Consistently Profitable Traders - Going Red to Black

1. Great.... I can magically tune into (dig deep... finding the source like Neo) my supernatural unconsciousness( or my psychic Matrix) and suddenly make money trading. If I had time to do that I'd rather be running tests and developing model.

2. What do you mean accept a loss? I hate losing money. I don't trade to lose money... I trade to make money. I can't believe all these psycho-gurus keep on emphasizing this. You know what.... I'm going to accept the fact that I suck at playing golf and start making 50K bets with a semi-Pro. Yeah... accept losing a trade my ass!!!! Seriously... this is one of the biggest BS. that the psycho-BS books write about.

3. Robots are permitted in trading. Yeah... stop repeating after me. But your reasons for "messing it up"???? Dude markets change. If they didn't I'll take some simple backtested model and I'll be a multi-gazillionaire by now.

4. I'm using profanity for the sake of Mike, you have a fuckin' problem with that? Actually... you can't seem to understand the context of what I write even before my profanity so it really doesn't mean much to you anyways...

Finally... Read the whole post... you keep on snip-picking some little phrase and go out into your imaginatory interpretation. Dude... you have to work on you narrow peripheral mind....

Oh... forgot about the profanity...

FUCK!!! I just got a boner thinking of Britney Spears!!!!

Quote from LeeD:

I believe a person can cope with these if they take time to dig deep and find the sourse of the problem. Hence, my insistance on the importance of psychological factors.

Agree 100%. However, firm discipline combined with good money management can help make the most even of a marginally profitable methodology.

It's interesting that you bring up something that in the case of a trader is again a psychological issue. If a trader cannot accept a loss simply as the cost of doing trading as a business, they think a loss is someone's fault. As most people are reluctant to blame themselves for their mistales such as lapse of discipline, a trader would try to find and external (even imaginary) force to blame. Not very much unlike witch hunt when people blamed supernatural for poor harvest and other difficulties.

Thanks!



Is this the golf robot you have in mind? Or this one? I haven't seen the infomercial where a robot is used to compare clubs.

Anyway, suppose robots were permitted in golf competitions. A player would still need to position the robot near the ball, calibrate it in some way (the robot doesn't see where the target hole is - it just does a perfect swing). It would also be up to the player to choose the route when the hole is not achievable in a single swing.

Even if the robot takes care of the perfect swing it's still up to the player to pick the optimal route to the next hole, choose the direction of the next hit (knowledge of golf, skill), and not to mess all of this up, not to take annecessary risks (discipline, psychology).

Similarly, even if one has a good automated system it's easy to mess it up... by keeping it online during extraordinary conditions like a market crash or by taking too much leverage.



Finally, what's with personal attacks? If you are having a bad week, I feel for you. We've all been there. Today removed over half of this week's profits for me. On the other hand, in the unlikely event you are trying to make others feel bad about themselves, you should try harder.
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Huh????

Suddenly you start contradicting yourself... oh wait... it's only for entertainment purpose only... right...

So we have a schitzo in the house to entertain us with a bunch of useless posts, despite of him waiting for talon's post on some conviction...

talon please entertain LeeD with some conviction of yours, we all can enjoy a crazy person go crazy!!!!!

Forgot the profanity for this one too...

PINCHI BENDEJO!!!! My left nut is slightly bigger than the other... I just realized it while I was entertaining myself. Don't judge me based on how I jack off!!!!

Quote from LeeD:

Disclaimer: I wrote about romanticism in trading for entertainment purposes only... and to "bump" this thread (still waiting for reply from Talon regarding trading on conviction).

I guess I am not in sync with current fasionable trends. I thought pilots and astronauts were romantic and women who strip for magazines were glamorous.

If you believe newspapers they certainly are. http://www.telegraph.co.uk/news/ukn...hat-dumb-blonde-jokes-could-be-offensive.html


Isn't trading like any other job? You certainly prove to yourself if you make it. Otherwise, it's about doing something that pays the bills and is occasionally a bit of fun.
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Quote from DEM BONES:

What would you say was your single most important realization or action that put you over the top to become a consistently profitable trader?
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It's not a single thing. It's a set of things that have to all be in place (at least to some degree) before you can be profitable. Some things I had to do:

1) I already has a mathematical understanding of risk from being a gambler but unlike something like blackjack you have to see your positions slowly win/lose in trading, and it takes an emotional toll. It's like betting sports and sweating every game, which I never did. Worse you have the option of messing with the position in that bad emotional state. As such my ideal risk as a trader was lower than appeared mathematically correct.

2) I needed better technology and execution - a better broker, better trading station (both software and hardware), better charting, better order management.

3) I needed better conceptual trading ideas. When I started the only tool I had was EMA crossover. While not totally useless, it was 70's tech and hard to turn into a winner.

4) I needed automation. Automation causes you to stop questioning your own actions and start questioning why the system isn't working. That, if you're smart, leads to better systems. I'm not an automated trader now, but I had to pass through a phase where I was mostly automated and my systems are still pretty rule bound.

5) I needed to learn a bunch of general financial information. If you'd asked novice me what the TED spread was, I would have had no clue.

6) I needed better instruments. The ones I started trading were had bad properties in terms of liquidity, size, volatility etc.

7) I needed to track upcoming economic events so I would know when the behavior of my instruments was about to change.

8) I needed to experience some "unexpected loss" events (slippage, brokerage crash, misprints, trading errors, inexplicable execution price etc.) and learn how to deal with them and prevent them.

9) I needed lots of screen time to develop decent intuition. Oddly, it didn't really get better until I went automated. Then I would have intuition that a given trade the system put me in would or wouldn't work, and I'd frequently be right. The trick was to figure out what I had picked up on.
 
1. If you have a good trading method but have a large drawdown once in a while. working on psychology should improve equity curve. You are taking what I say to the extreme.. then take a step further and wonder why it doesn't make sense.... It's because it's absolutely not what I wrote.

2. You cannnot make money on every trade in the long term. If you freak out every time you have to take a loss and engage in "revenge trading" or other equally unwise activity, it's gonna hurt.

3. You made my point for me. Thanks! Having a good robot doesn't mean you don't need to know what you are doing or control your emotions.


Quote from TSGannGalt:

Actually... you can't seem to understand the context of what I write even before my profanity so it really doesn't mean much to you anyways...

Finally... Read the whole post... you keep on snip-picking some little phrase and go out into your imaginatory interpretation. Dude... you have to work on you narrow peripheral mind....
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TSGannGalt, you often complain I don't get what you write. Are you a particularly emotional female by any chance? I know a few who expect everyone to understand what they mean, which is often very different from what they say. I tend to read or hear what people say and not double guess.

Quote from TSGannGalt:

Suddenly you start contradicting yourself... oh wait... it's only for entertainment purpose only... right...
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Opinions expressed don't constitute investment advice - that kind of jazz.
 
Wow... I leave for a couple days and look what happens? At least it's a little vindication because there was both hostility and profanity that I was not responsible for. Just... wow. :)

(anyway, welcome back TSGannGalt!)

To answer the question let me say first of all I have read the book the question refers to and frankly did not find it that useful. I know it is held in high regard by a lot of people, and i DO think that psychology is a very important component of success. My issue with that book is that it trivializes the very difficult and very important task of finding a real edge in the market. Without that, all the psychology in the world is not going to help you... it may help you lose money more slowly and steadily, but you cannot make money unless you really have an edge.

To grossly oversimplify, and edge means that when you see conditions X1, X2... (there can be one or many of these conditions) then there is a higher probability that the next market move will be Y. (Note that Y can be simple directional, combination of direction an magnitude, non-directional volatility up or down, directional in one direction before a certain size move in another, etc etc.) The point is that when you see your conditions are fulfilled, you have some confidence that the most probable market move will be Y.

Now, I am putting a trade on because of that belief. I do know that the trade will be right z% of the time (and z may even be less than 30% in some cases) so there is a good chance I am wrong this time. If I am, I simply walk away from the trade no problem no worries.

Do you think anyone really puts on a trade because they believe future market movement will be random? If so, why put on a trade because the outcome will be... random. No point.

As usual, I don't think I explained myself very well but hopefully you see the point reading between the lines.

FWIW, this is not a glamorous job. thats one of the challenges.. it is hard work, the money is great when you're good at it, but it is still hard work and it frankly isn't all that interesting to most people. Just my experience and opinion, but I usually try very hard to avoid discussing what I do with people who are not in the business.

Quote from LeeD:

1. If you have a good trading method but have a large drawdown once in a while. working on psychology should improve equity curve. You are taking what I say to the extreme.. then take a step further and wonder why it doesn't make sense.... It's because it's absolutely not what I wrote.

2. You cannnot make money on every trade in the long term. If you freak out every time you have to take a loss and engage in "revenge trading" or other equally unwise activity, it's gonna hurt.

3. You made my point for me. Thanks! Having a good robot doesn't mean you don't need to know what you are doing or control your emotions.



TSGannGalt, you often complain I don't get what you write. Are you a particularly emotional female by any chance? I know a few who expect everyone to understand what they mean, which is often very different from what they say. I tend to read or hear what people say and not double guess.

Opinions expressed don't constitute investment advice - that kind of jazz.
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Quote from talontrading:

To answer the question let me say first of all I have read the book the question refers to and frankly did not find it that useful. I know it is held in high regard by a lot of people, and i DO think that psychology is a very important component of success. My issue with that book is that it trivializes the very difficult and very important task of finding a real edge in the market. Without that, all the psychology in the world is not going to help you... it may help you lose money more slowly and steadily, but you cannot make money unless you really have an edge.
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That's an interesting view on Trading in the Zone. It explains why people, who have already resolved most of their psychological difficulties, often find themselves, let's say, unimressed by the book.

My takeaway was totally opposite. The main idea of the first few chapters is with any amount of analysis it's impossible to predict the market reliably. So, a trader should only act when they have sufficient odds in their favour. To me this sounds exactly like "when they have an edge".

It's true the "exercise" at the end of the book goes somewhat contrary to the above idea and suggests taking "any" system and just executing it in a disciplined way. The author doesn't suggest a trader will make any money this way though. It's just a way to make discipline a habbit.
 
Quote from LeeD:

That's an interesting view on Trading in the Zone. It explains why people, who have already resolved most of their psychological difficulties, often find themselves, let's say, unimressed by the book.

My takeaway was totally opposite. The main idea of the first few chapters is with any amount of analysis it's impossible to predict the market reliably. So, a trader should only act when they have sufficient odds in their favour. To me this sounds exactly like "when they have an edge".

It's true the "exercise" at the end of the book goes somewhat contrary to the above idea and suggests taking "any" system and just executing it in a disciplined way. The author doesn't suggest a trader will make any money this way though. It's just a way to make discipline a habbit.
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"Trading in the Zone" assumes you already have an edge. He makes it pretty clear it's not a technical book in any way. The book is all about developing a trader's mindset that allows you to confidently trade every setup that fits the criteria which defines your edge, and avoid the common fear-based mistakes: "rationalizing, subconsciously distorting information, hesitating, jumping the gun, or hoping."

I have no doubt whatsoever that I have an edge, but I'm currently reading this book for the 3rd time and will pretty much read it over and over again until I stop doing all those things, which I still do, although if I get a good thrashing from again from Bighog like I got today, a re-reading may not be necessary :p
 
Quote from NoDoji:

"Trading in the Zone" assumes you already have an edge. He makes it pretty clear it's not a technical book in any way. The book is all about developing a trader's mindset that allows you to confidently trade every setup that fits the criteria which defines your edge, and avoid the common fear-based mistakes: "rationalizing, subconsciously distorting information, hesitating, jumping the gun, or hoping."

I have no doubt whatsoever that I have an edge, but I'm currently reading this book for the 3rd time and will pretty much read it over and over again until I stop doing all those things, which I still do, although if I get a good thrashing from again from Bighog like I got today, a re-reading may not be necessary :p
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"Trading in the zone" is an excellent explanation of the thought process of traders and I enjoyed it a lot the several times I've read it. However, and apart from the gross assumption that many "gurus" start with - namely that the trader already has an edge, I see two problems with it:

1) Not being a technical book is ok; getting the one technical aspect mentioned in the book wrong is not. Page 194, paragraph that starts: "In a bond trade...". His take of scaling in/out consists in trading 3 cars with a stop for all 3 at 6 ticks (so far so good), but then he takes his first car out at 4 ticks??? WTF! That makes absolutely no sense at all... except for one wrong reason: you're very, very likely to hit your first target, which may be emotionally rewarding but still has a negative expectancy (yes, I know that if you have over a 66% win rate you'd have a positive expectancy, but still it would make more sense to either trade with 2 cars or with two units of 2 cars). This is in line with the systems that many brokers recommend, taking out some cars quickly, that promotes the gambling/lottery mentality of "I got 2 out of 3 targets, I'm so close..." while still losing money most of the time. (Nothing against scaling out, but not like this).

2.a) His proposed exercise, while useful for a new trader or someone starting over, is hardly implementable by more experienced traders that may be trading several systems and taking into account discretionary information. Yet, he offers no other plans of action - other than enrolling in his seminars???

2.b) Also, the problems that new traders tend to have are not psychological, but lack of funds, experience, a true edge, etc. but after reading this book they almost invariably tend to be convinced that their problem is psychological, that it's a matter of discipline, that they're subconsciously sabotaging themselves, etc. - even if they're trading with $500 margins, averaging down and trading by the seat of their pants. I've seen new traders forking over for a seminar (his or other's) more than they actually had in their trading account, because they preferred to hear that their lack of success is their parents' fault for not encouraging them when they were kids than to have someone tell them that they need to get a job, save a trading stake and then put in the 10,000 hours (or whatever).

I'd say you're virtually already there, but if you want specific techniques for taking each and every one of your trades (and your programmer husband is still playing hard to get - :D j/k), I'd recommend <a href="http://www.amazon.com/Daily-Trading-Coach-Becoming-Psychologist/dp/0470398566/ref=sr_1_1?s=books&ie=UTF8&qid=1282603868&sr=1-1">this book</a>.

(And yes, I realize this applies particularly to myself :( :D :p )

The horror! The horror!
 
Quote from Picaso:

I'd say you're virtually already there, but if you want specific techniques for taking each and every one of your trades (and your programmer husband is still playing hard to get - :D j/k), I'd recommend <a href="http://www.amazon.com/Daily-Trading-Coach-Becoming-Psychologist/dp/0470398566/ref=sr_1_1?s=books&ie=UTF8&qid=1282603868&sr=1-1">this book</a>.

(And yes, I realize this applies particularly to myself :( :D :p )

The horror! The horror!
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I'm all excited now. My geeky boy ran the updated mini-me (that would be the automated version of me trading CL without the cumbersome handicap of having a human brain). It netted $1300 in the overnight session (simulated account, of course, because this is brand new code) and I'm about to find out right now if it did the right things or just accidentally made money as a result of programming bugs.

Thanks for the book link!
 
Quote from Picaso:

"Trading in the zone" is an excellent explanation of the thought process of traders and I enjoyed it a lot the several times I've read it. However, and apart from the gross assumption that many "gurus" start with - namely that the trader already has an edge, I see two problems with it:

1) Not being a technical book is ok; getting the one technical aspect mentioned in the book wrong is not. Page 194, paragraph that starts: "In a bond trade...". His take of scaling in/out consists in trading 3 cars with a stop for all 3 at 6 ticks (so far so good), but then he takes his first car out at 4 ticks??? WTF! That makes absolutely no sense at all... except for one wrong reason: you're very, very likely to hit your first target, which may be emotionally rewarding but still has a negative expectancy (yes, I know that if you have over a 66% win rate you'd have a positive expectancy, but still it would make more sense to either trade with 2 cars or with two units of 2 cars). This is in line with the systems that many brokers recommend, taking out some cars quickly, that promotes the gambling/lottery mentality of "I got 2 out of 3 targets, I'm so close..." while still losing money most of the time. (Nothing against scaling out, but not like this).
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The way you describe it, to me it looks like the scaling out in the execise is working as expected. Namely a) It rewards the trader emotionally for making a discipline decision; b) It promotes the attitude that trading is similar to gamling (not roulette, but, say, poker) in the sense you never know how each trade will work out and inevitably loose at least sometimes; c) additional benefit is I belive this method of sclaing out improves strategies with moderate negative expectancy (which most non-discretionary strategies of beginning traders would be).

Quote from Picaso:

2.a) His proposed exercise, while useful for a new trader or someone starting over, is hardly implementable by more experienced traders that may be trading several systems and taking into account discretionary information. Yet, he offers no other plans of action - other than enrolling in his seminars???
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My understanding the exercise is not designed to be "blended" into one's trading style. It is designed to be performed exactly as it is.

As an analogy, imagine you are an experienced boxer and you decide to do karate. You'll start with very basic execises and do them exectly as they are. As a boxer you may be able to perform a few very efficient defensive moves but you won't use them; instead you'll practice the basic ones from the karate spectrum. Why? Because the point is not to add a few good moves to your boxing style but to learn to do things the "karate" way.

Similarly, the exercise form the book is not designed to be incorportaed into one's trading style. It's pure purpose is to trade in a discipled way by strictly following one's rules. As Talontrading put it, to be a "discretionary robot".

Quote from Picaso:

2.b) Also, the problems that new traders tend to have are not psychological, but lack of funds, experience, a true edge, etc. but after reading this book they almost invariably tend to be convinced that their problem is psychological, that it's a matter of discipline, that they're subconsciously sabotaging themselves, etc.
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That's an interesting point! I always thought people would usually start reading this kind of book after they became aware of their psychological problems. Psychology appears to be on the sidelines of what the mainstream view of trading is about.

Quote from Picaso:

I've seen new traders forking over for a seminar (his or other's) more than they actually had in their trading account
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A popular view is most starting traders keep loosing money for some time before they become consitently profitable. Assuming one is aware he/she is gonna loose money anyway, limiting the size of a trading account is a meaningful precaution.

Quote from Picaso:

if you want specific techniques for taking each and every one of your trades (and your programmer husband is still playing hard to get - :D j/k), I'd recommend <a href="http://www.amazon.com/Daily-Trading-Coach-Becoming-Psychologist/dp/0470398566/ref=sr_1_1?s=books&ie=UTF8&qid=1282603868&sr=1-1">this book</a>.
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How does this book compare to Trading in the Zone?
 
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