What Would Experienced Traders Consider As EXCESSIVE TRADING....?

[joshdance 10]

  DangerBoy said:

I have racked up my 10 000 hours yes.. the first 2000 sifting through allot of this "overtrading" type garbage.

 

I rarely bother with boards but once in a while I get bored and do and then wish I hadn't bothered..

 

If a system is 100% programmable and mechanical, then of course the possibility of overtrading doesn't exist, because there is no discretion involved. However, once human choices come into play, then taking trades that are not "good" trades per one's definition of "good" becomes a possibility. That's not a good thing, but it's life, it's human, it's reality. It's not the ideal scenario we'd all like to achieve (which perhaps you have achieved already)--that we always do exactly as we should.

 

Losing money and seeking revenge by forcing trades, or making a lot of money and becoming careless, are realities in trading. Even with a well-defined setup, if it's not programmable, then it leaves room for interpretation, and one becomes susceptible to taking trades that one would normally, in an ideal situation, not take. This is what I mean by "overtrading." It's not good at all. But it's the reality in trading, I suppose until one reaches that 10,000 hour mark and after years of consistent profitability where you are so disciplined that it's a non-issue. If you say you've never forced trades with a discretionary method, then I'd very seriously doubt that you are being forthcoming.

 

What you said before is the perfect picture, and the kind of stuff we read in books--it may be true, but that really doesn't in itself mean anything. It's like telling someone to always think before they speak. Great advice--but not much practical to actually implement. If you have some advice on HOW this is done, I would love to learn. I suspect that like anything else, however, it just takes the time, and development of discipline, to be successful in the long run. I have seen huge strides in my own trading over the last few months just by putting in the time. I can't say I've heard too many traders who are successful claim to do so by taking shortcuts.

[DangerBoy 10]

  joshdance said:

If a system is 100% programmable and mechanical, then of course the possibility of overtrading doesn't exist, because there is no discretion involved. However, once human choices come into play, then taking trades that are not "good" trades per one's definition of "good" becomes a possibility.

 

it is only a possibility if your trade set ups are not clearly defined, your system does not have to be mechanical to clearly define your set ups.. in fact I do not know of a successful trader who does not use clearly defined set ups..

 

  joshdance said:

That's not a good thing, but it's life, it's human, it's reality.

 

It's your reality... I do not say that to belittle you in any way, merely to point out how you generalise your own personal experience..

 

  joshdance said:

It's not the ideal scenario we'd all like to achieve (which perhaps you have achieved already)--that we always do exactly as we should.

 

For me there is very little thinking during the day, I spend most of my time working on execution.. the markets move to quickly to be sitting wondering whether a set up just occurred or not.

 

  joshdance said:

Losing money and seeking revenge by forcing trades, or making a lot of money and becoming careless, are realities in trading.

 

Some peoples realities yes..

 

  joshdance said:

Even with a well-defined setup, if it's not programmable, then it leaves room for interpretation, and one becomes susceptible to taking trades that one would normally, in an ideal situation, not take. This is what I mean by "overtrading." It's not good at all.

 

The biggest problem with this type of thing is that if your set up was never clearly defined in the first place then how do you ever decide whether it was a good or bad trade?? Inevitably what you will do is decide after, once you have either won or lost, in the majority of cases you will decide that losers were bad trades and the winners you'll hardly pay any more attention to.. often on the losers you will make a slight note not to do that particular thing again and so you will forever be the donkey chasing the carrot..

 

  joshdance said:

But it's the reality in trading,

 

Some peoples yes..

 

  joshdance said:

I suppose until one reaches that 10,000 hour mark and after years of consistent profitability where you are so disciplined that it's a non-issue. If you say you've never forced trades with a discretionary method, then I'd very seriously doubt that you are being forthcoming.

 

Racking up 10,000 hours behind a screen does not necessarily mean you will be any better for it.. I have come across countless traders who have been at it for years, still asking the same basic questions.. or worse answering the same basic questions..

 

  joshdance said:

What you said before is the perfect picture, and the kind of stuff we read in books--it may be true, but that really doesn't in itself mean anything. It's like telling someone to always think before they speak. Great advice--but not much practical to actually implement.

 

Why is it not practical to implement?? I will give you an example from our previous conversation and show you why throwing around these terms so flippanlty leads to great confusion and my own frustration...

 

Let me take it back to a simple analogy to show the shortcomings of this to try and illustrate my point.. it is a ridiculous analogy but I think you will catch my drift.. let's say we have a game, a light flashes three colours, red, green and yellow... when it flashes you have the choice to hit a button, if it's red and you hit the button you get paid 3 dollars, if it's yellow and you hit it, 50% of the time you will get paid a dollar and 65% of the time you will lose a dollar, if it's green, you will lose two dollars..

 

That is the game right and we know all the variables are constant.. so now I create my "system", I want it as simple as can be and I define my rules.. the red flash is my set up.. when I see it flash red, I'm going to hit the button.. but only on a red flash.. the other two I will ignore, even if it takes 100 yellow flashes.. so we start playing.. and I execute 100% and I have a pretty good result.. we can be assured of positive expectancy right?? that is obvious.. now I play the game a second time, but this time I get bored so I begin "overpressing", now instead of hitting just on the red flashes I start hitting the yellow flashes also because I see that once in a while the yellow flashes are paying out.. this is scenario two right.. what do you think happens to the results of the system in this scenario? Scenario 3, I play the game again, however in this instance I'm being more cautious, so I begin "underpressing", I play the game as originally intended, only pressing the button on red flashes, however in this case, on occasion I decide to skip a red flash for whatever illogical reason, it would make no sense to skip but you get the drift..

 

So now having heard the idea laid out this way do you think that "overpressing" as you would call it, is in any way shape or form comparable to "underpessing"??

 

  joshdance said:

If you have some advice on HOW this is done, I would love to learn. I suspect that like anything else, however, it just takes the time, and development of discipline, to be successful in the long run.

 

Like I said before time does not necessarily lead to success in my view, in some people it only helps to ingrain bad habits.. what I would say is this.. find yourself some basic 100% definable set ups.. you need to get passed the hurdle of thinking during the day... it is like our above analogy in Scenario 2 but in this case you are hitting the yellow flashes not because of boredom but because you are not entirely sure what constitutes a yellow or a red flash, you eventually make up your mind, you hit the button and you get a win and you decide the light must have been red... you see the problem with this approach?

[gosu 10]

The lighted buttons game is a very poor analogy to the real game.

 

There is never a time when only one button is available to press but always two, labeled "long" and "short." Therefore, can anyone else see that the red and green lights describe the same market position and are therefore redundant?

 

When the market lights up a "sure thing" trade, you still have to choose the right button because pressing the wrong button means "sure loss."

 

Moreover, the amount of gain offered when the market lights up is never fixed.

 

The biggest flaw in the analogy relevant to the thread topic is that it is missing a set of buttons, call it gray. When the market turns gray, pressing either button (long or short) has little effect on the score because the market doesn't go anywhere.

 

Now it is possible to consider whether "overpressing" is meaningful.

[joshdance 10]

  DangerBoy said:

it is a ridiculous analogy but I think you will catch my drift..

 

I do catch your drift, and you're right, it is a ridiculous analogy. Your analogy can be executed and programmed in 10 lines of code, by a machine. We're not machines. Incidentally, you're right that anyone would be pretty much foolish to press anything but reds, except maybe when the yellows form a very repeatable pattern in terms of payouts, and you can calculate that it would be more advantageous to follow this pattern in the absence of enough red signals.

 

If a setup is 100% definable, if can be programmed and is not subject to discretion in execution. Give me an example of a 100% definable setup that cannot be programmed (just make one up, I don't need anyone's), please, I would love to see it.

 

Out of curiosity, what market(s) do you trade? And you say you've been on trading forums before--when, and under what user names if I may ask? Perhaps I can read some of your old posts and see if I can glean some wisdom on how you improved, as it was happening.

[DangerBoy 10]

  gosu said:

The lighted buttons game is a very poor analogy to the real game.

 

There is never a time when only one button is available to press but always two, labeled "long" and "short." Therefore, can anyone else see that the red and green lights describe the same market position and are therefore redundant?

 

When the market lights up a "sure thing" trade, you still have to choose the right button because pressing the wrong button means "sure loss."

 

Moreover, the amount of gain offered when the market lights up is never fixed.

 

The biggest flaw in the analogy relevant to the thread topic is that it is missing a set of buttons, call it gray. When the market turns gray, pressing either button (long or short) has little effect on the score because the market doesn't go anywhere.

 

Now it is possible to consider whether "overpressing" is meaningful.

 

I just made it up off the top of my head, it was not intended to be a representation of the market, only a simple game with basic rules to illustrate a point.. scenario 1 and 3 both have no risk what so ever since you cannot lose, in scenario three you will make less money but you are not influencing the expectancy of the game. In scenario 2 you change everything because now you are choosing a flash that is outside the parameters of the system, depending on the frequency of occurrence of the flashes and how often you are breaching the rules, you could easily end up losing money since the yellow button is negative expectancy, the more you play it the more impact it will have on your returns, possibly negative depending on frequency of red and yellow flashes and how often you hit yellow.

 

The point was that what you are doing in scenario 2 and scenario 3 are two completely different things and yet somehow on this thread they were being compared as if one and the same and primarily because people are using the wrong terms in the first place.. I will say again, there is no such thing as excessive trading within the realms of a positive expectancy game, if you are taking trades that are not within the realms of the plan then call it for what it is, a punt.. and if you are taking punts because you cannot identify your entries, then call that for what it is, a poorly defined plan..

[DangerBoy 10]

  gosu said:

The lighted buttons game is a very poor analogy to the real game.

 

There is never a time when only one button is available to press but always two, labeled "long" and "short." Therefore, can anyone else see that the red and green lights describe the same market position and are therefore redundant?

 

 

What a load of twaddle.. it's so far off the mark I wonder whether you even bothered to read the thread,the lighted buttons game is not meant to represent the market.. merely to try and invoke some thought as to how flawed the process is of trying to compare the ideas of "over" and "under" trading when at the heart of it they are two totally different concepts.. (and the the first in itself is a totally different concept from what is implied)

 

I do find it quite interesting though that you have given yourself sole authority as to what defines the "real game" in the markets..

 

Who is to say that the market should have a long and a short button? What if I create a game where I have a button that simultaneously goes long in one market and short in another market? Better yet, what if in my game I have no buttons, my game is simply to watch the stream of information and every time price ticks into a whole number I mark it down on my notepad... why? who cares.. maybe I'm obssessive compulsive and I take enjoyment from it as bizarre as it is.. the point is, are any of these two games any less real than your game???

 

As far as I see it the market is just a continuous flow of chaotic information, maybe even labelling it as chaotic is going to far.. but at the end of the day what you decide to do with it is entirely of your own making.

 

In any case I can see this conversation has far outlived it's useful purpose, so I'll leave it at that and wish you both well on your trading endevours..

[wrbtrader 10]

Every discretionary successful trader I know (retail and institutional) that has a clearly defined trading plan has overtraded (taken trades outside the trading plan or taken trades not approved) once in awhile although institutional buddies get into more trouble with those at their firm in comparison to retail traders that only answer to themselves.

 

Anyways, that's all the stuff involving "fear and greed" (trader psychology) that's a concern for any discretionary trader regardless if they have a trading plan or not.

[wrbtrader 10]

  joshdance said:

...If a setup is 100% definable, if can be programmed and is not subject to discretion in execution. Give me an example of a 100% definable setup that cannot be programmed (just make one up, I don't need anyone's), please, I would love to see it...

 

Discretionary trader with a 100% definable trade method is different than a mechanical trader with a 100% definable trade system. The former does not use codes because the trader depends on an "analysis process" to ensure particular situations are in place whereas the latter does use programmable codes.

 

A discretionary trader may include 100% definable global event or key market event that must be in place to validate any trade signals he/she gets. Simply, if the event doesn't occur...the trade signal is then ignored. Simply, I don't think you can program the "analysis process" of some successful discretionary traders unless you're only making reference to the trade signal itself and not in reference tot he "analysis process" that must occur prior to executing or ignoring a particular trade signal.

 

Yet, I'm not a programmer or quant person. Thus, if you say such is possible via my example above...I would love to see a particular program code example of such because that would also imply you should be able to program a robot to have the same "human reactions" whenever a specific definable situation has occurred.

 

My point, this is the same reasons why two discretionary traders using the exact same 100% definable trade method will have different trade results as shown in countless of threads at any trading forum whenever someone shares a clearly definable trade method.

 

We just react differently when in the exact same 100% definable situation...that's just human nature.

Edited September 6, 2011 by wrbtrader