Problem with the 4 Cardinal Rules of Trading?

[dom993 10]

Hello,

 

We are taught that there are 4 cardinal rules that should be observed at all times, if one wants to succeed at trading. None of the rules is certainly easy to follow, but actually, there is one that I so far failed to abide by, despite all efforts.

 

From my own knowledge, here are the 4 rules:

 

1 - Follow the trend

2 - Cut your losses short

3 - Let your profits run

4 - Manage your risk

 

I am sure every body has his most difficult one. Please share your experience.

Best wishes and a profitable 2013 to all TL'ers !

 

Here are my own rules:

 

1. Trade with an edge

2. Don't rely on anyone to find my edge(s) - and in particular, always verify myself through backtesting that a supposed edge is indeed an edge

3. Use a minimum of 1000 setups to validate an edge, over a minimum of 5 years

4. Accept that any single trade, taken in isolation, is useless & meaningless - for an edge to translate into profits, hundreds of trades are necessary

5. For any strategy/system, know in advance what is a "normal" drawdown, and at what point a drawdown would signal that the edge no longer is.

6. Execute flawlessly - I have personally found that automated execution is what works best for me.

 

Cheers

[TheDude 10]

With regards to not letting profit run, how come no one's mentioned getting back in?

 

It seems too many folk have a perceived problem, when there's a very easy solution. Nothing wrong with taking profit, but who said the trend is finished when you get out?

[TheDude 10]

Or the lack of a trading plan . . .

 

For day traders, I'd say religiously sticking to 'a plan' is probably going to do more harm than good, especially if trading off a chart.

 

The market is far too fluid and evolving for a set of defined rules to work, even if allowing for the law of large numbers.

 

If a set of fixed rules/plan (assuming thats what you define the plan to be - entry, management and exit definitions, risk management etc) could consistently pull money out of the market on an intraday basis (where the velocity of making money is much higher - without wanting to sound like Jack H the biggest troll on the internet!!), dont you think some fund or bank, with all their computing power would have discovered them and be trading this way?

 

I appreciate there are many successful systematic/algo day trading prop firms out there which may seem to discount what I've said here. However, these guys will be constantly changing their models throughout the course of the day. The plan is dynamic. It's probably beyond what most of the audience here is capable of.

 

Therefore, I'd say that the successful day trader has a set of 'values' or 'criteria' which are both flexible and (more importantly) put into a context that comes with experience and intuition - something the constant algo re-jigging attempts to mimic. ie discretion without calling it discretion, but science - to please ego.

[Roger Felton 10]

With regards to not letting profit run, how come no one's mentioned getting back in?

 

It seems too many folk have a perceived problem, when there's a very easy solution. Nothing wrong with taking profit, but who said the trend is finished when you get out?

 

I think you will find I covered that in a recent post....a good point to say again, though

[kuokam 10]

None of the rules prescribes a Risk to Reward ratio. On the contrary, letting profits run presupposes the trend will keep going, and so will the "reward".

 

 

I was a trend trader for several years and I hated every minute of it. Day after day, year after year I could see that if I had just put my greed to catch a trend aside and take the "hit and run" trades, I would have been light years ahead in the game. If the market is going to trend strongly, I'll get numerous opportunities to get back in.

 

Follow the Trend - What trend? A short term trend can easily be a long term pullback. I love trading pullbacks. They are generally quick and very accurate.

 

Cut Your Losses Short - Nobody's been able to define that. Use a 2 tick stop? Good luck. You have to pull the ripcord on a losing trade based on a number of factors including the current market condition. Choke your stops and you won't be trading long.

 

Let Your Profits Run - I do. They run right to my profit target and it's generally not too far away. If I have an 80% chance of bagging 10 ticks (about $200) in 5 minutes and a 30% chance of 50 ticks in 2 hours, sorry guys, I'm out in 5 and off to the next trade.

 

Manage Your Risk - That's pretty much my "cardinal rule" but it needs a lot of work on definition. Basically, I never get emotionally attached to a trade by spending too much time finding it or getting so deep in a hole I can't let go. I never get even close to that point.

 

My stops aren't placed on the traditional 2 or 3:1 formula. That doesn't work. For example, you enter a trade long for 30 ticks and you place a 10 tick stop. The market stagnates and 4 hours later, the trade has wandered all over the place but now is 10 ticks above BE but coming down steady. All your indicators say the market is tanking and will drop another 50 ticks before finding support.

 

But you can't exit now or you'd be breaking a cardinal rule! It's 30 ticks or bust. That's nuts! Determine the odds of a trade's success and stay on it. They can change dramatically during a single trade. I built an indicator that does that for me because the algorythm is pretty complex. If they stay above 50% on a 3:1 trade, stay in. If they drop below, get out fast. But you'll rarely enjoy the high percentages going for the big targets.

 

The problem with these "Cardinal Rules" is they're all too vague. Define them for your specific system and don't be afraid to toss the ones that flat don't work for you. Just because they're cardinal rules for someone else doesn't mean they have to be for you. Your rules are what works for you...and that's all that matters.

[YertleTurtle 10]

For day traders, I'd say religiously sticking to 'a plan' is probably going to do more harm than good, especially if trading off a chart.

 

The market is far too fluid and evolving for a set of defined rules to work, even if allowing for the law of large numbers.

 

If a set of fixed rules/plan (assuming thats what you define the plan to be - entry, management and exit definitions, risk management etc) could consistently pull money out of the market on an intraday basis (where the velocity of making money is much higher - without wanting to sound like Jack H the biggest troll on the internet!!), dont you think some fund or bank, with all their computing power would have discovered them and be trading this way?

 

I don't really agree here. A trader can have fixed rules without developing an automated system. I am a discretionary day trader but I have well defined trade setups and profit targets as well as money management practices that allow me to trade successfully. So some of my rules are fixed and some are fluid but they are clearly defined. These are my rules but I couldn't simply program them into a computer and print money.

 

I think using the term "criteria" instead of "rules" is just semantics.

[Roger Felton 10]

None of the rules prescribes a Risk to Reward ratio. On the contrary, letting profits run presupposes the trend will keep going, and so will the "reward".

 

At least for me, a R2R ratio could never be a "rule" because it omits a vital piece of data...the W/L ratio. As a trader, I'm a scalper 99% of the time. I may shoot for 6 ticks on one trade and 30 ticks on another depending on what the market tells me is there with a high probability. I care nothing about what might be there with a mediocre probability.

 

On a given trade I might go for 10 ticks and use a 15 tick stop. Traders recoil in horror at the very thought. However, statistically and consistently, over a long period of time, if a trader's W/L ratio is, say, 17 out of 20, then who cares? The trader is making money. In fact, in this example, profit could be made if a 50 tick stop were used with a 10 tick target!

 

By using swing highs and swing lows on certain specific bar types, the market will also tell you the amount of stop necessary. So, there will be occasions when perhaps a 5 tick max. stop might be needed while the profit potential might be 80%+ that 30 ticks will be there. No two trades are ever identical though they may appear that way to most traders.

 

A Risk to Reward ratio is useless information unless it is used in conjunction with the individual traders well-established Win to Loss ratio.

 

Funny, you almost never hear traders talk about something so completely logical.

[Roger Felton 10]

I don't really agree here. A trader can have fixed rules without developing an automated system. I am a discretionary day trader but I have well defined trade setups and profit targets as well as money management practices that allow me to trade successfully. So some of my rules are fixed and some are fluid but they are clearly defined. These are my rules but I couldn't simply program them into a computer and print money.

 

I think using the term "criteria" instead of "rules" is just semantics.

 

Right on. Computers trade on logic, humans trade on emotion. Your "fluid" rules are something way beyond current coding capability to understand and mimic.

[TheDude 10]

So some of my rules are fixed and some are fluid but they are clearly defined. These are my rules but I couldn't simply program them into a computer and print money.

 

I think using the term "criteria" instead of "rules" is just semantics.

 

Yeah - that was kind of what I was trying to get at.

 

 

When ever I read this 'stick to the trading plan 100%' I get the impression the author is suggesting trading is like assembling a model kit or something.

[joshdance 10]

For day traders, I'd say religiously sticking to 'a plan' is probably going to do more harm than good, especially if trading off a chart.

...

Therefore, I'd say that the successful day trader has a set of 'values' or 'criteria' which are both flexible and (more importantly) put into a context that comes with experience and intuition - something the constant algo re-jigging attempts to mimic. ie discretion without calling it discretion, but science - to please ego.

 

I think "values" and "criteria" can be incorporated into a plan. For example, my plan says that if the market opens above X, I am looking to buy at Y. And I would prefer to see Z happen in order to do so. However, this does not mean that I won't buy at Y-1 or Y+1, once I observe the behavior of the market at the open.

 

Contrast that with getting up in the morning, and buying if it looks strong and selling if it looks weak -- sometimes this will work, but it does not take into account context as you mention, nor does it take into account important prices that others will be making decisions based off of. Trading by the seat of one's pants is a good way to achieve inconsistency, and ultimately stalls improvement as you never know whether you got lucky that day or not--in other words, without some framework and plan it's difficult to gauge progress. Anyone can have a good week or month, but trading well consistently is the hard part.

[TheDude 10]

I think "values" and "criteria" can be incorporated into a plan. For example, my plan says that if the market opens above X, I am looking to buy at Y. And I would prefer to see Z happen in order to do so. However, this does not mean that I won't buy at Y-1 or Y+1, once I observe the behavior of the market at the open.

 

Contrast that with getting up in the morning, and buying if it looks strong and selling if it looks weak -- sometimes this will work, but it does not take into account context as you mention, nor does it take into account important prices that others will be making decisions based off of. Trading by the seat of one's pants is a good way to achieve inconsistency, and ultimately stalls improvement as you never know whether you got lucky that day or not--in other words, without some framework and plan it's difficult to gauge progress. Anyone can have a good week or month, but trading well consistently is the hard part.

 

I'd agree. I dont think I'm explaining myself too well (if anyone gives a tinkers cuss!)

 

Take The Turtles method. It worked in it's day, and we know the key to trading it successfully was following those instructions/rules to the letter. No discretion. 1-2-3. It's the basis of the whole CTA industry we have today. Some are pulling down big numbers doing this.

 

I have similar approaches to my spread trading where I'm holding for 1 day to a month or 2.

 

Such an approach however doesnt lend itself to day trading. Not for me anyway. Sure I have a structure, and a general criteria/model or what ever you want to call it, but nothing is written in stone. You cant cater for all eventualities. I may see a scenario unfold. I may sell. 30mins later, I may see pretty much an identical scenario unfold, maybe at a similar/same prices, but this time I buy. If I were following rules, Id be doing the same thing. Obviously it's the context that causes the difference - and you cant put that into rules.

 

Sometimes I find myself with a position on and I cant even remember why I got in. Was it x or y? I am confident that my subconscious saw it or whatever, and so I clicked. I know there must have been a reason otherwise I wouldnt have entered - yet I know Im not trading from the gut or impulse. There was a reason there. My focus is then managing the trade. I know Im going to puke or scratch if it goes against me a few ticks - but thats the only mechanical rules based stuff I can handle.

Edited February 6, 2013 by TheDude

[joshdance 10]

Sometimes I find myself with a position on and I cant even remember why I got in. Was it x or y? I am confident that my subconscious saw it or whatever, and so I clicked. I know there must have been a reason otherwise I wouldnt have entered - yet I know Im not trading from the gut or impulse. There was a reason there. My focus is then managing the trade. I know Im going to puke or scratch if it goes against me a few ticks - but thats the only mechanical rules based stuff I can handle.

 

Yes I think we are saying the same thing, except perhaps for the above. I have had many great trades where I got in, not quite being able to quantify exactly why, and also some very poor ones. Ditto for trades where I know the reason, both good and bad. The problem with taking a position and not remembering why is that for me personally, the result is confusion, win or lose. I do not have a quantifiable reason, so if the result is either win or lose, I have no way to really learn and grow from it; there is no feedback. I have had months where I traded on intuition alone, and done quite well, but sooner or later I lost that consistency. I think intuition is very important, almost necessary as a trader; however, without some quantifiable reason to get into and out of the market, my trading, personally, becomes little more than gambling and becomes very frustrating to me, because even after a great day, the next day it's back to "hope I read the market well today" instead of having a plan, good or bad, that I can then change or stick to based on what I observe happening.

[TheDude 10]

Sure I can understand that.

 

The activity I refer too happens very quickly sometimes. The fact it's happened has registered and Ive instinctively got into the trade before Ive even realised consciously whats happened. It can happen on exits too - win or lose, but not as frequently perhaps.

 

It's a nice feeling to suddenly be looking at the screen with no position, then all of a sudden see youre a few ticks onside already without consciously knowing wtf just happened - but also being ok about it, realising youre in the zone. Goes the other way sometimes too though

[Vince50 10]

Jesse Livermore traded on inside information and by the seat of his pants and played Monday morning quarterback. You are not learning what he did; instead, you are learning what he should have done. There are really no records of his claims. A great deal of it sounds like bullshit to me, especially the part about cleaning out the bucket shops because he was so good. Give me a friggin break.

 

Mouse, as usual you are spewing out waaaay too much logic. I really dont need that much reality in my life. What I need is coffe. Plenty and plenty and plenty of coffe. Black, sweet, milk, no milk doesnt matter. As long as I can get into that "energy state" the floor traders do right before the opening bell, I want it! :coffee:

 

Now I alwasy thought what you did about Livermore but was afraid to say anything and tarnish the great ones image. But if bottom line results are what we are going by here...committing suicide and dying broke is not a sign this man had his sh%$t together as a trader.........winner or not!

 

As far as the 4 cardinal rules go, most of you are missing the boat. Wnat we need to focus on is the 5th cardinal rule which will help you to take care of at least 3 out of the 4 all by itself.

 

THE FIFTH CARDINAL RULE: Print out every single trade you make. Mark your entry and exit points, and go over where you could have changed your strategy to have gotten either more profit, less loss on your losers...or....avoided the trade altogether because you made so little it just wasted your day. This 5th rule was given to me by a man whose name I will not mention. I consider him to be the best day trader of equities I ever saw in my life with n oone even in his league. Why?...I spent 6-9 months watching him give us in the room the trades BEFORE they were taken! And he made more money in the first 90 minutes of trading than anyone I ever saw did in the whole day. In fact, very often by 11am, he was just kicking back watching his winners run. That is a mighty good goal to have as a day trader. Do you realy think you wont burn out if you are constantly looking for trades all thru the day? I spent a fortune in money and time to get his principles. Do not discount them lightly. He said this rule made him the trader he is today. Discount it at your own risk. Or career!

 

He says that if you dont go over your trades as soon as the trading day is over, you are never going to have the same perspective on it if you wait till the morning or next day. This 5th rule is so hard to do by the way, 4 years later after learning it, I still dont do it.

 

Question for the group: Who does do it?

 

One pro's thought about that is that if you cant take the time to do it, you are over-trading. Cut your trades by 60% and spend more time analyzing them " after the dealings done."

 

There is soooo much to be gained by this simple exercise I was thinking about writing a book about it.

 

How about this for a compromise. Print out 2 trades every day. Your biggest winner and your biggest loser and compare them to each other. Was it just luck and the loser was by far the better thought out trade. We need to re-memorize the trade then as our memory often records extreme pleasure and painful trades over simply good ones that have little emotion. PM me if you want to discuss this in depth.

[DbPhoenix 42]

There is soooo much to be gained by this simple exercise I was thinking about writing a book about it.

 

Or one could put this into practice: The Trading Journal.

 

This might also be of interest: Trading in 90 Minutes.

[Vince50 10]

Or one could put this into practice: The Trading Journal.

 

This might also be of interest: Trading in 90 Minutes.

 

Phoenix,

 

I am ashamed. How can I mention printing out trades and not keeping a journal. Of course! the journal helps you to spot the patterns you cant see in the visuals. They are like Brother and sister. One alone is powerful, both are unbeatable. Having neither means trading is just a hobby. Unless you already are a pro.But then youd have the past print outs and journals to show us anyway. It all comes full circle. Thank you Phoenix! Now....is there one person on this thread who does both......every day without fail? How about 3x a week when you think of it? No? How about after you drank a pint of Jack Daniels and you are wondering why the trading action is so slow in the Eur/Usd.......on saturday at noon?!!!:rofl:

[rplust 10]

Phoenix,

 

How about after you drank a pint of Jack Daniels and you are wondering why the trading action is so slow in the Eur/Usd.......on saturday at noon?!!!:rofl:

 

The advantage of trading on Saturday afternoon is that you can keep your losses at an absolute minimum.....lol...... But seriously, you are right. For me keeping a trading journal is like an uphill battle, especially going over losses because there is the other side of my conscious which tells me " forget about it, it's done!"

[Vince50 10]

The advantage of trading on Saturday afternoon is that you can keep your losses at an absolute minimum.....lol...... But seriously, you are right. For me keeping a trading journal is like an uphill battle, especially going over losses because there is the other side of my conscious which tells me " forget about it, it's done!"

 

plust, You really are more right than you know. We keep a journal for a while, and then we go, "oh yeah, I see Im getting out too early, or worse yet...........WE CONFUSE OUR OWN SELVES! We find that one trade we just got in and got out. The next trade we added on as profit accrued, and the next trade we put on 3 lots and took "OFF" lots as profits accrued. So often, the trade journal makes us realize that even though we have an absolute trading plan, we have no trading plan thats understandable even to ourselves. LOL

And then we slowly just stop keeping records. I think the less organized we are in keeping records the more we need to focus on that and less on trading, even if it means cutting your trades in half and more time pulling them apart, piece by piece like an expert mechanic trying to find the noise in his car.

 

Now, Im not saying we literally change money mgmt with every trade but we do it often enough because we always want to either "squeeze more" or " lose less" on our trades so...the journal reveals the chaos. Sometimes I think some of us are incapable of journaling coherently on a consistant basis and should just keep a log insted. You know"

 

Eur/usd short@13533. All in all out. 10:05am in 3:22pm out. Got out on price break of 8sma.. PROFIT: 59 pips

 

The problem with this is that it doesnt tell us if we have a winning system and if we are losing every week, it doesnt tell us why. So then we spend more time in figuring out how to not keep proper journals and records than we do actually trading. I am not an organized person. My desk is always a mess and a pile of notebooks and papers that have gotten shuffled to another spot and back to my desk,some papers for 2 yrs now! Im serious. Im doing this 15 yrs and I still hate meticulous record keeping.

 

The problem with trading or being the best at anything this hard is that you can do 9 things perfect,and the one thing you dont do right,may prevent you from winning at all. I sometimes wish I got into tennis instead of trading. Then I would get feedback every day. Just from the score! Plus my opponent would tell me"Hey,you are depending too much on your backhand"..my instructor would give me his take, and every person I played while training would give me his /her feedback. We dont get that in trading.We must give it to ourselves, and that's often the fatal flaw to a dream of becoming a mega successful trader.

 

I truly think that 75% of us would increase our profits by 50% if we could hire someone to keep inpecable records for us. That would include a journal. They would obviously be taking dictation from us after every single trade! Graphs showing what times worked out best, what pairs, which MM method, even our mood at the time. Now that I think about it, if done really professionally, more time would easily be spent keeping records than actually trading itself.

 

I have always claimed on this board, FF, and many others, that trading is so much harder than it needs to be because we are doing it alone. And listening to myself now, I can clearly see that spending 2 hrs a day on Forex trading boards like this, wonderful as they may be, can never take the place of a partner sitting at the next desk in an office with you, BOTH OF YOU LOOOKING AT THE SAME SCREEN,SAME CHARTS ,SAME TIME,SAME PLACE!

 

I dont care that some of the market wizards and your best friends best friend all got rich trading at home in their underwear. IT IS NOT THE RIGHT WAY TO TRADE! And we buy software and newsletters so we feel we arent doing this alone. WE ARE DOING IT COMPLETELY ALONE IF ANOTHER PERSON IS NOT IN THE ROOM WITH US!

 

Maybe, just maybe, you need traders to work in pairs. One guy is the actual trader who executes, and the other guy is monitoring the trader and in a sense analyzing the guy who is analyzing the charts! Yuh think maybe you'd get a different result,doing that? Maybe....yuh think? :haha:

 

Perfect corrolation/example: When the great boxer Muhammad Ali first got known, many of his critics thought he would never last because he broke 2 cardinal rules of boxing: He kept his left hand down way too low and was unguarded, and #2 he often punched moving backwards which goes against the law of physics! Despite these huge " flaws/bad habits" he became the champion of the world! Now here is the analogy..........You get into boxing tomorrow....and you try to box the same way he did. I assure you that your next hospital visit and early retirement from the sport will be close by!

 

Now by the same token...you get someone into trading and have them do it the way many pro traders do. They will lose their shirt. What we also dont know about the market wizards or anyone else is that they may have spent a looooong time being perfectly disciplined,refining their craft and keeping records in an office doing it the right way. They just leave that part out....in "some" cases. So maybe that should lead a to cardinal rule #6: Dont trade alone if you cant keep good records.

 

And if you must trade alone and you are not winning(on paper,sim or live)...........DONT TRADE. IT MAY NOT BE FOR YOU!

 

AND SPEAKING OF MARKET WIZARDS, HEDGE FUND PROS, AND THE BEST FOREX TRADERS ON THE PLANET:

 

Would any professional trader making over 500k per yr, be so cheap that they would not hire an asst. or 2 or 3 to work with them and keep track of records and data they never could. I bet when the big pros like Paul Tudor Jones (who has 29 people working for him!) have their end of the month "How did we do this month" meeting, I will bet all my money that he finds out something new, that one of his assistants brings out a pattern that either he or the market is doing, he would never catch by themselves.

 

In my humble opinion,after about 40 years researching what makes people the best at any endeavor,and keeps them there is........

 

The amount of success you have will be directly proportionate to the abilities of the people you have around you. Period!

 

Look at Tiger Woods and Venus and Serena Williams. How could they have made it to the top of a game every bit as hard as trading while teenagers! Could they have ever done it that fast alone. Impossible! Could they have even done it at all....alone?.......improbable.

 

Why look to swim against the tide. This is the way a successful life works. Even Warren Buffett needs Charlie Munger .......and a staff. And Im sure he isnt in and out of a trade 3x a day like many of us are.So if he needs backup......

 

I will admit to all of you right now. I am a winning trader. But I cant trade for a living. Big difference. And I suspect that not keeping meticulous records is the main culprit. I always wanted to marry a woman who loved trading and loved keeping records. How many women are there in the world like that? Six? LOL

 

And after all is said and done......YES, I TRADE ALONE........FOR NOW.

[TheDude 10]

Mouse, as usual you are spewing out waaaay too much logic. I really dont need that much reality in my life. What I need is coffe. Plenty and plenty and plenty of coffe. Black, sweet, milk, no milk doesnt matter. As long as I can get into that "energy state" the floor traders do right before the opening bell, I want it! :coffee:

 

Now I alwasy thought what you did about Livermore but was afraid to say anything and tarnish the great ones image. But if bottom line results are what we are going by here...committing suicide and dying broke is not a sign this man had his sh%$t together as a trader.........winner or not!

 

As far as the 4 cardinal rules go, most of you are missing the boat. Wnat we need to focus on is the 5th cardinal rule which will help you to take care of at least 3 out of the 4 all by itself.

 

THE FIFTH CARDINAL RULE: Print out every single trade you make. Mark your entry and exit points, and go over where you could have changed your strategy to have gotten either more profit, less loss on your losers...or....avoided the trade altogether because you made so little it just wasted your day. This 5th rule was given to me by a man whose name I will not mention. I consider him to be the best day trader of equities I ever saw in my life with n oone even in his league. Why?...I spent 6-9 months watching him give us in the room the trades BEFORE they were taken! And he made more money in the first 90 minutes of trading than anyone I ever saw did in the whole day. In fact, very often by 11am, he was just kicking back watching his winners run. That is a mighty good goal to have as a day trader. Do you realy think you wont burn out if you are constantly looking for trades all thru the day? I spent a fortune in money and time to get his principles. Do not discount them lightly. He said this rule made him the trader he is today. Discount it at your own risk. Or career!

 

He says that if you dont go over your trades as soon as the trading day is over, you are never going to have the same perspective on it if you wait till the morning or next day. This 5th rule is so hard to do by the way, 4 years later after learning it, I still dont do it.

Question for the group: Who does do it?

 

One pro's thought about that is that if you cant take the time to do it, you are over-trading. Cut your trades by 60% and spend more time analyzing them " after the dealings done."

 

There is soooo much to be gained by this simple exercise I was thinking about writing a book about it.

 

How about this for a compromise. Print out 2 trades every day. Your biggest winner and your biggest loser and compare them to each other. Was it just luck and the loser was by far the better thought out trade. We need to re-memorize the trade then as our memory often records extreme pleasure and painful trades over simply good ones that have little emotion. PM me if you want to discuss this in depth.

----------------------------------------------------------------------------------------------------------------------------------

 

You'd like to write a book about doing something which is so beneficial (according to some other guy) that you are unable to do it yourself? I just wonder what the rest of this book would be about.How to ignore good advice? And you want us to PM you for some further insight that you couldn't just discuss here?.... Why?

But then if you're going to ignore advice i would be with you there.Other peoples' advice sucks 9 times out of ten,regardless of how nuch money/power they have..Presumably if this other guy consistently lost momey in the first 90 minutes the advice would be seen in a different light.

If you feel the need to keep a journal keep one otherwise don't.And if you don't and you consistently make money then,for you,it's somebody else's cardinal rule.

 

Bernie Madoff advised people that the best way to make money was to give it to him.

George Bush advised America that the best way to end "the war on terrorism" was to invade Iraq,a country that had nothing to do with 911.Tony Blair advised the UK that the best way to prevent further Terrorist attacks was for us to give up some of our freedoms.An attack,by the way,that he directly precipitated by joining Bush in his illegal war.

 

I'll tell you what is written in most new traders' journals.:

 

Started off well today,but gave it all back in the afternoon by buying near the top.-didn't stick to my rules...

 

Tried to get my money back buying a dip that turned into an all day sell off-didn't stick to my rules,..

 

planned to increase size on the next trade (i know) took a quick profit ,chickened out on the first tiny pullback,left a ton of money on the table..didn't stick to my rules.

 

Decided to adapt my rules based on the fact that i'm not following them..resulted in me freezing like a rabbitt in the spotlight staring at this weeks biggest loss.

 

Have gone back to my original plan,saw 3 setups today,too chicken to take them...didn't stick to my rules.

 

I used to keep a journal when i was learning.I just don't need to now,so there's no such thing as a cardinal rule..that's my advice..and for lot's of people that advice sucks.That's ok though,there are no plans for a book at this moment in time.

.

 

If there was a 'like x1000' option for posts, this one would get it!

 

Thanks Mitsubishi for saving me the time of typing the same!!

 

Why focus on negatives anyway? It will only reinforce them.

[DbPhoenix 42]

How is a student who knows nothing supposed to know the value or otherwise of what is being shown?

 

Depends on his GQ, or Gullibility Quotient. Gullibility is exacerbated by stupidity, laziness, ignorance, greed, and, interestingly, arrogance. The lower the GQ, the more likely the beginner will be to assess value accurately, making him less likely to fall for vendors' nonsense.

 

The GQ of nearly all "traders" is quite high, and, since those qualities that comprise the GQ are exactly those which make the markets attractive to those with high GQs, those with low GQs are able to profit handsomely.

 

It is important to note that GQ need have nothing to do with time. I've known "traders" who've been at this for years, and yet their GQs are just as high as they were at the beginning. What's worse is that they generally delude themselves into believing that they are better than they are, having had, say, ten years' experience, when in actuality they've had one month of experience a hundred and twenty times.

[DbPhoenix 42]

What is worrying is that too many of these types are in very powerful positions- hence the financial crisis.

 

If you mean those with high GQs, it may be more likely that they are highly-skilled at manipulating the gullibility of others. That has particularly been the case in the US for the past three or four decades.

 

But back to our regularly-scheduled program.

[SIUYA 11]

plust, You really are more right than you know. We keep a journal for a while, and then we go, "oh yeah, I see Im getting out too early, or worse yet...........WE CONFUSE OUR OWN SELVES! We find that one trade we just got in and got out. The next trade we added on as profit accrued, and the next trade we put on 3 lots and took "OFF" lots as profits accrued. So often, the trade journal makes us realize that even though we have an absolute trading plan, we have no trading plan thats understandable even to ourselves. LOL

 

A journal should be used to compare, revise and learn from - its not just a recording of data. (My broker does that...i dont ned an assistant.)

I think you sum up in a way what happens to many - beautiful form coming into the race, nice start, quick out of the gates - no stamina.

 

When i first started in this game i moved house and had over 500 pages of hand written a4 notes and reams of charts - not including books etc. and all the stuff i threw away (cut and paste these days makes you lazy).....it was scary what you think you did and did not know.

Even now (while admittedly i dont keep a journal like i used to because i generally know when i f...k up) I still review my trades......work out if there was anything i did right/wrong, what i should have done. Takes 5 mins.....helps reinforce certain things.....and you know what - there is usually one a few things that get repeated. Its not hard....but most still dont do it.

view it as a checklist - simple easy and blatantly obvious when something is not ticked off.

1...did i wait for an alert to show me the trade might start to occur

2...did i wait for a good entry into the trade

3...did i panic out, or wait until either my stop was hit or the trade showed my original plan was not working out as i had thought.

4...did i run until target (this might not be a target or might be a change in situation)

5...extra notes - keeps these generic and easy to sort. eg; 'good patience, poor patience, impulsive entry, impulsive exit, panic exit too early.

 

Simple. You dont need it to be such that - "The pope is sick, i was worried the global vatican leaders might push forward their plans for world domination and enslave us all, so i took so profits and shorted the USD." - one for the GQ

[DbPhoenix 42]

Novice traders tend to trade beyond their skills. They don't have an accurate picture of what they can and cannot do. Not only do they perform poorly, but they also lack the psychological ability to perceive that they are doing poorly. They start with the belief that they are "good performers" and don't take the time to develop a method to assess their actual performance. Top performers, in contrast, try to gauge their performance accurately, and tend to avoid worrying about whether they are "good performers" or not.

 

First, novice traders should be aware that their intuitive performance estimates are grossly exaggerated and take active steps to ignore them. Second, they should create an objective log of their trading results so that they know exactly how well they are performing. As skills improve, their estimates of performance will be more accurate.

--Innerworth

[Vince50 10]

What is worrying is that too many of these types are in very powerful positions- hence the financial crisis.

 

Mits, you wrote this to me: You'd like to write a book about doing something which is so beneficial (according to some other guy) that you are unable to do it yourself? I just wonder what the rest of this book would be about.How to ignore good advice? And you want us to PM you for some further insight that you couldn't just discuss here?.... Why?

 

First of all, id think after 1200 posts here youd just stick to building people up or not say anything....just like our mothers taught us. We have enough people who are ex-perts on trading on this and every trading board already, no?

 

#2-I said I couldnt keep a journal anymore but you dont bother to ask why. Let me tell you..........I DID IT FOR YEARS! When you take karate for example and you watch a guy walk into the dojo and not warm up, you know either he is cutting corners....or he has sooooo much experience he understand his mind and body well enough that it is not mandatory for him anymore.

 

#3-Yes, Id like to write a book. The fact that I havent should count as a plus, because most guys who write books cannot trade profitably for long periods....or they wouldnt write books. Warren Buffett waited 50 yrs to write a book. I wonder why?

 

#4-Yes according to "some other guy"? Do you know who this other guy is, before you berate him? This "other" guy has called more daily tops and bottoms in the equity market in front of me by 10:30 than all the trade room callers in the country combined. He prefers to enjoy his money and stay anonymous.

 

#5-Often the best teachers to learn from, are those who make a lot of mistakes....and admit them. I still am happy to PM with those who can see I did not start trading last year. -( You already have gone beyond us all here so you wouldn't PM anyone for advice anyway. I would not be on ANY thread where I could not respect what at least one person wrote enough to seek them out privately. Some of the best things here Im sure have been said

 

 

#6-WHY DID YOU PICK ME OUT OF THE CROWD TO BUST MY CHOPS? AM I SPECIAL? Or do you just do it to everyone you dont agree with or newbies you can bully. I can see you'd be the kind of teacher that would take the wind out of his students sails as soon as the kid started becoming a little too pleased with himself. I dont have the time nor the "self importance" to post 1200 times here as you do or to put anyone else down who admits they cant always do what they preach. I am in that catagory. It is called being human.I am too busy learning from others and managing my spot currency and equities accounts. Please do not comment to me again, and I will show you the same respect. The only post of yours I would like to see, is just your last year of trading statements of live accounts.Surely you make a very handsome living to be able to put "me" down. I am really very offended by you saying all this, and not even knowing me if I am profitable or not, my age, my yrs trading and who my mentors were. I think you were very out of line. Let us shake hands and go our separate ways, please.

 

To leave something here on a positive note. May I say to some of the newer guys to trading here: Do not be intimidated by the people who know more than you or have many more years experience. Often the best systems and the biggest winners are those with limited knowledge, who can write their system on the back of an envelope and even a 14 year old can understand it. In fact, as a tip for all of us, myself included..........after you finish studying all of your indicators, fib numbers and different time frames, and you want to know what to do, bring a child into the room,ask him to look at the chart you want to trade from and ask him if the currency or stock is going up or down, then you will know the trend far better than any indicator. Children see simply and clearly! Happy trading, everyone.

[Roger Felton 10]

Mits, you wrote this to me: You'd like to write a book about doing something which is so beneficial (according to some other guy) that you are unable to do it yourself? I just wonder what the rest of this book would be about.How to ignore good advice? And you want us to PM you for some further insight that you couldn't just discuss here?.... Why?

 

First of all, id think after 1200 posts here youd just stick to building people up or not say anything....just like our mothers taught us. We have enough people who are ex-perts on trading on this and every trading board already, no?

 

#2-I said I couldnt keep a journal anymore but you dont bother to ask why. Let me tell you..........I DID IT FOR YEARS! When you take karate for example and you watch a guy walk into the dojo and not warm up, you know either he is cutting corners....or he has sooooo much experience he understand his mind and body well enough that it is not mandatory for him anymore.

 

#3-Yes, Id like to write a book. The fact that I havent should count as a plus, because most guys who write books cannot trade profitably for long periods....or they wouldnt write books. Warren Buffett waited 50 yrs to write a book. I wonder why?

 

#4-Yes according to "some other guy"? Do you know who this other guy is, before you berate him? This "other" guy has called more daily tops and bottoms in the equity market in front of me by 10:30 than all the trade room callers in the country combined. He prefers to enjoy his money and stay anonymous.

 

#5-Often the best teachers to learn from, are those who make a lot of mistakes....and admit them. I still am happy to PM with those who can see I did not start trading last year. -( You already have gone beyond us all here so you wouldn't PM anyone for advice anyway. I would not be on ANY thread where I could not respect what at least one person wrote enough to seek them out privately. Some of the best things here Im sure have been said

 

 

#6-WHY DID YOU PICK ME OUT OF THE CROWD TO BUST MY CHOPS? AM I SPECIAL? Or do you just do it to everyone you dont agree with or newbies you can bully. I can see you'd be the kind of teacher that would take the wind out of his students sails as soon as the kid started becoming a little too pleased with himself. I dont have the time nor the "self importance" to post 1200 times here as you do or to put anyone else down who admits they cant always do what they preach. I am in that catagory. It is called being human.I am too busy learning from others and managing my spot currency and equities accounts. Please do not comment to me again, and I will show you the same respect. The only post of yours I would like to see, is just your last year of trading statements of live accounts.Surely you make a very handsome living to be able to put "me" down. I am really very offended by you saying all this, and not even knowing me if I am profitable or not, my age, my yrs trading and who my mentors were. I think you were very out of line. Let us shake hands and go our separate ways, please.

 

Vince, I empathize with ya, my friend. You spoke your piece and you did it very well. This guy will never stop with the intimidation and bullying as long as you respond back to his vile posts. They just get worse and worse. I can tell you're understandably a bit frustrated and perhaps angry but that's what he wants. It's just what he does...attack people he doesn't know and pick a fight. Be prepared. He will respond back to your post telling you what a whiner you are. DO NOT RESPOND BACK. Just move on and your life will be infinitely better off. Do as I say, not how I stupidly did...LOL