This is the last one I will dig up from the bowels of this thread for today. There is so much here if traders will take the time to read. I have read the whole thing once. Now going through it in detail taking notes.
From post #60
I just wish I could remember all this stuff!
""Long, long ago, when the world was young and I was a broker, I had to
find trades for clients. I found a great many good trades, yet I
noticed that people would find reasons to get out of them. So I
started asking people when I had a good trade for them, if they would
rather I was right, or whether they would prefer to make money.
Yup, you read that right. And I acquired something of a reputation for
eccentricity. But I have often seen that choice presented to traders
in the subsequent 20 years.
Are you going to trade based on your opinion, interpretations, indicators, or are you going to make money?
The fact is, most traders have so many transactions, they can't keep
track of what they think, much less what their trading plan is.
There's too much pointless activity, and you have to cut down on that
type of time wasting.
But when you do that, and you start defining a trading plan and what you are doing, you're going to find two things:
Number one is that frequently, regardless of your trading method, you are going to have a loss on a specific transaction. And as we all know, you get right out of those trades.
No thinking required, no excuses...right?
Number two is that when you are finally right, you will start thinking you are on a hot streak, cracked the code, can do no wrong....basically, you'll
think you're the greatest thing since walking upright became popular.
There's just one problem. You'll start thinking.
When you have a loss, it makes sense to cut the loss. If you have
acquired any maturity as a trader, then the concept of NEXT kicks in.
Small loss, part of the game, yadda yadda, next trade.
But when you have a profit, there isn't a next right away. You
literally have to make a new decision every time you look at that
trade. Stay in or get out? And the reasons for getting out will
accumulate. You'll keep checking new indicators. You'll talk to people without a position in that market. You will literally keep searching until you have found a reason to get out of that profitable position.
But here's the thing...you never control anything in a market except
your orders. Do you really want to follow a trading plan that relies on you being right?
Saying a trend is going to end and getting out of a
profitable trade is fully as dangerous as saying a trend is going to
start and you'll stay in a losing position until it does...and make
back all your losses with interest or whatever.
Because without large profitable trades, eventually even small losses will break you.
This is what amateurs do. They think about being right. They dream
about it. Professionals think about risk. They dream of new and better
ways to calculate stops, get a higher percentage of profitable trades,
anything that helps to make up for being wrong.
I know of millionaires that will only trade mini contracts. They know how easy it is to be wrong. They know they *will* be wrong. They *count* on being wrong!
But they also try to find ways to make money in spite of being wrong.
A trading plan is *not* about what you think. It's about what will
trigger you into a trade, (selection), how you will avoid losing money,
(cutting losses), and MOST importantly of all, the whole point, the
reason you trade, letting your profits run.
Once you have a trading plan, none of these steps should require further thinking. If they do, you need a new plan. And if you know you need a new one, why trade with the old one?
As you pointed out, staying in a bond or note trade late last
year could have made up for two years of treading water for you. This
is why you undertake risky trading activity. This is what the effort
is for. Not high percentages. Not smaller losses. Huge, profitable,
trades. But you have to let your profits run to get them.
Whew. I'm getting carpal tunnel syndrome.""
There's no substitute for experience.
From post #60
I just wish I could remember all this stuff!
""Long, long ago, when the world was young and I was a broker, I had to
find trades for clients. I found a great many good trades, yet I
noticed that people would find reasons to get out of them. So I
started asking people when I had a good trade for them, if they would
rather I was right, or whether they would prefer to make money.
Yup, you read that right. And I acquired something of a reputation for
eccentricity. But I have often seen that choice presented to traders
in the subsequent 20 years.
Are you going to trade based on your opinion, interpretations, indicators, or are you going to make money?
The fact is, most traders have so many transactions, they can't keep
track of what they think, much less what their trading plan is.
There's too much pointless activity, and you have to cut down on that
type of time wasting.
But when you do that, and you start defining a trading plan and what you are doing, you're going to find two things:
Number one is that frequently, regardless of your trading method, you are going to have a loss on a specific transaction. And as we all know, you get right out of those trades.
No thinking required, no excuses...right?
Number two is that when you are finally right, you will start thinking you are on a hot streak, cracked the code, can do no wrong....basically, you'll
think you're the greatest thing since walking upright became popular.
There's just one problem. You'll start thinking.
When you have a loss, it makes sense to cut the loss. If you have
acquired any maturity as a trader, then the concept of NEXT kicks in.
Small loss, part of the game, yadda yadda, next trade.
But when you have a profit, there isn't a next right away. You
literally have to make a new decision every time you look at that
trade. Stay in or get out? And the reasons for getting out will
accumulate. You'll keep checking new indicators. You'll talk to people without a position in that market. You will literally keep searching until you have found a reason to get out of that profitable position.
But here's the thing...you never control anything in a market except
your orders. Do you really want to follow a trading plan that relies on you being right?
Saying a trend is going to end and getting out of a
profitable trade is fully as dangerous as saying a trend is going to
start and you'll stay in a losing position until it does...and make
back all your losses with interest or whatever.
Because without large profitable trades, eventually even small losses will break you.
This is what amateurs do. They think about being right. They dream
about it. Professionals think about risk. They dream of new and better
ways to calculate stops, get a higher percentage of profitable trades,
anything that helps to make up for being wrong.
I know of millionaires that will only trade mini contracts. They know how easy it is to be wrong. They know they *will* be wrong. They *count* on being wrong!
But they also try to find ways to make money in spite of being wrong.
A trading plan is *not* about what you think. It's about what will
trigger you into a trade, (selection), how you will avoid losing money,
(cutting losses), and MOST importantly of all, the whole point, the
reason you trade, letting your profits run.
Once you have a trading plan, none of these steps should require further thinking. If they do, you need a new plan. And if you know you need a new one, why trade with the old one?
As you pointed out, staying in a bond or note trade late last
year could have made up for two years of treading water for you. This
is why you undertake risky trading activity. This is what the effort
is for. Not high percentages. Not smaller losses. Huge, profitable,
trades. But you have to let your profits run to get them.
Whew. I'm getting carpal tunnel syndrome.""
There's no substitute for experience.
Illegitimi non carborundum - Noli pati a scelestis opprimi.
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