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Tradewinds
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Posts posted by Tradewinds
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Whenever I get on the bad side of a trade, I think to myself, "If I can only get out of this trade at a one tick profit." Then I put in an order to exit at the smallest possible profit. What often happens, is that the price comes back to a profit, goes through my exit, and keeps on going. :crap:
My point is, I need to do what my indicators tell me to do. So I program signals that tell me what the pressure is on the price.
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It is easier and best to protect their egos and say they made money without showing that they actually made decisions that lead to profits.Of course, I could be completely wrong about that.
It's not just trading, people don't go around "spilling their guts" about their flaws and failures. It's a mentality of not showing weakness. Pain avoidance is hardwired into our brain.
I've been developing my trading skills and my strategy for over 3 years. I have lost some money trading, but maybe a couple thousand at the most. The reason I haven't lost much money, is because I trade only simulated trading for the most part.
My ego wants to be successful, make a lot of money, and feel like I actually know what I'm talking about. But before I get to that point, I can either participate, or be afraid of getting involved in discussions. It's part of the learning process.
One thing I have noticed, and it's not just trading, is that when people have put a lot of time and effort into learning something, sometimes they get a bad attitude. I help people on a programing group, and I answer even the stupidest questions with a helpful and encouraging demeanor. It's because that's the kind of person I want to be. In the beginning, I just started posting what I had figured out on my own. And I was annoyed at these people who have this superiority complex because they are at a higher level than others. It sometimes happens, that more experienced people act like a new person who doesn't know anything is like an annoying bug that should be squashed.
So that's part of the reason people don't make their failures and weaknesses known.
But back to your point. It's good to be transparent, and stop caring about what other people might think.
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"Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself."
"Trading Without Ego"
by
Ruth Barrons Roosevelt
I searched threads for the word "ego" in the title, and there were no results, so I thought I'd start a thread titled "Ego and Trading".
My opinion is, that trading is a mixture of playing against the market and against ourselves.
What is the Ego made up of? How does it affect trading? Is there a good and a bad Ego? The implication is, that Ego is bad, and it hurts our trading results. The Ego is about ourselves. The negative implication of Ego, is that it is an inward and selfish thing, something that leads us to believe false things and deceive ourselves, which then leads to irrational and self-destructive behavior.
In trading, it could take the form of thinking that we know something, when we really don't know much, and in fact might just be fooling ourselves. Or it may take the form or thinking that we can will the market to do what we want.
What do you think?
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It's not all psychological. I think it's helpful to know how our emotions and behavior affect our trading, and that is certainly a big part of trading. But the market is "tricky", in the sense that it is difficult to predict for most people. If 90% of traders fail, then they must be using the wrong information, tactics and strategies. And the people who do know how to make money in the market, probably are not going to tell you how they do it. They will give you little hints here and there, but intentionally leave out critical information.
It is true, that people can be given a winning strategy, and fail to implement it. So it isn't all about having the right knowledge. But if we don't have the right knowledge, and a winning strategy, then no amount of psychological discipline will ever make us a winning trader.
The market often shows signs of reversing direction, consolidates, and then continues. The market often seems directionless. It often seems like it is trying to "fake you out". That is what causes the problems.
Are you trying to constantly have an order in the market, rather than waiting patiently for the best set up?
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The blue rectangles are my identification of balance/imbalance "nodes" in the order flow....Once I have these in place I then monitor the Time & Sales Strip as price tests these key reference areas. It takes a while to get used to but that is the way I was taught...I lot of offices use this method (or similar methods) rather than the indicators and widgets that are found in most charting software.
Where can a person find out how to determine or calculate a supply/demand "node". And thank you for this thread.
Node: "In general, a node is a localised swelling (a "knot") or a point of intersection (a vertex)." wikipedia
http://en.wikipedia.org/wiki/Node
So maybe it's a point of intersection where the balance of supply and demand is switching over from one bias to the other. There must be some threshold level where the balance is considered to be switched over, and that's why it's a band rather than a thin line.
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Two questions:
- What percentage of the time is the entry price being misjudged by an amount that would warrant the scaling in?
- Are you good at judging the direction the market will go in, but not be so good at getting the entry price right?
I'm wondering if the answer to those two questions determines whether averaging in might make any sense or not.
It might be possible to be good a judging the direction the market will go in, but not be so good at getting the entry price right.
My opinion is, that averaging in, is making the assumption, that the optimum entry point is often misjudged. If the optimum entry point was rarely misjudged, then averaging in would be counter productive. If you were real good at picking the entry price, and tried to average in, not all the orders would fill. Unless you intentionally picked bad entry prices. That wouldn't make any sense.
So my first question would be, "What percentage of the time is the entry price being misjudged by an amount that would warrant the scaling in?"
In post #4 you stated:
"Looks like it's back to the simple method here."
So I'm assuming that you gave up on this idea.
And in post #2 you brought up the point about how the exit orders fill, as opposed to the entries. It seems you were trying to both average in, AND scale out. If you averaged in, but then took profit on ALL the orders at the FIRST opportunity, that would eliminate the problem of having the order go against you with to many orders in the market.
But no matter what the strategy, it will always come down to how well we are reading the market and anticipating what it will do.
Again, the temptation is to average in because the entry is being misjudged. If the entry is being misjudged more than not, then averaging in might compound the mistake. It could make things even worse. I suppose it might be possible to be good at judging the direction the market will go in, but not be so good at getting the entry price right. That's not to bad a situation to be in.
If the entry is being anticipated well more often than not, then averaging in on the good entries either gives you worse prices than you could have gotten, or minimizes the size of the entry. Either way, potential is being hurt. So that doesn't make any sense.
If you are real good at judging what direction the market will go in, but not so great at picking a good entry price, then averaging in, would probably be good. Instead of 3 orders at 3 different levels, I would consider entering 2 orders, the smaller order at the least good entry, and the second, bigger order at a really good price. So 1 entry of 1 and a second entry of 2 contracts. Instead of 3 entries of 1 contract.
From experience, when I misjudge the entry price, it probably means that I misjudged what the trend was going to do. In that case, averaging in, just makes things even worse. So my gut feeling is, that even in the best case scenario, "averaging in" is tricky.
- What percentage of the time is the entry price being misjudged by an amount that would warrant the scaling in?
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Hows this for a technique :- lets assume the Russel is in a reasonable tight range and you are anticipating a move down out of it.Sell 2 units at the top of the range and cover 1 at the bottom lets say at +1.2 for arguments sake Move stop to -1. If price approaches the top of the range sell 2 more and rinse and repeat.
I have not used this technique for a while but it is possible to build a large multiple position that is essentially risk free (if you count the whole exercise as a single trade). long tight boxy ranges are good for this.
So, the reason it is "Risk Free", is because you took profit, and even if subsequent orders went to a loss, the original profit covers the loss. The real issue is identifying the "long, tight, boxy range". There needs to be a way to anticipate and verify that price pattern. I think this strategy would be excellent for a sideways market with a downward bias.
No matter what strategy is being employed, there needs to be some underlying basis for the application.
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Problem solved. Linear regression channel.Just curious. Did you give up on MA's, or are you still using them? I don't like Moving averages myself. What did the Linear Regression channel solve? Knowing the basic longer term trend? Knowing how far away the current price is from it's historical path?
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Not that backtesting is not relevant, but just because it is statistically relevant does not make it real life relevant.I totally agree. In fact, I would state that a statistically relevant backtest could become absolutely meaningless. The underlying rules of a strategy may have absolutely nothing to do with accurately valuing the underlying security. A backtest could be a reflection of nothing more than investor behavior over a certain period of time. Investor behavior could change. If investors were basically speculators for the last 20 years, and not accurately valuing securities, that could be a potential problem going forward. I'm not saying that is the case. I'm just pointing out the issue of how value is determined for securities, and IF it is flawed, then trouble is inevitable at some point.
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The trick is determining what the slope actually means. By the time a MA line shows a peak, you are already way to late, the price has already dropped. So you need to look at slope still going up, but not going up as much. Momentum is slowing.
But MA lines have all kinds of problems. In a nice smooth, trending market, they will work just fine. But price does all kinds of things. Price will retrace, it will look like it's going up, and then go down. MA lines are terrible for those kinds of situations.
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are there any ten-percenters here too?
if only there was a way to tell the difference.
peter
Even though I will take good information from anywhere and anyone, I do put some value in what people are telling me by the way they behave. And I tend to think that the real truth is a mix of what different people are telling me. It's natural for people to go to extremes in their beliefs, seeking non-existent, absolute certainty to make them feel secure.
When I listen to a politician, I like what they are saying, and it seems good. Then I listen to another candidate, and I like what they are saying, and it seems good. Then I listen to yet another candidate, and a lot of what they are saying seems good. But then I realize that they are opposing candidates with polarized view points. But they only communicate the positive and constructive side to their plan. So it all sounds good, because you never hear about the downside.
If someone becomes evasive in telling me what the "cons" might be, then I get very suspicious. I try to get a sense of whether someone is sincere, confident and secure in what they are communicating. Many people want to be lied to. This is typical in business management. If you tell management the truth, they won't like you, so many people fall into a trap of needing to tell management what they want to hear so you don't get a bad performance review.
Trading is as much about how a person deals with the bad news and the difficulty as how good their strategy is.
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Unless and until you have a track record of years (not months), you won't have any statistically relevant numbers to even decide from.
The statistical relevance depends upon the confidence level and margin of error needed to make a profit. And that in turn depends upon the sample size, and the sample size depends upon the number of trades that a system generates. It a system generates 200 trades a day, then it doesn't take years for enough data to do a statistical analysis. If the system generates 25 trades a year, then it will take years.
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You are right about volume analysis - it's all that really matters. After all it is volume that motivates price - Price doesn't motivate price and the passage of time does not motivate price, it is the occurrence of trade (buying and selling) that motivates price.
Knowing that it is not the passage of time but rather the occurrence of buying and selling that drives price makes one wonder why anybody would ever base their trade on indicators with price as the prime input (EMA, Bollinger, RSI, Candlesticks, Stochastic, CCI....) and to further compound the error, apply those indicators to time constant data vessels.
Three decades ago I was taught that the best indicators of future price don't have price as any part of their calculation.
As I have mentioned I run a small PRIVATE trading and technology company and the first thing I teach our new traders is that it is buying and selling that drives price. That none of our intra-session charts are time constant charts and almost none of our indicators have price as ANY part of their calculation.
Post #3
http://www.traderslaboratory.com/forums/f34/why-market-depth-useless-indicator-5501.html
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It's a long hard road to success in trading. Part of the problem is finding good information. Anyone can give their opinion about trading. Trading is probably a lot like hunting or fishing. You don't know for sure whether there are any fish out there or where they are. If you see game, you may need to fire at a moving target. And what your hunting, might decide it's going to hunt you.
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Now we have to accommdate the thinking brain.Rande Howell
We can take responsibility for our actions and behavior. But that doesn't just happen automatically. The will needs to be engaged. We can choose (engage the will) to use the thinking brain, rather than simply be a product of circumstance (random events).
It seems like there is an issue of dominance here. What are we going to allow to dominate us? Emotions can not be turned off. That is an impossibility. So it's an issue of what part of the brain is engaged during trading turbulence.
The brain can be trained. We have all had involuntary and passive training. So it makes sense that the brain can be actively trained. Of course, that takes actual work. Although inspiration helps provide a spark of power to overcome brain inertia. A brain at rest tends to stay at rest. :rofl:
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interesting that many speak of their strategy as if it was the holy grail that needs no supervision. we have auto-pilot systems that are in contol of the takeoff, the flight itself, and the landing...all without aid of a pilot. what real purpose does the pilot serve? would anyone actually board a plane that was pilot-less?i don't monitor the P&L column, but i do keep an eye on the price action...just in case unforseen turbulance develops. after many years of unsuccessful trading strategies, i am finally consistently in the black. that works for me...
good trading,
peter.
I think the analogy of a pilot is good. Turbulence is often predicted ahead of time. The pilot can divert. But that is part of their strategy. The pilot is often told what to do by the tower. The pilots have a flight plan. They are operating the controls, but for the most part they are following the plan very, very closely. Being prepared to deal with the turbulence is part of your strategy. Your strategy may be mostly, "in your head", rather than programmed. But you still have a strategy, and you execute it. That's the way it sounds to me. What I'm saying is, you may be executing your strategy a lot more mechanically than your realize. Your strategy just may be more complex and have subtleties that would be difficult to document and program.
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Thanks for that article. If the topic is discussed for long enough and deep enough, then it will come to the issue of, "Should the government regulate and attempt to control risky behavior?"
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. . . . the meaning embedded into the fear, . . . . .Rande Howell
I'm thinking that we often learn things passively. The association of fear with a particular meaning probably happened involuntarily, and possibly without any real comprehension of how we are being influenced by circumstance or other people around us. We simply "take on" beliefs of those around us, not necessarily in any kind of logical way.
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. . . an emotion is any deviation from a standard sensorial part that the brain as acclimated to.Rande Howell
Combat soldiers sometimes feel terrified of leaving the war zone. That is what they have become acclimated to. The world outside of the war zone has become something they can't relate to anymore. They become afraid of the "normal" world.
Even transitioning from non-combat maneuvers back to home base can be overwhelming. So that definition of any deviation from what the brain has acclimated to makes sense to me.
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profit vs. strategy?....not a case of chicken or egg.profit is the objective. strategy is your plan to secure objective.
execute the strategy with precision & commitment, but keep your eye on the objective.
or so it seems to me.
peter.
We all learn and get ideas as we are trading. So strategy development and trading can happen almost simultaneously. I would not see them as mutually exclusive. It's quite easy to intuitively know how well we are doing as we are trading, without actually looking at the P/L report.
I think part of the issue here is the level of alertness that a trader has while trading. If keeping your eye on the P/L column motivates you to stay alert, and make the right decisions, that's a good thing. I would rather just know that I dealt well with my loosers, and made good decisions with the winners, and trade my system, having confidence in it.
I'm more concerned with profit as I'm developing my strategy than when I'm implementing my strategy. I don't see much sense in live trading a strategy that I'm really not sure about.
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Thank you for telling the story. I appreciate it. Hopefully we will here the rest of the story.
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All in all entrepreneurship is living a few years of your life like most people won’t, so you can spend the rest of your life like most can't.I don't think I've heard that before. Thanks for that. I'm guessing that many entrepreneurs are not people with massive amounts of money that they can just burn through with no concern. And even the people with a lot of money, may risk it, for something even bigger.
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how many samples do you need in your test protocol...I am always glad to learn new things....I don't know what the sample size needs to be. It needs to be large enough to insure the results are reliable. The sample size depends upon how confident you want to be in the data, and what is an acceptable margin of error. Trader's speak of being better than 50% right and letting those right trades attain more profit. A good trader might have an 80% win rate. Then there is the amount of trades that your system produces. The more trades your system produces, the faster you can reach a conclusion about how good the rules are.
A sample size calculation would need to be made with those inputs.
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what are the test parameters?- Total Net Profit
- Gross Profit
- Gross Loss
- Commissions
- Profit Factor
- Cumulative Profit
- Max Drawdown
- Sharpe Ratio
- Total Number of Trades
- Percent Profitable
- No. of Winning Trades
- No. of Losing Trades
- Average Trade
- Average Winning Trade Loss Percent
- Average Losing Trade Loss Percent
- Ratio avg. Win/avg Loss
- Max. consecutive Winners
- Max. Consecutive Losers
- Largest Winning Trade
- Largest Losing Trade
- # of Trades per Day
- Avg. Time in Market
- Avg. Bars in Trade
- Profit per Month
- Max. Time to Recover
- Average MAE
- Average MFE
- Average ETD
There, hopefully you learned something Steve.
Come on Steve, you already know all this stuff, and probably a lot more than I may ever know. You are far superior to 99.9% of all the people in Traders Laboratory, . . . and humble to. :rofl: I'm just stumbling along here. Hopefully I'll get some scraps thrown to me for effort. - Total Net Profit
Ego and Trading
in Trading Psychology
Posted
Yes. It is insanity! :rofl: You are right. Which actually might be a helpful bit of information. I can tell myself. THIS IS INSANITY!! Hopefully it will motivate me to change my behavior. We will see. If I ever do become sane, I'll post my equity curve to prove that I won the internal battle.