"Always be fading"?
- Thread starter IronFist
- Start date
Quote from IronFist:
I disagree. I have no problem at all sticking to a method and following rules exactly.
The hardest part is figuring out a method that works.
All the methods I stick to and follow the rules of 100% aren't profitable over time
Well two points. First I think there is inherent difficulty in sticking to both a good and bad method. Obviouly sticking with a bad method long enough will lose you money and youll stop, and a good method is hard to stick with because there are always going to be losing trades that will continue to test your condifednce in the method.
No matter how much you read about the benefits of taking small losses (and you must do this), it is my experience that there is just no way to make this a positive expereince even even though you are follwing your plan (which should be the postive aspect of taking a small loss)....So mentally, even the proper small loss is for many, going to make you question staying with your plan over and over again, and you really need the discipine to overcome this logic...To me, this happens when you learn to thnk in probabilites and not outcomes (another topic altogether)
Second, I would have to ask, did you research, and spend many hours testing the plan you say stuck with that didnt work out?
Maybe its not easy to come up with a good plan (although I still say its easier than the discipline part), but I think its critical to test a plan way in advance before you ever trade for real, not only to know that it works, but then to have the confidence to stick with it over and over gain.
I started trading a few months ago, mostly options and swing trades. The market was generally uptrending, earnings reports weren't punished quite as badly as they are now and swing trades were profitable. I did some day trades, but fairly limited. I learned some very hard lessons about stops over the months. So back from vacation this week, I started day trading exclusively and I set fairly tight stops immediately upon execution based on max acceptable risk, with the philosophy that if the trade turns against me, good riddance and move on. Out of my 20 or so trades this week, I've had 3 small losers and the rest strong gainers for a net gain of $10,660 on the week. I kept reading how important trade management and discipline were but had been rather lax about it. This week I finally stuck to my plan without fail, and it's paid off hugely. The moral of the story is that you never know why a strong reliable stock like POT will suddenly drop below its 50-day SMA and trigger mass selloff, but if you think you've definitely picked a bottom based on previous support and you're wrong, your stop will save you. (Fortunately I traded them yesterday )
)One problem with systems is that for them to work you are usually suppose to take the trade when the system says to. I think many pick and choose when to trade. So even if you came up with a system with a 75% success rate if followed, once you start limiting the number of trades you initiate the success rate goes down. It's quite possible that most of the trades you select to enter are part of the 25% failure group and the drawdowns will knock you out soon. I know McNeil had an option trading system using reversals and ranges he said had a 60% success rate but he emphasized always entering the trade when signalled, using something like a 1.8% stop loss and having enough $ to cover the drawdowns in case your first trades were out of the failure group.
Whoever wrotes this obviously does not understand what a dealer is and their edge. You can never trade like a dealer unless you are one.
The closest analogy to what this person is suggesting (without even knowing) is tape reading the specialist (now obsolete). Even when this was a great strategy, it still lacked the key innate edges the specialist had which enabled him to others blind.
The dealer sees & knows what you are not privy to. The dealer has execution abilities you can never have. The best you can do is follow the dealer, which actually slightly interferes with his max profit.
Hydro PLEAAASE
Stop fetishising dealers. They don't have any super human powers. They frequently are not as smart or as well informed as you are. Their biggest edges are bid/ask, much more capital than you and your own lack of discipline that will inevitably blow you up. In fact that's what they do. Whether retail or institutional they just wait for the client to blow up.
I wrote this article. I been on equity and Fx dealing desks since Drexel Burham was in existence and the basic strategy of dealers never changes:
Inventory until the market proves you right.
That why so many market making firms went under in 1987. I was around then were you?
That was one of the few times when that strategy did not save them.
Stop fetishising dealers. They don't have any super human powers. They frequently are not as smart or as well informed as you are. Their biggest edges are bid/ask, much more capital than you and your own lack of discipline that will inevitably blow you up. In fact that's what they do. Whether retail or institutional they just wait for the client to blow up.
I wrote this article. I been on equity and Fx dealing desks since Drexel Burham was in existence and the basic strategy of dealers never changes:
Inventory until the market proves you right.
That why so many market making firms went under in 1987. I was around then were you?
That was one of the few times when that strategy did not save them.