Through the Looking Glass

[illiquid]

Quote from Xspurt:

Sorry, I didn't make myself clear. I was not referring to position size and hence I posted here. However as a rule if you are experimenting then reduce size and the bigger the experiment the bigger the reduction in size.

The point I was trying to make is that wider stops may be a sloppy way to try to take more out of the market and the result is less control. So adding something into the mix can allow greater control and reduced tolerance. The question is, add what?

Sorry for the misunderstanding. For me, I've never really thought to myself "hey, I think I can get 10 pts here, so let me widen my stop to 3". Aside from accomodating the inherent volatility of a higher priced and/or thinner stock, I try to exit any losing positions as quickly as I can. The bigger targets are only recognized/confirmed on subsequent price action, and my mental stop-loss would probably not change. It's true that I do tend to hold positions too long, and need to work on getting more comfortable with partial exits.

For me this is a far cry from a few years back, when I would often use a big target to justify holding losers for deep and extended drawdowns, trading as if I held 20x the position size I had. It's one aspect of my trading that I can say shows definite improvement since.

That's why Redneck's list is very important. Every area you lack understanding in is bristling with tools to aid you develop a more penetrating approach. If you get stuck discuss a topic to stimulate your thinking.

That's what this thread is all about, getting me to focus my thoughts while engaging the help of others -- I'm appreciative of all who contribute.

 

[ammo]

wasn't talking about you personally, just any trader personally,take what you've learned ,the part your best at,put on a position,manage it, and wait for it to come in, manage your risk,make sure you can afford the amount you are willing to lose,and either ride it out til it comes in or cover when you find you were wrong...do u know what works best for you ,over the long haul. Become an expert at that..streamline your trading by looking at the setups that your best at,lose all emotion, it's either a winner or a loser,no love,no hate,just a trade . Imagine that you have been at this for 50 years,making money is just a job,you no longer lose enough to worry about, because you have learned how not to let risk get out of hand And you no longer care how much you make because you will never spend it all. Now it's just a game . If you think like a pro,you may become that guy in 50 years. What's the most important thing he knows,how not to lose or to lose affordably. Once you learn that ,the money will come in and the emotions will disappear. Until then keep your positions smaller, you have postd that you have made money so you have that ,you posted that you give it back, so you dont have that part of the equation. Your not after the money ,your after the knowledge,the money is yours to keep once you have that

 

[trackstar]

Quote from illiquid:

And to be honest, when I first started out, those guys were my heroes: the likes of Kovner, Lipschutz, McKay, these were my favorite interviews in MW. I wanted to be able to see the markets like they did. It wasn't until later that I realized I could never play in their world, but that romanticized view of the markets still hasn't fully disspated I suppose. In any case I'll still be first to tell anyone that what they do and what we do here are two completely different games.

May I ask you to elaborate on this post?

 

[illiquid]

Trading your own account is a game unto itself. We may share the same checkerboard and pieces with trading opm but the two are not nearly as close as they would appear to be.

For the individual, percentage return is a completely useless gauge; compounding is also a concept irrelevant to a trader that needs to pay rent and put food on the table out of his daily earnings from the market. The yardsticks used to measure one just don't count for the other. Eventually, we all must deal with trading as income as opposed to statistics.

I remember reading in MW one trader stated that trading well had evolved from 80% prognostication/20% execution into the reverse of 20% prognostication/80% execution because of competition and information flow (and this was already 20 years ago). Well I would take it one step further for the individual trader -- something like 3% prognostication/97% execution. Why? Knowing how we will interact with a market is that much more important than knowing what the market itself will do. Timing and execution in our own time-frame-work is paramount and precedes any notion of "truth" regarding price; for individuals, it's the space between us and the markets that counts most in earning our bread. Hope this makes sense.

 

[ammo]

Quote from illiquid:

Trading your own account is a game unto itself. We may

the individual.... irrelevant to a trader.... his daily earnings ... we all

I remember reading (and this was already 20 years ago). Well I... Knowing how we will interact....... in our own time-frame...... .....between us and the markets that counts most in earning our bread.

still see a lot of my or me references,you don't count, there is no you or I, in the market, the herd of sheep do not each and every one have names,they are a herd, you are part of the have not herd, have not the info, have not the acct size, have not the quant analysis , have not the room full of bots,you don't exist...your a barnacle on a ship, underwater , they dont even know you are alive.....as soon as you let go of your ego and realize how little your trading capital is to the total amount of gidas exchanged every day, u could break it down to per minute and u still would'nt be a pimple on an elephants ass....whether you are making 400 per day or 12 mil a year ,you would still be small potatoes to the overall market,this is the last time i will mention this advice, forget yourself, your ego, what you think,you don't count, accept that and that's a big load off your mind, clears up plenty of thinking space for the markt

 

[illiquid]

Quote from ammo:

still see a lot of my or me references,you don't count, there is no you or I, in the market, the herd of sheep do not each and every one have names,they are a herd, you are part of the have not herd, have not the info, have not the acct size, have not the quant analysis , have not the room full of bots,you don't exist...your a barnacle on a ship, underwater , they dont even know you are alive.....

Yes, as we go about our entries and exits we are next to nothing, the market will do what it will do regardless. But we need to reconcile the fact that although the market by default has only one eventual path, there are a multitude of different ways to trade. Meaning, there are choices that need to be made, tools to select, frameworks to construct -- in order to make some semblance of structure out of chaos. Then will come the time to hunker down, let go the ego, trade the plan, be the barnacle. But until that point we must decide how/when/why we interact with the market on our own terms -- that is the only real advantage we have from the start.

Don't get me wrong ammo; I know the point you're making and it counts a hundredfold in my own case. But aside from keeping one's ego from interfering with perception, I don't believe a barnacle could endure the number of years it takes to succeed in this game. It's passion, persistence, outright determination that pulls us through those tough times. Eventually, years later, we will hopefully achieve that certain balance you mention, the point where the passion stays with trading yet stays out of the trade.

 

[athlonmank8]

Quote from Xspurt:

Someone who understands and one of the best posts on ET. Each of these segments takes years to learn and is a great guide for research. If you don't understand it or don't use it then get stuck into that topic.

There are also hints of hidden depths that are way beyond the grasp of all but the most experienced, determined and knowledgeable traders. Very hard graft combined with creative thinking or an exceptional mentor to pick this up.

Nice one

couldn't have said it better

 

[illiquid]

P/L for the week: -6,600 on 263k shares

-15, +2,0,+7

March results (since journal inception): -12k

Monday just got away from me, no excuses. Just a friendly reminder that for a wrong position, the market will always give you as big a line as you want -- a useful distinction from a good position where well-priced shares are as rare as gold.

Sloppy is the word that comes to mind for my trading in March. Or should I say, up and through March. The big negative days that stand out are at least great for forcing one to regroup, re-assess, wipe an emotional slate clean; you stand a good chance of getting your tuition back quickly. But when I tally how many trades done on impulse, premature entries, profits left unprotected, positions held too long -- these all add up over time to form a slow-motion blow up one may hardly notice on the blotter after each session. They are silent killers that take a small piece of me every day without calling much attention to themselves. I'm recognizing the source for most of the above as my subconscious need to not only catch every move that I "should" (read: deserve to) take, but also capture the maximum reward on each and every one. Hence I will plow into entries prematurely for fear of missing out, or on the opposite side hold positions far longer than necessary (because I just have to, have to, have to still be in when that absolute top print is made). But I'm exaggerating here to make a point; these mistaken tendencies actually operate on a much more subtle level day to day, and they're all the more dangerous for it. It's months like these when the newsflow slows down that these errors come to the fore, but regardless of which month I'll need to tighten the ship alot more than I've ever been used to -- more on this later.

 

[NoDoji]

Quote from illiquid:

Hence I will plow into entries prematurely for fear of missing out,

This pretty much sums up how I took my biggest losses or churned my way to a losing day (overtrading, revenge trading).

"Miss the boat" disease. I always took heat on those early entries and often ended up in "surely this has to retrace at some point" mess that never ended well.

Then there was the phantom revenge trading/overtrading. I actually WOULD miss a good move because I hesitated, then I'd start trading dumb to "get back" what I missed. That never worked out either.

I used to log into an active trading room every morning and there were quite a few traders who started trading (and calling their trades) right off the open. They'd be in and out of stuff that was "in play" and seemed to be making money hand over fist. After quite some time I realized it was having a negative influence on me. I wanted to be able to do that, but it wasn't compatible with my style. Finally, I sat myself down and confirmed some indisputable facts about my trading:

My best days usually had the least trades. Catching just ONE good move each day on just ONE stock or future contract provides a good day's pay. I have about 8 hours each day to wait for a few good setups, then pounce on them without hesitation.

I chose a small basket of stocks that move back and forth at least a couple points each day and often more than that - AAPL, AMZN and POT. I evaluated past charts for hours and hours, memorized how the highest probability setups look in two cross-referenced time frames, practiced in my sim account to get over the fear of trading such volatile issues, and then started trading them live.

This is working very well for me. I occasionally slip into an overtrading mode, where the price action is clearly in no man's land and I'm trying to create something where nothing is happening, but I catch myself pretty quickly now. Paying $16 on 8 trades to net $6 tends to wake me up.

When you enter a trade prematurely do you average into a larger position expecting a reversal to come shortly? I strictly trade reversals (either with-trend pullbacks that pivot and resume, or the first lower high/higher low that indicates a reversal of trend), but I always wait for price to pause and reverse below the low/high of the previous bar, that way I'm entering in the direction of the move instead of fading the previous move, and I can place a stop above the pivot high/low knowing if it's triggered it wasn't a real reversal after all.

 

[~~~]

Quote from ammo:

... accept that and that's a big load off your mind, clears up plenty of thinking space for the markt

illiquid,

i think one of the biggest appeals of ammo's ".......that's a big load off your mind, clears up plenty of thinking space for the market" I reckon, is weightlessness.

example...like the Lamborghini Gallardo LP570-4 Superleggera has made the new car 70kg lighter than the LP560-4. That's equivalent to nulling the weight of the driver. So, in effect, stepping from the regular Gallardo into the new Superleggera will be like becoming weightless.

the idea is simple: By taking out the superflous, what remains will be the purest of engineering nectar that a suitably skilled driver can savour on a race-track.