Why would a beginner need a large account?

[savoir]

This may very well be true, but without further guidance, I'd say the chances of a retail trader learning correctly on his own is close to zero which is why I'm comfortable discouraging newcomers from even trying.

For example, there are countless examples of people on this site studying Al Brooks or Jack Hershey, really putting down the work and believing themselves to be making progress, but when the rubber meets the road, i.e., live trading, they're just not able to make any money.

As a newbie, it's only too easy to think you're making progress when in truth you're actually not. Trading is a very marginal business and almost good enough is usually not good enough. This is in contrast to other businesses or professions where you don't need to be on top of your field to get by.

So, what would you suggest to a newcomer or even an intermediate player who may have been learning incorrectly so far?

We all started from somewhere. A true neophyte does have one important asset for learning. He has a mind unencumbered with past failure and conventional wisdom. But a beginning can be made only once.

In answer to your question, I can’t offer much. A learner who has dug himself into a hole should stop digging and reconsider the landscape. It gets harder to do that the more time and resources have been spent to do the digging.

Jack Hershey was a great person. You may be helping someone along by referencing him.

 

[Laissez Faire]

We all started from somewhere. A true neophyte does have one important asset for learning. He has a mind unencumbered with past failure and conventional wisdom. But a beginning can be made only once.

Yes. Agreed.

However, without any further guidance the neophyte will pretty much end up on the same path as everyone else not really going anywhere. Which is why your advice would carry more weight if you could indicate for the neophyte reading how to proceed and what is the right path to follow.

Thank you.

 

[Laissez Faire]

I agree with @ Laissez Faire on the things he wrote.

I would only add that any new or intermediate trader should also focus on psychological edges and not just technical edges. Nobody wants to hear the word psychology, but that's the main reason why most traders lose.

I’m sure that other people will disagree with me and might argue that it’s due to poor risk control or money management, etc, yet in reality it’s all part of psychological stuff.

Humbly, it seems to me that focusing on psychology is often putting the cart before the horse and that it's generally overrated.

If someone have a system/methodology which works great through back-testing, forward testing and simulated trading, but fails in live trading, it's likely that the cause is psychological. I think it takes a special type of person to be risking your money on a daily basis. It sure isn't for everyone. But I would bet most don't even have a system which works consistently in the simulator in the first place.

In my own experience, psychological factors strongly correlate with the leverage employed and the validity of your trading model. At one end of the spectrum you have someone trading with high leverage and a poor, untested methodology. At the other end you have someone trading with no leverage and a great, tested methodology. The former should experience a lot of stress with emotional issues while the latter should have little to none emotional issues.

At the end of the day there's just no substitute for experience. You simply have to rack up those hours at your desk and accumulate experience trading the markets and your methodology day in and day out. Takes a long time for everyone, I think.

What do you think?

 

[savoir]

Yes. Agreed.

However, without any further guidance the neophyte will pretty much end up on the same path as everyone else not really going anywhere. Which is why your advice would carry more weight if you could indicate for the neophyte reading how to proceed and what is the right path to follow.

Thank you.

I do not share your view that all self-learners are doomed to failure. But even if a person fails at trading, it may not be a negative. He is then freed to pursue something else more suitable.

Trading is a game, not so important in the larger scheme of things, and people get into it for their own reasons. Mostly they are attracted to the money aspect and they focus on that rather than building the mind for successful participation in the markets.

As for guidance, it is difficult to provide much on a message board beyond speaking generally and casually. A few have made good attempts at transferring their knowledge to others. Jack Hershey is one worth referencing again.

 

[PPC]

Humbly, it seems to me that focusing on psychology is often putting the cart before the horse and that it's generally overrated.

If someone have a system/methodology which works great through back-testing, forward testing and simulated trading, but fails in live trading, it's likely that the cause is psychological. I think it takes a special type of person to be risking your money on a daily basis. It sure isn't for everyone. But I would bet most don't even have a system which works consistently in the simulator in the first place.

In my own experience, psychological factors strongly correlate with the leverage employed and the validity of your trading model. At one end of the spectrum you have someone trading with high leverage and a poor, untested methodology. At the other end you have someone trading with no leverage and a great, tested methodology. The former should experience a lot of stress with emotional issues while the latter should have little to none emotional issues.

At the end of the day there's just no substitute for experience. You simply have to rack up those hours at your desk and accumulate experience trading the markets and your methodology day in and day out. Takes a long time for everyone, I think.

What do you think?

Yes, I agree with you on the points you wrote. I’d only add that someone trading with no leverage and a great, tested methodology might still end up self-sabotaging himself for other various reason (e.g. conflicting values, lack of self-esteem, fear of success, inability to follow the tested system, etc).

But yes, I agree with you, we're on the same page, i.e., that in general, leverage, poor risk control and untested methodology (style drifting) is often the catalyst.

My definition of trading psychology might differ to other people's definition. Mine is not just about mental state control, but also includes:

• awareness of blind spots (what is blocking the trader from achieving success) which can then result in self-sabotage,
• insights on how to deal with such obstacles,
• how to be your own coach/mentor from a detached perspective and to be capable to make objective honest self-appraisal (because it's hard to trade from home alone without anyone around to interject some logical perspectives or to restrain the trader's behavoir)

Most people can’t do that, so they blame the methodology and engage in style-drift, that’s why I believe that the proper psychology / awareness is so important. (if I would have any clue when I first started trading, I would not go ahead)

Somone on this forum (perhaps in another thread?) wrote that knowing yourself is important, and that to me is one of the most critical psychological factors for every trader, because the market will eventually push each trader’s buttons and find out every weakness one might have.

 

[Laissez Faire]

Yes, I agree with you on the points you wrote. I’d only add that someone trading with no leverage and a great, tested methodology might still end up self-sabotaging himself for other various reason (e.g. conflicting values, lack of self-esteem, fear of success, inability to follow the tested system, etc).

But yes, I agree with you, we're on the same page, i.e., that in general, leverage, poor risk control and untested methodology (style drifting) is often the catalyst.

My definition of trading psychology might differ to other people's definition. Mine is not just about mental state control, but also includes:

• awareness of blind spots (what is blocking the trader from achieving success) which can then result in self-sabotage,
• insights on how to deal with such obstacles,
• how to be your own coach/mentor from a detached perspective and to be capable to make objective honest self-appraisal (because it's hard to trade from home alone without anyone around to interject some logical perspectives or to restrain the trader's behavoir)

Most people can’t do that, so they blame the methodology and engage in style-drift, that’s why I believe that the proper psychology / awareness is so important. (if I would have any clue when I first started trading, I would not go ahead)

Somone on this forum (perhaps in another thread?) wrote that knowing yourself is important, and that to me is one of the most critical psychological factors for every trader, because the market will eventually push each trader’s buttons and find out every weakness one might have.

Okay. Good post. And I do agree. I'd add one more thing from my prior post and say that there's a strong correlation between psychological factors and the amount of discretion involved in your method. If you're fully mechanical and even fully automated, there's little to none human intervention, so the psychological aspect should be nearly eliminated. I do think I read that there was a time were Jim Simons in recent times were panicking a bit and wanting to override his systems, so it can of course happen even within a fully mechanical system.

But generally, those that that trade more discretionary from the hip are more prone to psychological issues. I'm sure a lot of it would boil down to a lack of trust in your system (which may not be that good or simply too vague). For example, it takes a lot of experience and trust to have the market move against you and still have the confidence that it will work out fine in the end.

In many ways, trading and the markets are rigged against human nature. Doing what's required, i.e., cutting losses and riding winners and staying 100 % objective/rational at all times isn't easy.

 

[Laissez Faire]

I do not share your view that all self-learners are doomed to failure. But even if a person fails at trading, it may not be a negative. He is then freed to pursue something else more suitable.

Trading is a game, not so important in the larger scheme of things, and people get into it for their own reasons. Mostly they are attracted to the money aspect and they focus on that rather than building the mind for successful participation in the markets.

Well, my view is not that all self-learners are doomed to failure. I just believe that the typically quoted high failure rate for retail traders is very real and the smaller your timeframe or holding period the higher it is. It can most certainly done, but it seems to me that it requires a substantial amount of effort and trial and error which is way beyond most people for a myriad of reasons. Even in traditional schooling where the curriculum is laid out before you and you may have all the guidance and resources available to you people still fail massively. In trading, you don't even know the curriculum and may spend years just trying to figure that part out.

As for guidance, it is difficult to provide much on a message board beyond speaking generally and casually. A few have made good attempts at transferring their knowledge to others. Jack Hershey is one worth referencing again.

Exactly. Which is why it's so difficult. On ET, it's mostly the blind leading the blind as far as I can see. And if you venture outside ET you're left with the traditional books or vendor on YouTube.

As for Jack Hershey, I sure enjoyed his posts and have picked up a few interesting things from him. But to be honest, I don't see many of his followers or students on this board that's actually making any serious coin. So, that makes you wonder if it's a path actually worth pursuing.

Thank you.

 

[PPC]

But generally, those that that trade more discretionary from the hip are more prone to psychological issues. I'm sure a lot of it would boil down to a lack of trust in your system (which may not be that good or simply too vague). For example, it takes a lot of experience and trust to have the market move against you and still have the confidence that it will work out fine in the end.

I’ve always traded discretionarily, and been only around discretionary traders, mostly intraday trading. From my perspective, the confidence to trade discretionarily comes from being able to understand the market structure and order flow dynamics, so when I look at a chart, I first map out where I can expect buyers and sellers, where the orders are clustered, and then l'll wait/look for patterns to develop in these zones. If the patterns that I trade develop in those logical zones, then I’d need to also see buying/selling pressure and asses other relationships before taking a trade.

It's actually very structured approach based around the institutional order flow. However, lots of retail traders assume that discretionary trading means to read a book about patterns and then they stare at charts and if something resembles say a flag, or triangle then they’ll trade it. I think this where they start shooting from a hip, and get themselves into trouble, and they won’t have confidence in such approach as you pointed out.

The confidence comes from lots of manual back testing bar by bar and creating a library of set-ups, but most people won’t do that, they just want to trade and make money.

Moving market against you isn’t an issue because the stops are tight and in very logical places, something a mechanical traders cannot do. Targets are also strategically placed where buyers/sellers are expected, so it becomes basically trading from zone to zone.

To me that’s my definition of discretionary trading, others might do it differently, but nevertheless, all the successful discretional traders I’ve met, follow very structured, well thought out and tested approach, they know exactly what they need to see and what to avoid, it’s just that it cannot be done by computer.

Back to the original starting post, beginners have very tough time trading discretionary, and because they don’t know how markets works and are not psychologically ready for trading. It's also hard for them to design a robust mechanical system because they don't understand how each market trades, so their mecahnical system are not robust, and have large drawdowns.

So yes, it makes no sense for them to trade larger account, yet trading small account if one needs to live of profits creates a huge pressure. It can be hard to trade small accountbecause it encourages people to take bigger risks.

I think everyone has to “suck it up” and go through the years of frustrations. There are no shortcuts, and no easy solutions. One needs to be committed.

 

[river]

Yes. Agreed.

However, without any further guidance the neophyte will pretty much end up on the same path as everyone else not really going anywhere. Which is why your advice would carry more weight if you could indicate for the neophyte reading how to proceed and what is the right path to follow.

Thank you.

Since you referenced Jack Hershey, below is a post by him taken from an ET thread that was subsequently deleted. He talks about the key choices the learning trader should make in order to stay on the right path. No nine point list could possibly be a panacea for all decisions made along a learning path but if a neophyte decides to learn the price/volume relationship to trade, as advocated by Jack Hershey, perhaps the list below will help keep that learner on a fruitful path.

--river


jack hershey


from the ET thread For every dollar lost I make two, that is the barrier always


09-10-09 01:39 PM

Quote from Kamerajos:

if you want me to go into complete details my good sir, I can do that

but I am afraid I'll have to ask you do the same, respectfully. (PM if you want)
Notice how you told absolutely nothing about how you trade; your entire paragraph says nothing.

I at least shared info on my system 66% accuracy with 1:1 RR

you shared nothing !




You may be doing as well as expected for you.

As I review your commentary, I see you have taken many forks in the road to success.

Were you to have taken a more critical path, the forks you missed making the right choice on would have led you to much higher ground.

Let’s review and see where you got left behind by others who made better choices.

1. Accepting that the market is always right rather than predicting was a choice you didn't make. Witness your losses you mention. For me I let the market give me its "tells". You don't.

2. You did not choose to partner with the market; I did. I do my part and not the market's part. There is no probability involved in our partnership. Your use of probability means you are taking chances to "beat the market" instead of learning that the market must be trusted and you must earn the market's trust when it appears. It has not appeared for you and never will.

3. At another fork, you decided to choose to ignore the sides of the market. There are two: the right side and the wrong side. You alternate because you are unable to be told by the market which side is the right side. To be on the right side a person does not enter and exit. You are still hung up on entry/exit trading. You will always strive to be right rather than rich. I am at La Costa in Carlsbad using their hookup as I take a break from writing. (April was courteous and sent us fruit and wine last afternoon) La Costa picked us up at Dana wharf as another courtesy. We just came over from Catalina where we stayed at the Zane Grey Pueblo.

4. Staying on the right side of the market involves reversal trading. The market does two things, neither of which you are aware. It continues or changes. The corresponding trader activities for this pair of circumstances is how expert traders trade. You do neither; I do both. During the market dictating continue, I HOLD. When the market dictates change, I REVERSE. The market does not dictate enter or exit ever. But that is what you do only.

5. The market continually sends "tells" to the trader to let him know when continuing is turning into change. These leading indicators are available all the time and always express the market sentiment which is, of course as all other things: binary. I trade in a binary vector orientation which is the nature of markets. You chose the fork in the road to "BET" instead. Volume operates according to two vectors: increasing and decreasing with respect to time. You chose the fork in the road that cast volume aside as a market measure. I use volume as the leading indicator of price.

6. By the above I am told by the market the following: what is going on NOW; what is next and how fast the operating point is changing. I obey the market's mandates all the time by staying on the right side of the market; staying in the market all the time and reversing at the time the right side of the market changes. The market, binarily, informs me in NOW to accomplish this. You enter and exit by "betting" on the future you have guessed. So you have a lousy record and results.

7. At some fork in the road an expert trader learns that the definition of an expert trader does not include the requirement to trade full time. To make about 5 to 7% a day takes about 9 minutes for a beginner. Consequently, the main task of the trader is to add contracts as time passes. This is a binary matter as well. Doubling down on contracts is how it is done and only done with profits. Anyone can merely trade at a 40 contract level, part time of their choosing, and never use their original capital in trading after the first doubling (remove it).

8. In summary, you, in my opinion, have made the wrong decision at every fork in the road. I regard your opinions and viewpoints as humor from a person who is using induction instead of deduction. Deduction is the only way to learn to learn how to trade. The foundation of trading emerges from a hypothesis set and its parametric measure. 20 words total. The four basic words are: increasing, decreasing, continuing and changing. You missed the boat completely. The helicopter ride from Catalina to the mainland is about 14 minutes.

9. An expert doesn't need to see price to trade.

 

[Laissez Faire]

Since you referenced Jack Hershey, below is a post by him taken from an ET thread that was subsequently deleted. He talks about the key choices the learning trader should make in order to stay on the right path. No nine point list could possibly be a panacea for all decisions made along a learning path but if a neophyte decides to learn the price/volume relationship to trade, as advocated by Jack Hershey, perhaps the list below will help keep that learner on a fruitful path.

Thank you. That's an interesting quote. Are you a (profitable) student of Jack Hershey yourself?

I can't help wonder, though. If Jack illuminated the right learning path - why are there so seemingly few of his followers who end up making any money? I've seen so many over ET over the years who start out studying his teachings, but in the end they don't seem to make it work with actual live trading. And the few who does make any coin don't seem to be anywhere near the claims promised by the methodology and Jack himself, i.e., "To make about 5 to 7 % a day takes about 9 minutes for a beginner".

Thank you.