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Broker: Advantage Futures, Ninja/TT and InvestorRT/IQFeed.
Trading: Treasury futures
Posts: 312 since Nov 2010
Thanks Given: 194
Thanks Received: 912
I promise I won't marry you. Then we don't have to get divorced. To be honest, I'm sorry I jumped into this discussion. It's a distraction. Only the part about the impact of major life events has anything to do with trading. I'm sure TraderJon is more than capable of defending himself if he cares to do so, it was really none of my business. Peace?
"You don't need a weatherman to know which way the wind blows..."
I just read through this thread and, not surprisingly, found a lot of the common misconceptions that can lead a beginning trader down the wrong path.
The most important aspect of trading is gaining an edge. The objective is to design a profitable system. Without a system with positive expectancy you are nowhere. Psychology won't make you profitable by itself. If one does not have an edge and only focus on the psychological aspect of trading, one is chasing a ghost. Every bad trade can be blamed on lack of composure,but the real problem is the lack of a solid trading system. If trading discretionarily, psychology plays an important part in the implementation/execution of the system. If fully automated, the psychological aspect is all but eliminated - one just need to refrain from shutting the system off.
The traits that can get one ahead in business, can leave one behind when it comes to trading. As a retail trader, one is far better off being an observer, rather than being an aggressor. The main advantage one has, is one's nimbleness due to trading small size. Even if one cannot benefit from the traits responsible for success in business when trading, treating the structural part of one's trading venture as a business is paramount. Most beginning traders are far too unstructured and naive in their approach.
As a student of philosophy, I take offense at that statement. First of all, it is impossible to know if a poster/trader are "above"/"below" oneself. As a novice trader, one doesn't necessarily have the knowledge to separate the authentic traders from the poseurs. Besides, unless one has verified his/hers track record, one has no idea if they actually are profitable. Secondly, even if a highly successful discretionary trader would share his methods, it is doubtful another trader would be able to emulate his trading easily.
The thing is, good ideas might come from everywhere. A struggling trader might be on to something, without even being aware of it him/herself, and thus potentially (and unknowingly) help others achieve profitability.
There are a lot of successful traders that offers excellent advice, but the advice offered usually doesn't resonate with new traders, mostly due to faulty preconceptions of what becoming a successful trader entails. Instead, a lot end up paying self-proclaimed "experts" thousands of dollars for nothing, or read posts from people who do not know what they're talking about. But, as Big Mike points out, that can also be valuable. It is preferable to learn from the mistakes of others, rather than doing them oneself. There are countless ways to make money in the markets, the key is to find an approach that fits with one's personality.
I have always thought of fora as good analogy for the markets. Just like one has to filter out the "noise" of the market, the same is true for a forum. The focus should be on differentiating the valid ideas from the useless, not necessarily if the poster is "above" or "below" oneself. I have learned a lot from academics that are hopeless traders (or not even trading at all), but excellent theoreticians. The ability to handle risk in a productive manner is a trait difficult to learn. Perhaps it is purely genetic...
There are endless numbers of smart, educated and otherwise trade "intelligent" traders/investors.
The main differentiator to successful day trading is overcoming the human factor. Some call it psychology, some call it discipline, some call it emotionless trading....it's all a similar concept.
Having an edge isn't enough, particularly given the large volitility and leverage present in many of the instruments day traders negotiate.
It's very similar to poker. You can walk into any major poker room in the US and find a spectrum of players with respect to their skills/knowledge. The players that are successful in the long term are the ones with diiscipline. Knowing the odds, knowing advanced concepts like pot odds, position, etc, isn't enough.
That's why I think BigMike's post is cogent, because the lessons learned from others is very helpful in living vicariously through someone else's failures. "A dumb man never learns, a smart man learns from his own mistakes, but a wise man learns from the mistakes of others."
For some of us, the solution is automation. Others, who prefer discretionary styles, need discipline more than they need help gaining an "edge."
As we've seen in several threads on this forum, you can take a random line and gain an "edge" from it. Indicators are a dime a dozen, the real secret to long term success is discipline and money management. Guys who can gain an expectation edge are a dime/dozen. Hell, I can take an indicator I've never used and craft a strategy that will give an edge very easily. It's being able to apply that edge that's the difficult part. Slippage, varying market conditions, knowing when to take profits and step out, knowing when to cut a loser short, etc, etc, etc. Those aren't "edge" issues (at least not in a first order aspect), those are psychology and human factor aspects.
I suppose you COULD favor strategies that reduce the human factor burden or avoid them more than others, and that would be a way to systematically remove discipline and money management challenges, but for most traders, on most instruments, using most methods, money management and psychology is the real factor that determines whether they'll be successful.
I truly regret posting in this thread at all, and this will be my last post on the subject. I hesitated in writing this post because I almost feel like I'm defending myself, but decided to go ahead and attempt to clarify my belief's on the subject and that is the only reason. Having an edge, controlling your emotions ie; (Psychology) and the proper MM setup are all part of the puzzle. I never said that not having a proven methodology is not important because it is. But, I can have a proven method and still have fear with my trading, hesitation to pull the trigger and/or bail out of a winning trade. We have all heard the phrase "cut your losers short and let your winners run". Most guys and myself included have been in a trade and the market moves in our favor +.15 to +.20 ticks and close the trade and then the market runs forever it seems and then there are times when you take some heat when the trade turns against you and then out of fear you close the trade and then it rolls over and had you stayed in the trade it would have been a winner. Why because of fear and the lack of control of your emotions. This sounds like Psychology to me. The point being is psychology play's the biggest part in trading. I look at Free Solo climbers, they have to have such discipline to climb ten's of thousands of feet up mountains without a rope or anything to protect them if they fall. Any lack of complete emotional discipline and they fall to their deaths. Wouldn't you say psychology is the biggest asset to their success?
I still hold my position that you will benefit the most from those with much more trading experience. Learning from less experienced mistakes??? Comon man, give me a break. If someone has been trading for lets say 2 to 3 years and the other guy is just starting out. How in the world can the guy with a few years experience learn for the newbie? The mistakes the newbie is making the the other guy has already made several times and should have overcome those mistakes. Is the newbie going to create a new way of making mistakes or being a losing trader? Experience is KEY here. Take the same two guys going for a job interview and lets take education out of the equation, who is more likely going to get the job? Please don't open up a can of worms here because yes there will be scenarios and circumstances when the less experience guy may get the job, but if anyone wants to debate it go for it. I know what I stand for and I know in my experience and what I have accomplished in my life and how I made my accomplishments have been the difference. No! I'm not being ignorant or patting myself on the back. If you knew my background and how I accomplished the successes I have you would understand where I come from and why I have my beliefs.
So for those that want to knock down what I have said go for it, I may chose to read it, and if I do I will decide to take it with a grain of salt if it is meaningless and the same debate that already has been created or if it has any real substance I may consider your position.
I agree with most of your post. Risk/money management is a critical part of any trading system, and the lack of such can wipe out any "edge". My point was more that you should do some statistical research regarding the expectancy of one's "edge". Maybe scaling in/out will reduce the risk, and increase profitability, and thus alleviate a lot of the psychological pressure. This is a logical and mechanical solution to what might be viewed as a psychological problem. Another problem is position sizing, something which can lead to severe stress if not handled properly.
I started out position trading stocks based on fundamental analysis, I didn't even know there was something called TA. I started in 2003, and so I had the power of a massive bull market on my side. Needless to say, I did reasonably well. As my interest for the markets grew, I decreased my timeframe. After a dabbling in swing trading, I moved on to trading index futures. I watched charts for about a year, not even placing a trade. Blew up my first $5000 account and have been profitable ever since. I was trading purely discretionary at first, but quickly added ATM. This made trading much less stressful, and it also made sense moneywise. As time progressed I automated more and more of my trading. I still trade bigger moves discretionary, but all of my "grinding" is done automatically. It doesn't make sense to spend my life glued in front my screens, I have other interests I want to pursue other than trading.
My main point was that a poorly developed trading strategy will add a lot of psychological stress, and that maybe focusing on tweaking system parameters will solve a lot of the psychological problems. If you are confident in your method, you will feel no stress. If you have sound risk/money management, each individual trade should not be a psychological burden. But if you do not have a system with positive expectancy you will "bleed to death by a thousand cuts"....
I might have been a little harsh, I am not looking to argue. I will admit that your posts irritated me slightly, you came across rather arrogant. Especially since you were (are?) not profitable. I would not dream of telling you how to run your advertising business, so I find it funny that you would lecture profitable traders on their profession.
But, believe it or not, my main objective was to offer advice to struggling traders. This tone on this forum is reminiscent of ET in the early 2000s, is it refreshing to see traders so intent on helping each other. I have seen quite a few people, who where very successful in the business world, lose their shirts while attempting to trade the markets. People who are good at sales, good at "getting things done" etc come into trading with a backwards view. A retail trader can't push the market around, so he has to let the market push him. Patience is a virtue that helps tremendously when it comes to trading. Trading is not like an extreme sport, and I should now, as I skateboarded for quite a few years. I won't equate that to free solo climbing though, those guys are crazy. Trading is systematic and boring (if you're doing it right). It is better to sit on the sidelines and wait for the right moment to jump in. If you trade a liquid market, you can just add contracts and increase your income dramatically. 5 points a week on the ES isn't much if you're trading 1 contract, but at a 100 it is quite decent. Compounding is the key to obtaining wealth from trading.
Well, you are thinking to linearly. There are countless ways to trade successfully, and thus, you can learn across experience levels. You might be an experienced discretionary trader, but with no programming experience. A struggling trader might help you with automating your strategy, and in the process you might even be able to tweak your methods to achieve better results. A new trader might have a degree in statistics or math, and maybe a discussion on a subject like fuzzy logic might trigger a thought process that helps you with your trading.
Experience is key. But a concept brought forth by a novice trader might help an experienced trader see things in a new way. Learning from struggling trades is mainly reserved when you are starting out, it can speed up your learning curve. But again, a less experienced trader might have done extensive research into neural networks e.g. which might save you some time. I think I have illustrated my point well enough...
One thing a novice trader can't teach, is experience. Experience is (IMO) the most critical "edge" any trader can have...
With regard to your example, I would say research is the answer to that. Would it be more profitable to scale out at a few ticks and let a portion run, or would it be better to let your stops hit and occasionally hit a home run. The ability to run such tests are dependent on the possibility of quantifying your method of course.
Broker: Advantage Futures, Ninja/TT and InvestorRT/IQFeed.
Trading: Treasury futures
Posts: 312 since Nov 2010
Thanks Given: 194
Thanks Received: 912
Having an edge may be an insufficient condition to success trading, but I absolutely agree with @Lornz that it is a necessary condition. I don't think it is so easy to find profitable methodologies. The competition in this business is extreme and getting more so.
"You don't need a weatherman to know which way the wind blows..."
