Mental Ceilings and self fulfilling prophesies

G

Girlpower

In another thread there is a discussion going on about more or less is trading worth it or is it better to get an MBA and go work in LargeCo.Inc.

The premise is basically that avarage gains from ES in points terms are about 1-1.5 points per day. This is taking into account winning days and losing days, and within the discussion, the premise is also that trading much larger size, the long term avarage falls to below or roughly 1 ES point per day of profitability.

The question/s I am posing for discussion is this.

IF, everyone agrees that the longer term avarage on big size is roughly 1 point per day, how much does the 'belief' that the long term avarage is or is going to be about 1 point per day become a mental ceiling, and as a consequence a self fullfilling prophecy?

Suppose everyone agreed and 'believed' that in fact the number 1 point per day avarage was wrong and it was in fact 2 points per day. Would that then become a new self-fulfilling prophecy over time?

I wonder, how much of this is a consequence of actual market mechanics, and how much is attributable more to the ingrained belief systems of what can and can't be done /or/ is or is not normal and expected?

I would love to hear people's views on this. :)

Best

Natalie
 
Self-limiting beliefs can undermine one's results, but honestly I don't see this as one of them. For one thing, I doubt most traders see themselves as 1 point a day traders. From what I've read here, many seem to have grandiose visions of their actual and future results. I dare say most would turn up their noses at 1 point a day, although as I showed in another thread, such results would put them in the front ranks of professional traders.

I think the real problem is more likely to occur when a typical "breakeven", meaning losing, trader begins to be successful. In this business you don't have to be overly successful to generate some huge returns, and before you know it you are looking at a big account and big income. Some cannot deal with that, for reasons explored in your previous thread, and self-defeating behavior ensues. I think it is more a question of absolute dollars rather than daily returns.
 
Any mental/emotional construction, paradigm, a mind accepts as reality will impose it's percieved limits/boundrys, on that mind, after all it has been accepted as reality.
How many times have you seen someone with accomplishments say " I did it because I didn't know it couldn't be done". Big Al Einstein often said if he were a better physicist he never would have done the work he did. Stepping outside the limitations of others requires risk not many are willing to take, you have to feel something inside yourself, something that senses and drives the beauty of truly expanding yourself in the face of the mediocrity of the consensual reality we exist in.
Banjo
 
About the 1 point / day reasoning ... just a few thoughts,

During year 2000, many pros did a lot better than 1 pt/day.
But in year 2001 and year 2002, the average goes way lower.

Maybe related to the volatility change over these few years?

Do not forget that every point you lose per trade, you need to make 3 pts back to even out the differences.

e.g.

case 1

trade 1 + 1 pt
trade 2 - 1 pt
trade 3 + 3 pt

average is + 1 pt

case 2

trade 1 + 1.5 pt
trade 2 - 1 pt
trade 3 + 2.5 pt

average is + 1 pt too.


For the traders I know, they usually belongs to 2 camps -

1. very high winning percentage (80%+) and usually got wacked a few days per month that flat out their performance to about 1 pt/day.

2. lower percentage (50% to 60%) and usually winning 2 out of 3 days - that also works out to about 1 pt per day.

Isn't that amazing :)
 
Quote from Lawrence Chan:

Do not forget that every point you lose per trade, you need to make 3 pts back to even out the differences.

e.g.

case 1

trade 1 + 1 pt
trade 2 - 1 pt
trade 3 + 3 pt

average is + 1 pt

case 2

trade 1 + 1.5 pt
trade 2 - 1 pt
trade 3 + 2.5 pt

average is + 1 pt too.


For the traders I know, they usually belongs to 2 camps -

1. very high winning percentage (80%+) and usually got wacked a few days per month that flat out their performance to about 1 pt/day.

2. lower percentage (50% to 60%) and usually winning 2 out of 3 days - that also works out to about 1 pt per day.

Isn't that amazing :)
More...

Ok so we have a mathematical justification as to why the number 'is' 1. But equally there are lot of mathematical justficiations as to why it could just as easily be 2 - by taking 3 more trades in the same ratios as stated for example...? or adding those two examples together to make 6 trades in a day and 2 points?

Also, in the people examples, how much of the result is caused by market action hurting their plan and how much is possibly self-sabotage bringing them back to the widely agreed and believed 1 point avarage?

Best

Natalie
 
Quote from AAAintheBeltway:


I think the real problem is more likely to occur when a typical "breakeven", meaning losing, trader begins to be successful. In this business you don't have to be overly successful to generate some huge returns, and before you know it you are looking at a big account and big income. Some cannot deal with that, for reasons explored in your previous thread, and self-defeating behavior ensues. I think it is more a question of absolute dollars rather than daily returns.
More...

Yep - self-sabotage, brought on by being unable to handle the absolute$$$ good point. But then implies a mental ceiling and a self-fulfilling prophecy doesn't it?

Best

Natalie
 
The 2 examples I showed has 66% winning (2 out of 3 trades).

That is about what most profitable traders can do.

If the winning size and losing size average out to be about the same, the edge is 33%.

And since most traders take some profit on a 2 to 3 pts run by getting out part of their positions, that limited the average winning per contract immediately.

So to improve the average, it is likely that a completely different way to trade must be employed before you will see drastic differences in performance.
 
Quote from Lawrence Chan:

The 2 examples I showed has 66% winning (2 out of 3 trades).

That is about what most profitable traders can do.

If the winning size and losing size average out to be about the same, the edge is 33%.

And since most traders take some profit on a 2 to 3 pts run by getting out part of their positions, that limited the average winning per contract immediately.

So to improve the average, it is likely that a completely different way to trade must be employed before you will see drastic differences in performance.
More...

Right, but having said that it still comes back to the original question I posed. You are still justifying why 1 point is correct and re-inforcing it, and yet using your own example I have demonstrated that by doubling activity in the markets, the result is also doubled.?

Best

Natalie
 
Quote from Lawrence Chan:

Do not forget that every point you lose per trade, you need to make 3 pts back to even out the differences.
More...
You are mixing average points per day with average points per daily trade.

e.g.

case 1

trade 1 + 1 pt
trade 2 - 1 pt
trade 3 + 3 pt

average is + 1 pt
More...
If these trades were done on the same day, then the day's total would be 3 points or an average of 3 points. The average daily trade is 1 point.
 
Quote from Mr Subliminal:

You are mixing average points per day with average points per daily trade.

If these trades were done on the same day, then the day's total would be 3 points or an average of 3 points. The average daily trade is 1 point.
More...

yes - I know the maths is flawed. But thanks for pointing that out :)

The point I'm trying to get to is more a case of raising mental ceilings and changing results posively as a consequence.


best

Natalie
 
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