for a minority group--when u r good, u r good w/o external confirmation.
You also have to wonder how much talent goes unrecognized. If you donít have people around you who point out how good you are at something or if you are never exposed to what you are good at then you will go through life not knowing. I think talent shows you see on TV are a good example of this.
in most aspects, i do concur.
however, for a minority group of unfamiliar strangers, when they are good at something, they know that they are good.
and within the group, some excel more than others, but they all recognize without being confirmed by their peers or others that they truly excel at whatever tasks at hand.
this minority, really do not need external confirmation.
a case in point, there are numerous traders on board who are always a silent minority, who hardly post, who hardly interact and who hardly react to any post nor reference.... for this group, there really is no necessity for exterior confirmation nor recognition, whatever. for they know what they are capable of, without being told nor confirmed by any third entity.
i gather this is an exception rather than the rule with most people. just thought to throw out a divergence here, which some might be able to draw lines to trade on as support or resistance depending on if you are a buyer or seller at that moment in time.
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Since I failed to go out with a ban(g), I thought I'd try to give this a journal a worthy finish.
I've received a few PMs and requests on the forum urging me to share my approach to trading. I'm not interested in doing anything that could jeopardize my livelihood, and I've struggled quite a bit with how I could share something without doing so. The problem is that I haven't found a way to do this. I view trading in a very specific way, and by sharing the framework I operate within, I would be giving it all away. Unlike what most beginning traders tend to believe, markets are pretty efficient, and it wouldn't take much for my strategies to become obsolete. My trading requires constant reinvention, and it involves a lot of work. I've spent much more time researching than I have trading. I'm sure others have found the holy grail, but I'm just someone who spends a lot of time to stay on top of things. I honestly don't think this post will do much good, but I like to honor my word. It's a byproduct of my OCD...
Year 1170 (MCLXX) was a common year starting on Thursday (link will display the full calendar) of the Julian calendar. It was also the earliest dating for the making of Cheddar cheese. It seems fitting that I write this final entry, my post 1170, on a Thursday. I'm also fairly certain that the vast majority will find this post quite cheesy, so this can't merely be a coincidence... If you actually believe that, I advise you to read Gann and study this: SACRED SCIENCE INSTITUTE: Where Ancient Wisdom & Future Science Meet...
I started by swing/position trading for a 2-3 of years, and I always assumed intraday moves were too full of noise to be worth the effort. I used to think those that spent hours glued in a screen, watching tick by tick, were idiots. That is, until I become one too. My goal was to daytrade for a couple of years, in order to make enough money to be a global macro trader. I've always found it more fun to do analysis, of both fundamentals and time series, than actually trading. That's why I prefer the longer-term; I'm quite comfortable making an educated bet, and letting it play out as it may. Actually, that's not entirely true. I mainly use options for such trades, and I do try to work my position when I can, in order to smooth the equity curve. Options adds another dimension to trading, and I would make much less if I only were taking outright positions in futures.
For my first year or two, I was mainly focused on Norwegian stocks. I wouldn't even follow the market live, I would rely on newspaper quotes. There were only about 200 stocks listed on OSE, so I would keep tracks of each of them every day. I have a pretty decent memory, so I the only tool I really used was my brain. I also played close attention to the indices, currencies, bonds, and commodities. I was mainly doing fundamental research, and combining that with my own crude forecasting of volatility, and perception of sentiment vs. value. After a while, I started getting a strong feel for when things overreacted to certain events, and I started to refine that approach further. I did maybe 5 trades a year, but I spent hours every day doing research and studying financial theory. I would use Excel, which I had used extensively for sports betting in previous years, for all of my analysis, and, since I didn't even know VBA, I think one must have OCD to endure the tediousness of my analytics. On the other hand, I think that doing things "manually" had its advantages. Kind of like when the old TA guys recommend drawing charts by hand to get acquainted with how price moves.However, I've never done that, so I wouldn't really know. I think charts are best used for a general overview of what has happened, but I don't really use them much for trading analysis. I prefer to work with the actual data itself, as I can slice and dice it as I wish. The key is really create a framework to operate within, not adopting someone else's.
The only reason I started posting was that I have been suffering from some health problems the last couple of years, and I'm not referring to my insanity. I've finally gotten to the bottom of it now, and I expect to be back to normal within the next couple of months. Over the last couple of years, I've felt that my brain has become less and less sharp, and I've not been able to do much of what I enjoy doing. I'm really glad I finally found it was due to a deficiency, and everything should be reversible. What does one do when one can't get much done, and also is unable to get out much? One becomes a forum troll, of course. I'd like to think that I've contributed some practical knowledge, however; maybe even a few conceptual nuggets. It's hard to tell, as I have such a massive ego that I tend to glorify my own existence. That's really been the intent of my posting on message boards. I've been trying to overcome my narcissism. I've deliberately made a fool out of myself, and stood by it. Especially on topics that I know quite a bit about, like philosophy and options. I've also posted messages at an excessive pace, without proofreading, and I've tried hard not to edit a lot of them. All ways of breaking down my arrogant personality, and a way of combating my damn OCD.
As for my actual trading approach, I don't really want to say much. I can say that I find it much more valuable to study academic literature for new ideas, and methods for analyzing the markets. From there one must be highly creative, and organize and analyze data in an intelligent manner. The inefficiencies that can be exploited as a retail trader are neither easy to find, nor usually very persistent. I've generally found it easiest to focus on swing trading, but I do have a couple of intraday strategies that are currently working.
I must admit that I'm not sure I'd ever be able to be able to trade intraday had it not been for a few posters on ET. At the time, nearly a decade ago, there weren't many alternatives, and it might be wise to dig in the archives of Elite Trader, as there are quite a few nuggets buried between all the junk. It's a shame that Baron did not keep the old threads prior to 2001, when he changed servers, but there is still a lot of good material there. It's quite refreshing to read the subforums from "the beginning" in "ascending order", and I would recommend doing so. Trolls had not yet been invented, and the willingness to share attracted a few knowledgeable traders. I actually view the process of being able to separate the good advice from the bad on trading fora as a precursor to being able to separate the signal from the noise of a time series.
I'm far too lazy to keep this narrative style going, so I'm going to revert back to what this thread always has been about:
A few scattered thoughts:
-As I used to be a sports bettor, I've always focused excessively on risk management. Trading is no different. It's important to stress that risk/money/trade management is not simply deciding on using 1% of available capital at any time. I'm talking of a much more elaborate way of dynamically adjusting both position sizing, trade management and capital allocation. I'm not claiming that one can make money by random trades, but it's amazing how much much one can squeeze out of very small "edges".
-I've talked dismissive of charting a few times on the forum, and I want to emphasize that I was referring to raw price graphs. I do, of course, use charting in my statistical analysis. This is analogous to when I've berated indicators, but I frequently use both market internals/breadth indicators, and so-called economic indicators. The key is to use external data, not just display the same data in a myriad of ways.
-I see a lot of people struggling with scaling up... I did the exact opposite of most when I started. In order to avoid overtrading and excessive risk-taking, I always imagined trading with 10 contracts -- even when I was only trading one. Keep in mind that this is just a game, and it's best to focus on points, not dollar amounts.
-Keep updated on what's going in the world. I used to subscribe to the WSJ, but it's nearly unreadable now. FT and the Economist are still pretty decent, and are the only publications I find worth reading. Bloomberg TV is now as bad as CNBC was when I started. It's quite appalling. The European and Asian versions of both channels are much, much better, though.
-One of the most detrimental concepts ever adopted by the trading community must be the 10, 000 "rule". One does not learn to trade by watching charts for 10,000 hours, and this is a complete waste of time for most people. It's not about time spent, but time spent wisely. Deliberate practice is the key. However, a stroke of genius is enough to devise a profitable strategy. It's just about finding something that works. However, for most, myself included, it requires a lot work and data analysis, not to mention a lot of thinking.
-It seems most think that they will find some sort of universal approach, and constantly misuse terms such as probability. I've always taken the opposite view, and I'm proud to be a speculator. I make educated bets, and I fully understand that all my "knowledge" is just a rough approximation.
-Spending time of going through Al Brooks' ramblings seem like a total waste of time to me. If you are going to only trade patterns of a 5-minute chart, read charts -- not books! If you can't see, and validate, the patterns for yourself, you probably shouldn't trade them. Trading isn't about learning a method, it is about learning to do creative analysis. Just to clarify, I don't have anything against Mr Brooks personally, but I get somewhat annoyed by his cult-following of "pure" price action traders. Hey, guys, what about your moving average?
-Price lags. Yes, indicators generally lag more, but price itself lags. That's the argument for doing order book analysis, or placing speculative bets ahead of events... The latter is what speculation is generally about, and I found that it is actually less risky then waiting for confirmation. I think Paul Tudor Jones summed it up nicely:
“I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.”. Livermore was of the same opinion...
Speaking of PTJ:
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have” I'm amazed by new trader's willingness to lose thousands of dollars by trading too much, too soon. There's really no point in losing much money; you shouldn't trade until you have a very good reason to do so.
-People are lazy. They want someone to show them the way, but finding something that works is exactly what's difficult about trading. It's not about psychology, it's about actually finding something that works. It's lazy to assume that trading is about controlling one's emotions; it's a sure way of chasing one's own tail. If one finds something that works, the psychological effect is generally immediately remedied. If that is not the case, then one is acting irrationally, and needs to seek professional help!
-Journals are worthless. Talk doesn't get you anywhere:
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-The best ideas can be found in academic journals....
-Trust no one. Don't buy any tools or methods. If you have a good idea, feel free to pay a programmer to make a custom solution for you. Don't waste time going through all the junk invented by failed traders turned indicator vendors.
-People dispense advice without being profitable themselves. After a while, some have the terminology down, and talk like they were floor traders. They can "explain" moves, and talk "intelligently" based solely on charts. They can "see" accumulation and distribution, and they whether the rally was short covering or not. These people are generally trying to get a return on their ego, because they cannot get a return on their capital. Avoid those people like the plague. They're the most dangerous posters out there, because it's very hard to see through their bullshit.
-How one's brain is wired, actually does matter. Just like height, speed and looks are physical attributes, so is the ability to process information rapidly. Try watching a tick chart, yes, the real tick by tick chart, for a couple of weeks. Do the same with the DOM. Look for things like this: http://www.youtube.com/watch?v=MTxYXDmUdts&hd=1. If it's meant to be, it's meant to be. Due to the influx of machines, I wouldn't spend much time on this. It's probably wiser to take a step back, out of the realm of high frequency traders, and try to catch some nice swings instead.
-Don't underestimate the power of a good trend. Take guys like Stanley Kroll, Livermore and Darvas, e.g. Returns are asymmetric; squeeze as much out of a good position as you can. This is referring to bigger swings, of course. It's much wiser to get a high win rate with at least 1:1 on medium-frequency systems.
-People say they want freedom, but they only want a job with better pay and fewer hours. I work more than most normal jobs, but, because I love it, it feels like fun. Trading is about embracing uncertainty, not about being told what to do. If one is to find the biggest opportunities, one must be flexible and nimble.
-A community is nice, but it doesn't work for most styles of trading. No one would want to risk having their systems stop working just to be nice to others. What I fail to understand, is why people don't collaborate on longer-term trading. One could share the workload, and hopefully experience some sort of synergy. I guess most traders don't have the account size to swing futures. They should consider spreading...
-Most people tend to look for a method/system, but one should rather try to think conceptually about what the methods represent. There are only two approaches, at least for the average directional trader: reversal, or continuation. Volatility expand and contract, momentum come and go. Most people think they are employing different systems, but they are just using arbitrary combinations within the same paradigm.
-Nearly all TA books are far too long. It's better to buy access to the archives of Stock & Commodities Magazine, and get the cliff notes instead: 1982 STOCKS & COMMODITIES Volume
-Geometric approaches are worthless. The only form of TA I have remotely useful, is the simplest form of S/R: peaks and troughs, and clustering.
-Most people fear news. The only intraday trading I do manually, is trading the open and news releases. I find markets less efficient in those situations. I do a lot of pre-market/trade analysis, but use discretion as a filter.
-If charts are supposed to represent mass psychology, it should work better on longer time frames, right? No one is stopping you from using daily charts or higher or intraday trading.
-I hate the word time frames when used of arbitrary constructs of time periods. A session has an OHL&C, a week has a beginning and an end -- the same with a month, quarter and year. Funds rebalance their portfolios, and they have reporting dates. companies have earnings. Some events are inescapable... It doesn't matter if you use 5 or 60 minutes, it's just a different way of displaying the same data.
-Spread trades often require less margin than outright positions....
-Many reach a point where they lose money at such a slow rate that they think they're actually making money. This does in no way indicate that they are any closer to becoming profitable. It's very dangerous to attribute this to psychology, as one could go insane by such thoughts. They are also in no position to dispense advice. Again, trust no one. Not even me. In fact, stop reading right now!
-One doesn't know what one doesn't know. The general trading community seems to be an embodiment of the Dunning–Kruger effect.
-"Markets aren't random, because orders aren't placed at random". That's not an argument against randomness...
-Markets are interconnected. Money flows from one node to the other in this complex system. Keep an eye on the bigger picture, even when trading intraday....
-Your order routing, data quality, latency and reaction time all suck. Why are you making things harder than they need to be? A good swing trade can easily make as much as most intraday traders make in a month... It's generally even less work... Imagine that...
Wow, what a load of garbage this post ended up being. I don't want to share anything that could stop the flow of money into my beloved trading account, thus this has become a long post of nothingness. I apologize, but actually writing such a long post is torture for me, so now I can retire without feeling guilty for my modest trading success. I'm not in any way claiming to be omniscient, nor do I claim that my thoughts are interesting for anyone other than myself. Unlike some of the other self-proclaimed experts that tend to frequent message board, I'm mostly interested in sharing resources I have found valuable, and I will do so in the next post. I'm not trying to gain admiration by spewing out vague statements in order to become worshiped by less knowledgeable patrons. I've frequently been deliberately vague, and I've also willfully contradicted myself on several occasions. The main motivation for this was to motivate both discussion and thought, but I seem to have failed miserably at both.
This post has not been proofread, and I'm currently tripping on LSD. Please note that I am not claiming that intraday trading can't be much simpler than what I've been talking about, but I sure as hell wouldn't be sharing anything like that!
Seriously, though... Just sit and observe, for weeks, or maybe even months. Don't sim trade, or try to apply any method someone else has taught you. Just observe... Keep a quote board to get a feel for the interconnectedness of it all, and use whatever charts or astrology that makes sense to you. One is never going to be able to become a discretionary intraday trader if one doesn't fully understand and believe in what one is doing. I generally only take 1-2 trades a day (per instrument), and I'm simply playing a game of inverted Whac-A-Mole (think about it, it's actually a lot deeper than you originally thought it was... Feel silly now? Good, you should! )
Now, I intend take the summer off, while working on automating the rest of my intraday trading, and hopefully I'll only be swing/position trading from the fall. I'll with another Tudor Jones quote:
"What’s so special about macro hedge fund managers?
I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It is just hard to find a great macro trader. When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500.
When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade. Markets have consistently experienced “100-year events” every five years.
While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it".
Good trading to all!
Last edited by Lornz; June 15th, 2012 at 03:05 AM.
Reason: Added a link, left the errors in place...
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I intended to organize this better, but I just can't be bothered. It probably fits the thread better if it's as chaotic as my other posts, so I'll leave it be.
I think a lot of traders struggle with psychological issues because they lack a clearly defined approach, but also because they know next to nothing about how the financial system is supposed to work. There are so many resources available out there. I just posted a few. I've also included a selection of books that I enjoyed (but I left out some "hidden" treasures...) Some of the books are newer editions, or (hopefully) equivalent books, as some of the ones I read have become antiquated already. Speaking of antiquated, I love the old stuff: Cosimo Bookstore - BUSINESS - Making Money . Most of the original editions are available for free at archive.org.
Wyckoff basically invented the Footprint chart, and he also wrote about creating synthetic instruments. Livermore was the first (?) stat arb trader.
This is lost on most people, but it's all in there, if one knows where to look. Livermore also didn't use charts, he used a ledger. Charts area just visualizations of data, don't treat it as a living being. Our brains fools us all the time, and relying too much on a chart is like begging to be deceived. My trading is mainly based on volatility and momentum. I don't try to understand or predict every move, and I actually think that the market is close to random most of the time. However, I still make a decent amount of money, so I must be doing something right....
Reading your exceptional post on giving your journal a worthy finish; I had a thought about how to describe making/losing money in trading. Its base on the theory: "energy can be neither created nor destroyed; it is simply transferred to some other form of energy."
Trading is the same principle: Money is neither made nor lost; it is simply transferred from one trading account to another.
RE: your posts; Any thought written or spoken which makes one stop and think is no wasted thought; It is rather the inginition which sparks the synapses which generates another thought. And that my friend is worth the price of admission.
nosce te ipsum
Trade what the market is doing; NOT what you think its going to do.
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