Thoughts of a shorting

By no means The Jedi. I certainly respect that we all have different trading approaches. I was answering a comment made by Leugimp in which he equalled a profitable trade with a good trade, to which I disagreed, just as I disagree with a non-profitable trade equals to a bad trade.

A couple thoughts occurred to me.

Hanover said in a post that he could always find some reason not to take the trade. I agree, there will always be some signal or indicator that disagrees.

Also, there was once or twice I felt really strongly about a trade, loaded up, and got hurt. I don't load up any more.

Many times a trade I passed on would have been a winner. Lately I'm in a circle where I lose a few, lose confidence, which causes me to pass on a few would be winners, then I think I must be doing OK after all, then I take a few trades, which are losers.

So, as said previously, if it looks good to you, take it, obey MM. Win, lose, go on to the next.

I just wanted to make sure as sometimes it's easy to get confused between who said what and why on here. As for the trade itself, well that was a nice little success story. Now I definitely agree with the long sentiment that it's back to business as usual on this pair and the way from here is up. I'll be sure to post back when I find my long trade in the making.

bad = having undesirable or negaitive qualities; below average in quality or performance, etc., etc.

where does "non-profitable" not fit into the definition of bad?

The point is that when you are results oriented, results is what determines good and bad. In this case, if you lose money it was a bad trade; where you are directly associating the word trade with the results of the trade. You may have had good analysis - and a good plan, and good execution, where each of these had their own end results.

Good analysis' end result is to create a clear picture of the forces at work in the market and how certain causes and effect relationships would be likely to play out. That is the end result - not which one actually plays out.

A good plan's end result is to make decision points based on said analysis that would maximize your opportunity for a gain with little risk within the framework of good analysis. That is the end result of the Plan - not the outcome of the trade.

Good execution's end result is to enact your plan exactly as it is spelled out and to be efficient in that execution. If part of the plan allows for adaptation then following the rules for that adaptation and executing flawlessly within those rules would be the desired end result - not the outcome of the trade.

Trading's desired end result is to make money. PERIOD. If you didn't make money on that trade, the trade itself was a bad trade, as explained by the definition.

You may have had good analysis - pat on the back
a good plan - pat on the back
and good execution - double pat on the back;

But if you lost money - the trade was bad. Or if it hurts your ego less, the trade went bad(only if it was in the black at sometime before closing out at a loss).

Bottom line is that you are simply here to make money, and all of the pats on the back will do you no good if you are losing money. Of course all of those aspects are important, but only so much that they help you make money. Meaning, you may have good analysis and lose on a trade and think, damn, i should have looked into those other options more carefully, meanwhile you are not working on your execution which costs you 20 pips per trade, or more. Once you focus each aspect on the ultimate goal of making money, your focus will lead you to much more efficient and profitable trading.

Another example - how many people trade naked divergences and lose money time after time after time. If your analysis is focused on making money, you would quickly see and feel that divergences happen in trending markets, and to trade a divergence naked is to trade against the trend. You are told divergence = trend change and you follow it blindly losing time and time again. If making money is your focus, your analysis would show that a great possibility exists that the divergence will likely be followed by a pullback which could be a good time to enter with the trend as opposed to trading the divergence against the trend. My point is, get in the habit of making money, get in the habit of using information to make money, get in the habit of hurting on every losing trade and seeing if you can use that information for profit, if you are consistently losing on the same type of trade and setup, how can somebody profit from your repetitive losses. What is there to gain. Look to profit off of failures(just as in the naked divergence example), let peoples blind enthusiasm push the market to safe levels for you to make your decisions and make them pay. Make a fortune!

While I certainly see what Leugimp is saying, I think that it can be just as dangerous to try and swing the pendulum too far back that way. Yes it's in your best interest to study your losers and try and discern why they lost. However, no system will ever be perfect, nor any trader. Despite a huge statistical track record of wins, there will always be losses. It could be your ninetieth trade and sixth year before you hit a loss, but you will undoubtedly come up against a losing trade at some point, no matter how honed you and your methods are.

Take the fight club principles here, accept that some things will always be out of your control and that you will never be perfect and move on. Does it mean you should stop trying to improve? Obviously not. As soon as you do get complacent or lazy, you've lost. Just be willing to accept that some things can't be changed.

For example, genetics. Let's say you were short and running track. No matter how much you practice running and working out you did, someone who's a foot taller than you with longer legs can work out just as much as you and because of defined limitations (height) they can be faster than you, and that's something you can't control (unless you also subscribe to the Tanya Harding philosophy...). Does it mean you shouldn't work out and try and improve yourself? Obviously not, as there's still a chance that you can beat them.

For a relative example, I day trade breakouts. I have filters set up for various variables like price envelope size and time filters. But no matter how refined I may try and make the filters, there will always be days where price just barely tips off my trigger and retreats all the way back to my stop loss after pushing 3 pips in my favor. It's just gonna happen. It happened this week as a matter of fact. Was it a "bad" trade? No. It followed all the rules but just ended up as a loss. Would I repeat the same entry again? Yes, as those are the rules and the only way to

However, if that one "bad trade" happens to wipe out all of your accumulated profit...Then I definitely agree that it should be back to the drawing board for you to look after your methodology. I know that there are some systems out there that are purposely designed to only win one out of ten times with the winner making 10x as much as the losers combined. I personally could never trade that way as I seek income over capital growth.

I can see how people would equate the business of "good trades" to a case of "trying to prove yourself right". I'm also willing to bet that the more veteran and plush traders don't really bear that grudge anymore. They are, as Leugimp says, in it to earn money, plain and simple. I think that happens to be one of the cruxes that traders must overcome. Switching from one side of the equation to the other. From the side of trying to prove your ideas right, to the side of making money. Similar, but not quite the same.

I'm sure I'll add more to this post as it comes to me.

The system may not be bad overall, and maybee i'm just talking about semantics here, but the trade was a bad trade generated by a good system(assuming the system is good). You cant be a trader without having bad trades, its part of the game. Nevertheless, the trade result was undesireable, therefore bad.

Im also not trying to be picky here, but it is important that you see it as bad; not because you wouldn't make the trade again(to make the trade is to execute a plan within given analysis - if these three are done well than you really couldn't do better) but because the result is undesireable. Its not a matter of blame or fault - if you have a plan of investing in a property and execute perfectly and two months later are forced to sell at a loss, no matter how good the analysis was, no matter how well you executed your good plan, you and most will remember that deal as having been a bad deal.
Trading is no different other than perhaps at higher volumes. Thinking this way is good because it keeps you focused and honest. There is no room to disregard the undesirable result because you just so happend to run through the motions soundly. And if there is nothing to learn, than there is nothing to learn, that is ok, but at least you looked into it....Losing money is bad in and of itself - in the big picture it is inevitable and even necessary, but at the same time it is that ego thing that gets in the way of subjective improvement.

I have the feeling that WTB and Leugimp have been discussing pass one another because the earlier says that "one bad trade doesnt make a bad system", whilst the latter says that one should always stay critical of one's system and change it if itproduces too many bad trades.

Both are extremely valid points, if not the most important ones in succesfully making your way in any area in life actually.

The problem is that both those schools of thought have to go together whilst one side just waits for the opportunity to point the finger at the other side and say : HAHA !

Guess thats why we had this healthy discussion between WTB and Leugimp...


Interesting to see that you (Jedi) posed a question and found your answer yourself...in fact it seems that you actually had your answer all along but that you just needed to reconfirm this with yourself....

I think I can totally relate to this since it can be really frustrating sometimes to make a decision on when and which way to trade...especially after a couple of losses (talking about me here)...

But what frustrated me even more was when I then tried to get the answer from somebody else so that this burden would be removed from my shoulders...
I'd come here to FF and see what others say in different threads and some would shout UP,UP,UP then others would just very confidently say that it's gonna sink like a stone... it would leave me none the wiser and just more frustrated. Actually it undermined my belief in my system and I'd feel thrown around like a leaf in the wind in terms of decision making...

So I decided to finally stick to my system and developed a metaphor for myself that would carry me through.

I think of me developing my trading skills like the forging of a sword !
Katana swords are made up of two different metals:
One rod has characteristics of flexibilty whilst the other has characteristics of rigidity.
Because if the sword is too flexible it wont have as much impact and get blunt too easily but if it is too rigid it will break too easily.

Both rods need to be heated, hammered and twisted around one another, cooled in water and this process is repeated again and again.
The more often they are twisted around one another the higher the quality of the sword becomes in the end.
(The forging of a katana is probably a little more complicated than that but this metaphor is good enough for me)

This is how I look at the development of my trading.
Both metals are parts of my mind where the rigid metal is my notion to stick to my system and the flexible metal is my decision making.
Both need to get heated, hammered, twisted, cooled over and over again in order to forge a trading ability of high quality that will cut it and get those pips home. Even with Jedi the most important weapon is their mind.

It only struck me when I read that someone wondered why noobs think that forex is as easy as jumping in making a few clicks and go home with big bucks.
Because that is what I was believing deep down.
But it is a trade like any other that has to be learned or forged and no one can take this of my shoulders and every decision I take furthers my development.

One practical thing that I started doing and which seems priceless is documenting my trades.
I Print out screenshots with comments on why I took a trade and what I've looked for, any concerns etc. and file them and later do the same with the outcome of that trade i.e. when my S/L or T/P has been hit.

All the best

MP