Four Key Principles for Trading?

[TheNegotiator 13]

A little book I picked up recently for a casual read presented me with a potential nugget for any aspiring trader. It mentions a 4 key principles for life, as put by a 17th Century Japanese Samurai. The Samurai is (I gathered) Miyamoto Musashi. The principles are:-

 

No Fear

No Surprise

No Hesitation

No Doubt

 

With all the psycho-analysis of traders these days, I thought that these principles are excellent and far more apt to the trading than much else out there. Of course it has to be taken with the context of ability, but I believe this is a great way in which to practise trading.

[Tams 20]

Four Key Principles for Trading?

 

 

the trend is your friend

do not disagree with your friend

do not argue with your friend

do not make enemy with your friend

[SIUYA 11]

Four Key Principles for Trading?

 

 

the trend is your friend

do not disagree with your friend

do not argue with your friend

do not make enemy with your friend

 

so is that a combination.....

 

No Fear --- have no fear of the trend (your friend)

No Surprise ---- dont be surprised when the trend continues (dont disagree with him)

No Hesitation ---- have no hesitation of trading with the trend (dont argue with him)

No Doubt --- there is no doubt that the trend will end at some stage, until then repeat.....until your friend becomes a new friend

[TheNegotiator 13]

Four Key Principles for Trading?

 

 

the trend is your friend

do not disagree with your friend

do not argue with your friend

do not make enemy with your friend

 

Certainly an interesting point although I would add it might apply more to some products than other-but that is a different topic

[Tams 20]

so is that a combination.....

 

No fear --- have no fear of the trend (your friend)

no surprise ---- dont be surprised when the trend continues (dont disagree with him)

no hesitation ---- have no hesitation of trading with the trend (dont argue with him)

no doubt --- there is no doubt that the trend will end at some stage, until then repeat.....until your friend becomes a new friend

 

* * * * * g-o-l-d-e-n ! * * * * *

[zdo 20]

No Fear

No Surprise

No Hesitation

No Doubt

 

 

TheNegotiator,

 

These are all ‘effortless high performance worker’ traits… yet I meet so many good traders who tolerate no talk of parallels of physical skills and athletics with trading … we even have a few on this board. What’s up with that ???

 

re: “…I believe this is a great way in which to practise trading.” What do you mean by ‘practice’ trading?

Training to literally not experience those four is quite different from training to cope with them when they come up. Which way are you talking about?

 

Also, negoc8r, I’ve not seen ANY psycho-analysis on this board. Can you explain for me or give an example of what you mean by “psycho-analysis of traders these days”

 

Many thanks.

 

I bring these questions because -

 

The only truly effective and for sure consistent, way I have found to allay Fear is with proper sizing for my capitalization (in both excursion (/trend) and reversion methods, btw). I;ve found that all the mental trickery temptations that would keep me within 'tolerable' levels of Fear damage my bottom line too much.

 

I have not alleviated Surprise at all and as long as I’m still initiating any ‘leader’ trades (which about 20% of my trades are) I don’t see my ‘surprises’ ever going away. I don’t see my ‘surprises’ ever going away for the ~80% of the following / reacting / responding to market circumstances trades either. Also, for some methods, I consciously and unconsciously ‘project’ two or three possible maps for a time period and am continually Surprised that none of them were accurate, etc…

 

I can see where No Hesitation is definitely apt to Samurai level sword fighting, but quite often, Hesitation puts me into a better position than I would have had I slashed on in to the position…a related example - for certain situations in tennis, they teach you to commit and ‘make a move’ one way or the other… yet in those same situations often the appropriate ‘move’ is to Hesitate / ‘hold the center’ and force the onus of precision onto the opponent, etc.

 

Experiencing palatable Doubt during ~ 30% of my trades has not kept me from surviving and thriving in this game... were the samuria dealing with morphic emotional fields of crowds? etc.

[TheNegotiator 13]

zdo,

 

By "practise trading" I mean the continual practise of trading. Not simulated trading.

 

The psycho-analysis of traders is now an industry in itself, I think you'll recognise.

 

No Fear

No Surprise

No Hesitation

No Doubt

 

Of course all of these things should be contextually applied. Simply being a fearless, unsurprised, non-hesitant and strong self belief trader will take you down only one road should you have no clue about trading.

 

But if you have a clue, a plan and are experienced, these are important ideas.

 

No Fear- No fear that your well prepared plans are strong possibilities for the market to explore.

 

No Surprise- As when a scenario comes along that you didn't expect, there were probably clues along the way(this is why hindsight trading is so lame)

 

No Hesitation- When you have your plan, you trade it knowing you could be right or you could be wrong but you have to trade it to see.

 

No Doubt- That your plan is a possibility for the market and given the possible rewards, the risk is worth taking.

 

 

Anyway, I think it's a good approach for execution and can help curb those mischievous emotions' tendencies.

[zdo 20]

.. again, Training to literally not experience those four is quite different from training to cope with them when they come up. Which way are you talking about?

 

... also, would you please refer me to a psycho-analyst in the industry?

 

... not being critical... and if you just want to keep the topic casual just don't reply ... I'll understand.

[gosu 10]

No one stated the principles better than The Gambler himself, Kenny Rogers.

 

 

 

Pay particular attention to the second stanza about the secret to survivin', starting at 1:41.

 

Modified for trading:

 

Ev'ry [trader] knows

That the secret to survivin'

Is knowin' what to throw away [wash]

Knowin' what to keep [hold]

 

'Cause ev'ry [trade's] a winner

And ev'ry [trade's] a loser

 

Etc.

 

And the key word throughout is KNOW.

Edited February 16, 2012 by gosu

[Obsidian 10]

No Fear -- when you to enter a trade

No Surprise -- when things don't happen as you thought

No Hesitation -- when you are about cut your loss or take your profit

No Doubt -- when you have a logic behind your trading system

[TheNegotiator 13]

.. again, Training to literally not experience those four is quite different from training to cope with them when they come up. Which way are you talking about?

 

Frankly zdo, I just saw it in a book. The point is that if we prepare properly, this is how we should act in our execution of our trading plan. The more we experience and attempt to trade in this way(or practise), the better we become. If anyone else disagrees with this then that's fine too. It fits nicely for me though.

 

... also, would you please refer me to a psycho-analyst in the industry?

 

Really? Are you saying nobody's doing this, or are you asking me to recommend a good one?(j/k)

[tradelab 10]

Creating opportunities for economically disadvantaged producers

Fairtrade is a strategy for poverty alleviation and sustainable development. Its purpose is to create opportunities for producers who have been economically disadvantaged or marginalized by the conventional trading system

 

Transparency and accountability

Fairtrade involves transparent management and commercial relations to deal fairly and respectfully with trading partners

 

Capacity building

Fairtrade is a means to develop producers' independence. Fairtrade relationships provide continuity, during which producers and their marketing organisations can improve their management skills and their access to new markets

 

Payment of a fair price

A fair price in the regional or local context is one that has been agreed through dialogue and participation. It covers not only the costs of production but enables production which is socially just and environmentally sound. It provides fair pay to the producers and takes into account the principle of equal pay for equal work by women and men. Fair Traders ensure prompt payment to their partners and, whenever possible, help producers with access to pre-harvest or pre-production financing

 

Gender equity

Fairtrade means that women's work is properly valued and rewarded. Women are always paid for their contribution to the production process and are empowered in their organisations

 

Working conditions

Fairtrade means a safe and healthy working environment for producers. The participation of children (if any) does not adversely affect their well-being, security, educational requirements and need for play and conforms to the UN Convention on the Rights of the Child as well as the law and norms in the local context

 

The environment

Fairtrade actively encourages better environmental practices and the application of responsible methods of production

[zdo 20]

Creating opportunities for economically disadvantaged producers

Fairtrade is a strategy for poverty alleviation and sustainable development. Its purpose is to create opportunities for producers who have been economically disadvantaged or marginalized by the conventional trading system

 

Transparency and accountability

Fairtrade involves transparent management and commercial relations to deal fairly and respectfully with trading partners

 

Capacity building

Fairtrade is a means to develop producers' independence. Fairtrade relationships provide continuity, during which producers and their marketing organisations can improve their management skills and their access to new markets

 

Payment of a fair price

A fair price in the regional or local context is one that has been agreed through dialogue and participation. It covers not only the costs of production but enables production which is socially just and environmentally sound. It provides fair pay to the producers and takes into account the principle of equal pay for equal work by women and men. Fair Traders ensure prompt payment to their partners and, whenever possible, help producers with access to pre-harvest or pre-production financing

 

Gender equity

Fairtrade means that women's work is properly valued and rewarded. Women are always paid for their contribution to the production process and are empowered in their organisations

 

Working conditions

Fairtrade means a safe and healthy working environment for producers. The participation of children (if any) does not adversely affect their well-being, security, educational requirements and need for play and conforms to the UN Convention on the Rights of the Child as well as the law and norms in the local context

 

The environment

Fairtrade actively encourages better environmental practices and the application of responsible methods of production

 

So WHO determines if the trade is fair?

[tradelab03 10]

Goals of Fairtrade are

 

To improve the livelihoods and well being of producers by improving market access, strengthening producer organisations, paying a better price and providing continuity in the trading relationship

 

To promote development opportunities for disadvantaged producers, especially women and indigenous people and to protect children from exploitation in the production process

 

To raise awareness among consumers of the negative effects on producers of international trade so that they exercise their purchasing power positively

 

To set an example of partnership in trade through dialogue, transparency and respect

 

To campaign for changes in the rules and practice of conventional international trade

 

To protect human rights by promoting social justice, sound environmental practices and economic security

[zdo 20]

Goals of Fairtrade are

 

To improve the livelihoods and well being of producers by improving market access, strengthening producer organisations, paying a better price and providing continuity in the trading relationship

 

To promote development opportunities for disadvantaged producers, especially women and indigenous people and to protect children from exploitation in the production process

 

To raise awareness among consumers of the negative effects on producers of international trade so that they exercise their purchasing power positively

 

To set an example of partnership in trade through dialogue, transparency and respect

 

To campaign for changes in the rules and practice of conventional international trade

 

To protect human rights by promoting social justice, sound environmental practices and economic security

 

Again -

WHO determines if the trade is fair?

Who does the "To improve... " ?

Who does the "To raise awareness ... " ?

Who does the "To set an example ... " ?

Who does the "To campaign ... " ?

Who does the "To protect ... " ?

[SIUYA 11]

Again -

WHO determines if the trade is fair?

Who does the "To improve... " ?

Who does the "To raise awareness ... " ?

Who does the "To set an example ... " ?

Who does the "To campaign ... " ?

Who does the "To protect ... " ?

 

an autobot.

the 'man'

the global elite

aliens

all of the above.

[zdo 20]

an autobot.

the 'man'

the global elite

aliens

all of the above.

 

SIUYA, Thank you for speaking for tradelab, but you only answered five of the questions. What's up with that?

[tradelab 10]

Principle #1: Always Invest with a Margin of Safety

Margin of safety is the principle of buying a security at a significant discount to its intrinsic value, which is thought to not only provide high-return opportunities, but also to minimize the downside risk of an investment.

 

Principle #2: Expect Volatility and Profit from It

Investing in stocks means dealing with volatility. Instead of running for the exits during times of market stress, the smart investor greets downturns as chances to find great investments.

 

Principle #3: Know What Kind of Investor You Are

You only have two real choices: The first choice is to make a serious commitment in time and energy to become a good investor who equates the quality and amount of hands-on research with the expected return. If this isn't your cup of tea, then be content to get a passive ( possibly lower) return but with much less time and work.

[zdo 20]

For those few ‘samples of one’ who might want to cut through the rampaging ‘voice of trading’

 

A trade is not an investment

An investment is not a trade.

 

Mark as trades the transactions for which you have no control over the outcomes besides your exit // beyond unwinding the position at a profit or loss

Mark as investments the transactions you make which include the possibility to materially participate in creating the desired outcomes and those that you make a concomitant commitment to do just that.

 

Make and crystalize that distinction for yourself. It helps.

[SIUYA 11]

SIUYA, Thank you for speaking for tradelab, but you only answered five of the questions. What's up with that?

 

I just figured any one of my answers could be used to answer any of the questions....sheer coincidence there was 5 answers and 6 questions (or was it spooky mulder, or the SNB who caused that outlier).

[MightyMouse 12]

 

Principle #2: Expect Volatility and Profit from It

Investing in stocks means dealing with volatility. Instead of running for the exits during times of market stress, the smart investor greets downturns as chances to find great investments.

 

 

Yup, smart investors held onto Woolworth's, Pan Am, Enron, Eastern Airlines, Commerce One, and Merry-Go-Round. Each was a great investment given the information available at the time.

 

You might want to change this from investor to trader and instead of finding great investments, they find great money making opportunities. Your definition sounds little bit like bottom fishing, or trying to catch the falling knife. Catching the knife leaves you with multiple lacerations.

 

Also smacks of the convention: The market always comes back. This is true as long as there is a central bank that can inflate the value of assets.

 

 

Principle #3: Know What Kind of Investor You Are

You only have two real choices: The first choice is to make a serious commitment in time and energy to become a good investor who equates the quality and amount of hands-on research with the expected return. If this isn't your cup of tea, then be content to get a passive ( possibly lower) return but with much less time and work.

 

 

Be the Ball, Danny.