I am posting this e-mail I received from LBR Group for educational purposes.
It simply reiterates something that took me almost 9 years to understand. There is no holy grail to trading. No system that the "pros" use . There is no big secret way of trading that is right all the time. Once you truly unerstand and actully believe this .....and actually stop searching for it you are on your way to at least surviving.
The true "Holy Grail" is called Risk management, position sizing and consistincy in using a trading technique that you are comfrotable with.
Just my thoughts.....Nick
TRADING AND BETTING THE HORSES
While some people question how easy it is to make a
consistent living TRADING, how about making a consistent,
comfortable living betting on horse races? Here is a story
about Ernest Dahlman - someone who has experienced amazing
success at betting on horses for the past 35 years. Some of
the principles that have contributed to E.D.'s success are
the very same applied by top, professional traders. The
following includes excerpts from a June 3, 2001 article
titled THE WIZARD OF ODDS, published by the New York Times
and written by William Grimes. We recommend that before you
read our story you read the original article in its
entirety. It is necessary to register first on the NY times
website. They will have the article freely available only
until June 10. Go to the following link:
http://www.nytimes.com/2001/06/03/magazine/03DAHLMAN.html)
This Wizard of Odds, "Ernest Dahlman, may be the world's
most successful horse bettor. The reason he's so good is
that he doesn't gamble." But, according the article, "in
a busy year, Dahlman might bet as much as $18 million."
Let's look at some of the main principles that contribute
to Dahlman's success and see how they are transferable to
trading.
1) Dahlman narrows his playing field. He specializes
primarily "with races at tracks in New York and California"
where he perceives himself to have a larger edge. This way,
he can become familiar with the subtle nuances such as local
trainers (in whose hands a horse can experience a "religious
conversion") and track conditions. A trader will do best
to concentrate on a select "stable" of markets and learn
their individual personalities, than to jump into markets or
individual stocks that have not been thoroughly researched.
2) Dahlman specializes in a very specific type of bet - the
exacta, his "bread and butter." A trader will do best if he
specializes in just one style or pattern or trading
methodology. Know the risk/reward characteristics of your
individual technique. Dahlman chooses what would at first
glance appear to be a high risk technique, but one which
offers good rewards.
3) Dahlman pays more money to minimize his risk. He hedges
his bet by creating a box ("twice as expensive as a straight
exacta" but which "lets Dahlman have things both ways").
Successful top traders are far more interested in strategies
by which to minimize risk than those that go for the big
gains. Stops, protective options, or spread strategies are
just some of the ways to minimize risk.
4) Be a "plodder," a nickel and dimer. "On average,
(Dahlman) says, he earns 3 or 4 percent on his investment."
He never bets serious money on long odds. Stick with the
high probability setups. Don't try to hit home runs. "The
point is, there's no such thing as a sure thing. Favorites
win only a third of the time, an immutable racing statistic.
Even successful bettors tear up more tickets than they cash.
The trick is to cash enough tickets, at the right odds, to
offset the losses and turn a profit. That's where addition
and subtraction come in."
5) Know the seasonalities of your game. "'Winter is my
favorite time of year,' he said cheerfully. 'It's more
predictable. The horses tend to be older, and you know what
they're going to do. And out in Northern California it
rains, and you get a lot of grass races switched to the
main track, resulting in complete mismatches.'" If you
are a grain trader, there are distinct times of year when
volatility increases. If you trade options, there has
historically been a strong tendency for volatility to
contract going into the summer - good if you are a short
premium player, bad if your game favors a momentum style.
Do you do best at the beginning of the year or the end of
the year? Know the cycles in both your game and yourself.
6) Do your daily homework. "Most horseplayers love a
contentious 12-horse race with the promise of three-figure
exactas and monster trifectas. Not Dahlman. 'Anyone who
knows anything about gambling will tell you I'm not a great
gambler,' he says. 'What I'm good at is arithmetic. I can
add and subtract.'" "Like many other professional
horseplayers, Dahlman relies in part on the work of others.
The Daily Racing Form gives him a compressed description of
the last dozen races run by each horse entered in a race.
That merits a quick glance. The more serious numbers come
from 'the sheet'" ... which analyze and quantify... "a
variety of factors, ranging from track resiliency to wind
direction to the distance actually traveled by each horse."
He considers his detailed record keeping to be his biggest
edge. What type of detailed record keeping do you maintain
with your own trading?
7) Specialize, Specialize, Specialize! Who would have ever
thought of specializing in Dahlman's "overriding
preoccupation, horseshoes? Years ago, Dahlman began
noticing something funny about horses equipped with mud
calks, cleats that some trainers use for extra traction when
rain turns dirt into mud. Dahlman noted that even when rain
failed to materialize, a lot of horses seemed to improve
several lengths when wearing mud calks for the first time"
It's also another "reason he loves Golden Gate Fields,
near San Francisco. It rains a lot there, so plenty of
mediocre-seeming horses are switching to mud calks for
the first time and then sneaking into exactas at good
prices. A second reason for loving Golden Gate is that
the track posts very detailed shoe information before
each race." Find your niche!
8) Believe in your own game and don't listen to anyone
else! Although "Dahlman accepts as highly accurate ...
the raw speed numbers," he rejects "other assumptions
in the sheets." Others dismiss Dahlman's horseshoe
theory. It does not matter who thinks your style is right
or wrong ... all that matters is that you believe in it
yourself and follow it consistently.
9) Keep your losses at the sleeping level. In the best
quote from the article, "If I keep my losses at $7,000, I
can sleep easily," Dahlman says. "I can get that back
in one race." Your sleeping level may be different
from anyone else's.
Here is a person who has managed to keep a balanced
life and raise 6 children while still maintaining his
passion for the horse racing. As the game changed,
from trotters to thoroughbreds, he was able to adapt with
the times. We have seen many games come and go in
the markets, from equity options arbitrage to the
disappearance of SOES traders. We have seen markets
change from a momentum environment to a trading-range
game. A trader must specialize in one thing yet be ready
to recognize when it is time to learn a brand new game.
Recognize that Dahlman built up a lifetime of racing
knowledge. He relies on that experience to interpret the
incredible amount of information he gathers. For newer
traders just learning to make their way in this business,
recognize that, ultimately, experience is the best teacher.
Every day that you trade, you gain experience. Keep the
discipline, keep the faith. To repeat one last quote:
"It's an art with just enough science to make it possible
for a very tiny percentage of bettors to take money away
from the herd of less disciplined bettors."
Trading? or betting the horses?
Best Wishes,
Linda Raschke
LBRGroup, Inc.
P.S. You are receiving this message because at one time or
another your e-mail address was registered in the LBR
guestbook. If you wish to be removed, simply reply to this
message with REMOVE in the subject line.
It simply reiterates something that took me almost 9 years to understand. There is no holy grail to trading. No system that the "pros" use . There is no big secret way of trading that is right all the time. Once you truly unerstand and actully believe this .....and actually stop searching for it you are on your way to at least surviving.
The true "Holy Grail" is called Risk management, position sizing and consistincy in using a trading technique that you are comfrotable with.
Just my thoughts.....Nick
TRADING AND BETTING THE HORSES
While some people question how easy it is to make a
consistent living TRADING, how about making a consistent,
comfortable living betting on horse races? Here is a story
about Ernest Dahlman - someone who has experienced amazing
success at betting on horses for the past 35 years. Some of
the principles that have contributed to E.D.'s success are
the very same applied by top, professional traders. The
following includes excerpts from a June 3, 2001 article
titled THE WIZARD OF ODDS, published by the New York Times
and written by William Grimes. We recommend that before you
read our story you read the original article in its
entirety. It is necessary to register first on the NY times
website. They will have the article freely available only
until June 10. Go to the following link:
http://www.nytimes.com/2001/06/03/magazine/03DAHLMAN.html)
This Wizard of Odds, "Ernest Dahlman, may be the world's
most successful horse bettor. The reason he's so good is
that he doesn't gamble." But, according the article, "in
a busy year, Dahlman might bet as much as $18 million."
Let's look at some of the main principles that contribute
to Dahlman's success and see how they are transferable to
trading.
1) Dahlman narrows his playing field. He specializes
primarily "with races at tracks in New York and California"
where he perceives himself to have a larger edge. This way,
he can become familiar with the subtle nuances such as local
trainers (in whose hands a horse can experience a "religious
conversion") and track conditions. A trader will do best
to concentrate on a select "stable" of markets and learn
their individual personalities, than to jump into markets or
individual stocks that have not been thoroughly researched.
2) Dahlman specializes in a very specific type of bet - the
exacta, his "bread and butter." A trader will do best if he
specializes in just one style or pattern or trading
methodology. Know the risk/reward characteristics of your
individual technique. Dahlman chooses what would at first
glance appear to be a high risk technique, but one which
offers good rewards.
3) Dahlman pays more money to minimize his risk. He hedges
his bet by creating a box ("twice as expensive as a straight
exacta" but which "lets Dahlman have things both ways").
Successful top traders are far more interested in strategies
by which to minimize risk than those that go for the big
gains. Stops, protective options, or spread strategies are
just some of the ways to minimize risk.
4) Be a "plodder," a nickel and dimer. "On average,
(Dahlman) says, he earns 3 or 4 percent on his investment."
He never bets serious money on long odds. Stick with the
high probability setups. Don't try to hit home runs. "The
point is, there's no such thing as a sure thing. Favorites
win only a third of the time, an immutable racing statistic.
Even successful bettors tear up more tickets than they cash.
The trick is to cash enough tickets, at the right odds, to
offset the losses and turn a profit. That's where addition
and subtraction come in."
5) Know the seasonalities of your game. "'Winter is my
favorite time of year,' he said cheerfully. 'It's more
predictable. The horses tend to be older, and you know what
they're going to do. And out in Northern California it
rains, and you get a lot of grass races switched to the
main track, resulting in complete mismatches.'" If you
are a grain trader, there are distinct times of year when
volatility increases. If you trade options, there has
historically been a strong tendency for volatility to
contract going into the summer - good if you are a short
premium player, bad if your game favors a momentum style.
Do you do best at the beginning of the year or the end of
the year? Know the cycles in both your game and yourself.
6) Do your daily homework. "Most horseplayers love a
contentious 12-horse race with the promise of three-figure
exactas and monster trifectas. Not Dahlman. 'Anyone who
knows anything about gambling will tell you I'm not a great
gambler,' he says. 'What I'm good at is arithmetic. I can
add and subtract.'" "Like many other professional
horseplayers, Dahlman relies in part on the work of others.
The Daily Racing Form gives him a compressed description of
the last dozen races run by each horse entered in a race.
That merits a quick glance. The more serious numbers come
from 'the sheet'" ... which analyze and quantify... "a
variety of factors, ranging from track resiliency to wind
direction to the distance actually traveled by each horse."
He considers his detailed record keeping to be his biggest
edge. What type of detailed record keeping do you maintain
with your own trading?
7) Specialize, Specialize, Specialize! Who would have ever
thought of specializing in Dahlman's "overriding
preoccupation, horseshoes? Years ago, Dahlman began
noticing something funny about horses equipped with mud
calks, cleats that some trainers use for extra traction when
rain turns dirt into mud. Dahlman noted that even when rain
failed to materialize, a lot of horses seemed to improve
several lengths when wearing mud calks for the first time"
It's also another "reason he loves Golden Gate Fields,
near San Francisco. It rains a lot there, so plenty of
mediocre-seeming horses are switching to mud calks for
the first time and then sneaking into exactas at good
prices. A second reason for loving Golden Gate is that
the track posts very detailed shoe information before
each race." Find your niche!
8) Believe in your own game and don't listen to anyone
else! Although "Dahlman accepts as highly accurate ...
the raw speed numbers," he rejects "other assumptions
in the sheets." Others dismiss Dahlman's horseshoe
theory. It does not matter who thinks your style is right
or wrong ... all that matters is that you believe in it
yourself and follow it consistently.
9) Keep your losses at the sleeping level. In the best
quote from the article, "If I keep my losses at $7,000, I
can sleep easily," Dahlman says. "I can get that back
in one race." Your sleeping level may be different
from anyone else's.
Here is a person who has managed to keep a balanced
life and raise 6 children while still maintaining his
passion for the horse racing. As the game changed,
from trotters to thoroughbreds, he was able to adapt with
the times. We have seen many games come and go in
the markets, from equity options arbitrage to the
disappearance of SOES traders. We have seen markets
change from a momentum environment to a trading-range
game. A trader must specialize in one thing yet be ready
to recognize when it is time to learn a brand new game.
Recognize that Dahlman built up a lifetime of racing
knowledge. He relies on that experience to interpret the
incredible amount of information he gathers. For newer
traders just learning to make their way in this business,
recognize that, ultimately, experience is the best teacher.
Every day that you trade, you gain experience. Keep the
discipline, keep the faith. To repeat one last quote:
"It's an art with just enough science to make it possible
for a very tiny percentage of bettors to take money away
from the herd of less disciplined bettors."
Trading? or betting the horses?
Best Wishes,
Linda Raschke
LBRGroup, Inc.
P.S. You are receiving this message because at one time or
another your e-mail address was registered in the LBR
guestbook. If you wish to be removed, simply reply to this
message with REMOVE in the subject line.
