especially when focused on one instrument/market...
Words of Wisdom
- Thread starter duard
- Start date
The interesting thing about waves is they occur across all aspects of nature. Of course in trading they clearly exist. Transmitted waves through liquid medium are worthwhile studying with regards to finacial instruments IMHO. For instance as waves travel across open water the larger waves gobble up the smaller waves and lengthen proportionately in their periodicity. They also "stack" which is to say they bunch up closer together between "sets." The same phenomenom exists in the financial markets whereby an instrument experiences periods of volatility "bunched" together followed by quiescence. Mandelbrot has published with regard to this documented tendency in nature. Witness the hurricane season this year and compare with last year. It is no random chance that severe weather occurs "back to back." It is a natural phenomena which if studied and undestood can make understanding tha markets much easier.
I can go on and on but I leave it for now.
D.
A financial market is the exchange of a financial instrument between buyers and sellers. If there are more buyers than sellers than price moves up and vice versa. Think of executed buy and sell orders as "packets." These packets exert an influence on price and create "wavelets." These wavelets combine to create "waves." These waves combine to create a "movement" or "trend." You obviously will have many opposing packets, wavelets, waves, and movements at all times. What becomes noticeable, however, is that at times one side or the other (buyers or sellers) becomes dominant when the conditions are favorable and money can be made at a favorable risk/reward ratio. Recognizing the proper set of market conditions is just that. Sizing up all the various combinatorics can result in systematic success. Of course this is just one aspect of profitable trading but obviously a critical ability.
"The speculator is not an investor. His object is .... to profit by either a rise or fall in the price of whatever he may be speculating in. Therefore the thing to determine is THE SPECULATIVE LINE OF LEAST RESISTANCE AT THE MOMENT OF TRADING; and what he should wait for is the moment when that line defines itself, because that is his signal to get busy." Remiminiscences of a Stock Operator P122 3rd paragraph.
D.
"The speculator is not an investor. His object is .... to profit by either a rise or fall in the price of whatever he may be speculating in. Therefore the thing to determine is THE SPECULATIVE LINE OF LEAST RESISTANCE AT THE MOMENT OF TRADING; and what he should wait for is the moment when that line defines itself, because that is his signal to get busy." Remiminiscences of a Stock Operator P122 3rd paragraph.
D.
Never enter a trade unless you can point out why you think you're right, and more importantly, how you'll know you're wrong.
"Don't get married to a broker"
That is definitely sound advice. But of course, all the prettiest girls do.<P>I would add, "Buy low, sell high," in case it hasn't already been offered here.
Q
Murphy's Laws in the Stock Markets
http://www.greekshares.com/murphy's_laws.asp
Developing Trading Strategies
* Sometimes it takes several years to recognize the obvious.
* The simpler it looks, the more problems it hides.
Buying Stocks
* If anything can go wrong, it will.
* If anything can't go wrong, it will.
* If you know something can go wrong, and take due precautions against it, something else will go wrong.
* You will never run out of things that can go wrong.
* Failure is the opportunity to begin again more intelligently.
* The less you do, the less can go wrong.
* You can never tell which way the train will go by looking at the track.
* Always assume that your assumption is invalid.
Selling Stocks
* You never know how soon it is too late.
* When things go wrong, don't go with them.
* If you are in a hole, stop digging.
Following Trading Strategies
* Being punctual means only that your mistake will be made on time.
* A good place to start from is where you are.
* To learn from you mistakes, you must realize that you are making mistakes.
* Experience is what causes you to make new mistakes instead of old ones.
* The best defense against logic is ignorance.
* If you enjoy what you are doing, you are probably wrong.
About Diversification
* Things go wrong all at once, but things go right gradually.
Customer Service of Financial Sites
* If you don't know the answer, someone will ask the question.
* You don't have to explain something you never said.
* If you want to make enemies, try to change something.
* Be kind to everyone you talk with. You never know who's going to be on the jury.
* Never be too right too often.
* The only changes that are easily adopted are changes for the worse.
* The less you have to do, the slower you do it.
* Always do exactly what your boss would do if he knew what he was talking about.
* The e-mail never comes when you have nothing to do.
* The less you say, the less you have to retract.
UQ
Murphy's Laws in the Stock Markets
http://www.greekshares.com/murphy's_laws.asp
Developing Trading Strategies
* Sometimes it takes several years to recognize the obvious.
* The simpler it looks, the more problems it hides.
Buying Stocks
* If anything can go wrong, it will.
* If anything can't go wrong, it will.
* If you know something can go wrong, and take due precautions against it, something else will go wrong.
* You will never run out of things that can go wrong.
* Failure is the opportunity to begin again more intelligently.
* The less you do, the less can go wrong.
* You can never tell which way the train will go by looking at the track.
* Always assume that your assumption is invalid.
Selling Stocks
* You never know how soon it is too late.
* When things go wrong, don't go with them.
* If you are in a hole, stop digging.
Following Trading Strategies
* Being punctual means only that your mistake will be made on time.
* A good place to start from is where you are.
* To learn from you mistakes, you must realize that you are making mistakes.
* Experience is what causes you to make new mistakes instead of old ones.
* The best defense against logic is ignorance.
* If you enjoy what you are doing, you are probably wrong.
About Diversification
* Things go wrong all at once, but things go right gradually.
Customer Service of Financial Sites
* If you don't know the answer, someone will ask the question.
* You don't have to explain something you never said.
* If you want to make enemies, try to change something.
* Be kind to everyone you talk with. You never know who's going to be on the jury.
* Never be too right too often.
* The only changes that are easily adopted are changes for the worse.
* The less you have to do, the slower you do it.
* Always do exactly what your boss would do if he knew what he was talking about.
* The e-mail never comes when you have nothing to do.
* The less you say, the less you have to retract.
UQ
Interesting read about money management from the MM thread. I think this has merit.
Quote from achilles28:
I want to contribute to this thread. But after reviewing the posts and contemplating my knowledge amassed on the subject thus far, there are few *generalized* axioms I can offer.
The starting point for every newbie trader or newbie strategy is start small. 2% rule is good. 1% is better.
After that, sky is the limit.
Once a trader *completely understands* the rationale behind his edge - why it exists, what occurs before it, the anatomy/profile of a winner, and has hundreds of historical trades under their belt - one has arrived at a place where mm specialized to his/her particular strategy can be applied effectively.
And this is the crux of the whole money management issue - moderate utility can be taken away from applying the general principles of 'max drawdown', risk of ruin, optimal f, kelly yadda etc, but thats it.
The real meat and secrets of mm lie within your OWN strategy. Your own strategy - once its understood inside and out - will tell you where to add, how much, whether to fade or not, where to pyramid. etc.
Its the intimate understanding of ones own strategy that will unlock the secrets of 'money management' for the trader. The general principles thrown around on this thread will just ensure you survive long enough to get there.
...
Hi achilles,
Your contribution is the only thing worthwhile in this whole junk thread. As jackbird said "fuzzy maths" only useful for losers and their math quack sycophants.. Don't forget that dadioos like van Tharp only cater to that kind of greedy all-believing public.
Of course if you insist, MM makes sense if you understand this as your own global technique of "how to speculate with your money". No little formulas apply in any general way to this endeavor. Win or loss depends on the judicious manipulation of quite subtile insights. Mathematics can have its place in this but almost nothing can be naively borrowed from probability theory alledgedly applied in a haphazard manner by doctrinaire know-nothing losers.
Quote from achilles28:
I want to contribute to this thread. But after reviewing the posts and contemplating my knowledge amassed on the subject thus far, there are few *generalized* axioms I can offer.
The starting point for every newbie trader or newbie strategy is start small. 2% rule is good. 1% is better.
After that, sky is the limit.
Once a trader *completely understands* the rationale behind his edge - why it exists, what occurs before it, the anatomy/profile of a winner, and has hundreds of historical trades under their belt - one has arrived at a place where mm specialized to his/her particular strategy can be applied effectively.
And this is the crux of the whole money management issue - moderate utility can be taken away from applying the general principles of 'max drawdown', risk of ruin, optimal f, kelly yadda etc, but thats it.
The real meat and secrets of mm lie within your OWN strategy. Your own strategy - once its understood inside and out - will tell you where to add, how much, whether to fade or not, where to pyramid. etc.
Its the intimate understanding of ones own strategy that will unlock the secrets of 'money management' for the trader. The general principles thrown around on this thread will just ensure you survive long enough to get there.
...
Hi achilles,
Your contribution is the only thing worthwhile in this whole junk thread. As jackbird said "fuzzy maths" only useful for losers and their math quack sycophants.. Don't forget that dadioos like van Tharp only cater to that kind of greedy all-believing public.
Of course if you insist, MM makes sense if you understand this as your own global technique of "how to speculate with your money". No little formulas apply in any general way to this endeavor. Win or loss depends on the judicious manipulation of quite subtile insights. Mathematics can have its place in this but almost nothing can be naively borrowed from probability theory alledgedly applied in a haphazard manner by doctrinaire know-nothing losers.