Zurich Axioms - A book a friend gave me

[TheBramble]

When people know you're a trader, they can sometimes take a quite different view of what "Trading" is all about and respond with kind intent. And no explanation ever rally clarifies it. Or is ever really worth the effort.

So, when I received a copy of Max Gunther's "Zurich Axioms" I immediately...put it to one side...However, ennui and a need for 'something a little different' crept up on me and I started to read it.

I'll post just the first few.

1. Worry is not a sickness, but a sign of health. If you're not worried, you're not risking enough.
{Always play for meaningful stakes}

2. Always take your profits too soon.
{decide in advance what you want and get out when you get it}

3. When the ship starts to sink, don't pray, Jump!
{Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain}

4. On Forecasts: Human behaviour cannot be predicted.
{Ignore the economists, talking heads etc.}

5. Chaos is not dangerous: until it begins to look orderly.
{Beware the Historians' trap}

{Beware the Chartists' illusion}

{Beware the Correlation and Causality Delusion}

6. Avoiding putting down roots.
{Do not become trapped in a souring venture because of sentiments (like loyalty and nostalgia)}

{Never hesitate to abandon a venture if something more attractive comes into view}

Some of these I immediately bristled at, others I embraced warmly.

Comments, Opinions or Views?

[If it gets interesting, I'll post the others...]

 

[Beach Runner]

Hi The Bramble,

I read this book a few weeks ago and I see on the paperback cover that I have are the words: "Wealth Warning: This book can make you rich". If only.

Nevertheless I found it an interesting read; I found intriguing:

'Always play for meaningful stakes'

Which interestingly goes against (as the author states) "Only bet what you can afford to lose". And I particularly like:

'Resist the allure of diversification'.

Nice to see the book mentioned. I think it is one of those bedtime reads that you can annotate quotes in (unless you lead a more interesting night life, of course).

 

[TheBramble]

Yeah, I've almost put it down myself a few times. Almost. But it's interesting, the juxtaposition between what (most) successful traders hold sacred and how what Gunther is saying 'could' be interpreted.

I'm not coming down on one side or the other at the moment - just keeping an open mind.

I find it (still reading it) thought provoking enough to post certain aspects up on t2w. Thanks for your response.

 

[ardhill]

I'm not coming down on one side or the other at the moment - just keeping an open mind.

A true trend follower :cheesy:

 

[Beach Runner]

The Bramble wrote: Some of these I immediately bristled at

I'd be interested to read what one or two of these are?

Cheers.

 

[Roberto]

I remember reading it about 20 years ago and finding it fascinating ... and that was a long time before I was even aware of "trading" at all.

 

[DaveJB]

Taking profits too soon is a no-no in my book, it's the occasional big winner that really boosts the pot - a decent stop loss system should allow you to comfortably stay in a trade without losing too much when you inevitably get out after a peak.
On our school's daily bulletin each class takes it in turn to supply the thought for the week... I liked this week's idea:
We all have photographic memories, but we don't all have film.
Dave

 

[fudgestain]

When people know you're a trader, they can sometimes take a quite different view of what "Trading" is all about and respond with kind intent. And no explanation ever rally clarifies it. Or is ever really worth the effort.

So, when I received a copy of Max Gunther's "Zurich Axioms" I immediately...put it to one side...However, ennui and a need for 'something a little different' crept up on me and I started to read it.

I'll post just the first few.

1. Worry is not a sickness, but a sign of health. If you're not worried, you're not risking enough.
{Always play for meaningful stakes}

2. Always take your profits too soon.
{decide in advance what you want and get out when you get it}

3. When the ship starts to sink, don't pray, Jump!
{Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain}

4. On Forecasts: Human behaviour cannot be predicted.
{Ignore the economists, talking heads etc.}

5. Chaos is not dangerous: until it begins to look orderly.
{Beware the Historians' trap}

{Beware the Chartists' illusion}

{Beware the Correlation and Causality Delusion}

6. Avoiding putting down roots.
{Do not become trapped in a souring venture because of sentiments (like loyalty and nostalgia)}

{Never hesitate to abandon a venture if something more attractive comes into view}

Some of these I immediately bristled at, others I embraced warmly.

Comments, Opinions or Views? ..

Perhaps one may re-write them and call them the Unknown Axioms of Trading
1. The greater your worry and anxiety, the greater is the extent to which you have not learnt to understand your market.
2. Know your market; after that it is only the size of the shovel you carry that determines the size of your profits.
3. When your ship starts to sink know the truth; it is already far too late for you.
4. Markets can be predicted intraday; it is perhaps the greatest pleasure of trading to know that most others believe they can never be forecast.
5. There is never chaos; there is only ever you and what you do.
6. Beware of ever being overeager to trade; you study research build and test your trading model and when that is done successfully, only then, trade and take no prisoners.
7. Grow deep roots in your trading experience and success; multiply your operations; and nourish a tree so big it provides the forest canopy.

 

[TheBramble]

I'd be interested to read what one or two of these are?

1,2 & 4.

 

[TheBramble]

An Expansion

1. Worry is not a sickness, but a sign of health. If you're not worried, you're not risking enough.
{Always play for meaningful stakes}

A categorical disagreement with this. I have no idea if Max Gunther has many millions more than me or not, but that is exactly how I started off trading. It's only when I started playing with a risk I consider 'almost not worth the effort' that I have began to make consistent profits. He relates to traders such as Livermore et al who went broke 4 times and amassed fortunes in between times. I'm sure there are those that like to trade that way - I'm not one of them and I don't see how it can lead in general and in most cases to sustained increase in capital.

2. Always take your profits too soon.
{decide in advance what you want and get out when you get it}

My immediate response to this one was to disagree. Seems like what every newbie does. But as an expansion and by virtue of the sub-axiom it does make sense. It is simply stating you should have a target and get out when you get there. As opposed to hope/greed. Makes sense. I think most would agree a scale-out at 1st target and then a trailing stop (or other such device) to let you know when to completely close out your position.

3. When the ship starts to sink, don't pray, Jump!
{Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain}

Totally agree. Fudgestain indicates it's too late by the time you know the ship is sinking. Of course he's right, you'd make much more by being out before that. But in most cases it is that very process which tells you to get out ahead of the crowd. Maybe FS has a technique that let's him know his trailing stop is going to get hit before it does - for the rest of us, I think we tend to rely on the stop getting hit to let us know.

4. On Forecasts: Human behaviour cannot be predicted.
{Ignore the economists, talking heads etc.}

On forecasts yes. I don't exactly trade contrary to forecasts (I don't trade news/forecasts at all), but I would almost take that position.
Human Behaviour - No. Absolutely not. It is pretty much totally predictable en masse in the markets.

5. Chaos is not dangerous: until it begins to look orderly.
{Beware the Historians' trap}

{Beware the Chartists' illusion}

{Beware the Correlation and Causality Delusion}

Can't agree/disagree with this. I don't see any Chaos in the markets per se, just randomness and traders responding to it. If was ever orderly I'd be scooping the pot on every trade and betting the ranch.

6. Avoiding putting down roots.
{Do not become trapped in a souring venture because of sentiments (like loyalty and nostalgia)}

{Never hesitate to abandon a venture if something more attractive comes into view}

Total agreement. If your trading capital is not making the move you want in the timeframe you expect - get out - move on. And just because SBUX did you proud last time makes no difference to this time. One of the biggest traps is having a favourite. This doesn't mean I don't have a core set of stocks I watch consistently - I do, but I don't favour a trade in any one of them more than any other, or indeed any that show promise on any given day outside my core set.

 

[CityTrader]

Like Roberto, I also read it 20 years ago ( think I was trading metal markets back then) and thoroughly enjoyed it. I only wish " mind of a disciplined trader" & " trading edge" were as easy to read and understand!

 

[CityTrader]

My immediate response to this one was to disagree. Seems like what every newbie does. But as an expansion and by virtue of the sub-axiom it does make sense. It is simply stating you should have a target and get out when you get there. As opposed to hope/greed. Makes sense. I think most would agree a scale-out at 1st target and then a trailing stop (or other such device) to let you know when to completely close out your position.

I thoroughly agree with this one. My view is, that's a spin on the "you have to leave something on the table for the next man"

i.e Unless you believe it's the top BEFORE other people do, you'll never be able to sell out of your position- or unless someone else believes there's still margin in buying that instrument from you, there will be no more buyers. This obviously doesn;t apply to odd lot futures trades, more applicable to multiple of NMS equity trades...

 

[Beach Runner]

Came across this on Elite Trader:

"It is amazing how suddenly people find an old book and start promoting it all over the place on multiple forums. There is some sort of orchestrated campaign to promote this book, why because the publisher is reprinting this book and it will be out in October. I have seen same or similar messages about this book on other financial forums in last few weeks."

I don't think anyone has been promoting it here (the book is of course, The Zurich Axioms); it's just the fact that the book has recently been reprinted and is available. People browse; people pick it up. Anyway, here's the thread for anyone interested:

http://www.elitetrader.com/vb/showthread.php?threadid=38102

 

[TheBramble]

Well, that might explain why it suddenly appeared in front of me.

It must be on the WH Smith/Waterstones circuit because my kind benefactor would not likely be browsing a trading type bookstore.

 

[Beach Runner]

Yes, Souvenir Press are obviously pushing the reprinted paperback edition. I chanced upon my copy in Waterstones in Birkenhead - not the first place to look for books on futures.

 

[Tuffty]

I don’t know why but I write this with accent.

Mr Bramble you interesting. Your post are intelligent and I appreciate you have knowledge of the trading.

I like to challenge your disagreement with Maxiom 1. It say no return no worry, big return big worry as risk big. If you disagree you must agree with one of following:-

1) You profit small overall so no worry.
2) You not worry as you learn to hide worry.
3) You not worry so you must be robot.

I think number 2 correct. If so it not healthy as no worry one day BIG losses. I want you to succeed as I do me in the trading. Please worry for me if not you.

There is alternative in which you be super market man as you got big profit no risk. If so I wish to know what you do so I too do same and be super market man number two.

You now agree with max 1, no?

 

[TheBramble]

Tuffty - you have me worried.

 

[TheBramble]

Yes, Souvenir Press are obviously pushing the reprinted paperback edition. I chanced upon my copy in Waterstones in Birkenhead - not the first place to look for books on futures.

It'll be interesting to ponder if it's the general domain how many previously uninterested armchair investors will come into the fray.

Even with TZA they'll most likely make the mistakes everyone else does/did when they start out.

The SBs will be a fairly obvious recipient of new money players. In fact, if I was one of them, it wouldn't be a bad idea to regularly get pulp trading books out on to the general high street store bookshelves - keep the retiree interest up. (Not a poke at retirees - they just have more money and time than most).

 

[Tuffty]

I think I've sorted out the worry issue. We should be worried when we trade, not because we don't know what we're doing, but because we do know what we're doing as we are taking on risk. If one is not worried then one hasn't taken on enough risk (ie we won't get a return as no risk no return).

Now I can stop worrying about this.

 

[DaveJB]

Not my idea of fun -
if you are worried then you aren't being logical, in my view - worry is emotional, and emotion isn't helpful.
I would suggest that to deliberately take a position you are going to worry about is a bad idea, and you should never be worrying about an existing position - either it has hit the stop, or it hasn't - worrying is a waste of time.
Dave