risk and exploiting the opportunities.
(ii)Within the context of making money, managing risk is always in the overall background. Most traders fail because they don't understand that risk management is the key to long term survival. In this business you cannot have a discussion about returns without the ever present risk factor being part of the conversation. Talking about returns without addressing risk is foolishness and recklessness and is excatly what the mod. was trying to highlight about making thousands of pips but in isolation to risk i.e. without protective stops.

 

[Firey6]

Thanks for your replies, they were very eloquently written.


I still do not know the answer to the 2nd point i posted though of-
Someone who doesn't use money-management and instead relies completely on their own skill and analysis of trade entries to be their MM, but yet is consistently extremely profitable and sucessful every week/month, even after many many years,
is loathed hated looked-down-on and thought to be inferior in skill.

Whilst people who use strict MM but yet still have lots of losing trades and lose money or only make small/medium returns each month, are for some wierd reason considered to be 'more skillfull', even though they are less sucessful.


But how can someone regard themself as more 'skillfull' than someone else who is consistently more 'sucessfull' than them after multiple months/years?
As surely you would judge how skillfull someone is at trading by looking at their performance over a number of years and seeing how sucessfull (in points and/or profit % returns) they have been each month during all of those years?

 

[Brumby]

Thanks for your replies, they were very eloquently written.


I still do not know the answer to the 2nd point i posted though of-
Someone who doesn't use money-management and instead relies completely on their own skill and analysis of trade entries to be their MM, but yet is consistently extremely profitable and sucessful every week/month, even after many many years,
is loathed hated looked-down-on and thought to be inferior in skill.

Whilst people who use strict MM but yet still have lots of losing trades and lose money or only make small/medium returns each month, are for some wierd reason considered to be 'more skillfull', even though they are less sucessful.


But how can someone regard themself as more 'skillfull' than someone else who is consistently more 'sucessfull' than them after multiple months/years?
As surely you would judge how skillfull someone is at trading by looking at their performance over a number of years and seeing how sucessfull (in points and/or profit % returns) they have been each month during all of those years?

What you have brought up is precisely the conversation that is taking place in another thread titled "ZuluTrade" regarding a signal provider Kama Spot that fits your issue.

I think in trading, it is important to appreciate that there is more to meets the eye as in the movie "Transformer" i.e. what is apparent is not necessarily obvious.

In order that there is a meaningful and objective conversation there has to be a number of things that are clearly understood and agreed to as to its meaning because it can mean different things to different people like :
- success
- skillful, and
- the ever present elephant in the room, risk and what is acceptable

If I were to sum up the issue, draw down or blow up is something that we think we understand until we are faced with it. It is like insurance, it is a pain when we have to pay the premium but glad that we have coverage when there is a disaster.

You have one situation where someone is ahead with very little regard to risk and another trading within acceptable risk parameters but returns are constrained because of it. When the story is not finished, we do not know whether to be thankful there is an insurance policy or we were smart enough to dispense with it.

 

[Firey6]

The reason that im so intrigued is that ive been following the live calls of spanish89 on elite trader for a number of years, although he was a former memember of this site approx 5years ago.

I remember when he 1st started his journal on elite that everyone over there thought he was gna make someone money for a few weeks but then fail and lose it all,
however its been nearly 6years now but yet he has continued to be sucessfull and generate some incredible profit returns each month through his live calls.

He has now moved to live calling all his trades on twitter () instead of on elite, but when ive spoked to him he has told me some horror stories about the members on this site.
He basically said (in slightly more less pleasant and more mocking languge) that the people on this site are all uptight losers who are jealous of his sucess, and that he has proved you all wrong by the profit returns hes made over the past 5years yet you are all too pig-headed to admit it that you were all wrong that he wouldn't become extremely sucessfull at trading).


All i personally care about is making money from trading, so never got involved in all the personal vendettas and stuff or had any interest in taking sides, as being a keyboard warrior isn't really a high priority compared to my real world life! lol

But from the context of what hes said it did get me very curious as to what people in the trading community actually care more about,
someone who uses very liberal MM techniques but is consistently extremely sucessful VS someone who uses very strict MM but yet is far less sucessful each month over that same 5year period.

 

[Brumby]

The reason that im so intrigued is that ive been following the live calls of spanish89 on elite trader for a number of years, although he was a former memember of this site approx 5years ago.

I remember when he 1st started his journal on elite that everyone over there thought he was gna make someone money for a few weeks but then fail and lose it all,
however its been nearly 6years now but yet he has continued to be sucessfull and generate some incredible profit returns each month through his live calls.

He has now moved to live calling all his trades on twitter () instead of on elite, but when ive spoked to him he has told me some horror stories about the members on this site.
He basically said (in slightly more less pleasant and more mocking languge) that the people on this site are all uptight losers who are jealous of his sucess, and that he has proved you all wrong by the profit returns hes made over the past 5years yet you are all too pig-headed to admit it that you were all wrong that he wouldn't become extremely sucessfull at trading).


All i personally care about is making money from trading, so never got involved in all the personal vendettas and stuff or had any interest in taking sides, as being a keyboard warrior isn't really a high priority compared to my real world life! lol

But from the context of what hes said it did get me very curious as to what people in the trading community actually care more about,
someone who uses very liberal MM techniques but is consistently extremely sucessful VS someone who uses very strict MM but yet is far less sucessful each month over that same 5year period.

One person's meat is another person's poison.

The level of accountability is different when you are trading your own money as opposed to having an overflowing effect on others i.e. giving live calls.

The other component not discussed is the importance of psychological and not just monetary capital. Protecting the psychological capital is just as important because once the psychologival capital is depleted then it is very difficult to trade in a positive state. The advantage of taking consistent profits even if not at optimal level can be a positive factor in sustaining trade performance. It is the reason why trend trading can be very difficult to sustain psychologically because of the high draw down and low win rate.

 

[Splitlink]

An odd question. Anyone making consistent profits must be following rules, of some kind, surely? Even if one is a person who follows his own doctrine, disregarding all the others established over time.

 

[Firey6]

An odd question. Anyone making consistent profits must be following rules, of some kind, surely? Even if one is a person who follows his own doctrine, disregarding all the others established over time.

As far as i can tell from his live-calls all his trade exits where he closes the trade for a loss are done manually and at market levels chosen discretionately, not by letting the market spike up to touching an automatic stoploss.

You can check him out for yourself on his twitter though.

 

[Brumby]

As far as i can tell from his live-calls all his trade exits where he closes the trade for a loss are done manually and at market levels chosen discretionately, not by letting the market spike up to touching an automatic stoploss.

You can check him out for yourself on his twitter though.

A discretionary trader by definition applies discretion even if there are set rules and protective stops in place.

Part of trade management is the on going process of evaluating the health of a trade once it is opened. Sometimes the subsequent price action on entry might suggest that the probability has degraded and rather then for a protective stop to be hit it is preferable to scratch the trade and move to a new one. Sometimes it gives a better outcome, sometimes not. A trader takes responsibility, conducts a post evaluation and move on.

 

[tar]

Firey6 :

Hi

You didn't read the whole discussion at Zulu's thread , so you took my words out of context , what i meant is making thousands of points by not using stops and by averaging down 10 times at the risk of blowing up at anytime is hardly a skill , anyone can make it and when i said anyone i didn't mean everyone literally , it depends on market conditions at the time and luck , but if all of us did trade that way atleast one of us surely will score big pips but that's hardly a skill it is more like " average and hope " that's what i meant . On the other hand using strict MM without making money consistently is not successful trading , making consistent growth for a long period of time with MM and Stops and a reasonable DD that what i would call skillful trading or proper trading . So your comparison is not valid no one said if you use strict MM then you are a successful or a skillful trader you have to add to that "and make money consistently" , so the appropriate comparison should be :
1-Trader makes money consistently by not using stops and by averaging down and he's at the risk of blowing up at anytime .
2- Trader makes money consistently and he has strict MM and stops "not necessarily tight SL " and has reasonable DDs .

The first trader is not skillful and not successful in my book cuz he will give everything back sooner or later , maybe he has some skills don't get me wrong but he's relying on luck here , the second trader is the winner in this comparison because he managed to make money consistently "even if it is less than the first trader" while using strict MM and without betting the farm .

BTW i am not talking about scaling-in strategies here , we are talking about averaging in losing trades in the hope of a comeback !

Re Spanish : Good for him i have no problem with that its his own money but i wouldn't call that a skill or success without looking at the rest of his trading statistics like for example his Max DD is it 20% or 80% ... etc , another thing here claiming making money for the last 6 years is a thing and proving it is another , you need a verifiable track record with all the trading statistics like average win , average loss , max DD , DD periods , risk per trade/group of trades , correlation to the SP500 ... etc , twitter accounts "please don't advertise his account" and word of mouth wont do in that case i am afraid .


Just my 2 cents .

 

[DionysusToast]

What is more important, and who would you class as a more sucessful trader?

A trader who follows all the rules of using tight stoplosses, only risking 2% of their capital per trading, waiting until a clear trend is already in place before placing a trade,
but after a few years they have only made small profits/losses at the end of each month.

Sorry - but whose rules are these, exactly?

OR

A trader who averages-in to all their trades, who trades against the trend by trading top & bottom formations and so uses very wide stoplosses, where if the market did ever hit their emergency stoploss they would lose 30%+ of their capital,
but after a few years they have consistently made very large profits at the end of each month.

Are those really the only 2 alternatives you know about?

I think you need to widen your horizons a little.

For example, in terms of your second example, I know plenty of people that scale into trades but they don't put 30% of their account on the line in the process.

You might want to also get to terms with the fact that a lot of trading is not directional at all.

 

[rawrschach]

Hey spanish. The only rule is to trade with an approach that has positive expectancy.

 

[Splitlink]

Tar, I think that most people who follow the "no stop" path have found that out!

In my case, over the years that I have been trading, I have never been an advocate of "no stop" but I have, several times, used stops a long way away. I have used 50 points, which is a tremendously risky adventure, as far as I'm concerned, and guess what? No matter how safe I thought it was, I got stopped!

The psychological damage that does to one's self esteem, mine, at least, is considerable. I prefer not to do it.

Essentially, one can be all day in a trade and end , not being stopped out, but still making a big loss if one closes. For how long is that situation going exist? By that me, a shorter term trader would have seen other opportunities to recover his loss.

 

[Heed Helpers]

Hi all,

I am also interested in this kind of trading and hearing about spanish89 i was wondering if anyone knew who he traded with as i am looking for a good trusting broker, obviously if the broker he trades with is good then i also want to be part of that so i can see real money is made.

PS: I,ve researched and seen quite a few brokers around but there are so many, i just hope its one that i know of. Please help.

thanks,
Ana

 

[malaguti]

An odd question. Anyone making consistent profits must be following rules, of some kind, surely? Even if one is a person who follows his own doctrine, disregarding all the others established over time.

I agree with Splitlink.
And also, how do you quantify successful? in the short term he/she may have more money but in the long term my consistent RR ratio will prevail.
Having said all that, you could still trade both and still follow the rules. Typically you would not just have one strategy, but rather combine for different scenarios. At least I do anyway

 

[Splitlink]

I agree with Splitlink.
And also, how do you quantify successful? in the short term he/she may have more money but in the long term my consistent RR ratio will prevail.
Having said all that, you could still trade both and still follow the rules. Typically you would not just have one strategy, but rather combine for different scenarios. At least I do anyway

I don't agree that long term trading necessarily measns long term success. In fact, I think that the opposite could, easily, be the case. Trades cannot be left to their own devices, day after day, with no control, other than putting more into the pot if it is losing money.

At the same time, let's face it, cutting short trades can, also, lead to nasty, long term losses.

Nevertheless, I prefer the latter. At least, I am out and can think again, maybe, looling at another instrument.