Mental Ceilings and self fulfilling prophesies

Quote from OddTrader:



I would say this is the key point of this thread, if I am correct.

Once again the process and its aim (end-results) should be much more important than the words involved.

It would be possible that a competent trader preparing/expecting merely 1 point may constantly catch 3 points; whereas another competent trader preparing/expecting 5 points may mostly catch 1 point.

Perhaps there are still some other aspects, in addition to all others already mentioned in this thread, we should also pay much attention to, I would just think.


:confused:
More...

What myself and Alfonso are getting at is that we don't 'expect' anything in particular, per se, from the market, so there are no mental ceilings on daily performance... we are talking about long run averages that we have actually realized and we are talking about the % return implications of other people's alleged long run averages (and whether or not the % implications are within the realms of reality)... I, for one, have no mental ceilings... I simply have my historical results and Microsoft Excel to track my performance over time...

Before people start talking of their long run averages, I suggest that they better make sure that what they are talking about is a daily average per contract over the long run, and then they should convert those numbers into an annualized % return using any reasonable margining assumptions... alternatively they should talk of % returns and make reasonable margining assumptions in coming up with those returns...

In my view, a disproportionate number of people here are doing one of 3 things:
1) bullshitting, and possibly not even trading real money (and hence remaining ignorant of the ground realities)...
2) using what they think their long run average
points per day / annualized % return (under reasonable margining assumptions) is, without actually calculating it, by running a long run, historical results-based, simple statistical analysis in a spreadsheet...
3) are confusing their long run average performance with their better days, and choosing the latter figure to report...

The alternative to 1)-3) is that these same people are on the rapid path to billionaire status, using even the crudest of money management... personally, I don't buy this alternative...
 
Quote from OddTrader:



I would say this is the key point of this thread, if I am correct.

Once again the process and its aim (end-results) should be much more important than the words involved.

It would be possible that a competent trader preparing/expecting merely 1 point may constantly catch 3 points; whereas another competent trader preparing/expecting 5 points may mostly catch 1 point.

Perhaps there are still some other aspects, in addition to all others already mentioned in this thread, we should also pay much attention to, I would just think.


:confused:
More...

Ok - That adds another question into the mix of this thread.

There are numberous threads/posts from new traders who ask variations on a single question.

"I am thinking of starting to trade ES (insert any instrument's you like here), and have $x available to do this. What kind of average daily return can I expect to achieve?"

And so there answer comes out one way or another.

Now the question I am posing is this.

Suppose you answered this question by saying that the long term average daily return is (unsing the ES model 0.5 points perday, and that adds up to a lot of money over a long time. This is in itself a good and valid answer.

They then go away and work hard and reach the level where they consistently make 10 point profit over 20 trading days. They are achieving success, and are profitable.

Would those traders who have started out with the blief that 10 points made every 20 trading days, and worked everything out so this is a successful winning formula for them then simply increase size to increase the $ return and so be more successful in the belief that they are now achieving the nrom for successful traders?

Suppose that instead of .5 points perday or 10 points per month (ish) they were told 2 points per day or 40 points per month. Would they continue to refine and develope systems to achieve those levels and then increase size accordingly to create more returns?

How about 4 points per day or 80 points per month?

At each of those levels would they try to increase the monthly points return as well as size or just merely the size in the belief that they are on the pace with the points return?

Would it be difficult for them to get past the belief that (taking the 2 point example) 2 pts pd 40 pm is the level to achieve? or would they be able to automatically shift to working on ways to double the points return on the same capital usage?

How much will percaption have played a part in where they draw the line having started without prior knowledge of what can be achieved?

Even the highest number in those examples above. would they also be come a stopping point?

Just more to add into the mix of limiting/non limiting beliefs and to discuss.

best

Natalie
 
Quote from candletrader:



What myself and Alfonso are getting at is that we don't 'expect' anything in particular, per se, from the market, so there are no mental ceilings on daily performance... we are talking about long run averages that we have actually realized and we are talking about the % return implications of other people's alleged long run averages (and whether or not the % implications are within the realms of reality)... I, for one, have no mental ceilings... I simply have my historical results as a gauge to track my performance over time...

More...

My thoughts below:

You still have a (different form of) process and aim, whether implict or explict. Therefore I would guess, mental function actually affects your performance, consciously or not. Probably just like Soros' reflexivity theory.

Particularly and most importantly your current mental status (maybe a better wording than ceiling) would determine your efforts, if any, to be allocated for any possible changes/improvements.

However as you may feel whatever the historical performance has been fairly satisfactory to yourself in order to enjoy life, that would be fine too, because trading always involves risks.




Before people start talking of their long run averages, I suggest that they better make sure that what they are talking about is a daily average per contract over the long run, and then they should convert those numbers into an annualized % return using any reasonable margining assumptions... alternatively they should talk of % returns and state any relevant margining assumptions in coming up with those returns...
More...

Personally I truly believe your consistant average of nearly two points daily is a very impressive performance. Sometimes, if not often, an improvement of performance, which might be also related to a relevant change of method/strategy/system/else, would be a quantum leap, of which the timing could be completely out of our control. Think about some time ago the development process of your existing system, and you know.

:mad:

Enough for now!:D
 
Quote from candletrader:



In my view, a disproportionate number of people here are doing one of 3 things:
1) bullshitting, and possibly not even trading real money (and hence remaining ignorant of the ground realities)...
2) using what they think their long run average
points per day / annualized % return (under reasonable margining assumptions) is, without actually calculating it, by running a long run, historical results-based, simple statistical analysis in a spreadsheet...
3) are confusing their long run average performance with their better days, and choosing the latter figure to report...

The alternative to 1)-3) is that these same people are on the rapid path to billionaire status, using even the crudest of money management... personally, I don't buy this alternative...
More...

As if the above is a fact and without doubt, I would think you just simply ley it go!

Do a comprehensive research to see whether there is any room for yourself for another point or even much more. That's it!
:p
 
Suppose everyone identified all the trades that habitually lose but their system/method still takes, and instead of constantly trying to find somome method of filtering them out of their system, they developed a method/system that identifies those trades but in the opposite direction as valid, with the effect that the losing trades have now been neutralised by taking the other side of them on a second system as well and so cancel them out.

What effect would this have on the long term average return/performance?

Best

Natalie
 
Suppose there was a 10 or 15 min method which works totaly on picking up trends and takingalrge amounts from the trends, but made losses when the trends didn't run through.

Suppose there was a paralel system on 1 min that 'slalomed' through the market added to that. The 1 min system never picks up big moves or large numbers of points in one go.

Wouldn't the effect of the 1 min systems be to neturalise the failed breaks etc. from the 15 min system, take trades where the bigger system couldn't, and also to increase the returns of the 15 by adding subtracing during the profitable trends, reducing as the retracements start and adding back as direction is resumed?

Wouldn't this change the average p.c. daily /monthly return?

Couldn't using duality be a powerful thing to do?

Just another idle thought to play with. :)

Best

Natalie
 
Hi Natalie,

I look at developing a trading edge as the ability to adapt to different market conditions. Since I am just beginning to understand trading my focus is very simple: how to get in the market with the best chance of winning and then getting out with the money.

If I design a trading system then it has to be able to give me a lot of opportunities to trade for my expected profit. I can't stand sitting in front of a screen for six hours and trading only three times. So, instead of going for the big win I'd rather get lots of practice in getting in and then getting out with my profit.

I have kept some statistics: over the last 195 trades I have averaged 21 trades a day. Two-thirds of them are winners and one-third either lose or draw. So I have an edge that is slightly better than 50/50. The problem is my losing trades are just about twice my winning trades. So, I have to be right most times to pay for the losses and make a small profit.

Early on, I discovered the real obstacle to overcome is the commission. Those trades resulted in roughly $600 in profit and generated $1200 in commissions. Who is really winning in this game?

So instead of maximizing yield (say I do good and average 3 pts. a day), I have to think of a different way to make those 3 pts. This is where your experience can hinder you, I think, and help create a ceiling. It is ingrained through trading to expect a certain profit each trade or a certain loss with a certain frequency. To trade otherwise forces me out of my 'comfort zone'. To me it is scary to think of trying to make 3.5 points on a single trade, although when I first started trading the ES contract I did this with some regularity (including a few badly timed trades). Recently, I tried this again and had a disastrous day.

This is an example of limiting behavior. It has nothing to do with being well-prepared and identifying the opportunity. It has a lot to do with expectations of what is attainable. I have trained myself to accept less but with more frequency. The price I pay is opening my pocket to my broker.

Now, for your questions posed about raising the bar on performance. I think I will have to add a different way of trading to this method. I reason this way because of your discussion with alfonso about liquidity issues limiting flexibility. For one contract, trading the way I have been is no problem. I hesitate to trade for quarters and halves with more than that because with only a thin edge, two or three bad trades in a row can wipe out a day's work.

All this is to say, growth is limited by the factor which is most needed for that growth. In my case, I need to train myself to have the patience to trade for more points and to cut down the frequency with which I trade. Trading is definitely a fix for me. I need to learn to cultivate that desire for the profit and refrain from reaching out for it so often. Thereby, will I reduce my cost of trading and will better appreciate the satisfaction of my desire.

Best Ever,

Bruce
 
Thanks Natalie.

Here are my thoughts (I know I may not answer all your points mentioned), all about risks,:

I would not think too many people to start too many points, due to too many reasons, other than risks, when they measure the potential risks involved.

Using points is not appropriate. Perhaps we should use % of daily range, which could be from 0 to N (you know!). You can see naturally there is a limit. And I believe the law of diminishing is applicable.

Whether sizing is important would depend on your systems' designs. If we use % of daily range as a valid measure, the size factor should be not in the equation, hence irrelevant, I suppose.

I also believe every person is a self-learning human being of a self-organising nature. A new trader would learn her/his limits, both mental and financial, sooner or later.

All about risks!

:mad:
 
Quote from Girlpower:

Suppose everyone identified all the trades that habitually lose but their system/method still takes, and instead of constantly trying to find somome method of filtering them out of their system, they developed a method/system that identifies those trades but in the opposite direction as valid, with the effect that the losing trades have now been neutralised by taking the other side of them on a second system as well and so cancel them out.

What effect would this have on the long term average return/performance?

Best

Natalie
More...

Before others to shed light to your questions, I try to provide my simple thoughts first.

Actually I do not fully understand/comprehend your question. :D However I just try to say that when developing a new system, it might be much better to actually trade it practically with another instrument, in order to avoid the issue of conflicting signals.

I don't want to say too much to reduce your exploration funs, becuase you need to pay a price for the funs during the progress.
:D
 
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