This should be an interesting read

[dbphoenix]

Fair enough. But please keep in mind that JL's approach, once he refined it, was to "probe" a market, by placing a small trade and only adding to it if it went in his favor. If the first probe went against him, then he would quickly exit and wait for his timing criteria to tell him when to try again. I think it's hard to criticize such an approach.

True. However, once the trade begins backing up, the ego often intrudes and tells the trader that the trade is still good even though it's not. At the very least, one must define what constitutes a "good" trade. Nothing moves in a straight line with no retracements at all.

I've read Reminiscences not less than four times, including the annotated version, and I never got the impression that when he was talking about his general trading principles that they included wishful thinking. So I'm inclined to believe that the sitting tight comment referred to a position that was profitable and presumably heading in the right direction.

But, again, one can lose sight of what is the "right direction" and hold on to a trade that was once a winning trade and is or is becoming a losing one. Otherwise he never would have incurred the losses he did.

 

[Gringo]

I have fallen into this 'sit tight to make big bucks' trap a few times and seen price come back to BE. During the past year or two price has bounced back from median a lot more often instead of continuing to the lower TC. Despite knowing that probabilities favoured exiting at the median I am guilty of pushing the luck and as a result have seen the gains evaporate.

Quoting from this wonderful old movie Scaramuche: The sword is like a bird. If you clutch it too tightly, you choke it… to lightly, and it flies away.

I would add that balance in trading is no different and is a combination of planning and emotional detachment (that closed Mindfulness thread!).

Gringo

 

[Frederick Foresight]

We all have to draw the line somewhere, depending on our individual approaches and inclinations. dbphoenix, earlier in this thread, you mentioned targets in passing, in connection with bias and ego. In my early days, I bought into the idea of targets unthinkingly, and allowed trades that almost reached target to go into loss. That changed. Now I don't predefine targets at all but watch the price action closely while in an open trade. Because I am inclined to take very short leaps of faith, I favor exit and re-entry over hanging tough.

While I suppose there could be a middle ground in respect of using targets, I'm inclined to believe that using targets is essentially predicting the future, whereas entry criteria are based on reacting to PA as it is occurring. And since I have never been able to predict, I personally have no use for targets.

 

[dbphoenix]

Doesn't necessarily require faith if one fully understands his market. Though some to many disagree with Dow Theory, it was at least an attempt to characterize the broader market and "judge the market by its own action", a theme taken up by Wyckoff. Once one understands this structure, the ego is in effect removed from the situation, whether it's trading the first 90m using a tick chart or trading the multi-week timeframe using daily or hourly bars.

For example, if one is trading intraday, he ought to know what he can expect from his instrument during the timeframe of a day. If he does, he knows when to exit and when to give price a freer rein. He does not just "hang on" hoping for more. But the same requirements apply regardless of timeframe or bar interval. Gringo mentioned watching price bounce off the median of the weekly channel and come all the way back to the entry. But if one acknowledges that possibility, he can exit at the "target" of the median, as you suggest, and determine what he wants to see that will prompt a subsequent reversal entry or continuation entry.

I doubt you want to get into trading, but I suggest that it is the influence of the ego that persuades one to stop listening and push ahead while ignoring the yellow flashing lights, much less the red flags. And the more successful one is, or was, the more likely the ego will assume control, particularly if one is being observed, studied, examined, "followed".

 

[Gringo]

And the more successful one is, or was, the more likely the ego will assume control, particularly if one is being observed, studied, examined, "followed".

Interesting.

 

[Frederick Foresight]

Interesting.

Yeah, kind of like a self-correcting mechanism, I suppose.

I remember reading years ago somewhere that a trader or fund manager didn't want to have his picture on the cover of a magazine. I think he said that this would be the beginning of the end. Because once you start believing your own press, you're done.

 

[dbphoenix]

The farther into the future we look, the greater the chance of unexpected variables coming into the equation.

Which may be the source of his difficulties. Instead of focusing on "now", he focused on what was expected, or anticipated, or predicted. In the meantime, the market goes on about its business and couldn't care less what anyone expects or anticipates.

 

[Frederick Foresight]

Which may be the source of his difficulties. Instead of focusing on "now", he focused on what was expected, or anticipated, or predicted. In the meantime, the market goes on about its business and couldn't care less what anyone expects or anticipates.

It looks that way. (Sorry, I deleted the post from which you quoted.)

 

[game]

Yo FF. Nice thread. Since you have read RSO 4 times, would you care to share the top 5 things that you learnt from reading it? Perhaps we could extend the discussion down that trail...

 

[Frederick Foresight]

Yo FF. Nice thread. Since you have read RSO 4 times, would you care to share the top 5 things that you learnt from reading it? Perhaps we could extend the discussion down that trail...

Thanks, I'm glad you like the thread. As for a top 5 list, please don't make it a homework thread. Reminiscences is full of timeless wisdom and cautionary tales, the combination of which provides a meaningful education.

But since you asked, what comes immediately to a tired mind at this hour includes my earlier post wherein I quote him stressing the importance of what's happening right now in terms of price above all else, and essentially going with the trend. Aside from that, Livermore advises to never add to a loser, comments on the value of probing (scaling), and to not take the market personally because it doesn't care about you. He speaks of the importance of letting profits run while cutting losses short. We've all heard it before, but it takes on special meaning when it comes from someone who has walked in his shoes. And what big shoes they were. I could go on, but then I'd just be reciting the book to you.

Your turn.