How can you do that day trading? Where do you add? It seems that when the trend gets established, it's about to reverse. Or are you breaking even/losing on 80% of your trades. The 20% pay?
How to end the search for the holy grail?
- Thread starter FireWalker
- Start date
How can you do that day trading? Where do you add? It seems that when the trend gets established, it's about to reverse. Or are you breaking even/losing on 80% of your trades. The 20% pay?
When do you know that your position is correct? At that point I personally would add on the last half of my position, hold on for a little longer, and when the momentum drops off I would exit. As long as you can squeeze a little bit more out of the move after your add, you've improved your performance more than you think
Since I haven't seen anyone mention the path I took to my "holy grail" I'll give you my two cents.
I just kept looking at every idea I could investigate. The list included Gann, Elliott Wave, conventional TA, individual gurus, seminars, books, web sites, other traders, Woodie, Murrey Math, and on and on and on.
Part of it was the need to get it all out of my system. Most important though was finding something that made sense to me. Notice, I didn't say something that worked (ie. produced profits) but that it made sense.
For all the bashing of Tony Robbins and the like, what I learned from him was and is far and away much more important than anything to do with trading itself.
It's ALL about beliefs and committment. Period. Once I got in my head that I created all the results (ie. my circumstances) I ever got, that also meant I would create whatever came next. I can't tell you how many times I quit and started trading inside a period of a week. Once I stopped doing that and just buckled down, and said, "it doesn't matter how long it takes, this is what I do", it was a matter of a few months before I had major breakthroughs.
I'll repeat once more though, what made it possible was the psychological tool to manage my state, construct useful beliefs, and make adequate mental representations of what it was I needed to do. Work on that first. The trading stuff you need will be drawn to you like a magnet, you won't have to look for it.
I just kept looking at every idea I could investigate. The list included Gann, Elliott Wave, conventional TA, individual gurus, seminars, books, web sites, other traders, Woodie, Murrey Math, and on and on and on.
Part of it was the need to get it all out of my system. Most important though was finding something that made sense to me. Notice, I didn't say something that worked (ie. produced profits) but that it made sense.
For all the bashing of Tony Robbins and the like, what I learned from him was and is far and away much more important than anything to do with trading itself.
It's ALL about beliefs and committment. Period. Once I got in my head that I created all the results (ie. my circumstances) I ever got, that also meant I would create whatever came next. I can't tell you how many times I quit and started trading inside a period of a week. Once I stopped doing that and just buckled down, and said, "it doesn't matter how long it takes, this is what I do", it was a matter of a few months before I had major breakthroughs.
I'll repeat once more though, what made it possible was the psychological tool to manage my state, construct useful beliefs, and make adequate mental representations of what it was I needed to do. Work on that first. The trading stuff you need will be drawn to you like a magnet, you won't have to look for it.
just got my sfo magazine. interesting article that pertains to this thread.
http://www.equitypm.com/TheJanusFactor.htm
http://www.equitypm.com/TheJanusFactor.htm
Actually, POP says that day traders should put their full position on at the beginning of the trade.
ALS - Wouldn't you say that adding for day traders isn't always a good rule.
POP - Adding correctly regardless of your time period is useful in making bigger gains in the long run. Day trading is certainly a shorter run. A day trader should cheapen the cost of what they have and to do this you almost certainly have to have your biggest position on first.
See http://www.webtrading.com/phantom/chapter6.htm for the complete discussion.
ALS - Wouldn't you say that adding for day traders isn't always a good rule.
POP - Adding correctly regardless of your time period is useful in making bigger gains in the long run. Day trading is certainly a shorter run. A day trader should cheapen the cost of what they have and to do this you almost certainly have to have your biggest position on first.
See http://www.webtrading.com/phantom/chapter6.htm for the complete discussion.
Once you give up the pursuit of perfection and fully integrate the probabilistic nature of the trading environment into your psyche, you will be able to use technical (and other) indicators with relative ease and confidence... this is because you will finally be able to genuinely accept the hit rate of 40% to 80%, depending on what strategy you are using... and you will not be thrown by your consistent inability to win 100% of the time...
I just watch TV 2 days ago showing an experiment on brain
In an experiment an adult had to distinguish the syllab "TA" (no it's not technical analysis
) pronounced in two different ways: french way and ... indian way. They registered his wave brain to see if he could distinguish between the two. His brain didn't react, and I admit that I heard the "TA" syllab pronounced I couldn't distinguish between them either.Then they did the same experiment with a Baby: the Baby's brain immediatly recognised the difference between the two kind of "TA" pronounciation.
This means that it is not our eyes that make us understand what we see, eyes are just captors, it is how our brain is wired with environment and education that allows us to interpret data.
So when I say that I am incapable to "see" what a TA guy "sees" on chart, It can mean that my brain is not "wired" adequatly to do so and/or (because it is not exclusive) traditional TA has some degree of freedom for interpretation that makes it difficult to use so that most of the time people would use it not as a decision tool but rather as a psychological helper to justify their more or less rational/irrational beliefs or intuition.
Now that I have a model I can say that there are different schools of TA, all of them are "ill" founded so that it is not astonishing that it is incomplete. So yes the charts alone are not enough if information is not processed by the brain. And a theory can help to do so. (Now what I say for TA I would say the same same for their opponents the EMH/fundamentalists propagandists and the same for the "3rd school" the Behavorial finance. Each of them has some semi-truth but lack the rest of truths from other schools so that each of them are incomplete and refused to recognise it).
So I agree with you if you mean that a model, framework or theory that is "out-of-the-data" is needed to really transform information into something valuable for decision process and that if people just relies on chart without using a theory behind they will have some deceptions. As Deming said :
"...it is only by illumination of outside knowledge that we may observe that we are in the pit"
What Deming said belongs to the school of Henri Poincaré - the mathematician/physician who is the first to discover chaos phenomena in fact - whose thought has been well summarized here:
http://www.utm.edu/research/iep/p/poincare.htm
Science and Hypothesis
(full 1905 text here http://spartan.ac.brocku.ca/~lward/Poincare/Poincare_1905_01.html)
"According to Poincaré, although scientific theories originate from experience, they are neither verifiable nor falsifiable by means of the experience alone. For example, look at the problem of finding a mathematical law that describes a given series of observations. In this case, representative points are plotted in a graph, and then a simple curve is interpolated. The curve chosen will depend both on the experience which determines the representative points and on the desired smoothness of the curve even though the smoother the curve the more that some points will miss the curve. Therefore, the interpolated curve -- and thus the tentative law -- is not a direct generalization of the experience, for it 'corrects' the experience. The discrepancy between observed and calculated values is thus not regarded as a falsification of the law, but as a correction that the law imposes on our observations. In this sense, there is always a necessary difference between facts and theories, and therefore a scientific theory is not directly falsifiable by the experience. "
"Regarding Poincaré's point of view about scientific theories, the following have the most lasting value:
Every scientific theory is a hypothesis that had to be tested.
Experience suggests scientific theories; but experience does not justify them.
Experience alone is unable to falsify a theory, for the theory often corrects the experience.
A central aim of science is prediction.
The role of a falsified hypothesis is very important, for it throws light on unforeseen conditions.
Experience is judged according to a theory. "
IMHO:
A trader needs to create and implement a strategy that matches his/her personality.
Trading is like personal creativity. It is a manifestation of our characters, imagination, etc. Different people work at different paces; have different comfort levels, different amount of trading capitals, etc. I do not believe that there is something called "One size fits all". Adopting a trading guru's strategy can be problematic, as your personality may be opposite to his/hers. Of course, the trading plan should be executed with confidence and discipline as well.
I occasionally have the very same problem, jumping from strategy from strategy, always adding and changing rules, etc.
Usually the reason is that I have not completely accepted loss. And losing is part of trading. (read Mark Douglas). So I start searching for the holy grail (again).
But the solution is actually very simple, at least for me.
Whenever I find myself jumping - usually it shows immediately in the results - I do the following:
I set up a few very simple rules. And I start trading the rules with one goal in my mind: Stick to the rules religiously. I absolutely do not care about making money at that point, but just applying the rules. Also I trade ridiculously small size (50 shares!).
I keep a spreadsheet with the results as if I trade 1% of my account on every position. This is to boost confidence, but I look at it only once a week after the market is closed.
Try it, you will find that as soon as you stop caring about making or losing money it makes all the difference in the world.
Below you will find the rules I use:
- buy or short only after at least 20 minutes
- do not buy or short after the first 90 minutes
- buy or short only stocks that are trading below or above yesterdays range
- do not trade stocks that open outside yesterdays range
- Buy/sell only the breakout to a new high/low of the day
- take half position of at 1R (if you risk 30 cts per stock, take profit on half your position at 30 ct)
- trail the rest throughout the day on support/resistance
- Do not take a position if it does not 'feel right'
- Do not trade if you are not relaxed
- keep trading 50 shares until you have had at least 30 trades in which you did not deviate from these rules.
If - as a trader - I can not stick to these simple rules, I have no business trading larger size.
Also I believe that most good traders actually do not know what it is that makes them successfully. You need to develop intuition, and you will only be able to use that if you are relaxed.
I find I always trade best when I have some simple rules (to keep focus) and then only take a position if it does not feel 'wrong'.
It is kind of like the handwriting recognition of a Pocket PC. As a human it is not hard to distinguish between a 's' and the character '5'. Or "1" as opposed to "i". But do you know exactly what rules you use in this recognition process? It is the same with the market. By watching the market a lot and learning how to use 'feeling' in a positive way you can actually start reading the market.
Try this simple exercise. Think of a few rules. You do not want too much rules, but a few sensible ones. It has made a world of difference to my trading.
Even though size is completely ridiculous, it feels like real trading and therefore is a lot better than papertrading.
Hope this helps you too...
Usually the reason is that I have not completely accepted loss. And losing is part of trading. (read Mark Douglas). So I start searching for the holy grail (again).
But the solution is actually very simple, at least for me.
Whenever I find myself jumping - usually it shows immediately in the results - I do the following:
I set up a few very simple rules. And I start trading the rules with one goal in my mind: Stick to the rules religiously. I absolutely do not care about making money at that point, but just applying the rules. Also I trade ridiculously small size (50 shares!).
I keep a spreadsheet with the results as if I trade 1% of my account on every position. This is to boost confidence, but I look at it only once a week after the market is closed.
Try it, you will find that as soon as you stop caring about making or losing money it makes all the difference in the world.
Below you will find the rules I use:
- buy or short only after at least 20 minutes
- do not buy or short after the first 90 minutes
- buy or short only stocks that are trading below or above yesterdays range
- do not trade stocks that open outside yesterdays range
- Buy/sell only the breakout to a new high/low of the day
- take half position of at 1R (if you risk 30 cts per stock, take profit on half your position at 30 ct)
- trail the rest throughout the day on support/resistance
- Do not take a position if it does not 'feel right'
- Do not trade if you are not relaxed
- keep trading 50 shares until you have had at least 30 trades in which you did not deviate from these rules.
If - as a trader - I can not stick to these simple rules, I have no business trading larger size.
Also I believe that most good traders actually do not know what it is that makes them successfully. You need to develop intuition, and you will only be able to use that if you are relaxed.
I find I always trade best when I have some simple rules (to keep focus) and then only take a position if it does not feel 'wrong'.
It is kind of like the handwriting recognition of a Pocket PC. As a human it is not hard to distinguish between a 's' and the character '5'. Or "1" as opposed to "i". But do you know exactly what rules you use in this recognition process? It is the same with the market. By watching the market a lot and learning how to use 'feeling' in a positive way you can actually start reading the market.
Try this simple exercise. Think of a few rules. You do not want too much rules, but a few sensible ones. It has made a world of difference to my trading.
Even though size is completely ridiculous, it feels like real trading and therefore is a lot better than papertrading.
Hope this helps you too...