Mental break-down from TA

[Cutten]

Quote from ozzy:

My dad has a Phd. in Electrical Engineering he absolutely "SUCKS" at trading/investing. When it comes to academics he's probably one of the smartest people I've met. Bottom line, intelligence alone is not enough.

Of course. Being a 6'8 badass is not enough to become heavyweight boxing champion. You also need to put in years of training, learn skills, get experience, and in most cases be born with a fairly resilient "chin". But do you thnk a Joe Frazier or Mike Tyson would have been better or worse if they were 6 inches taller and 30 lbs heavier? Has any featherweight won the world heavyweight title? The fact is, size makes a big difference in boxing. The fact that it is not the *only* factor does not mean it is not a very important factor. Other things being equal, a significantly bigger guy will beat a smaller guy.

Similarly, intelligence makes a big difference in trading. Of course someone who has no trading exprience or skills whatsoever, barely knows anything about the market, and approaches it in a dilettante superficial fashion is going to lose regardless of how "smart" they are in other fields. But if two people really apply themselves and study the markets in depth, research them, think about them, then try to trade, starting off small and gradually increasing size, then the smart one has a huge advantage over the stupid one. That's why you don't see hedge-fund superstars with IQs of 80, why investment bank top traders aren't thick as pigsh*t. Even during the dotcom era, the top traders were generally the clever ones.

 

[djxput]

My 2 cents here ...

One of the best threads I have read here on ET.

Lot's of good info.

While I realize some of the info might be a real 'ball buster' to Cash's ego; probably better to learn it here then with your money.

I have alot of the same issues that many of these posts talked about here. I'm very glad I read this thread.

thanks for all the insite guys

 

[slowBear]

After two years of lurking on ET, I read this thread yesterday and some things seemed to jell. So I sat down this morning and wrote out some new (for me) beliefs. These are describing successful traders and their systems.

1) You learn to trade by learning one pattern at a time. Pattern = setup + entry/exit + stop etc.

2) You learn it by doing it over & over & over again. Practice!!!!! This is what is meant when people tell you that "you have to do the work"

3) In the end you develop a sense of the risk/reward profiles of the pattern OR you test it extensively to quantify the risk/reward characteristics of the pattern. This is the source of confidence.

4)Once the risk/reward profiles are known, you can then correctly size the position -> money management.

5)Many traders would not be able to describe their system in enough detail for it to be automated because the patterns they have learned are far more complex than they consciously realize (this is not a bad thing).

6)Over time you learn more patterns. This gives you more trading opportunities and therefore more profits. You also learn to deal with different "market conditions".

7)Putting technical changes aside (e.g. decimalization), "market conditions" are always repetitions of previous "market conditions". (A new trader just hasn't seen them before.)

8)Mechanical systems that stop working due to changed "market conditions" have not been tested on enough data (see #7) OR are not complex enough to measure "market conditions" and turn themselves off.

9) Discipline is simply obeying the rules of any pattern that you have learned.

Clearly there are a number of successful people on this thread. I would really appreciate any constructive criticism and/or validation of the above.

Thanks in advance
slowBear

 

[gnome]

Quote from slowBear:

After two years of lurking on ET, I read this thread yesterday and some things seemed to jell. So I sat down this morning and wrote out some new (for me) beliefs. These are describing successful traders and their systems.

1) You learn to trade by learning one pattern at a time. Pattern = setup + entry/exit + stop etc.

2) You learn it by doing it over & over & over again. Practice!!!!! This is what is meant when people tell you that "you have to do the work"

3) In the end you develop a sense of the risk/reward profiles of the pattern OR you test it extensively to quantify the risk/reward characteristics of the pattern. This is the source of confidence.

4)Once the risk/reward profiles are known, you can then correctly size the position -> money management.

5)Many traders would not be able to describe their system in enough detail for it to be automated because the patterns they have learned are far more complex than they consciously realize (this is not a bad thing).

6)Over time you learn more patterns. This gives you more trading opportunities and therefore more profits. You also learn to deal with different "market conditions".

7)Putting technical changes aside (e.g. decimalization), "market conditions" are always repetitions of previous "market conditions". (A new trader just hasn't seen them before.)

8)Mechanical systems that stop working due to changed "market conditions" have not been tested on enough data (see #7) OR are not complex enough to measure "market conditions" and turn themselves off.

9) Discipline is simply obeying the rules of any pattern that you have learned.

Clearly there are a number of successful people on this thread. I would really appreciate any constructive criticism and/or validation of the above.

Thanks in advance
slowBear

Focus on #1, and #9.

Good trading is intellectually simplistic but an emotional challenge.

KISS

 

[Lamont_C]

Quote from slowBear:



Clearly there are a number of successful people on this thread. I would really appreciate any constructive criticism and/or validation of the above.

Thanks in advance
slowBear

You pretty much have it, though 2&3 could be more clear. You don't learn simply by doing it over and over again. If one is doing something wrong, doing it over and over again is more likely to entrench the wrong behavior than to correct it. You have to have some sort of objective or goal in mind when you're "doing it". Otherwise, the practice is little more than busywork.

As for practicing and testing, I don't know what distinction you're making, unless by "testing" you mean doing no more than plugging numbers into a computer and generating data without actually looking at a chart. If so, this sort of testing isn't going to do you any good unless you plan to automate your trades and won't be looking at charts. If you're going to be doing the trading yourself, then conduct your test under the same conditions under which you're going to be trading.

If you need any further help, see posts 5 & 8 in the following thread:

http://www.trade2win.com/boards/showthread.php?t=16681

LC

 

[slowBear]

though 2&3 could be more clear

I agree.

#2 -- absolutely correct. Doing something the same way and expecting a different result is insanity. I didn't include the tacit assumption that the pattern should at least be breakeven.

#3 The purpose of the "OR" was to distinguish between trades who automate and those that watch the market and react to their patterns.

 

[nkhoi]

Quote from slowBear:

#2 -- absolutely correct. Doing something the same way and expecting a different result is insanity. ..

in my case, Doing something the same way and didn't see the same result should had have me on alert, but I was too thick to realize that. My sept profit is gone and I hope the lesson stick this time.

 

[cashmoney69]

I stopped trading for a while, and went back to paper trading. I've made more fake $ in the last 9 days than any one month trading real money. Maybe its luck, because its not an emotional issue. I feel the same way with pt's as I do real money.

Tell me your experiances, but it seems that the most profitable set-ups are:

1. Finding channel breakouts or breakdowns, and trading them in the direction of the break by placing buy stop orders above or below the trend line. Example: CAT ..here is the link

http://stockcharts.com/h-sc/ui?s=CAT&p=D&b=5&g=0&id=p45450555920

2. Consolidation - These plays can produce big gaps and breakouts, and are easy to see with BB's. Example: AAPL .. here is the link

http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p45450555920

3. Gaps - Simple, find a stock that has gapped, and trade in the direction of the gap. I like to look for ones that have gapped at least a dollar or more like RIMM or AAPL. RIMM is a perfect example of a good gap play.

http://stockcharts.com/h-sc/ui?s=RIMM&p=D&b=5&g=0&id=p45450555920

 

[Lamont_C]

Quote from cashmoney69:

I stopped trading for a while, and went back to paper trading. I've made more fake $ in the last 9 days than any one month trading real money. Maybe its luck, because its not an emotional issue. I feel the same way with pt's as I do real money.

Tell me your experiances, but it seems that the most profitable set-ups are:

Finding the setup or the pattern is only a preliminary step. You're leaving out everything else. Which is why your paper-traded results are unrelated to your real-time/real money results.

 

[cashmoney69]

Quote from Lamont_C:

You're leaving out everything else. Which is why your paper-traded results are unrelated to your real-time/real money results.

What am i leaving out?