1) actually we just like to see how much we can get away with
2) it doesn't ?
3) should we stare at the bad ones
3 thoughts about behavior
- Thread starter TradeWrecker
- Start date
1) actually we just like to see how much we can get away with
2) it doesn't ?
3) should we stare at the bad ones
Somewhere between now and your 16,000th post could you attempt to actually write something useful... Just give it a try.
If the masters of ET are watching, this thing is so far OT the best thing that could happen to it is it gets closed...
I've read ALL 51 of TradeWrecker's posts. His struggle continues. I empathize with him and anyone who is dealing with a fading star approach. He suggests his sector is not meeting its announced potential. The announcement was probably only understood in the way he did in his reading of it. There was an apparent misunderstanding.
A quick read of "The Predictors" by Bass and Derman' book on his experience from MTS at BTL to academics (Financial stuff at Columbis) via GS, can orient almost anyone to "how it goes" in Tradewrecker's orientation.
There are many ways to make money in the financial industry, passively or actively.
Behavioral Financial may the thread owners topic here under psychology. He is also acquiring OPM to grow a CTA operation he is revising based upon two paper writers (he deems them as authoriative) he counts on for direction in the genetic functionality of the quant approach.
His "three thoughts" are oriented to what is published that he includes in his belief system regarding trading and behavioral psychology. People could agree with him and he could further explain how his CTA based quant oriented operation reconciles with his three thoughts. He cited five books as primers for a six bok which he finds to be on a more difficult comprehension level.
Ammo explained how his path has wound thither and yon to lead him to a constructive trading approach. TearderWrecker has no room in his considerations for such and Traderwrecker is NOT oriented to the behvioral position of Ammo.
Fine.
When I read Teaderwrecker's OP, it seemed inviting and open for discussion as a forwarding mechanism of all and including traderWrecker.
1957 must seem like the Dark Ages to most and they are correct. It was the Dark Ages and the financial industry was quite hositle to "outsiders" who looked at the "opportunity" from the wiewpoint of science and math and logic.
I could explain the decades from 1950's to the Present. Actually, I do have some nifty time lines on how trend monitoring and analysis front end decision making and timely actions.
My path has been similar to others who have written about such. Darvas spells out how people felt about "traders" In his era, william J. O'Neill was masterful in jelling his initial experience to aid others. He is royalty in the financial industry. I formally replayed my periods as a trader in the context of his framework as a mans of better understanding my progress. Bass and Derman, on the other hand document the humor of their eras.
Now EMH and Behavioral Finance are dueling away in some ways and NSF is pouring research down an assortment of rat holes. The is not dissection or railing on my part. What it may be is looking at the global context of "opportunity" and placing this and that in the setting.
What inspired me to post in this thread was simply to make a statement in the "context" of Behavioral Finance's principles as stated by authorities in Behavioral Finance.
What is very mellow to me is the terminology of BF with regard to EVENTS and how the statisitical evidence of BF relates to the world of trader performance. Pre and post peformance is consider relative to ACTUAL market events.
TradeWrecker struggles to fre himself from "buy and hold" by delving into the "genetic" sector of the "quant world". He attains "3 thoughs" that he posts in "psychology. We empathize.
Here is this stellar conclusion of behavioral finance obtained from behavioral science:
"When YOU get an emotional signal", take the effort to "make a reasonable change in YOUR technique"
So I figure Trade Wrecker is open to considering something on the spectrum of successful trading. I pick a "beginning point" for the simplest consideration of all. The simplest piece for "putting the pieces together". BF soesn't speak of putting the pieces together but is does speak of considering "making a reasonable change in your technique". This is the sub parts of pieces just like beginning with an atom or molecule and looking at its parts more closely.
I "know" how traders learn the many successful ways of trading. It is just like carpentry or being a mechanic or being a plumber. It is NOT creative, primarily. Every person who has a job looks at trading in terms of his job. Lower, middle and upper school students look at it more effectively and efficiently. College students compare it to games and sports, not subjects nor majors.
Lets assume the thread is in psychology and is about Behavioral finance since it deals with behavior in trading.
If a person can deal with an approach that trades trends and within the trend, only the dominant moves, then, it may be believable that, he can use the BF concept of responding to a behavioral signal to make improvements in what he is doing.
Trading dominant moves depends upon two things: dominance and sentiment.
This points out the MOST BASIC aspect of understanding and partnering with the markets.
It is not dissecting or railing. It is simply a way to begin and to progress at the human potential for gaining purposeful experience.
It is possible for any person from 5th grade upward to understand and be successful in trading form this starting point.
The qualifier, as also is that he must have a reasonable process for doing the learning. The process most approapriate is using logic as the basis of carrying out the process.
How long in this thread did it take for such a learner to learn NOT to set targets? Learning this could be based upon personal experience of doing dominant move in trends and finding out the change inprice in a move is NOT determined by setting a target.
BF suggests an emotional signal occurs as a target is or is not met. At that time BF suggests, if an emotional signal occurs, the way to treat the behavioral condition is to "make a reasoned change in technique". What if the trader does this and decides to focus his technique on taking the segment of profits, segment by segment?
He is measuring two things: Both are slopes. They come and end in a leading/lagging manner. Can anyone from fifth grader on up figure out the possibilities of two things taken two at at time where each thing only has two individual possibilities? I think so.
This is the point in time where that person figures out why flipping a coin doesn't work. Two coins are involved and if one coin is used, then the person is one coin short for doing the experiment.
To paper trade this idea in order to reduce personal risk caused by ignorance, reach in your pocket and get out two different coins. One is called sentiment and the other is called dominance.
Write on the dominance coin's sides the two possibilities. Write on the sentiment's coin a + and a -. + means long and - means short.
To do a day's trading make a list 25 trades long (this is the ES 5 min chart).
flip the dominance coin first and write in its column a trade IF the dominance side is up. Flip the sentiment coin. Write in the direction of the trade.
Here is the deal. From this point on you need to do Behavioral Fincne.
As you do both coins in the oprder suggested, IF you get an emotional signal , journal your feelings and then journal the reasoned change in your technique.
Right now you may or may not know the rules for trading this basic technique. One thing is for sure, by flipping the two coins in the order suggested and journalling , you CAN be a successful trader for real in a very short period of time.
My posts were too complex for most to think about or understand. I was asked to dumb it down and speak only CW'ese. I did and I made a point.
This post makes the point that a person can begin at the beginning and he CAN use logic as the mathematics to become and expert trader in a short time, providing he has a purposeful approach and a learning plan.
Anyone can amaze themselves by beginning to think critically. It is a matter of two coins and some columns on a sheet of paper.
In 1790, richardo discovered : "cutting your losses short and letting your profits run". My two coin experience for you is how richardo made his dicovery. What if you flip the two coins in the opposite order?.....LOL.......
FreeMarket Rider:
You said:
"I'm not ready to write off the ideas or the efforts people have made to post them. I'm also not going to put my hard earned capital on the line based solely on what has been written here (show me the money or not). There are many version of "truth" that do work (for a time at least) in markets."
This is where a lot of people wind up as a consequence of the accummulation of prior decisions.
The two coins being flipped, may allow you to consider how your thinking presently works.
If you could actually use the slopes of dominance and sentiment in a market, paper trading to make it a reasoning process only, you might be able to gain "acceptance" of what the market informing you.
By having more and more experience.... something else will come into the picture.
Not many people let the market inform them. This is probably a consequence of experience.
The mind doesn't forget nor erase what makes it into long term memory. One of the most regretable things is seeing people approach, go through and pass, forever, the point of no return with respect to learning how and why markets operate.
There is a thread elsewhere on the greatest risk in trading. Another thread is a poll on what is realistic about a monthly % return for trading a small account (50K).
This thread and those are each riddled with inductive thinking.
Please try to consider the alternative to inductive thinking. try to consider, briefly, how using logic as the mathematics of trading could be a possibility.
The two coins were related to velocity (time rate of change) and the pairing of the two market variables. Essentially this is a binary vector approach.
There is no way any person can "clean the slate" or "begin with a clean slate".
BUT "behavior" is a rock solid place that everyone has. Pairing behavior with "reasoned change of a technique" could take a person out of induction and towards mostly critical thinking.
In another thread there is a discussion of "money management". Initial capital is "hard earned money". I recommend that all traders remove their initial capital as soon as they double their money trading. The reasons are simple and behaviorally based. "Hard earned money" has NO PLACE in trading. Remove it ASAP. Trading only with profits changes entirely the "money management" behavior and the behavior's basis.
In that thread I reviewed just what is the basis for a treder's decision making based on his performance.
There are two additional factors: Thomas Glocer is very informative on the use of information for determining HOW to use money and its performance when used. As CEO of a foundation that does such traning, he is eloquent about the two bottom line measures: leverage and productivity. He is also CEO of the mergered Reuters new corporation.; they are vertically integrating financial information at this point.
Lastly, three books by Claudia Gaudiani are worth the read. She tells how poeple who have successfully done what Glocer trains people in, subsequently do. the books are: "Generosity Unbound"; "The Greater Good"; and "Genrosity Rules".
Polio was a trenchant example of how things add up; the March of Dimes ended in some ways with the cessation of polio. But it continues in other ways and always will.
William J. O'Neill started with 500 bucks and created his IBD empire. His Instituional Service was going for 44K a year a clip when I was asked to Beta test it as a courtesy. He asked; I didn't ask him.
There is no "hard earned money" in trading. The money velocity of trading for a beginner is as outlined in the Excel posted. This potential trader begins with doimance trading only and that involves two slopes on a V. P chart. Successful trend monitoring and analysis is never going to go away
Angels, VC's and philantropic persons solve problems that they percieve as opportunities. All hard earned money is disposed of by satisfying needs. After that there is no hard earned money.
Extracting capital from markets is "free" money. Putting it to work is how problems are solved.
For a trader money is just a vehicle. It allows participation at no risk and where there is no noise or anomalies in the markets.
1. Apply initial capital.
2. Remove intial capital when doubled.
3. Use intial capital for postponed needs.
4. Trade on profits only.
5. Extract capital and apply it to problem solving.
You said:
"I'm not ready to write off the ideas or the efforts people have made to post them. I'm also not going to put my hard earned capital on the line based solely on what has been written here (show me the money or not). There are many version of "truth" that do work (for a time at least) in markets."
This is where a lot of people wind up as a consequence of the accummulation of prior decisions.
The two coins being flipped, may allow you to consider how your thinking presently works.
If you could actually use the slopes of dominance and sentiment in a market, paper trading to make it a reasoning process only, you might be able to gain "acceptance" of what the market informing you.
By having more and more experience.... something else will come into the picture.
Not many people let the market inform them. This is probably a consequence of experience.
The mind doesn't forget nor erase what makes it into long term memory. One of the most regretable things is seeing people approach, go through and pass, forever, the point of no return with respect to learning how and why markets operate.
There is a thread elsewhere on the greatest risk in trading. Another thread is a poll on what is realistic about a monthly % return for trading a small account (50K).
This thread and those are each riddled with inductive thinking.
Please try to consider the alternative to inductive thinking. try to consider, briefly, how using logic as the mathematics of trading could be a possibility.
The two coins were related to velocity (time rate of change) and the pairing of the two market variables. Essentially this is a binary vector approach.
There is no way any person can "clean the slate" or "begin with a clean slate".
BUT "behavior" is a rock solid place that everyone has. Pairing behavior with "reasoned change of a technique" could take a person out of induction and towards mostly critical thinking.
In another thread there is a discussion of "money management". Initial capital is "hard earned money". I recommend that all traders remove their initial capital as soon as they double their money trading. The reasons are simple and behaviorally based. "Hard earned money" has NO PLACE in trading. Remove it ASAP. Trading only with profits changes entirely the "money management" behavior and the behavior's basis.
In that thread I reviewed just what is the basis for a treder's decision making based on his performance.
There are two additional factors: Thomas Glocer is very informative on the use of information for determining HOW to use money and its performance when used. As CEO of a foundation that does such traning, he is eloquent about the two bottom line measures: leverage and productivity. He is also CEO of the mergered Reuters new corporation.; they are vertically integrating financial information at this point.
Lastly, three books by Claudia Gaudiani are worth the read. She tells how poeple who have successfully done what Glocer trains people in, subsequently do. the books are: "Generosity Unbound"; "The Greater Good"; and "Genrosity Rules".
Polio was a trenchant example of how things add up; the March of Dimes ended in some ways with the cessation of polio. But it continues in other ways and always will.
William J. O'Neill started with 500 bucks and created his IBD empire. His Instituional Service was going for 44K a year a clip when I was asked to Beta test it as a courtesy. He asked; I didn't ask him.
There is no "hard earned money" in trading. The money velocity of trading for a beginner is as outlined in the Excel posted. This potential trader begins with doimance trading only and that involves two slopes on a V. P chart. Successful trend monitoring and analysis is never going to go away
Angels, VC's and philantropic persons solve problems that they percieve as opportunities. All hard earned money is disposed of by satisfying needs. After that there is no hard earned money.
Extracting capital from markets is "free" money. Putting it to work is how problems are solved.
For a trader money is just a vehicle. It allows participation at no risk and where there is no noise or anomalies in the markets.
1. Apply initial capital.
2. Remove intial capital when doubled.
3. Use intial capital for postponed needs.
4. Trade on profits only.
5. Extract capital and apply it to problem solving.
Jack - Your points have been well made. I believe that most (who have been able to grasp key elements) have to recognize the potential as well as the challenge of building out expertise / experience necessary to move towarda 100% in the market approach. At larger fractals this becomes position trading.
To the limited extent that I've talked with and read about floor traders, your approach mirrors the kind of thinking they use. Trading with order flow based in the direction of market sentiment.
Anyone who's been clobbered holding positions without stops / protection can't help but have an emotion reaction to the idea of trading without stops. My understanding from some pro's I've met is that protection is always part of the landscape. It always comes at a cost which lowers efficiency.
As best as I can understand, the real edge in your approach develops from the elements of decision support that are learned and used to overlaid on basic V & P analysis. You've referenced an ability to contrast the actions of the herd from the smart money. You have also referenced 75 metrics that have become part of what you use in your market "displays". Perhaps you can point us toward other places on ET where you've discussed these elements in greater detail.
I'm not writing this to piss anyone off (especially the OP who deserves credit for his accomplishments). Anyone who wants to be a successful trader needs to be able to eliminate the defects associated with the psychology (BF). It is also absolutely necessary to find something that generates an edge beyond merely providing decision support.
Since we all seem to be worried about the noobs reading this thread, I'll offer a single reading reference: The Futures Game: Who Wins, Who Loses & Why
I think this text has been used in the past to supplement college level courses on futures markets for finance majors. Any noob who can get through that book will have a reasonable understanding of "The Game" and whether or not they are cut out for the life of a trader. A lot has changed since this book was written. That said, IMAO, it still presents a fairly comprehensive picture of the business without delivering any over simplified pie in the sky promises or easy solutions. It clearly dispels any notion that trading is an easy profession.
To the limited extent that I've talked with and read about floor traders, your approach mirrors the kind of thinking they use. Trading with order flow based in the direction of market sentiment.
Anyone who's been clobbered holding positions without stops / protection can't help but have an emotion reaction to the idea of trading without stops. My understanding from some pro's I've met is that protection is always part of the landscape. It always comes at a cost which lowers efficiency.
As best as I can understand, the real edge in your approach develops from the elements of decision support that are learned and used to overlaid on basic V & P analysis. You've referenced an ability to contrast the actions of the herd from the smart money. You have also referenced 75 metrics that have become part of what you use in your market "displays". Perhaps you can point us toward other places on ET where you've discussed these elements in greater detail.
I'm not writing this to piss anyone off (especially the OP who deserves credit for his accomplishments). Anyone who wants to be a successful trader needs to be able to eliminate the defects associated with the psychology (BF). It is also absolutely necessary to find something that generates an edge beyond merely providing decision support.
Since we all seem to be worried about the noobs reading this thread, I'll offer a single reading reference: The Futures Game: Who Wins, Who Loses & Why
I think this text has been used in the past to supplement college level courses on futures markets for finance majors. Any noob who can get through that book will have a reasonable understanding of "The Game" and whether or not they are cut out for the life of a trader. A lot has changed since this book was written. That said, IMAO, it still presents a fairly comprehensive picture of the business without delivering any over simplified pie in the sky promises or easy solutions. It clearly dispels any notion that trading is an easy profession.
Jack - Thanks for your reply - I have to chuckle, I was writing a reply to you as you were composing one to my prior. 
Your words and comments reflect wisdom, irregardless of the "show me the money" issues out there. Food for careful thought for sure.
I've always maintained that if one value's money, it owns you rather than you owning it. (I've always found I'm short of CW on this point). And trust me, I've had to "bust my ass" to get mine for many years. Right now I'm paid for what I know not what I have to do - a much more fun place to be.
Your words and comments reflect wisdom, irregardless of the "show me the money" issues out there. Food for careful thought for sure.I've always maintained that if one value's money, it owns you rather than you owning it. (I've always found I'm short of CW on this point). And trust me, I've had to "bust my ass" to get mine for many years. Right now I'm paid for what I know not what I have to do - a much more fun place to be.
Your reading suggestion has probably gotten a lot of mileage in most business schools. Business schools are an interesting tradition.
When a person is in the risk business, hedging it is a very good idea.
I feel so fortunate that I got into trading through the route I encountered.
It is really very hard to explain how serendipity works. Seeing the market's offer in the form of information in a newspaper and reading the description of the price volume relationship was such a simple thing to consider.
Finding the pieces and putting them together seemed to be fun. Fun was our primary orientation in the '50's since there was such an extreme contrast between the market's offer and what any life style cost.
a person later expressed it to me as an "idea". The "idea" was that no one every had to be "empty". A person could have as much as he wanted. It was just there for the taking.
Being a parasite of this huge "offering" of free money only required obeying the information from the market.
Your reference seems to weave in a lot about risk taking and hedging the risk for a premium.
I was so saddened by the financial industry giving up its integrity along the way.
It is extremely important to have "immumity" to the global economy and how it doesn't operate.
Larry Harris's work is a good read simply because of the substantive content. Most of my reference books are "tabbed" with those little 3M rectangles. Not so much for their operational contents but more for the way people express their specific vantagepoints on things.
I guess it simply comes down to being a "taker" to acquire capital. The mechanism of "getting" the market's offer is so uncomplicated.
Mechanical Engineering deals with machines and how they work. It sys it all, for me.
Having been an Electrical Engineer, I got to deal with how information is transferred using carriers. The Mechanical Engineering was duplicated by the three gizmos of energy.
I studied Theoretical Physics in a quant orientation at the beginning of my career. IBM, my employer, thought it was good for future research and development; it was. By looking at all three fields, it gets kind of clear that the logic of computers was the key reasoning type of mathematics that applied to "taking" the market's offer.
The financial industry, we found, by reading your reference, didn't turn to that paradigm.
Paradigm theory fully deployed using only non probablistic information theory (applied logic), for me, totally removed prdiction, probability and chance from pool extraction.
Translated into, business school'ese or conventional vocabulary, this means no noise and no anomalies. What is left? The only thing is the market's offer in segments.
Someone asked in another thread, what happened to the capital that is disappearing in this Depression. Value is NOT what is traded in markets.
Teweles, Frank, et al are dealing with the financial industry and the instruments found in markets. Value of instruments could be Business Administration and Finance set of concerns. MBA's go through learning to be employable and to manage capital.
To HAVE trading skills and knowledge does involve following a path.
I orient to BE, DO, HAVE.
To trade, a person solves one problem once.
The problem is pool extraction, all else follows from pool extraction.
We do not agree on much of anything. That is perfect for each of us. Also we can discuss our vantagepoints with no harm done.
Pool extraction is like a third party experience as markets operate. All those instuments traded in markets have a purpose for the counterparties described by Teweles, et al.
I am parasitic to all of this. I am simply a "taker" all of the time. I siphon what is available to the extent I make it available to me. I use "capital" as my "ticket" to the game. My bias is always neutral strategywise I MUST stay on the "correct" side of the market. I manage "flow" from the market to my accounts according to the sentiment of each market movement whether dominant or non dominant. In electrical engineering this is called a fullwave rectifier that turns AC into DC. As determined in WWII, the higher the frequncy the better in terms of weight. Today HFT has finally appeared and it requires little "weight" since very brief profit segments are used.
As traderwrecker may have found out, when I trade, at the max of NFA, I do not collect fees nor share profits. I get professionals (who give me POA's to trade their accounts) to work where they spend 20% of their time helping others in need who cannot pay their normal fees (Usually there is a quid pro quo as part of the profession's practices).
RE: the financial industry I am an "outsider". I just "extract form pools" continually. The context of "extraction" is mathematical logic used in the market paradigm of volume, price (the two coins).
As Behavioral Finance papers poiint out, I am a foreigner who uses a "foreign language" and there is no franca lingus.. See A Lo, et al citations which I have included in my recent posts.
Logic will probably never be included in the workings of the financial i8ndustry. As you say I am antithetical in my thinking.
I have been able to affect transference of my viewpoint and trading operations. I know that a learning process is workable and exists. for 50 years this has been verifiable. The failure to learn is much lower from this non stratified random sample than for the financial industry. The specific reason is that the audience of successful learners is self selecting.
The handicap of the financial industry vis a vis its record on "successful traders" is simply that the entry bar is set amazingly low in all sectors of the industry. The industry, as we found out in this thread, is based on sales and marketing to clients. Performance comes from non trading enterprize.
Retention in the industry used to be based on hedging. Since there is no transparency, that is no longer an issue for performance.
Fortunately, 4 out of 5 reject my outsider viewpont.
Jack - I've inserted a few comments below - My beliefs are not as far from yours as you might think. At this point, I'm really putting all my market beliefs on the table for a useful review. I also have to say that I do respect the OP's point of view as well. Also much of the honest comments made by other posters. Like I said before, there are many ways to skin the market cat.
Thanks for your comments.
For those dong cycle 1, here is a rules flow sheet.
At any time you will be somewhere on the sheet and proceeding from left to right.
As you see the top is thrader's tasks (5) and below that is where he gets his instructions from the market.
Trades can be within a bar, one bar open to open or longer than just one bar.
Cycle 2 introduces the non dom and cycle 3 introduces the two half cycles as they overlap.
All of this trading is non probalistically based. There is no forecasting nor prediction.
I omitted the "wash" loop for now. It is probably important to get familar with how the actual BF emotional signal is generated. If it is, then a person can "add" reasoned changes to improve the technique.
If a person starts with just the cycle 1 definition and then skips to the flow sheet, he gets to pass on how iterative refinement based on BF signals works.
Most who are following this, probably have learned setting targets is a mistake. The trade targets thus dropped, then the number (values combined) of trading segment profits exceeds the "labelled targets" and these simply become daily perforance goals that are very practical.
There were 10 trades today that could have been handled by a beginner doing cycle 1. Doing 6 out of 10 would come close to meeting the cycle 1 daily goal.
With this flow sheet and giviing a glossary of names to the word groups, a person can do logging and trades simultaneously.
For those dong cycle 1, here is a rules flow sheet.
At any time you will be somewhere on the sheet and proceeding from left to right.
As you see the top is thrader's tasks (5) and below that is where he gets his instructions from the market.
Trades can be within a bar, one bar open to open or longer than just one bar.
Cycle 2 introduces the non dom and cycle 3 introduces the two half cycles as they overlap.
All of this trading is non probalistically based. There is no forecasting nor prediction.
I omitted the "wash" loop for now. It is probably important to get familar with how the actual BF emotional signal is generated. If it is, then a person can "add" reasoned changes to improve the technique.
If a person starts with just the cycle 1 definition and then skips to the flow sheet, he gets to pass on how iterative refinement based on BF signals works.
Most who are following this, probably have learned setting targets is a mistake. The trade targets thus dropped, then the number (values combined) of trading segment profits exceeds the "labelled targets" and these simply become daily perforance goals that are very practical.
There were 10 trades today that could have been handled by a beginner doing cycle 1. Doing 6 out of 10 would come close to meeting the cycle 1 daily goal.
With this flow sheet and giviing a glossary of names to the word groups, a person can do logging and trades simultaneously.