Interesting and thought-provoking post, darkhorse. I'll have to chew on that one for a while.
too much emphasis on defense in trading
- Thread starter marketsurfer
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Quote from darkhorse:
Perhaps a racecar driving analogy can illustrate my intended point... in order to win, the racecar driver must execute with an optimal balance of speed and control. Too much emphasis on speed and you spin out or hit the wall; too much emphasis on control and you get left behind. The two elements are like a yin and yang that inform and fulfill each other; they must be balanced on a shifting knife edge over an extended period of time.
The idea I am trying to communicate is less a "moving" from offense to defense, and more of a constant sense of balance and proportion at all times. In many ways the split is artificial. If you get jammed up and miss out on the biggest trade of the year, is that a failure of offense or defense? Your financial capital may not be depleted, but your mental capital just went into deep drawdown. Offense copout = defense debacle.
On the other hand, say you set up an excellent trade, follow through in the face of bone-jarring, teeth-gritting conditions, and are then forced to exit with a small loss because of a fluke reversal. Is that offense or defense? Your financial capital absorbed a small hit, but your mental capital broke out to new highs thanks to strong followthrough in the face of adversity... and your powder was preserved for the next opportunity. Defense coup = bigtime offense dividends.
Many of these artificial distinctions (offense / defense) are pure mental construct. Where does the hand end and the wrist begin? At what point in the eating does apple become apple core? All these discussions and debates are simply frames -- attempts to create or facilitate understanding by way of analogy or example or shared experience.
Clarity, clarity, clarity. Know the strengths and weaknesses of your approach as intimately as you know your goals and your environment and yourself, and the path will become obvious. On the knife edge, all these things are crystal clear. Intuition is born of clarity. If the reasoning ain't crystal, that's an invitation to dig.
I think it was Gurdjieff who said "in order to know a little, we must first know a lot." Or something like that. Learn a lot, learn as much as you can stand, in order to find that small stash of vital truths that will guide you home.
Aspiring to greatness is hard. Damned hard. It's like climbing Everest. Those without an iron will and a taste for blood, sweat and tears need not apply. But that's the whole point! See you at the top
Well-telegraphed darkhorse. You've described exactly what I was going through trading the system in 2004. Every attempt to increase the value of the account was met by a massive dip that took me down to the abyss (2 times in a row). Only on the third attempt was I able to hold my grounds and make new highs. That meant increasing the account by 1566% on the mother of all dips (from a 94% drawdown...a monumental task indeed) just to get back to the breakeven point. How do you think I felt??? LOL, that's were PMA comes in real handy.
Now even though I was trading with "play money", the psychological effects were quite profound. Erratic and sleepless nights coupled with great inner doubt overwhelmed my soul for nearly 2 months. Many times I thought to myself to scrap the "losing account" and start a new one, then definitely I will do better, right??(Yeah right; false justification not to mention cheating..Nope, not for me). It was only after I scrutinized my self and my erratic results and looked deeper into my trading model that I worked so hard creating from nothing, did I realize that I was missing two critical components that was holding me back from reaching my goals. The answers to improving my model were right under my nose but I was too "blind" (upset and stressed out) too seeing it. In an instant, my state of mind changed from one of despair and anguish to a sense of inspiration and pride of not giving up on myself. I then managed to go from one point of being the last on collective2's trading list to currently # 3. Wow... what a ride!!!.
Now I look back and realize that I was meant to temporarily "fail" in order to succeed. Thus failure (to me at least) somehow brings the very best out me. I don't know why it has to be that way, but it is Best of luck in trading.
I think that failiure forces us to analize ourselves with a microscope, looking for the weakest traits of our personality [or at least those that affect us the most while trading] without failiure it's imposible to evolve as a trader. No wining streak lasts forever, one is bound to take a loser trader, to be proven wrong, everyday several times. What matters is how one approaches the idea of being wrong...
it's merely human to make a mistake, but only the wise can grow stronger from their errors.
it's merely human to make a mistake, but only the wise can grow stronger from their errors.
Was going to start a new thread, but I guess this one is close enough. Here's a quote:
"One trader . . . always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not. [His mistake was in] position size. He traded much too big. For every one contract I traded, he traded ten. He would double his money on two different occasions each year, but still end up flat."
This makes perfect sense, but I think the issue goes a bit further than just a matter of reducing one's size, as if per some formula to avoid an unrecoverable drawdown. There needs to be a mental shift in regards to balancing offense vs account preservation that is more than just a matter of math; it goes right to the center of adjusting how we view risk, reward, patience, and perserverence. The question is, would that trader still have made the same "brilliant" trades if his priority had been more defensively oriented?
"One trader . . . always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not. [His mistake was in] position size. He traded much too big. For every one contract I traded, he traded ten. He would double his money on two different occasions each year, but still end up flat."
This makes perfect sense, but I think the issue goes a bit further than just a matter of reducing one's size, as if per some formula to avoid an unrecoverable drawdown. There needs to be a mental shift in regards to balancing offense vs account preservation that is more than just a matter of math; it goes right to the center of adjusting how we view risk, reward, patience, and perserverence. The question is, would that trader still have made the same "brilliant" trades if his priority had been more defensively oriented?