Exp traders ... 5 Fatal Flaws of trading

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Quote from tomdavis:

Just considering that 75% of the volume comes from 10-lots or higher, that makes it highly likely that there's a professional on at least one side of any given trade, and perhaps both sides. [Note: My data is several years old, but I trade this market every day and there's no doubt in my mind that professionals move these markets, not the retail traders.]
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I see. To me there is really no such thing as professional or retail. They are either Locals or Papers. Locals use technical and Papers use fundamental. They have different strategies, different holding periods, and different profit taking point (if any).

I do agree that being on the right side is necessary. Volume is definitely a good confirmation tool.

PA
 
If there were a Holy Grail.....

Of course there is not but these rules are the basis for success in trading IMO.

For me in the early years I would have hit/miss success. My method/plan was simple & sound but eventually [a trade would occur] in which I would abandon my stop rules and start dragging my stop away as price moved against my position because I "knew" it had to eventually go with my "winning" trade. Of course it only took three or four of those episodes of lack of discipline to erase a months worth of profitable trading. Profitable trading that was a result of trading my plan CONSISTENTLY with discipline. Eventually I got tired of the emotional roller-coaster and account equity roller coaster and SURRENDERED to following my rules CONSISTENTLY. The other flaw I had to perfect was to stop trading once my daily target was made and/or volume dried up for the day e.g. lunch/afternoon. This simply was a matter of getting over having to be a part of the "action".

It's a good article. Thanks for posting as I think it is of enormous benefit to new traders. Sadly, they will likely have to "live' it the hard way before they see the true value of it.

Good trading!
Chris
 
Quote from TraderZones:

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Thanks very much to TraderZones for the great, now easy to understand explanation of "outperformance edge" and "money management"

I got it. :)
 
Quote from TraderZones:

There is. Few traders will come up with longterm, highly successful outperformance edges. I am talking positive expectancy, not psychology and feel good.

Trading is negative sum (a lot of costs are taken out of the pot). And most of those who do have an edge will blow up with money management problems.

Rules do not help a nonprofitable trader. Think someone who goes to the casino and plays roulette. Longterm, everyone loses except the casino. And of course, the tax authorities
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TZ, para #3 please ......

Using your exc. points #1 & #2 and applying them to para #3 ....

Even a beginning = unprofitable trader or a casino gambler with an EDGE + good $ management technique have a good chance of being profitable (ignoring the plight of the gambler should he get caught)

Is this it or did you intend some other meaning to para #3?
 
I would really like a trading platform that would secretly take the opposite ES position that I intend to take without my knowing it. In other words, if I want to go long ES, then the trading platfom would secretly short ES, but still tell me that I have a long position. If I think I'm losing money then I'm really making money, and vice-versa. If I had such a platform this year and didn't know it, then I would be up for the year instead of down for the year. Since it is so incredibly easy to lose money trading futures. then having a platform that lies to me and secretly takes the opposite position for me, could easily make me money.

EDIT: I suppose the only issue with such a platform would be slippage. If I wanted to Buy at 1098 and that was the Ask, then with a normal platfor I would get a fill on the long side. If the platform were to secretly fade, me, then it would then it would liky have to short at 1097.75 in order to get a fill if that were the current bid.

Anyway, If I could somehow just train myself to press "Buy" when I want to sell and to press "Sell" when I want to buy, and train myself to pretend I have a loss when I really have a gain (or vice-versa) then I could make a fortune. :D
 
Quote from iusandman:

If there were a Holy Grail.....

Of course there is not but these rules are the basis for success in trading IMO.

For me in the early years I would have hit/miss success. My method/plan was simple & sound but eventually [a trade would occur] in which I would abandon my stop rules and start dragging my stop away as price moved against my position because I "knew" it had to eventually go with my "winning" trade. Of course it only took three or four of those episodes of lack of discipline to erase a months worth of profitable trading. Profitable trading that was a result of trading my plan CONSISTENTLY with discipline. Eventually I got tired of the emotional roller-coaster and account equity roller coaster and SURRENDERED to following my rules CONSISTENTLY. The other flaw I had to perfect was to stop trading once my daily target was made and/or volume dried up for the day e.g. lunch/afternoon. This simply was a matter of getting over having to be a part of the "action".

It's a good article. Thanks for posting as I think it is of enormous benefit to new traders. Sadly, they will likely have to "live' it the hard way before they see the true value of it.

Good trading!
Chris
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Thanks Chris. Glad you found it good. I wish I was as lucky but I'm not.

Truth is I posted this article due to my personal disgust with all (except pure TA) the books I've read on trading - AND this article smelled just as bad to me but I wasn't sure because of the recurring theme - sagely demeanor. They all seem to have some truth in them, yet when one gets down to application, failure occurs swiftly.

But I too am glad I started this thread because I felt I could get to the bottom of these so-called RULES by going directly to actual traders not salaried analysts who get paid even when subscribers get hammered.

And it gets even more bizarre - TraderZones, who is a recommended Ignore List resident by sooooo many here is IMHO the one I've learned the most from and singlehandedly has cleared up a heck of alot about the subject matter of this thread.

There's a minefield everywhere in this profession. :D
 
Quote from NihabaAshi:

Those commensense rules are NOT all there is to it.

Here's a football analogy...I remember the first time I played high school football as a wide receiver. My football coach said remember 3 things...run your route, catch the ball and run to the other goal line.

Of course that's not all there is to it to be a good wide reciever but the coach was trying to keep it simple and that's ok in the beginning or for any newbie wide receiver. :D

Therefore the main reason why there's a high failure rate amongst traders is a combination of a lot of reasons and each trader has more problems with a few in comparison to another trader that has failed.

* Bad Money Management

* Bad Discipline

* Poor Trade Method

* Poor Capitalization

* Inadequate Trade Workstation

* Inadequate Broker Platform for the trading style or method

* Poor Stress Management

* Poor mental and physical health

* Failure to treat trading like a business

* Poor Team Collaboration

* Lacking in Market Experience (understanding the markets) will prevent having the ability to adapt

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I can name a dozen more reasons but you get the point. Further, I've met a few guys with a good trade method fail miserably because they didn't have any of the above critical pieces.

Simply, everything works together and if something important is missing...there's no balance in the trading plan to be profitable. So yeah...there's A LOT MORE to it than what the author mentioned but he probably only mentioned the stuff that was important to him of stuff he had the most problems with and assumed others may have the same.

Sit down and make your own rules and not just the ones you're having problems with and then develop a written trading plan with all those "commonsense" rules...

Should take a few years to get everything working (balanced) into something successful even though most traders will go belly up prior to reaching that point of balance. That's the main reason why this isn't a long career for most traders because the FAIL at keeping all those pieces working together.

Mark
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Thanks Mark.

>>> develop a written trading plan with all those "commonsense" rules <<<

I'm doing this but thus far I've filled about 40 waste-paper baskets. :D :D
 
Here is a link to three videos Jeff Quinto did for the CME group. I think they are very well done. At the end Jeff gives an example of his trading plan and offers a simple template you can download.

As I wrote in my post earlier, following my rules CONSISTENTLY was the key to consistent profits. One way you may want to look at it is that if your system has been shown to be profitable over 50 trades i.e. has a positive profit expectancy, then each trade you take is profitable by the amount shown in your PE calculation. You just have to hold to your targets and stops that you used to get your positive PE.

Check out the videos when you have a chance.

Link
http://www.cmegroup.com/education/ts.html

Cheers,
Chris

P.S. I agree regarding trading books. Only ones worth anything are Reminiscences of a Stock Operator and the Wizard series. My $.02 anyway :)
 
Quote from deadbroke:

Thanks Mark.

>>> develop a written trading plan with all those "commonsense" rules <<<

I'm doing this but thus far I've filled about 40 waste-paper baskets. :D :D
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Lets put it this way, if you're consistently profitable without a written trading plan...

Don't bother with it.

However, if you're not consistently profitable...won't hurt to have a written trading plan. Also, be careful about all that so called edge stuff via backtesting or simulators because it's a known fact most traders that think they have an edge can't do the same in real money trading conditions.

Thus, in those situations where there was an edge in backtesting or simulators...something obviously was not in balance (re-read my prior messages) when traversing from the tests to real trading.

In fact, just go to any online forum and you'll find many traders say they did all the testing and had a positive expectancy (an edge) but then blew up their accounts when they traversed into real money trading.

Did they really have a positive expectancy edge or were they missing those other important pieces I mentioned that's needed for successful trading??? something for you to think about when you reach that road.

Mark
 
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