Disillusioned

[jficquette]

Quote from nzbryant:

Great comment. My problem is I have been addicted to learning, but the same cause and effect relationship doesnt happen all the time in trading so you are learning less than you think.

Concentrate on understanding how news affects the markets and individual stocks. Upgrades, downgrades, mergers, earnings etc.

Consider that the 3 day cycle that tends to exist in news effected moves is mostly because it takes 3 days for brokers to call all of there clients to get them in or out of a position.

Go back and see stocks that have made big moves. Go back to that day and see what the news was. Try to get a feel for what kind of news is best for buying or selling. Corelate to end of month or quarter maniplations. Consider day of week. Consider other stocks in its space that may be the cause. Sometimes stocks will move in concert with bigger stocks in its same space out of simple corelation.

Forget about the charts. Go to the source and get to learn what the drivers are.

Only use the charts to find where the stops are.

Just my two cents.

John

 

[fletch2]

Quote from nzbryant:

Great comment. My problem is I have been addicted to learning, but the same cause and effect relationship doesnt happen all the time in trading so you are learning less than you think.

This is one of those things that translates from gambling games like poker.

A bad player has the hardest time understanding that losing all of his money does not mean he made a mistake. In fact, there are situations where if you don't lose every penny on the table, you made a terrible, terrible mistake.

The game "teaches" you the wrong lesson all the time. "I lost money there, I guess I did something wrong", or "I won money, I played that right!" Being able to see through this and not be affected by it is a huge key to success. So goes trading.

Fletch

 

[jficquette]

Quote from coolweb:

Hello John,
This is incorrect, mainly because a trader should only size up when the risk goes down or price is moving your way.
So when the risk is $1.00 , buy 10 shares
.50 , buy 20 shares
.25 buy 40 shares
.10 buy 100 shares

So only size up when, the risk minimizes or price is moving your way or a price statistics that have 85%+ success ratios.

You risk is still increasing. Besides, you only think you know your risk. Slippage etc can change that.

John

 

[ElectricSavant]

Bert do not give up. Hang in there. By posting publically you invite a response from anonymous readers. Take it all with a grain of salt and maybe you might get a diamond in the sand...

Your post may help many instead of the confines that a PM brings.

Keep opposite or opposing systems on a simulator...trade them...do the switch when appropriate in your real trading. Have several systems and identy what they actually do and how they work. Compare them...trade them....put on the real money at high probability times.

Michael B.

Quote from BertH:

I PM'd someone I respect on this, but decided to convey it to the board. Why? Not so that I could personally discourage anyone else from trying it--after all, I admit to being confused as hell right now. That's hardly a position to tell others what to do or not to do.

First of all, the title of my PM says it all--I've reached a point of deep disillusionment regarding my trading. While I've not actually lost from what I started in my account (gained small amount), it's been too erratic to have any real confidence in.
When I started this journey a couple of years ago, I could damn sure swear I saw significant patterns--repeated enough in a manner that--with discipline--would render strong profits over time.

Alas, the more and longer I dig in, the worse it gets (through more closely analyzing past data, seeing it more thoroughly, perhaps). I find that "setups" I thought put the odds strongly in my favor were a form of mirage--something that pulled me in, only to let me down in the end. It's not the market's job to make me happy; it's just that all the mega-hours and, especially, hopes I had seem dashed at this juncture. I'm an analytical sort with something of a mathematical mind. I believed I could beat this game, because I have pretty good discipline, and figured the analytical side would create some trading strategies that worked a heckuva lot more than they didn't. Instead, it just seems like a useless pull and tug, going in a circle and ending in the same spot.

I still believe--in the end--there's got to be some kind of system(s) that utilize and take advantage of the predictable patterns of human psychology. I thought I had some that could figure these patterns on the charts, but it's quite possibly all BS.

I'm just highly frustrated, disappointed, and disillusioned. I'm not sure if I'll resume this game at some point or not. Maybe it is largely a "random walk," and even when it's not "random," do we know when that time is coming or happening? Is it a tradable edge, enough to warrant making significant bucks from?

For those of you who have figured it out enough to be consistently profitable, definitely more power to ya. Maybe I'll get there someday, maybe I won't. Not sure what to do right now. I thought I loved this deeply at one point--now, I'm honestly not sure I have the stomach or patience.

Thanks for the ear regarding the ramble.
Bert

 

[coolweb]

Quote from BertH:

I


I still believe--in the end--there's got to be some kind of system(s) that utilize and take advantage of the predictable patterns of human psychology. I thought I had some that could figure these patterns on the charts, but it's quite possibly all BS.

Thanks for the ear regarding the ramble.
Bert

Heres a tip for you:


I trade 100% on chart price actions, meaning breaking of highs, breaking of lows. And VOLUME.

All from a chart, I don't look at time & sales,

From the above data, you can figure out exact stops to the T as long as the direction is YOUR way.

A stop placed @ $30.00 And Current price is $30.30
And we are in a downtrend.
You can be 100% sure your stop will be RAN.
But if it is the opposite, you can be 85% sure your stop will HOLD.

Its these little quirks, that makes chart reading works.
Its these little things that come only from constant trading experience.

 

[xtrhvydty]

Disillusionment, demoralization, and depression are instincts to get us out of the fight before we get killed. Heed them. Avoid the pride-redemption reflex to die trying. Regroup and and cool off over a few days. This is obviously where the psychological gremlins take out a lot of traders. Wait in the penalty box until your head is cool. Think of what another losing streak will do to your well-being and account. Take a few days off at the beach or in the mountains to put things in perspective.

If you truly have a 50% avg win ratio on all trades, then your probability (which is just an average) of 5 consecutive losses is about (1-.5)^5=3% (but then there's marginal/conditional probability of each trade to complicate things). So on average, 3% of any randomly chosen 5 consecutive trades will be all L's (which may be followed by 5 W's). Beyond that and your stats are way off OR you are in an anomalous period. This is the trader's twilight zone where wacky shit happens. Step away from the computer, and put the mouse down.

That "50% win ratio" will actually be higher or lower, or cluster around certain market conditions, stock stages, etc. Stop committing trader suicide with lazy computer backtesting and look at every single chart. Quantify everything. Learn about standard error, marginal/conditional probability, confidence intervals, uncertainty, etc. Determine the stats as a function of market volatility, sector volatility, chart patterns, trend, news/economic events, up/down legs, and include an uncertainty fudge-factor. You can decrease your position size during poor conditions, and increase it during more reliable ones (with adequate experience).

Stick to several high-probability, robust, rare-signal systems to diversify away these anomalies. Keep verifying your system and continue to measure relevant market metrics.

The markets are for people who get off on analyzing the crap out of everything. If you don't have a solid understanding of stats, probability, and system performance, you will probably fail.

 

[BertH]

thanks, xtr, 'preciate it.

Here's where confusion continues, though; I'll read comments from John on this page and think "you bet. That makes full sense." And it may well be true. But then coolweb comes in and cites the use of solely charts, and Zanger does the same thing. Is it that the adage "use what works for you" continues to be reality?

I do, though, think maybe John is onto something about the learning curve. I've run into frustration in that regard, as different circumstances may cause once-sound setups to be worthless next time around. That leads to the question of whether the setup merely was "due" to lose, or was it not thoroughly tested, or are the circumstances simply much different this time?

It's maddening, frankly.

By the way, again thanks a ton to so many well-thought posts on here. I'm blown away by the amount of replies. FWIW, I haven't made any trades since I posted, opting to not only take a step back from further trading, but to reassess whether this biz is for me period. I don't want to do anything rashly.

 

[jficquette]

Quote from BertH:

thanks, xtr, 'preciate it.

Here's where confusion continues, though; I'll read comments from John on this page and think "you bet. That makes full sense." And it may well be true. But then coolweb comes in and cites the use of solely charts, and Zanger does the same thing. Is it that the adage "use what works for you" continues to be reality?

I do, though, think maybe John is onto something about the learning curve. I've run into frustration in that regard, as different circumstances may cause once-sound setups to be worthless next time around. That leads to the question of whether the setup merely was "due" to lose, or was it not thoroughly tested, or are the circumstances simply much different this time?

It's maddening, frankly.

By the way, again thanks a ton to so many well-thought posts on here. I'm blown away by the amount of replies. FWIW, I haven't made any trades since I posted, opting to not only take a step back from further trading, but to reassess whether this biz is for me period. I don't want to do anything rashly.

Charts tend to look alike and those that do give the illusion that they reflect similar stages in the price action of a stock. The reason that some charts do certain things when they look alike and others don't lies in the news or manipulation due to inside information that one doesn't or can't take into consideration.

Think back to 40-50 years ago when charts were not freely available. If you plotted the price action of those charts of years ago they would look like those today. As a matter of fact, random data gives patterns identical to actual trades.

Considering that charts were not freely available 50 years ago then what drove the market?? Same thing that drives it today. News and insider manipulation.

I understand the risk reward concept in buying selling chart patterns. All I was pointing out is that it has a poor risk reward profile no matter what in that you can't increase profits without increasing risk.

I guess that begs the question "Is this business really worth it?" If you are pursuing it because you think it is a great business model then don't cause it isn't. If you are doing for the same reason I have been doing it which is because you love it then stick with it but learn more about what drives these stocks rather then spend all your time looking at charts.

John

 

[BertH]

Quote from jficquette:

Charts tend to look alike and those that do give the illusion that they reflect similar stages in the price action of a stock. The reason that some charts do certain things when they look alike and others don't lies in the news or manipulation due to inside information that one doesn't or can't take into consideration.

Think back to 40-50 years ago when charts were not freely available. If you plotted the price action of those charts of years ago they would look like those today. As a matter of fact, random data gives patterns identical to actual trades.

Considering that charts were not freely available 50 years ago then what drove the market?? Same thing that drives it today. News and insider manipulation.

I understand the risk reward concept in buying selling chart patterns. All I was pointing out is that it has a poor risk reward profile no matter what in that you can't increase profits without increasing risk.

I guess that begs the question "Is this business really worth it?" If you are pursuing it because you think it is a great business model then don't cause it isn't. If you are doing for the same reason I have been doing it which is because you love it then stick with it but learn more about what drives these stocks rather then spend all your time looking at charts.

John

Your noting that random data gives patterns identical to actual trades is something I just read on the other evening, where charting the results of a random coin flip created patterns that many would assume had some rational meaning if it was applied to a stock. Gave me kinda a sinking feeling of "being had" in some sense, though I'm not certain it's fully random when applied to stocks (not saying you're stating that either).
A question that somewhat follows then is if there's enough significant validity in repeated price patterns related to stocks to be highly profitable from. The answer probably depends on who I ask that from.

But I get the idea there are profitable methods that might be more reliable in the end, if one is open to them and willing to work.

 

[xtrhvydty]

Quote from BertH:


But I get the idea there are profitable methods that might be more reliable in the end, if one is open to them and willing to work.

profitable methods: direction neutral option trading

more reliable: predicting volatility, not direction

willing to work:
McMillan on Options
Option Pricing and Volatility
Statistics for Dummies
Probability for Dummies