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The Greatest Weakness
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The Greatest Weakness

  #91 (permalink)
Market Wizard
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SMLMikXL View Post
Trading rules are like rules when driving on a road. You are not supposed to stop on a highway but if all the cars in front of you are stopped it would be foolish to keep on the gas.

When things get fast only habits count.

Travel Well
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  #92 (permalink)
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PandaWarrior View Post
I am starting to think rules are not really rules. They are fairly rigid guidelines. Rules must not be broken but trading does seem to leave room for feel. And feel cannot be bound up in rules. The rules should be boundaries, places beyond we should not go. But traders intuition can often give you a real sense of when to trade even when the "rules" say no and when not to even though the rule says ok. That being said, I don't think the traders intuition really comes into play until you have around 5000 hours in it watching the same instrument and the same set ups. Its where experience meets opportunity.

I agree with this... watching the same instrument day after day after day--the setups become clearer and clearer--one will notice nuances and variations based on tempo, time of day, and most importantly--context..

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  #93 (permalink)
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Drawdrawn


hi!


sorry to interrupt the flow of a thread.

how to handle psychology after huge draw drawn when system indicates 10 consecutive losses and we incur more than 20 with couple of small wins in between and fear of loss stops u to put on trades only to regret later?


thanks for taking time to read this.

Happy trading
haraj

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  #94 (permalink)
Trading Apprentice
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pysh books

please suggest some books on psychology, money management?


thanks
happy trading

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  #95 (permalink)
Trading Apprentice
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Yes any suggestions would be welcome. I think that's a topic every trader has to deal with.

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  #96 (permalink)
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Richard View Post
I guess my question boils down to: does anyone have a set of rules good enough that simply following them is "the answer"?

I think we must develop our own set of rules--by validating those of others and/or creating some of our own. Creating our own rules might mean recognizing a pattern of failure due to our own personal weakness and committing ourselves to avoid that circumstance in the future. It might be something that isn't a problem for someone else.

Sometimes we try leaving off a rule doesn't seem to matter to us...until we discover that we didn't understand the motivation for that rule in the first place and now, through painful experience, we realize that it was a good rule after all. So with a deeper understanding and a dose of older-but-wiser maturity, we submit to what we thought we didn't like because it now keeps us out of trouble. The trouble is we have a tendency to not like rules. If it were really possible, we'd all probably like a completely effortless, worry-free answer-template we could strap onto ourselves and magically have no more trading problems. We need to take the rules that are out there and make them our own. If we don't, we won't realize their value and will receive no benefit from them. Sounds like work, doesn't it? uh-huh. It is.


Richard View Post
...every time I make an automated system, it underperforms what I can do discretionarily by a wide margin...when I trade discretionarily, I bend and break my "rules" fairly often.

Even very good automated systems will leave money on the table. Trying to squeeze out every drop of money on the one hand, creates an unperceived vulnerability in trading habit (a blind spot) that, on the other hand, will have opened a door through which the market will inevitably come to bite, gobble, consume, and frustrate.

The only way to actually KNOW which method is best would be to trade an equal amount of trades being disciplined to good trading rules, and then trading the same amount of trades intuitively--by the seat of your pants--and accurately and fairly documenting and comparing the outcomes. The problem is, the one who doesn't think rules are all that important will NEVER KNOW because they will NEVER actually succeed in changing their thinking and behavior enough to give it a fair trial. They'll bail out and nothing will change. (Unless, of course, they reconsider).

"There aren't any shortcuts to any place worth going." --Jared Martinez

Onward and upward. One patient step at a time. "Just pick yourself up, dust yourself off, and start all over again."

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  #97 (permalink)
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Rotu View Post
Yes any suggestions would be welcome. I think that's a topic every trader has to deal with.

"Trading in the Zone" by Mark Douglas
"Come Into My Trading Room" by Dr. Alexander Elder

"The Forex Mindset" by Jared Martinez
"The 10 Essentials of Forex Trading" by Jared Martinez

These are all good books and worthy of your time. Don't read them just once.

I must add, even if you are not a Forex trader, you'll find an abundance of trading psychology help that can help ANY trader in ANY market in "The Forex Mindset."

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  #98 (permalink)
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George View Post
I can give you the best rules in the world and the best methods for determining the position of a commodity, and then you can lose money on account of the human element, which is your greatest weakness. You will fail to follow rules. You will act on hope or fear instead of facts. You will delay. You will become impatient. You will act too quickly or you will delay too long in acting, thus beating yourself on account of your human weakness, then blaming it on the market. Remember that it is your mistakes that cause losses and not the action of the market or the manipulators. Therefore, strive to follow rules, or keep out of speculation, for you are doomed to failure.

If you will only study the weakness of human nature and see what fools these mortals be, you will find it easy to make profits by understanding the weakness of human nature and going against the public and doing opposite of what other people do. In other words, you buy near the bottom on knowledge and sell near the top on knowledge, while other people who just guess do the opposite. Time spent in the study of price, time and past market movements, will give you a rich reward.


W.D Gann in
How to Make Profits in Commodities
______________________________________________________________________

These lines were written in the 1940's. And only because we now use blue-tooth we're supposed to be more advanced!

/George

These Lines universally apply.

That's why we want to make the computer do the strategy.

We think how and when the script should act.

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  #99 (permalink)
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haraj View Post
how to handle psychology after huge draw drawn when system indicates 10 consecutive losses and we incur more than 20 with couple of small wins in between and fear of loss stops u to put on trades only to regret later?

The question suggests to me that you're not adequately confident about the statistical aspects of your edge, and the degree of statistical significance you have in the variability, and/or your position-sizing. But it's a huge topic for which it might be better to start a fresh thread (or add it to a more suitable one) than to take this one off-course?


haraj View Post
please suggest some books on psychology, money management?

Again, I'm not sure it belongs in the middle of this thread. There are several threads in the forum with good book recommendations. For example: https://futures.io/traders-hideout/8-some-highly-recommended-books.html . (I'm no expert on trading psychology books, but for money-management, I strongly recommend the second half of Van K. Tharp's Trade Your Way to Financial Freedom and Michael Harris's Profitability and Systematic Trading.)

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  #100 (permalink)
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hondo69 View Post
I was trying to explain trading to a buddy of mine last night and it was obvious he was becoming more confused the more I went on. Finally, he said, "if you're supposed to treat trading like a business, what would you tell a bank if you went in for a business loan?".

This question really took be aback as I never really thought about it that way before. But I plodded along anyway.

"Well, you see, the markets are fixed. It's not exactly collusion but it is definitely a game controlled by big money. And the big money can only maximize their profits by tricking retail traders. Let's say a strong uptrend is underway and you're waiting for a pullback so you can go along for the ride."

He stopped me right there and asked me, "Why wait for a pullback? If you have a confirmed trend then simply enter upon confirmation."

Guess what? I couldn't come up with a concrete answer to his question. Although I explained margins, slippage, commission, etc. to him it still didn't do the trick. Then I went into trading strategies and some indicators. In short, he said I was over-thinking the situation. Since no one can predict when a "run" will end and the pullback begins, just hop on the train and get out of the way.

I think he's right.

Not sure if hondo69 is still around, looks like last activity was in 2010. However my take is that yes, this is definitely a game controlled by big money. Depending on the markets, unless you have funding to swing thousands of contracts market price is not going to move.


Having said that, suggesting that 'big money can only maximize their profits by tricking retail traders' just doesn't make sense to me.

The game is generally played by big players Vs. other big players. Usually the player with more money wins. To the hedge funds or the 5,000 contracts traders, retail traders are just small fry. Sure, retail traders will get caught up in the action, but the big fish is not looking to take out my (say) 10-lot trade or even 100-lot trade. They're looking to (e.g.) trap people who just bought 1,238 contracts and price is not going anywhere.

This snapshot from John Grady's website captures the above concept rather well for me.

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As for 'why wait for a pullback' to me that's just common sense. A guy much wiser than me taught me that you can actually lose money by shorting into a downtrend or buying into an uptrend: it all depends on where you enter. If you enter at the wrong point and you're not prepared to stomach a significant drawdown you will lose money. All of this if the market conditions of course don't change half-way through, in which case you're in trouble!

I think the pullback bit is simply good risk-management, to limit your off-side risk as much as possible.

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