Mental Ceilings and self fulfilling prophesies

Quote from Girlpower:



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
More...

Actually that is not a justification of the 1 pt issue :)

What I have explained is that the performance is closely tied to a person's style and that most profitable day traders trade a few very similar styles (the very point I was trying to deliver!).

This particular trading style issue leads to the limitation of performance on a per contract traded basis. Most of these trading styles also inheritedly has the issue of decrease in performance on a per contract basis.

The most noticible reason was stated in the previous message, that is, taking profit on the 1st 2 to 3 pts runs on 1/2 or even more from the full position.

Thus I believe the mental ceiling issue is not a personality issue, but more related to the style in use.

The mental ceiling could be pointing towards why not trade with another method to see if improvements can be archieved.

But, for most profitable trader - the risk of changing ones style is way too risky to take because money is pulled in consistently now :)
 
Quote from Lawrence Chan:



Actually that is not a justification of the 1 pt issue :)

What I have explained is that the performance is closely tied to a person's style and that most profitable day traders trade a few very similar styles (the very point I was trying to deliver!).

This particular trading style issue leads to the limitation of performance on a per contract traded basis. Most of these trading styles also inheritedly has the issue of decrease in performance on a per contract basis.

The most noticible reason was stated in the previous message, that is, taking profit on the 1st 2 to 3 pts runs on 1/2 or even more from the full position.

Thus I believe the mental ceiling issue is not a personality issue, but more related to the style in use.

The mental ceiling could be pointing towards why not trade with another method to see if improvements can be archieved.

But, for most profitable trader - the risk of changing ones style is way too risky to take because money is pulled in consistently now :)
More...

Ok so you are not justifying but merely explaining it. And yet, by setting out to explain it rather than question it you have added more weight in all your assertions to the 1 point avarage being a given, a self fulfilling prophecy.

I do not believe that it is a personailty thing either, more an inground belief in a 'truism' that may be fundamentally flawed.

Also your explanation of this would carry more weight were it backed up with examples of a 2 point per day avarage or 3 or 4, and most importantly Why they are not achievable?

Also, why is it too risky to switch from one system to another which has maybe lower risk, higher profitability, greater success probability etc. Surely it would be more risky to stay with the original system under those circumstances?


Best

Natalie
 
Too much focus on this statistic. Do we know its accurate? And even if this "average" of 1 pt. is accurate, is it really important.

If I know that in an Alfa Romeo I can make it from San Diego to Newport Beach in no traffic in one hour, and my Co Worker at then end of my trading desk makes that same trip in his Yugo in two hours, the average time of our trips is 1.5 hours. Some newbie uses that information to gauge her trip, she could be late or early depending on her and her car's performance. Woudl this average then, be significant to her? In trading, the difference between the faster drivers and the slowest would be more like two people taking an F-16 to work, and the rest driving Yugos.

Averages do not accurately reflect the performance of the successful minority in trading. The average figures also have to take into account the majority of losing traders making something less than the average. The winning traders making significantly more

Unless I missed something, which I know I could have, how significant is the average as a benchmark to measure expectancy and success?
 
Quote from Girlpower:



Ok so you are not justifying but merely explaining it. And yet, by setting out to explain it rather than question it you have added more weight in all your assertions to the 1 point avarage being a given, a self fulfilling prophecy.

I do not believe that it is a personailty thing either, more an inground belief in a 'truism' that may be fundamentally flawed.

Also your explanation of this would carry more weight were it backed up with examples of a 2 point per day avarage or 3 or 4, and most importantly Why they are not achievable?

Also, why is it too risky to switch from one system to another which has maybe lower risk, higher profitability, greater success probability etc. Surely it would be more risky to stay with the original system under those circumstances?


Best

Natalie
More...


It seems like I have to explain everything in details.

Most daytrading styles that lead to profitable trading almost always include,

1. cut losses fast (be it 2 to 3 pts stops, or, when condition changed)
2. take profit on partial position

When say a trader trades a single lot and doing fine at about +1 pt per trade. And takes on average 5 trades. Then he nets 5 pts a day.

At 2 contracts, this trader will take profit on 1/2 of his position
at 2 to 3 pts run and cut losses slightly faster. His average net profit drop on a per contract basis - thus leading to a lower net profit per day, definitely less than 5 pts.

At 3 contracts, this trader will either take profit on 1 or 2 contracts out at the 2 to 3 pt run and cut losses yet slight faster. The average drops further due to the fact that when a position is completely wrong, the maximum hit is taken, while for profitable trades, not all contracts realize the max profit potential.

So it does not matter what the original starting point of averaging +2 pt per trade profit or +3 pt per trade profit, nor does more trades matters.

It is the % of total # of contracts taking the max loss vs % of total # of contracts taking max profit. The ratio keep increasing towards the losing side.

The 1 pt profit per day cannot even hold if you are trading 100 car at a time in the pit.

So, if and only if you breakaway from this trading pattern, the profit per day will just have to decrease on bigger sizes.

Why most traders prefer taking profit when they have a position with size ? That I don't know :)

In the old days, I know that liquidity is definitely the issue.

Nowadays, maybe most people could not fully backtest their ideas, thus, cannot develop the confidence and trust into a new strategy at all when weighting that towards a more familiar strategy that has been proven to work (at least during the period its been in use).
 
Traders asking the average questions are already profitable, at least on smaller size (1 to 20 contracts).

The reason for asking the question is how can they get to the next level of profitability.

When trading on size, the equity swing is huge, and most traders I know prefer to reduce it - even at the cost of lower profitability.

Lawrence


Quote from GetWhatUDeserve:

Too much focus on this statistic. Do we know its accurate? And even if this "average" of 1 pt. is accurate, is it really important.

If I know that in an Alfa Romeo I can make it from San Diego to Newport Beach in no traffic in one hour, and my Co Worker at then end of my trading desk makes that same trip in his Yugo in two hours, the average time of our trips is 1.5 hours. Some newbie uses that information to gauge her trip, she could be late or early depending on her and her car's performance. Woudl this average then, be significant to her? In trading, the difference between the faster drivers and the slowest would be more like two people taking an F-16 to work, and the rest driving Yugos.

Averages do not accurately reflect the performance of the successful minority in trading. The average figures also have to take into account the majority of losing traders making something less than the average. The winning traders making significantly more

Unless I missed something, which I know I could have, how significant is the average as a benchmark to measure expectancy and success?
More...
 
ET is not representative in my opinion.

You make fine assertions about base causes of the level of performance. The personal pictures people have here are very indicative of why they have the level of sucess that they do. Nothing will change because they have such a strong commitment to the levels of success they picture.

The ES potential does not look like the conventional wisdom on making profits here.

Some threads here are outstanding for surfacing and recognizing the contrast between performance and the potential of the ES market. If performance is 1, 2, 3, 4 or 5 points as day and the H/L is another higher series; the ratio is a very poor. H/L is not a measure of the potential either, it is an understatement.

The self fulfilling nature of people's pictures is uncontestable. It looks like people are very inefficient compared to the potential.
And they strongly accomodate the situations they are in.

The norm here seems to be a very low portion of the potential. here is a list of reasons why:

1. Mechanical systems orient to singular kinds of opportunity whose frequency of occurrance is always going to be low.

2. It is difficult to desing comprehensive mechanical systems.

3. set up oriented approaches focus on singular kinds of oppotunities as do the !. above.

4. multiple sets ups are less common and usually their recognition is not tied to a comprehensive monitoring strategy.

5. voids in the four above are usually dealt with by money management strategies instead of cures for voids. This severely limits income.

6. markets change. Almost no provision is made for this in any approach.

7. The market operates in two moduses and almost all approaches focus on one of them and not both. Operating in the wrong modus is lethal.

8. a lot of mechanical systems and set ups operate in a betting modus. That is entries are not oriented to market taking person into trae, but, on the contrary, the person enters on the hope that the market will do what the setup or mechanical process predicts.

9. double this list vis avis a focus on exits.

10. double again on the predications made in the same vein for protection stop strategies.

the 8 elements of 9. and the 16 elements of 10. Are where the most profound erosion in performance occurs. there are ticks in ES and the thinking in quantification only gets to the point level of refinement as we all see. What's up? This would not occur in any statistical effort.

I have a personal differing viewpoint. I feel performance ovr time is staged and the incremental right to improving performance comes from success with former levels of sophistication. I feel, as in any endeavor of business, the preformance is iteratively refined. All new ideas sand businesses start small and build upon success. Any approach that cannot not be improved to cover all potential possibilities is a deadend. The market is not sophisticated nor rocket science. I believe that the vast majority of quality approaches, and there are many, can be transferred and done by average individuals. The self fullfilling aspect of ET that is being well pointed out is a major deterrent for anyone towards working to achieving their potential.
 
Quote from Lawrence Chan:




It seems like I have to explain everything in details.

Most daytrading styles that lead to profitable trading almost always include,

1. cut losses fast (be it 2 to 3 pts stops, or, when condition changed)
2. take profit on partial position

When say a trader trades a single lot and doing fine at about +1 pt per trade. And takes on average 5 trades. Then he nets 5 pts a day.

At 2 contracts, this trader will take profit on 1/2 of his position
at 2 to 3 pts run and cut losses slightly faster. His average net profit drop on a per contract basis - thus leading to a lower net profit per day, definitely less than 5 pts.

At 3 contracts, this trader will either take profit on 1 or 2 contracts out at the 2 to 3 pt run and cut losses yet slight faster. The average drops further due to the fact that when a position is completely wrong, the maximum hit is taken, while for profitable trades, not all contracts realize the max profit potential.

So it does not matter what the original starting point of averaging +2 pt per trade profit or +3 pt per trade profit, nor does more trades matters.

It is the % of total # of contracts taking the max loss vs % of total # of contracts taking max profit. The ratio keep increasing towards the losing side.

The 1 pt profit per day cannot even hold if you are trading 100 car at a time in the pit.

So, if and only if you breakaway from this trading pattern, the profit per day will just have to decrease on bigger sizes.

Why most traders prefer taking profit when they have a position with size ? That I don't know :)

In the old days, I know that liquidity is definitely the issue.

Nowadays, maybe most people could not fully backtest their ideas, thus, cannot develop the confidence and trust into a new strategy at all when weighting that towards a more familiar strategy that has been proven to work (at least during the period its been in use).
More...

If your strategy was making 2 points a day on 1 lots, but when you go up to 2 lots and you now only make 3 points a day all you have really accomplished is to increase your risk by 100% and your profit by only 50%. That does not sound like a very good idea to me. One would be best served to not change as you go to the size for as long as possible.

Brandon
 
Quote from Brandonf:



If your strategy was making 2 points a day on 1 lots, but when you go up to 2 lots and you now only make 3 points a day all you have really accomplished is to increase your risk by 100% and your profit by only 50%. That does not sound like a very good idea to me. One would be best served to not change as you go to the size for as long as possible.

Brandon
More...


The time that the brick wall hits highly dependent on the original strategy's capability to net positive on a daily basis.

I think most traders change their strategy to scale out on the first really huge drawdown streak.
 
Quote from Girlpower:



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.

IF, everyone agrees that the longer term avarage on big size is roughly 1 point per day,
More...

I would discourage anyone who truly believes this premise from trading this contract at all. This believe is so limiting and ridiculous to me that any devotees of this idea are headed for trouble in the real trading environment.

Good luck to all.
 
Quote from Lawrence Chan:




The time that the brick wall hits highly dependent on the original strategy's capability to net positive on a daily basis.

I think most traders change their strategy to scale out on the first really huge drawdown streak.
More...

And there lies the flaw in your thinking about this subject. You are looking only at the possibilities of a particular strategy (any strategy in particular come to that) rather than what the market is actually able to give.

You are also thinking about what 'most' traders do in your opinion, rather than throwing away the pre-conceptions and considering the nature of the actual questions posed and so helping to perpetuate the myth I am questioning with this thread.

This means that for anyone thinking in this particular way, they have by deffinition created for themselves a glass ceiling and a self-fulfilling prophecy, instead of throwing away the pre-conceptions and moving the level of thinking to another plane completely.

Best

Natalie
 
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