I Feel The Need, The Need To Trade

[stanlyd 10]

The point of this was to to make it clear that sometimes we don't need to take a trade. I find that this is not so much true for folks that have been doing this a long time and can understand market conditions, but rather for new traders who might get chopped up in a trade action like today.

Today was no doubt a choppy day. Those of us in the chat room talked about it over and over but we still hung around looking for a move. As I thought about it after the day closed, I realized, I had mentioned that we had been in very tight range and that our market profile chart indicated that we should trade the extremes if anything at all, but longer intraday postions did not seem like a good plan. For me personally I was able to scalp the start of the day very well. I realized after several reversals I should have probably just called it a day and went to the batting range. I stayed engaged and did infact get stopped a few times. Since I was up from the first hour of scalping I was still ok but once I realized things had been whipping around I stopped trading.

 

I guess my point is that sometimes you dont have to make a move, and in fact not doing anything but avoiding the whip action is a "good trade idea" in itself. Keeping your gains from the prior trending day's profit's makes more sense than giving it all back on a day like today. The market will move again soon. Maybe tomorrow, maybe next week. I bring this up because as I look back at my trading log over the last few years I realize most of the reason I gave back profits is due to the fact that I felt the "need" to trade when in fact I should have stayed flat and waited for more confirmation of decent trading conditions.

Just something to think about.

[firewalker 10]

The point of this was to to make it clear that sometimes we don't need to take a trade. I find that this is not so much true for folks that have been doing this a long time and can understand market conditions, but rather for new traders who might get chopped up in a trade action like today.

Today was no doubt a choppy day. Those of us in the chat room talked about it over and over but we still hung around looking for a move. As I thought about it after the day closed, I realized, I had mentioned that we had been in very tight range and that our market profile chart indicated that we should trade the extremes if anything at all, but longer intraday postions did not seem like a good plan. For me personally I was able to scalp the start of the day very well. I realized after several reversals I should have probably just called it a day and went to the batting range. I stayed engaged and did infact get stopped a few times. Since I was up from the first hour of scalping I was still ok but once I realized things had been whipping around I stopped trading.

 

I guess my point is that sometimes you dont have to make a move, and in fact not doing anything but avoiding the whip action is a "good trade idea" in itself. Keeping your gains from the prior trending day's profit's makes more sense than giving it all back on a day like today. The market will move again soon. Maybe tomorrow, maybe next week. I bring this up because as I look back at my trading log over the last few years I realize most of the reason I gave back profits is due to the fact that I felt the "need" to trade when in fact I should have stayed flat and waited for more confirmation of decent trading conditions.

Just something to think about.

 

That's a really good observation, and I immediately recognize my own behaviour in it. I have tried letting go of "the need to trade" but I still suffer occasional "lapses", especially after I had some unexpected losses. I start looking for trades that aren't there, or higher risk trades.

 

Since I gave myself the rule to make no more than one (or two) trades per day, things have gone a lot smoother. Although walking away from the screen, when you 'feel the need' is, imho, escaping the problem. I think in the end it will benefit you more if manage to hang around and sit on your hands.

At the EOD you will have learnt to control yourself.

 

No one is saying you have to hang around the screen all day obviously... but controlling emotions seems better than just ignoring them or avoiding them, because in the end they will pop up again.

 

Your observations of yesterday are a particularly good example... perhaps it would be interesting to discuss what we can do, in order to prevent ourselves from overtrading and revenge trading. How do you, or anybody else, handle it?

[Sledge 13]

Your observations of yesterday are a particularly good example... perhaps it would be interesting to discuss what we can do, in order to prevent ourselves from overtrading and revenge trading. How do you, or anybody else, handle it?

 

Firewalker-

I think this comes with time and maturity as a trader to be honest. Once you realize that your trade went wrong because of "TRADER ERROR" and not "The market is out to get me!" you are leaps and bounds ahead.

 

Same thing with "revenge trades" People when new think "Crap- well I'll get it all back with this trade" Doesn't happen.

 

To all reading: You have to wait for the "Grade A" set-ups. If they aren't there- don't pull the trigger. When they do occur- you are ready. There is a lot of "down time" in this business. Patience is key!

 

stanlyd-

You are wise in your idea to walk away for a day- the money will be there tomorrow. I was on chat with a fellow trader a few days ago while he was looking for a set-up trading the E-mini, after looking at it when he woke, watching for a couple hours he said "I can't trade this shit" and took the rest of the day off! Smart man I said!

Sledge

[brownsfan019 17]

On Waiting.....

 

Wait for the fat pitch. - Warren Buffett: comparing investing to a baseball game where you can wait endlessly for the perfect pitch before you swing.

 

I only go to work on the days that make sense to go to work...And I really do something on that day. But you go to work and you do something every day and you don't realize when it's a special day. - George Soros talking to Byron Wien

 

His first conclusion was that he won when all the factors were in his favor, when he was patient and waited for all the ducks to line up in a row. - from Jesse Livermore, Worlds Greatest Stock Trader

 

Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed. ...Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.- Gerald Loeb

 

You make money on wall street by being very selective and being patient, waiting for those opportunities that are irresistible, where the percentages are very heavily in your favor.- Seth Glickenhaus

 

Unless, however, we see a very high probability of at least 10 percent pretax returns (which translate to 6 percent to 7 percent after corporate tax), we will sit on the sidelines. With short-term money returning less than 1 percent after-tax, sitting it out is no fun. But occasionally successful investing requires inactivity.- Warren Buffett

 

Many equity investors feel compelled to remain 100% invested in equities at all times. Bond investors are often similarly constrained. We strongly believe that this mentality leads to pursuit of relative rather than absolute investment returns, a direction we certainly want to avoid...A smaller pool of funds seeking to avoid meaningful declines in market value at every point in time and seeking more aggressive return objectives cannot afford to be fully invested in the absence of attractive opportunities. – Seth Klarman

 

SOURCE

[brownsfan019 17]

Few more from Livermore:

 

"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine - that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance."

 

"The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."

[milliard 10]

You have to wait for the "Grade A" set-ups. If they aren't there- don't pull the trigger. When they do occur- you are ready. There is a lot of "down time" in this business. Patience is key!

 

That's it right there. Good man.

 

Which mirrors the comments, actions & behaviour of the big sluggers in brownsfan's post.

[OAC 10]

Tim Morge, one of the top currency traders in the world for more then 20 years.

Even back in the 80s, the Finance Minister of Germany and Japan would visit his office regularly , as descrbied in a recent article. Now he gives occasional seminars, and in between seminars and to this day, he would still practice trading on his simulators. Now I get the impression that some of you guys are taking the day off or playing video games during your downtime. Where is your work ethics ?

Have you reached a plateau already ?

[Sledge 13]

Few more from Livermore:

*snip*

I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"

 

"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."

 

Livermore is the man! I really need to get a copy of his book. I have looked at a few places reading up on him in the past- but after a string of blunt quotes like that- I have to read more about what he has to say!

 

I love the folks who have no time for bullshit, no time to write a 500 page book trying to double talk and overspeak so you think they are smart and thus will follow their wisdom as if it were gospel.

 

Thanks for the string of quotes Bf!

Aaron

[brownsfan019 17]

Here's some links to Amazon for anyone that has not read some of the Livermore books:

 

Jesse Livermore: World's Greatest Stock Trader (Paperback)

 

Amazing Life of Livermore: World's Greatest Stock Trader (Hardcover)

 

How to Trade In Stocks (Paperback)

 

They are all inexpensive and belong in a trader's library.

[DbPhoenix 42]

Depends on what one means by "great". Livermore made fortunes, but then he also lost them by not following his own rules. So is the goal to make a fortune or also to hang onto it? I suspect that one reason why novices overtrade is that they focus too much on the former and not enough on the latter.

[brownsfan019 17]

Depends on what one means by "great". Livermore made fortunes, but then he also lost them by not following his own rules. So is the goal to make a fortune or also to hang onto it? I suspect that one reason why novices overtrade is that they focus too much on the former and not enough on the latter.

 

There's a lot to be learned by studying Livermore.

[Sledge 13]

Depends on what one means by "great". Livermore made fortunes, but then he also lost them by not following his own rules. So is the goal to make a fortune or also to hang onto it? I suspect that one reason why novices overtrade is that they focus too much on the former and not enough on the latter.

 

"The difference between Livermore and a real sucker, however, was that Livermore mostly admitted his mistakes and learned from them."

 

"It was only after going broke twice and then making much less profit in a raging bull market than he would have expected to that Livermore realized he was trading like a sucker. He was losing his profit because he was trading every day for the sake of trading. This, he realized, made him a "Wall Street Fool".

 

"Whenever I read the tape by the light of experience I made money, but when I made a plain fool play I had to lose. There was the huge quotation board staring me in the face, and the ticker going on and people trading and watching their tickets turn into cash or into waste paper. Of course I let the craving for excitement get the better of my judgment."

 

After he had learned to trade less, Jesse Livermore's profits soared.