Hardest and Most Valuable Things In Trading

[colonelangus]

Quote from deadbroke:

Confucius says it best and what's more, its stood the test of time ....

re: 3-5 min. timeframe .... "The worst thing about oral sex is the view"

re: testing with small entries ..... "A kiss is just shopping upstairs for downstairs merchandise."

re: >90% bullish or bearish .... "Crowded elevator always smell different to midget"

re: catching a falling knife .... "Dumb man climb tree to get cherry, wise man spread limbs"

re: bull or bear fakeouts: .... "The difference between a dog and a fox is about five drinks"

re: never marry a postion .... "Marriage is like a bank account. You put it in, you take it out, you lose interest"

re: experts v/s newbies .... "Gynecologist and a pizza delivery boy much alike. Both can smell it, but they can't eat it"

re: bet small, never ranch .... ""Foolish man give wife grand piano. Wise man give wife upright organ."

re: Patience (of Job, yes but not that of Wishful Thinking) .... ""Patience" is a naked woman lying down with her legs apart under a banana tree"

Dude, that is so fu..ing hilarious

IMO, the most valuable thing in trading is to be able to laugh whilst reading this even when down a few thousand bucks because i know, over time, as i keep throwing down on the high probability plays, i will end up profitable.
that said, psychology more valuable than system by a few tiny black hairs for those that are in this for the long haul. there are many systems that can work, be it scalping with any combo of the countless price action parameters, fundie swing trading, pairs, TA, etc. but if one cannot sufficiently develop patience, discipline and a fair degree of equanimity to whatever objective reality is presenting itself, as a trader, they will eventually go the way of the quagga (half zebra-half horse, now extinct).
totally, this is the hardest thing in trading because as buddha said, mind is as hard to tame as herd of stampeding elephants on crack(or whatever was the in style stimulant in the india of his time... maybe a betel extract enema).

 

[tradingjournals]

Great answers so far. Thanks to all of you. You are real ly a group of great and knowledgeable people. Thanks also to those who like to write insults to have given this thread a waiver. I appreciate it.

I have not given my views yet, but would do later. I wanted the thread to be independent, and be less about me and more about everyone else.

One concern I noticed is in relation to those who offer "expertise". It is true that the majority of them are not worth it, but what is worse is that some of them can actually harm the student (in knowledge at least).

I have a list of little questions that allow me to quickly filter out those who think they are experts. For instance, in the area of options, I ask these questions (which seem easy, but determine with precision the knowledgeable from the less non knowledgeable):

1. What is the delta of an ATM call option when interest rate is zero and there is no dividend? If the answer is 0.5, then I would strike the candidate out. If I hear, it is around 0.5 and/or some murkiness, then I proceed to question 2.

2. "I read that there are strategies where I can be delta neutral by buying puts and calls. In fact, I like the straddle. Is the straddle delta-neutral?" If the answer is yes with confidence, then another candidate is out.

3. By now I might already have none on my list that passed 1. and 2., but just in case I do have one good person, I can ask another question, such as this one. "Sir, I have read that a key to making money in options is to manage risk, and I like to write options and manage risk. I also read that an important rule is to never let the stock visit my short strike, which is always out of the money when I sell the option on my open trade. How do I calculate the probability that the stock visits my short strike from the greeks like delta which I have on my broker screen". If the answers is something like roughly delta, then I strike him out. If the answer is ____ then I may have a winner on my hand....

Do you have a short list of similar questions for stock trading expertise that would allow one to quickly sift the gold from the non-gold?

 

[NoDoji]

Quote from tradingjournals:

Do you have a short list of similar questions for stock trading expertise that would allow one to quickly sift the gold from the non-gold?

One question should do:

A perfectly balanced coin is tossed by a perfectly calibrated machine 50 times in a row and comes up heads. What is the probability that this coin will come up heads on the 51st toss?

 

[Retief]

Quote from NoDoji:

The trenches are more fun. For one thing you don't have to speak for hours. Plus, I outdid that guy! I made $260 in 20 seconds today

Not really. Trading is actually very boring, mainly comprised of waiting. Giving a three day seminar for $250,000 where you don't deliver what the people paid for is a kind of fraud. It's like giving blow jobs to earn a few bucks on the side. Sure, the extra money is nice, but it leaves a bad taste in your mouth.

There's a very old accounting principle dating from biblical times, which goes something like this. What does it profit one to gain the whole world and lose your own soul?

 

[tradingjournals]

Quote from NoDoji:

One question should do:

A perfectly balanced coin is tossed by a perfectly calibrated machine 50 times in a row and comes up heads. What is the probability that this coin will come up heads on the 51st toss?

Could you explain the relationship between coin flips and investing, and coin flips and trading?

One of my sayings: "I think that trading is mainly selling stops, and buying stops. In each trade you either sell a stop or buy a stop, but you do not know in advance if you will be buying stop or selling a stop. A trader is a stops trader, until he stops trading because of his decision to retire or the market's decision to retire him".

The above formulation of trading in (my) words format may lead to some surprising observations

 

[NoDoji]

Quote from tradingjournals:

Could you explain the relationship between coin flips and investing, and coin flips and trading?

One of my sayings: "I think that trading is mainly selling stops, and buying stops. In each trade you either sell a stop or buy a stop, but you do not know in advance if you will be buying stop or selling a stop. A trader is a stops trader, until he stops trading because of his decision to retire or the market's decision to retire him".

You wanted questions for stock trading expertise that would quickly allow one to sift the gold from the non-gold. "Expertise" insinuates that you are looking for someone who is an expert.

A person can experience enough consistent success that s/he believes s/he is an expert. However, to actually be an expert trader one must remain unbiased in the face of price action that violates belief.

Bias wipes out traders, even good traders.

Think of the hugely successful expert traders that make millions or billions and eventually lose everything. Why? Because success leads to confidence which can sometimes lead to overconfidence. Overconfidence is the result of bias. One sees X lead to Y 50 times in a row and believes without doubt that X will lead to Y the 51st time. If X suddenly takes a turn away from Y, belief can override reality in the minds of certain people, leading to wrong action.

So I provided a question to help you weed out those who are more likely to fall prey to bias overriding reality, which in trading (and investing) can lead to disaster no matter how much "expertise" these people may have.

 

[tradingjournals]

Nodoji: Thanks for clarification. It is helpful. I actually had a different understanding of your question-- from a a mathematical-probabilistic sense. Thanks for sharing!

 

[xburbx]

I think it does apply from a math stance as well. When you enter a trade, you can't predict price so you take the trade based on the exact market conditions at that moment. If the market conditions warrant say a 50/50 win condition and your money management is right then the trade should be taken. The market is the coin which at that given moment has a 50/50 flip of coming up heads/tails. You can't predict if it is heads or tails but you do know for sure it will come up heads or tails with a 50/50 shot. On a side note, if it comes up tails and you were looking for heads, you know to pull your bet as soon as tails lands. you know where you were wrong

 

[tradingjournals]

Quote from xburbx:

I think it does apply from a math stance as well. When you enter a trade, you can't predict price so you take the trade based on the exact market conditions at that moment. If the market conditions warrant say a 50/50 win condition and your money management is right then the trade should be taken. The market is the coin which at that given moment has a 50/50 flip of coming up heads/tails. You can't predict if it is heads or tails but you do know for sure it will come up heads or tails with a 50/50 shot. On a side note, if it comes up tails and you were looking for heads, you know to pull your bet as soon as tails lands. you know where you were wrong

Are you sure about the 50/50? When you decide it is tail or head?

I have a number of chapters written of a book, and one of the chapters addresses this problem.

 

[jack hershey]

Quote from tradingjournals:

Are you sure about the 50/50? When you decide it is tail or head?

I have a number of chapters written of a book, and one of the chapters addresses this problem.

Put the chapters aside. How could you respond to burb in this manner?

Relax. Let nodoji get you oriented.