Zen and The Art of Trading
- Thread starter martys
- Start date
Hey, Mike.
The title of the book was "Ernest Hemingway On Writing".
Can't remember if that particular quote was in there or not.
Best,
Larry Phillips
The title of the book was "Ernest Hemingway On Writing".
Can't remember if that particular quote was in there or not.
Best,
Larry Phillips
The post below is taken from the ET thread "Reminiscences of a Stock Operator" on the most famous trader's handbook based on the biography of Jesse Livermore. On pg 68 is the quote: "It never was my thinking that made the big money for me. It always was sitting. Got that? My sitting tight!" which was made famous by Jack Schwager, the author of the "Market Wizards." Jack interprets it as maximizing the profit potential while in a trade. But Richard Smitten in his new book "Trade like Jesse Livermore" gives a corrected explaination: Sitting really means waiting for a trade. It is the waiting for the right opportunities that makes the big money. This new explaination certainly ties things up for me.
Merry Christmas and Happy Holidays.
Regards,
William
P.S. I can't believe Larry is here - the biggest Christmas present!
Merry Christmas and Happy Holidays.
Regards,
William
P.S. I can't believe Larry is here - the biggest Christmas present!
Hey William-- Happy Holidays
The post below is taken from the ET thread "Reminiscences of a It always was sitting. Got that? My sitting tight!" which was made famous by Jack Schwager... It is the waiting for the right opportunities that makes the big money.
This is exactly the same in poker. You may sit down to play a 4 hour session and in that time you may be waiting for ONE hand. You may lay down a good hand, and then lay down another great hand, and fold many hands in between. You are "sitting tight". In poker this is called "picking your spots". You are waiting for the right combination of elements to line up before you make your play.
This reminds me of the writer Franz Kafka, who had a note taped to his desk. The note said: "Wait".
It works the same in sports betting. Are the top sports bettors in the country picking 14 different college football teams and 9 different hockey teams and 7 pro teams to win? No, they've narrowed it down to 1 OR 2 PLAYS-- where everything seems right. Meanwhile, the amateurs are betting the whole card (which is fine, naturally, if you're doing it for fun).
This new explaination certainly ties things up for me.
Merry Christmas and Happy Holidays.
Regards,
William
William-- I'll just intersperse some comments (below) about the quotes you've post, as they strike me, rambling on. (Stream of consciousness is always less valuable than free association.)
--------------------------------------------------------------------------------
Quote from Avalanche:
The best of Remincecents of a Stock Operator.
Page 21
What beat me was not having brains enough to stick to own gameâthat is , to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didnât know it.
This seems to be a common failure, in everything from poker to NFL football. Try to do "what got you there". Stick to your game. The Dallas Cowboys in Superbowl 13 deviated from their usual defensive allignment on one play and it cost them the game. ("99% of the time we would have been in place to stop that Steelers touchdown", one of their defensive players said. "This time we decided to try something different".)
There is the plain fool who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time.
The same applies in poker. The player who plays way too many (or every) hands. In short order he is like that very skinny sheep you see on cartoon shows, shivering, the one with all the wool missing.
Page 22
The Desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street--
This is a common problem among poker players and gamblers. The need to avoid turning into an "action junkie". There is some indication that physiologically, adrenalin can reset itself to new levels. A message is passed to the brain that the "standard level" has been raised and will be in effect. This occurs in situations such as pulling guard duty in downtown Baghdad, of course, but also occurs in things like gambling and, I'm guessing, trading. Once this new adrenalin level has been "okayed" and set, it's kind of hard coming back from it. Adrenalin is a pretty primitive item-- it doesn't "reverse" easily. If you tell it, "Hey, it's okay now, you can back off", not very much happens. It's hard to manipulate. It's easier pumping it up, than it is turning it off. Take the average trader, poker player, or combat marine and put them in a hammock in a field of daisys and see how soon they go nuts. The action level has been raised. It can only be cranked back down by degrees.
Page 36
But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
True in poker too. Your job is not to win pots, or to win money, it is to make CORRECT DECISIONS. Do this and the rest will follow in due course.
A man must believe in himself and his judgment if he expects to make a living at this game.
Pretty much true in poker. Although some (you've seen them on TV!) believe in themselves just little too much.
Page 39
We not only ran into an era of industrial consolidations and combinations of capital that had beaten anything we had up to that time, but the public went stock mad.
It's possible for the wheels to fall off in a lot of different directions at the same time. We can look for this to be (thankfully) rare.
Page 59
I was twenty when I made my first ten thousand and I lost that. But I knew how and why- because I traded out of season all the time; because when I couldnât play according to my system, which was based on study and experience, I went and gambled.
There is a saying in poker: "It cost me $20,000 to learn how to play, and then after I learned how to play, it cost me another $20,000."
I can name quite a few of the top poker players in the world who can't pass a craps pit. I used to play against a guy who had to come to the poker room through an intricate path, avoiding slot machines, because if he passed a row of slot machines he would begin literally shaking and perspiring and heaving, etc.
There's people who are just hooked on the feeling of gambling.
Moral: improve your own system. Fine tune it over time. Stick to it. Don't play "table games". Don't gamble just to be gambling. (Unless you can afford it).
There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what not to do in order to win. Did you get that? You begin to learn.
Most of us who have been in the business world at one time or another have made almost every mistake it is possible to make on the way to learning how not to make them. Gradually they are weeded out one by one, as each time we learn "one more thing not to do". Eventually we "get on the program" and are now ahead of the newbies who are just starting out, making all the same mistakes.
(CONT-)
The post below is taken from the ET thread "Reminiscences of a It always was sitting. Got that? My sitting tight!" which was made famous by Jack Schwager... It is the waiting for the right opportunities that makes the big money.
This is exactly the same in poker. You may sit down to play a 4 hour session and in that time you may be waiting for ONE hand. You may lay down a good hand, and then lay down another great hand, and fold many hands in between. You are "sitting tight". In poker this is called "picking your spots". You are waiting for the right combination of elements to line up before you make your play.
This reminds me of the writer Franz Kafka, who had a note taped to his desk. The note said: "Wait".
It works the same in sports betting. Are the top sports bettors in the country picking 14 different college football teams and 9 different hockey teams and 7 pro teams to win? No, they've narrowed it down to 1 OR 2 PLAYS-- where everything seems right. Meanwhile, the amateurs are betting the whole card (which is fine, naturally, if you're doing it for fun).
This new explaination certainly ties things up for me.
Merry Christmas and Happy Holidays.
Regards,
William
William-- I'll just intersperse some comments (below) about the quotes you've post, as they strike me, rambling on. (Stream of consciousness is always less valuable than free association.)
--------------------------------------------------------------------------------
Quote from Avalanche:
The best of Remincecents of a Stock Operator.
Page 21
What beat me was not having brains enough to stick to own gameâthat is , to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didnât know it.
This seems to be a common failure, in everything from poker to NFL football. Try to do "what got you there". Stick to your game. The Dallas Cowboys in Superbowl 13 deviated from their usual defensive allignment on one play and it cost them the game. ("99% of the time we would have been in place to stop that Steelers touchdown", one of their defensive players said. "This time we decided to try something different".)
There is the plain fool who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time.
The same applies in poker. The player who plays way too many (or every) hands. In short order he is like that very skinny sheep you see on cartoon shows, shivering, the one with all the wool missing.
Page 22
The Desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street--
This is a common problem among poker players and gamblers. The need to avoid turning into an "action junkie". There is some indication that physiologically, adrenalin can reset itself to new levels. A message is passed to the brain that the "standard level" has been raised and will be in effect. This occurs in situations such as pulling guard duty in downtown Baghdad, of course, but also occurs in things like gambling and, I'm guessing, trading. Once this new adrenalin level has been "okayed" and set, it's kind of hard coming back from it. Adrenalin is a pretty primitive item-- it doesn't "reverse" easily. If you tell it, "Hey, it's okay now, you can back off", not very much happens. It's hard to manipulate. It's easier pumping it up, than it is turning it off. Take the average trader, poker player, or combat marine and put them in a hammock in a field of daisys and see how soon they go nuts. The action level has been raised. It can only be cranked back down by degrees.
Page 36
But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
True in poker too. Your job is not to win pots, or to win money, it is to make CORRECT DECISIONS. Do this and the rest will follow in due course.
A man must believe in himself and his judgment if he expects to make a living at this game.
Pretty much true in poker. Although some (you've seen them on TV!) believe in themselves just little too much.
Page 39
We not only ran into an era of industrial consolidations and combinations of capital that had beaten anything we had up to that time, but the public went stock mad.
It's possible for the wheels to fall off in a lot of different directions at the same time. We can look for this to be (thankfully) rare.
Page 59
I was twenty when I made my first ten thousand and I lost that. But I knew how and why- because I traded out of season all the time; because when I couldnât play according to my system, which was based on study and experience, I went and gambled.
There is a saying in poker: "It cost me $20,000 to learn how to play, and then after I learned how to play, it cost me another $20,000."
I can name quite a few of the top poker players in the world who can't pass a craps pit. I used to play against a guy who had to come to the poker room through an intricate path, avoiding slot machines, because if he passed a row of slot machines he would begin literally shaking and perspiring and heaving, etc.
There's people who are just hooked on the feeling of gambling.
Moral: improve your own system. Fine tune it over time. Stick to it. Don't play "table games". Don't gamble just to be gambling. (Unless you can afford it).
There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what not to do in order to win. Did you get that? You begin to learn.
Most of us who have been in the business world at one time or another have made almost every mistake it is possible to make on the way to learning how not to make them. Gradually they are weeded out one by one, as each time we learn "one more thing not to do". Eventually we "get on the program" and are now ahead of the newbies who are just starting out, making all the same mistakes.
(CONT-)
(CONT-)
Page 60
If a stock doesnât act right donât touch it; because being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
I think this is generally true of most situations. Avoid situations where things "aren't adding up", whether it's a stock trade or some guy lurking around a movie theatre.
âI should say that a chart helps those you can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke.
Humility is a fine thing. There are often indications everywhere that we are in control of a situation when (surprise) we are not. ABC logic sometimes misses something, even though it's job is to not miss anything.
Page 62
I can see now that my main trouble was failure to grasp the vital difference between stock gambling and stock speculating.
Gambling often displays a desire to be "in action". Is this driving you? It's a fun thing, it's a thrilling thing, to have everything on the line, but it's not a good thing to be gambling to be gambling. If you can afford it, though, fine.
Page 63
It was the change in my own attitude that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.
The difference between the newbie and the experienced player starts to come down to the details. The latter is not just throwing money around. He's "picking his spots".
Page 68
--the big money was not in the individual fluctuations but in the main movements â that is, not in reading the tape but in sizing up the entire market and its trend.
Without knowing much about it, it seems to me that the big movements are made up out of people, and there must be certain people out there who are valuable barometers. If you pass a long line of people in a store buying Nike shoes, talk to someone in line. This has always been my thinking-- don't know how accurate it is though.
It never was my thinking that made the big money for me. It always was sitting. Got that? My sitting tight!
Sitting-- it's HARD to do, but keeps us out of trouble. It means you are cherry-picking your times better than most.
⦠It is no trick at all to be right on the market⦠Iâve known many men who were right at exactly the right time and began buying or selling stocks at exactly the right timeâ¦
Page 69
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
In poker world this is referred to as "selectively aggressive". You play less, but when you do play, you hit it harder.
In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps!
Again, I think (but don't know) that following general conditions would be a key. What are people thinking? What are average people thinking? What's going on in the country? What are attitudes? I don't trade, but to me, this Martha Stewart thing is a no-brainer. Look at how the public perceives her. She gets out she's going to be hero (of some weird sort, admittedly). She's going to be extremely strong. Isn't this obvious? Isn't that where this is going? If I was trading I'd be all over that..
Downside: some "unlucky" bizarre thing happens to Martha in the interm.
Page 77
It was not that all I needed to learn was not to take tips but follow my own inclination. It was that I gained confidence in myself and I was able finally to shake off the old method of trading.
This reminds me of (in poker) where you "gain confidence in your reads". You think a guy is bluffing who has just made a big bet, and you say to yourself: "I believe in myself. I have faith in my reads-- I call."
Page 84
But the average man doesnât wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesnât even wish to think.
Winning is in the specifics, and those who do the work generally end up ahead of the others.
Well I wasnât that lazy but I found it easier to think of individual stocks than of the general market and therefore of individual fluctuations rather that than of general movements. I had to change that and I did.
Page 109
The big men of the Street are prone to wishful thinkers as the politicians or the plain suckers. In a speculator such an attitude is fatal.
This sounds fatal. Wishing a certain situation into existence which will then, working backwards, justify all your previous actions.
Page 111
At 164 prices looked mighty high, but as I told you before, stocks are never too high to buy or too low to sell.
Page 126
âDo you wish to gamble blindly in the hope of getting a great big profit or do you wish to speculate intelligently and get a smaller but much more probable profit?â
The problem with gambling blindly is that, while fun, and thrilling, it can break you. That is, of course, unless you get lucky. But is that part of a good master plan? To get lucky? What part of that is a sound idea?
Page 130
The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear his loss may develop into a much bigger loss, and hope that his profit may become a much bigger profit.
At some point informed and experienced Caution reaches this level. What it means to me is that you "check everything". When your instincts tell you to "pull the trigger", you don't, necessarily. When they tell you to "fold your hand", you don't, necessarily. This may appear, on the surface, like "second guessing" yourself, but it is actually a pattern of high intelligence.
Happy Holidays to all,
Larry Phillips
Page 60
If a stock doesnât act right donât touch it; because being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
I think this is generally true of most situations. Avoid situations where things "aren't adding up", whether it's a stock trade or some guy lurking around a movie theatre.
âI should say that a chart helps those you can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke.
Humility is a fine thing. There are often indications everywhere that we are in control of a situation when (surprise) we are not. ABC logic sometimes misses something, even though it's job is to not miss anything.
Page 62
I can see now that my main trouble was failure to grasp the vital difference between stock gambling and stock speculating.
Gambling often displays a desire to be "in action". Is this driving you? It's a fun thing, it's a thrilling thing, to have everything on the line, but it's not a good thing to be gambling to be gambling. If you can afford it, though, fine.
Page 63
It was the change in my own attitude that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.
The difference between the newbie and the experienced player starts to come down to the details. The latter is not just throwing money around. He's "picking his spots".
Page 68
--the big money was not in the individual fluctuations but in the main movements â that is, not in reading the tape but in sizing up the entire market and its trend.
Without knowing much about it, it seems to me that the big movements are made up out of people, and there must be certain people out there who are valuable barometers. If you pass a long line of people in a store buying Nike shoes, talk to someone in line. This has always been my thinking-- don't know how accurate it is though.
It never was my thinking that made the big money for me. It always was sitting. Got that? My sitting tight!
Sitting-- it's HARD to do, but keeps us out of trouble. It means you are cherry-picking your times better than most.
⦠It is no trick at all to be right on the market⦠Iâve known many men who were right at exactly the right time and began buying or selling stocks at exactly the right timeâ¦
Page 69
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
In poker world this is referred to as "selectively aggressive". You play less, but when you do play, you hit it harder.
In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps!
Again, I think (but don't know) that following general conditions would be a key. What are people thinking? What are average people thinking? What's going on in the country? What are attitudes? I don't trade, but to me, this Martha Stewart thing is a no-brainer. Look at how the public perceives her. She gets out she's going to be hero (of some weird sort, admittedly). She's going to be extremely strong. Isn't this obvious? Isn't that where this is going? If I was trading I'd be all over that..
Downside: some "unlucky" bizarre thing happens to Martha in the interm.
Page 77
It was not that all I needed to learn was not to take tips but follow my own inclination. It was that I gained confidence in myself and I was able finally to shake off the old method of trading.
This reminds me of (in poker) where you "gain confidence in your reads". You think a guy is bluffing who has just made a big bet, and you say to yourself: "I believe in myself. I have faith in my reads-- I call."
Page 84
But the average man doesnât wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesnât even wish to think.
Winning is in the specifics, and those who do the work generally end up ahead of the others.
Well I wasnât that lazy but I found it easier to think of individual stocks than of the general market and therefore of individual fluctuations rather that than of general movements. I had to change that and I did.
Page 109
The big men of the Street are prone to wishful thinkers as the politicians or the plain suckers. In a speculator such an attitude is fatal.
This sounds fatal. Wishing a certain situation into existence which will then, working backwards, justify all your previous actions.
Page 111
At 164 prices looked mighty high, but as I told you before, stocks are never too high to buy or too low to sell.
Page 126
âDo you wish to gamble blindly in the hope of getting a great big profit or do you wish to speculate intelligently and get a smaller but much more probable profit?â
The problem with gambling blindly is that, while fun, and thrilling, it can break you. That is, of course, unless you get lucky. But is that part of a good master plan? To get lucky? What part of that is a sound idea?
Page 130
The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear his loss may develop into a much bigger loss, and hope that his profit may become a much bigger profit.
At some point informed and experienced Caution reaches this level. What it means to me is that you "check everything". When your instincts tell you to "pull the trigger", you don't, necessarily. When they tell you to "fold your hand", you don't, necessarily. This may appear, on the surface, like "second guessing" yourself, but it is actually a pattern of high intelligence.
Happy Holidays to all,
Larry Phillips
Great comments Larry.
Don Bright mentioned that one of his traders won a million dollar poker tournament and that this traders father is a professor of gambling/probabilities at a University in Las vegas.
I forget his name but you might know of him - anyway it shows how related trading and poker are.
Don Bright mentioned that one of his traders won a million dollar poker tournament and that this traders father is a professor of gambling/probabilities at a University in Las vegas.
I forget his name but you might know of him - anyway it shows how related trading and poker are.
Thanks-- and sorry for the poor formatting of my replies-- they tend to blend together into the previous post, indistinguishable and hard to read. How do you set them apart when posting a reply?
As for the poker player in question, I don't recognize him, but probably would know him if I heard the name.
Thanks,
Larry Phillips
As for the poker player in question, I don't recognize him, but probably would know him if I heard the name.
Thanks,
Larry Phillips