I'd like to throw a few thoughts out there and see if they chime with anyone...
After a couple of years in the kindergarten, the clouds are parting and warm rays of trading clarity are just starting to peep through. Everybody told me when I started out that 'you'll find your way', or 'your way will find you' or some other obscure advice.
I was a hard nosed analytic sceptic of anything left brain, and promptly dismissed those well meaning words. Well hey ho, looks likes they were talking sense afterall.
My journey so far can be summed up by the title of the thread. 'No Conflict'. This is an approach to trading that I am just starting to develop. And it is making sense and profit for me. I'm pondering whether it is just that the clothes fit me or perhaps it has wider appeal?
The sorts of ideas I have been playing with are (by no means an exhaustive list)...
- Why try to predict or impose your view of the market on the market? There will be conflict every time you are wrong.
- Why 'personalise' each trade, you will find fault with them all in a way. The good ones will not be quite good enough the bad will reflect all your faults and failings.
- Let the market and your results lead the way.
- Average everything you can by increasing the numbers in your sample. Test as many ideas as you can, try as many markets as you can and tinker with everything all the time. Conflict will certainly await you if you looking for a fat diamond.
- Get you ducks in a row: go inside and examine what you believe, that's the platform for building a trading approach you can trust. If you trust your trades you are free.
- Trying really hard to get a strategy to work? Add another filter? Stop fighting it, it's telling you load and clear CF&D: curve fit and disappointment! Move on and try another perhaps the next will want to dance with you.
So no, not objective, analytical or scientific. I'll stop here and see if anyone what to chat it through.
The following user says Thank You to mokodo for this post:
Agree entirely. That feeling of 'resistance' is familiar to everyone who's trading I'm sure. Ther'e a good tip I've read which I've applied to trading initially - but quickly found it to be applicable and very helpful in other areas of my life also (I think it is in one of Brett Steenbarger books).
When you feel that conflict/resistance, objectify it, realise that it only 'feels' like that because you are pushing against it. Stop pushing! I simply let the feeling in and it immediately dissipates. I am impatient by nature and now when I feel that impatience building up I just let it roll over me and and naturally my sholders drop, I breath out and I can wait it out again. Maybe patience is just the absence of impatience?
I thought I'd add in a few of my conflict busters to ad-hoc posts. So here's the first and perhaps the most important:
Conflict Buster no. 1
Do you have conflict with your partner or family over trading? That needs to be confronted and resolved. In my case this was a source of conflict until we talked through. So we have a family trading plan. I have a monthy profit goal/monthly trailing stop loss and if that gets hit I cut down my trading hours. I changed my complete approach, to writing automated strategies so I could do the school run in the morning, rather than being glued to the screens for the London open. I produce a completely honest monthly report for my wife and we talk it through, warts and all. It is only with her support that I can do this work I love.
That statement needs some clarification, or perhaps a brief scenario will be better. Trader A, let's call her Belle, spots an apparently repetitive signal in the market and strips out the noise. She codes it and tests it, runs it on demo and then goes live with a modest trading account.
It makes a bit, it loses a bit, but pretty quickly it's clear that reality is not a smooth continuation of the carefully practised backtest, walk-forwards, or even demo performance.
So what should Belle do? Clearly she should change her mind, but when and how? Immediately is when, and that is not immediately when the model is bust as determined by Monte Carlo boundaries or other scenarios she has planned out beforehand. It is immediately when she feels it is bust. From the guts not from the rule set. And how she should change her mind? She should not rip up the strategy, results or the experience she has gained; she should twist and tinker with it. Pivot onto another train of thought and see where that takes her.
In my experience rules are essential to trading profitably. But as soon as I feel trapped within the rules I change them. I am refer here mainly to the 'Meta-Rules' that govern money mangement and my practice as a trader - when I trade, which markets, risk, etc - rather than per trade entry and exit rules which I nearly always stick to. But hey somethimes is OK to change your mind on those too.
Because at the end of the day, it gets dark and we go to bed.
Last edited by mokodo; May 15th, 2012 at 08:17 AM.
The following user says Thank You to mokodo for this post:
One of the biggest strains I felt when trading (and still do to some extent as I have not been able to eradicate it totally) is waiting, or specifically watching and waiting. You know that feeling, you've put a trade on and then you watch it like a hollwood movie. Boy, it can be exhausting doing nothing!
I figured out that I was pouring my emotional capital away by 'monitoring' my trades. This caused me a great deal of conflict as I would lose my objectivity and miss other opportunities. And not just in trading, I'd miss out say reading a book or walking the dog or even doing something spontaneous and crazy with my kids.
I learnt to code and for those strategies that are appropriate, I now just turn then on or off and of course check on performance. But I do not feel the need to watch. And for those trades that have a discretionary element for the entry I set and forget. I am then free to get some more screen time, if that's warranted, and be open to other potential trades with a clear head. But to be honest most of the time I put on a trade and take a thinking walk.
All the strategies that I initially tested out and ran live had exits determined by market action - I bought I system andthat's what I was told to do. Trailing stops typically, which were intended to get the meat of an intraday or very occasionally a multi-day move (I trade 15 minute forex). My backtesting showed the PF was much better with AIAO, even though the accuracy was well down.
I steeled myself and said, hey you can take the losers to get those big winners -afterall everyone talks about discipline so just be disciplined. What happened in practice. Profit would clocked up and, as I was all in all out, I would see green turn red. And I'd occasssionally miss those big winners by not being in market at that particular time. These two factors cranked up the pressure and my objectivity flew out the window.
The approach was the best on paper, but it just was not me and it would never be. So I changed my mind (see conflict buster no. 2). My answer? I kept the entries and the risk allocation the same but changed the exits and money management. Now I set a 1:1 risk reward on all trades until I hit a weekly/monthly/yearly target. The trades are quicker so I can protect my emotional capital - not too much temptation to monitor (see conflict buster no. 3).
But my monkey is nagging away at me, "hey why are you happy with just 1:1, you are missing some great moves. Go on live a little..."
So to kept the monkey happy, once I have hit my weekly/monthly/yearly target I trail a stop loss on those gains and allocate the capital between the balance and the stop loss to much higher potential return trades. These are risky and accuracy is in 10-20% range. But they pay very well when they do pay. And I can set and forget these I am expecting them to all be losers.
My experience is that the 'best way' to trade handed down through the ages, is not the best way for me, at least not now. Try as I might to force it. Now about 85% of my trades are very very boring and the rest are crazy risky. I see no reason why not to pander to our various personalities. I did feel trapped by just trading in one style and now I trade two styles I enjoy the contrast and different vantage points on the market.
In May I returned 2.35% of my account starting equity. On the low end of my target, but completely acceptable. Me, my set-ups and the market were dancing happily along. Here we are in mid June and I am flat for the month. Two weeks of active trading and after costs not a penny to show for it.
This happens when you are trying to run on ice. To get traction you try harder, but this is exactly the wrong thing to do. But it's what I started to do without knowing it. After week one I just felt I needed to put more effort in, so I put more time into analysis, listened to market commentary (and I never listen to that!), traded more hours than I normally would - in short put more emphasis on getting moving again. My feet were running but slipping - luckily I did not topple over as I caught myself just in time.
To move on the ice you first need to stop, get your balance, then push off and glide.....
I took a day off, turned off the market commentary. Enagaged with the market on my terms; fewer hours not more. And get this for a power trip, once back trading my first step was to actively pass on the first two signals to reinforce the fact that there will always be trades setting up, I didn't need to go chasing them. (And yes they were both winners.)
Next time I hit the treacle, stop, get my balance, then push off and glide.