Three Laws in Trading

1. I objectively identify my edges
2. I predefine the risk of every trade
3. I completely ACCEPT the risk or I am willing to let go of the trade
4. I act on my edges without reservation or hesitation
 
Your first two points CANNOT be correct if you assume that people can actually make money trading. The reason is simple: if your two first points are correct, then it means that markets are completely random. That is, no "edge" as most people call it, exists in the market and you believe in the random walk / markets perfectly efficient theory. If that is true, then it does not matter what your money management rules are. A perfectly random market cannot be gamed. It is mathematically impossible.

Of course i do not agree with your first two points. Past action can and does regularly influence future action. One very obvious and simple example can be given by program trading or institutional buying/selling. Assume that an institution needs to acquire 5000 gold contracts. Such a buy would take weeks or perhaps longer to initiate. Or perhaps a producer mines a huge sum of gold and is selling 10k contracts. This takes time to do. Thus, price action at the start of one of these buys/sells is predictive of the future.

Quote from alex.samant:

hey. these are 3 laws that are commonly broken by the majority of traders, kinda explaining why the grim statistics with regards to the average success rate of a trader.

1) Nothing that happened in the past (near or far) has the power to influence what will happen in the future (near or far)

2) The outcome of your trade will depend 100% on your money management decision based on the present moment

3) Your trading routine has to be part of your life and NOT the other way around


Just a little something to think about .... ;)

Cheers y'all
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Quote from alex.samant:

hey. these are 3 laws that are commonly broken by the majority of traders, kinda explaining why the grim statistics with regards to the average success rate of a trader.

1) Nothing that happened in the past (near or far) has the power to influence what will happen in the future (near or far)
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You can't deny causality that's ridiculous. Everything that happens is influenced or caused by what came before.


2) The outcome of your trade will depend 100% on your money management decision based on the present moment
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The present moment does not exist. Decisions can only be based on the past, and can only influence the future. If you believed law 1 why would you bother with decisions or actions since they would have no effect.


3) Your trading routine has to be part of your life and NOT the other way around
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That doesn't make sense.
 
Quote from plyka:

Thus, price action at the start of one of these buys/sells is predictive of the future.
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you can think that after a positive outcome it was your predictive ability that led to that, but in the end it was price hitting your target. When it doesn't hit your target and it hits your stop then you can think it was you were off on your prediction , but in the end it just hit your stop. If there was predictive abiltity the outcome of profitable traders would be 95%...again im not saying you can't make money trading.
 
920.23 on the sp....someone predict where it will be in 2 hours take the past 2 hours data and let me know what it tells ya...:D

if past action is indicative of where we are headed then we should be at ZERO on the s&p...:eek: surely the ass raping price action seen from late 07 to mar 09 would indicate we should be at zero
 
Quote from alex.samant:

.

1) Nothing that happened in the past (near or far) has the power to influence what will happen in the future (near or far)
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I guess you probably won't be welcome at any parties at George Soros house. lol

He doesn't take too kindly to the dismissal of his theory of reflexivity.
 
Quote from euclid:




The present moment does not exist. Decisions can only be based on the past, and can only influence the future. If you believed law 1 why would you bother with decisions or actions since they would have no effect.
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Decisions/actions you make or take will influence YOU and perhaps many but it will never tell you where price is going even by looking at where price has been. Your desicion will most definitely affect your account but not where price is headed. Price is going where it goes wether you think it shouldnt or should or did in the past...the actions/desicions you make are not what the OP was referring to...he was refferring to PRICE now or later and it not being influenced by where PRICE was when YOU enter the trade, not just in your head by looking at the chart. If you can predict where price is headed you'd be a millionaire multi gazzillionaire...
 
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