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Zen and The Art of Trading
- Thread starter martys
- Start date
"POKER RULE#45: Observe the rhythm of the wall. When your opponents are all bettnig away very strongly, smoothly, and confidently, the good cards are distributed away from you. Picture it as a wall, one that goes up on one side of the table and comes down on the other. Ask yourself where you are in relation to this. Don't take on the high wall with your low wall."
Observe the rhythm of the market. Is it to the advantage of your strategies? Sit on your marginal hands. Back off when it's the turn for other people to take money even if it means not to trade at all for the day.
Observe the rhythm of the market. Is it to the advantage of your strategies? Sit on your marginal hands. Back off when it's the turn for other people to take money even if it means not to trade at all for the day.
"POKER RULE#46: Wait for your turn."
Is this the setup in your plan? Is the market conducive to your type of trading? Are you focused enough to trade? Or are you tired?
It is important to monitor overtrading. I was not going to spell it out for everybody because people should at least do their own thinking but hopefully it helps people I want to help. I found it quite helpful to keep it in mind by running this equation mentally. One can see clearly the problem with "trying too hard" with just simple math:
To illustrate my "pigeon hole" theory, I am going to use the scalper scenerio:
1) Traders pretty much have to stick with a very few non-conflicting setups.
2) Each technical setup only occurs a LIMITED number of times each day.
3) Let's say the average number of opportunities is 10x a day.
4) Let's say I am a scalper taking 1:1 risk/reward trade. In order for me to make money, my win/loss would have to be around 7 wins/3 misses or even better 8 wins/2 misses:
reward=1pt risk=1pt.
10 wins 0 losses = 10 pts = $500 P/L per ES contract
9 wins 1 losses = 8 pts = $400
8 wins 2 losses = 6 pts = $300
7 wins 3 losses = 4 pts = $200
6 wins 4 losses = 2 pts = $100
5 wins 5 losses = 0 pts = $0
5) If instead, I trade 20x because there are only 10 pigeon holes, there will be no place to go for the other 10 loser pigeons. Assuming I am good enough to get all ten holes from all the trying, my win/loss has decreased to 10:10 or 1:1 then I make $0 and the commissions will make the final deadly blow.
You have no choice but to have patience - it's simple math really. When in doubt, back off and stay off. The other important point is to stay away from trading setups outside of your plan especially when you are losing, it creates unnecessary chaos into your P/L equation. Yes, you might lose opportunities but at least not your head.
Is this the setup in your plan? Is the market conducive to your type of trading? Are you focused enough to trade? Or are you tired?
It is important to monitor overtrading. I was not going to spell it out for everybody because people should at least do their own thinking but hopefully it helps people I want to help. I found it quite helpful to keep it in mind by running this equation mentally. One can see clearly the problem with "trying too hard" with just simple math:
To illustrate my "pigeon hole" theory, I am going to use the scalper scenerio:
1) Traders pretty much have to stick with a very few non-conflicting setups.
2) Each technical setup only occurs a LIMITED number of times each day.
3) Let's say the average number of opportunities is 10x a day.
4) Let's say I am a scalper taking 1:1 risk/reward trade. In order for me to make money, my win/loss would have to be around 7 wins/3 misses or even better 8 wins/2 misses:
reward=1pt risk=1pt.
10 wins 0 losses = 10 pts = $500 P/L per ES contract
9 wins 1 losses = 8 pts = $400
8 wins 2 losses = 6 pts = $300
7 wins 3 losses = 4 pts = $200
6 wins 4 losses = 2 pts = $100
5 wins 5 losses = 0 pts = $0
5) If instead, I trade 20x because there are only 10 pigeon holes, there will be no place to go for the other 10 loser pigeons. Assuming I am good enough to get all ten holes from all the trying, my win/loss has decreased to 10:10 or 1:1 then I make $0 and the commissions will make the final deadly blow.
You have no choice but to have patience - it's simple math really. When in doubt, back off and stay off. The other important point is to stay away from trading setups outside of your plan especially when you are losing, it creates unnecessary chaos into your P/L equation. Yes, you might lose opportunities but at least not your head.
POKER RULE #47: Fit yourself into the flow of the game... Some players approach the game of poker simply as a game, the way you might play Chinese checkers, or Old Maid. They can be observed playing their own cards and nothing else, staring hard at their hand, brows furrowed, never glancing up, strugglnig along. It's as if they are playing in a vacuum. Still others do the opposite, trying to dominate all parts of the game, force victory, muscle over the game with various aggressive maneuvers...
Do either of the above two approach work? Yes, intermittently. A better approach - one that experience shows works more frequently - is to try to fit yourself into the flow of it...
In our business plan, we determined our role in the marketplace. Do our technical setups test out over time to serve our role? Do we stick with our plan? Do we trade only when the market flow is to our advantage? Or are we forcing our setups into the flow in order to pay for the groceries? Scared money rarely wins. The chance of winning will be even less if we deviated from a VALID plan.
Do either of the above two approach work? Yes, intermittently. A better approach - one that experience shows works more frequently - is to try to fit yourself into the flow of it...
In our business plan, we determined our role in the marketplace. Do our technical setups test out over time to serve our role? Do we stick with our plan? Do we trade only when the market flow is to our advantage? Or are we forcing our setups into the flow in order to pay for the groceries? Scared money rarely wins. The chance of winning will be even less if we deviated from a VALID plan.
"POKER RULE#48: Become aggressive within the opening that appear... Note how much more efficiently is the energy expended by the better players - projecting it deftly into openings they see between their opponents, and if none exist, remaining stationary or fallback. Their energy either projects itself into the openings or conserves itself."
In Chuang Tzu's chapter on preservation of vitality, Cook Ding butchers the cows non-coercively. Non-coercive trading is all about conserving one's energy and money by not participating in any "fighting-thru" trades. Sizing up the opposing forces before dipping your toes. Lady Luck is kind enough to be there on our winning trades. Don't expect you are any more special to her than any other participants. Don't count her in as part of your equation for pulling the trigger.
In Chuang Tzu's chapter on preservation of vitality, Cook Ding butchers the cows non-coercively. Non-coercive trading is all about conserving one's energy and money by not participating in any "fighting-thru" trades. Sizing up the opposing forces before dipping your toes. Lady Luck is kind enough to be there on our winning trades. Don't expect you are any more special to her than any other participants. Don't count her in as part of your equation for pulling the trigger.
"POKER RULE #49: Pick your times of confrontation... There is a famous cautionary Zen quote that says: "When two tigers fight, one will be killed and the other will be seriously wounded." What this means is: Why use strength against strength... Why be wounded or killed? Withdraw; conserve your energy for a better opportunity. Pick your spots - times of confrontation - carefully."
Don't get suck into a marginal trade or choppy markets. Minimize the loss if it doesn't feel right. Lower your efforts and activities in general. Conserve your energy and money for the right trades. Don't press the gas petal in a traffic jam.
Don't get suck into a marginal trade or choppy markets. Minimize the loss if it doesn't feel right. Lower your efforts and activities in general. Conserve your energy and money for the right trades. Don't press the gas petal in a traffic jam.
POKER RULE#50: Adjust your game for how much competition you have in the hand. Many players play their cards exactly the same way every time, independently of how many opponents they are up against or how strongly these opponents are bettnig... We need to factor these variables in. Why join in to times when it is an unfavorable circumstances?
Besides chart pattern and volume to dictate the technical setup, one also need to observe the market dynamics and support/resistance in order to decide whether to participate or not and in what capacity (scalping or riding trend).
Besides chart pattern and volume to dictate the technical setup, one also need to observe the market dynamics and support/resistance in order to decide whether to participate or not and in what capacity (scalping or riding trend).
"POKER RULE #52: Unlike many games and sports, poker has a third factor: the cards."
In trading, we pick our cards, i.e. we wait until the cards are right. If we press it with the wrong cards, there is noone to blame but ourselves for not being risk adverse. Worst yet, if we win with marginal hands... How unlucky!
In trading, we pick our cards, i.e. we wait until the cards are right. If we press it with the wrong cards, there is noone to blame but ourselves for not being risk adverse. Worst yet, if we win with marginal hands... How unlucky!
Quote from et_user:
What about Poker rule 51, up and down the ladder.
I'm collecting all the rules as interpreted by you into a word file to compliment the book.
Thanks.
Trading causes premature aging... I am getting senile.
"POKER RULE #51: Learn to play up and down the ladder. Don't just downscale your bets when you get cold, downscale the actual way you play the game. Back off within your method of play, alternately loosening up your game when things are going well and tightening back up when they are not.
Mathematician tell us that each hand takes place independently of all others. This is good advice to ignore..."
Back off and stay off the market when you get out-of-sync (confused) with the market rhythm. Profits are not important at that point. I try my best to scratch the trade when things doesn't look right or I don't like the rhythm (dull market).
Marty Schwartz suggests to go "neutral", take the lump sum, clear the head and digest any loss before going at it again. Don't go stop and reverse right away. Before you know it, they'll be taking the house away.
Sometimes I go "I am done with this swing for this time frame. I am getting tired. Let's not try to screw things up. Take a break and see if the next higher time frame sets up."