There’s Nothing Special About Your Strategy

[analyst75 12]

THE WAYS WE CON OURSELVES

 

I support a particular hospital charity that each year or so runs a home lottery and every year I enter. To date I have won a digital camera, an iPod, an Apple TV, a tonne of chocolate, wine (brilliant for a non-drinker but good for presents) and a host of other goodies. In fact I have never had a time when I have entered and not won something. Whilst my expectancy is not quite positive it’s not bad. If I were a news agency that sold lottery tickets and I had this many winning entries bought via my store people would be clambering over me thinking there was something special about my store.

 

One of the things we ignore in life is that we are subject to the same harsh statistics as everyone else – we have what I call the myth of individual specialness. Our basic narcissism leads us to believe that the laws that apply to the universe don’t really apply to us, as a result we spend a lot of time fooling ourselves into think there is something special or magical about what we do.

 

My capacity to win this particular lottery has nothing to do with me other than the fact that I enter, I am simply subject to the laws of large numbers as is everyone else. If you get enough people doing the same thing over a long period time then the probable drifts into the realm of the inevitable. It is no wonder some people win the lottery twice.

 

But because we are such poor natural statisticians this seems like magic to us and we ascribe some special quality to ourselves and this is apparently a well-known phenomenon in both lottery winners and those who have inherited wealth. They believe that something divine about themselves means that they were meant to win – they cannot accept that it was blind luck. My wife has a friend who received a very large inheritance from her parents, she has now divorced herself from all her friends of many decades because she believes that there is something superior about herself other than being the lucky product of the sperm sprint derby that we all undergo. Sometimes you land in the right spot and sometimes you don’t.

 

The central issue here is that even in trading we are subject to the ruthlessness of statistics and this ruthlessness is often at odds with our own emotional endurance. For example if you have a system with a positive expectancy this means that on average and over time your system will make money. But note there are two presumptive phrases involved in this definition – on average and over time.

 

You need to have the resilience to ride out the times when the system is not making money. When traders first encounter the notion of expectancy they assume that is means that every trade they take will make $X and are surprised when this does not happen. All trading systems will experience runs of losses, this is the natural order of things and you can experiment with this for yourself by looking at a coin toss simulator. If you click here you can see how streaks of either heads or tails form – this is a good example of what can happen in trading systems.

 

Despite trading being a basic exercise in statistics at its core it is an exercise in resilience because we have to find ways of dealing with brutality of statistics and even when we know our system is sound it is still hard to take a continual series of losses. Inevitably we come back to the notion of courage as a central tenet in the success of any trader.

 

 

Author: Chris Tate

 

Article reproduced with kind permission of: Tradinggame.com.au

 

This article is concluded with the 3 quotes below:

 

“Every time you have a hunch that the market will reverse, jot it down on paper. After 30 attempts, look back at how accurate your prediction is. You may be surprised by your results.” – Rayner Teo

 

“Defeats in trading are not really defeats, anyway — they are more like trial balloons we keep sending up, knowing in advance that a certain number of them are going to get shot down. Therefore, trading is really a process of two steps forward and one step back. The one step back part will always seem like a defeat, will always feel like a defeat, but is not a defeat – simply part of the process.” – Andy Jordan

 

“A large population of traders consider themselves to be much more effective than they really are.”- Chris Tate

[zdo 20]

My capacity to win ... has nothing to do with me other than the fact that I enter

Thanks Chris.

I mentioned a related issue over at http://www.traderslaboratory.com/forums/market-analysis/4622-charting-past-bears-11.html#post208768 about taking every signal - ugly, pretty, mediocre, classic, perfect - every signal. I’ve noticed in many other traders the ‘bias’ to wait for ‘high quality’ ‘cherry lookin’ signals and triggers. Been there done that myself.

 

What I observed in myself and others from this is consistently elevated ambivalence re: all signals, accompanied by reduced staying power / emotional stability / resiliency. Along side this comes reduced vibrancy and ‘health’... the body keeps the score. My solution was to gut it out until I could last all day and all night taking every signal. But ultimately I only got real change when I also added ‘love and acceptance’ to the things I had to acknowledge about myself and my tendencies and biases.

 

 

 

 

 

 

 

....

 

 

 

Chris quotes Chris

“A large population of traders consider themselves to be much more effective than they really are.”- Chris Tate

 

:haha: Wtf are you talkin about chris?

A large percentage of traders consider themselves to be much more effective than they really are.

ok... but...

A large percentage of traders consider themselves to be much less effective than they really are.

[zdo 20]

...actually there is something special about your system.

It has a positive expectancy.

 

HEY it better have a little bit of fkn positive expectancy !!!!!!!!!!!!!!!!!!!!!! :):)

 

have a great weekend all

[zdo 20]

Chris

 

You’ve profiled a bunch of traders right?

Have you written an article titled something like “There is Nothing Special About You” ?

 

Back in the day I made it a point to share some face time and screen time (or floor time) with some of the best (and best known) traders and managers of that era... and - even though their performance and income was anything but ‘ordinary/loser trading’ - in all almost cases these guys experienced themselves and carried themselves as quite ordinary.

 

... and paradoxically, almost all of them acknowledged living under the influence of ‘dopamine’, 'testosterone' , etc etc (btw there were exceptions to this)

 

...Historically, my best trading runs are not accompanied by ‘positivity’ or ‘confidence’... or content that I am special... Actually, it’s my experience that inflating into ‘special’ is a pretty good way to end a discretionary run...rules, being present and aware, risk/loss control, etc. drop below the required threshold of importance...

 

etc

etc

 

(:haha: ... please end the article with quotes from

1 Chris Hate

2 Mitsubishi

3 CrazyCzarina

and

4 Chris Tate

)

[zupcon 10]

Therefore, trading is really a process of two steps forward and one step back. The one step back part will always seem like a defeat, will always feel like a defeat, but is not a defeat – simply part of the process.” – Andy Jordan

 

LOL

 

I'd kill for 2 steps forward one step back

 

I'm typically making new equity highs less than 20 percent of the time, 80% of the time I'm either losing money, or making back the gains that I lost earlier

 

I am without the best trader that Ive ever met, with triple digit annual returns with very low drawdowns.

 

the two forward one back thing is a good analogy, but very far wide of the mark

[zdo 20]

There’s another angle on why “There’s Nothing Special About Your Strategy” -

“When traders first encounter the notion of expectancy” - or stated another way, when beginning traders attempt to impose a layer of genuine “statistics” onto whatever foundation of unconscious ‘magical’ structure they bring to the arena - they immediately revert to looking to ‘systems’ and methods to mitigate the ‘chaos’ ...

 

Rather than dig into the details of that - fk, let’s get to the point...

It is deep and intense involvement that makes real growth happen, not methods! Method is secondary. In the presence of deep and intense involvement even a wrong principle, a wrong method, and/or a wrong teacher can lead you to the ‘real’ where you can then find the truly correct practices and methods for your self

...

TL is such a sharing caring place ... where we discuss things openly and at any depth needed...