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Day Trading vs. Swing Trading vs. Position Trading 84 replies

Empirical observations and mathematical axioms in FX 0 replies

Attachments: Axioms of trading
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Axioms of trading

Quoting 4x_Trader
"Majority decision is always wrong" go against the crowd and you could make money surprisingly!

So right now are you long USD/JPY, GBP/JPY, AUD/JPY, CAD/JPY, or NZD/JPY?. I'd like to if so, what's your risk tolerence?
  • Post #62
  • Quote
  • Edited at 8:54am Oct 29, 2007 8:27am | Edited at 8:54am
Axiom 7: All profitable traders use discretion.

There is no system that can be traded strictly mechanically. If it could, that would be the Holy Grail, and it does not exist, so therefore, there is no strictly mechanical profitable system. Discretion comes from experience. It is a developed instinct, a gut feel, or simply recognizing learned patterns in price action, along with heeding fundamental changes in some cases.

I could be argued that everything a trader has learned and experienced have become a part of his "system", and he does it automatically, mechanically, and therefore he is not using discretion. In the strictest sense of the word, this could be true. But to the observer, the student, the outsider, this trader is using discretion, by definition.

No profitable trader can tell you exactly what it is they do. There are too many factors. Too many things to write down into a system that someone else could learn and follow as a system. Too many contingencies to program into an EA.

The corollary to this is: You'll just have to learn to trade.

And, probably best said by profitplay in post #34:

The Holy Grail is the Trader, not the System
Quoting blueruby
I've got another one coming, maybe, or maybe it's the wine....

It will go something like, "the same thing will bi+ch slap you again and again, until you learn the lesson".

Is that an axiom? I'm pretty sure it is.
Yes, yes. The market will teach you, all you have to do is listen. And it isn't a whisper, it stomps you into the ground again and again and again indefinitely, Jurassic park style, until you learn your lesson. Keep a journal. Write down when you do well, what you did! Do not just record mistakes and bad trades. It is much more important, it is vital, to keep records when you win! So how to say this in one sentence or less....

Axiom 8: The market will teach you exactly what you need to know to become profitable.

Naw.

Axiom 8: You will keep getting the same lesson over and over until you learn it. or maybe "tested until you pass the test"....

Nope.

Axiom 8: Your dragon will keep toasting you until you slay it.

Too vague.

Well, whateverthehell it is, I wish I'd listened to myself back then.
Quoting blueruby
The Holy Grail is the Trader, not the System
PS The people selling systems will never tell you this.
Quoting blueruby
This is a tough one. Up until today I would have agreed. I don't believe that there's a system that can be traded mechanically. I don't believe in EA's. I've concluded that discretion is what makes a good trader.

But today I sent off money for a highly recommended EA. It's impressive. The programmer was top notch. He included all the tricks. We'll see how it does. Until then, I'm optimistic. I would love to be proven wrong.

I think that's an opinion, not an axiom. Just for today, I believe in systems. The fact that it's open for argument means it's not an axiom, sorry.

i've been looking at eas for learning purposes only...just curious how that ea worked out???
Quoting dagoods
i've been looking at eas for learning purposes only...just curious how that ea worked out???
See what was being discussed in the original post, then see post #62.
This was one the most meaningful threads here. It's a pity it died out. Here is what I believe to be the only useful axiom in trading. It has three components.

1. Trends exist.

2. A trend is defined as a linear regression line connecting two points in the price X time space.

3. There's only one regression line that connects any two points in this space.

The rest is simple :. Choose two points on the TF that suits your temperament, draw a regression line, and apply signal detection theory to tell the error/noise around the regression line from a change in the slope direction...
sans peur et sans reproche
  • Post #68
  • Quote
  • Edited at 5:26pm Dec 29, 2007 3:53pm | Edited at 5:26pm
One way to look at axioms, in addition to the common "self-evident" description, is to understand that an axiomatic statement is implicitly assumed in any other statement we can make about the subject. I don't know that I would call most of the proposed axioms in the thread so far actual axioms in a logical or mathematical sense. To provide some flavor for what I mean, here are some examples of what I would normally think of as "axioms" regarding the market. We want them to be self-evident and beyond dispute right?

I. Some people desire certain assets.

II. Some people own certain assets.

III. A market allows people to communicate their ownership of and their desires for these assets.

IV. A person may borrow an asset from another person

V. A person may exchange one asset for a second asset with another person.

VI. When two people exchange assets, a market allows other people to see the ratio of one asset to the other in the exchange. This is called price.

That's what I came up with after a few minutes of thought. Now you may want to go on and say "VII. A price can only change as the result of a transaction" or something like that. But this wouldn't really be an AXIOM because you can derive that statement from the six existing axioms (I think).

I haven't actually analyzed this with the predicate calculus or anything, so there are probably some glaring errors. I just wanted to provide an idea of what a real set of axioms might look like.
BUY LOW SELL HIGH
Quoting ChesterB
BUY LOW SELL HIGH
Yep, but this whole forum, and this thread, and every trading book and piece of advice in existence was written to help solve the mystery of how to know when you are at a "high" or a "low".

Easier said than done, isn't it
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
Quoting blueruby
Someone didn't read the thread. Go figure.
I read the thread. You wanted an axiom , yes ? Geez, I didn't
realize my answer was too obvious to be an axiom.
Quoting ChesterB
I read the thread. You wanted an axiom , yes ? Geez, I didn't
realize my answer was too obvious to be an axiom.
My mistake, sorry.

I talked about axioms being general by nature and used the example "buy low sell high" but it must have been in a different thread, I thought it was in this thread. I guess I didn't know what was in my own thread!
to speculate means we jump into action while there is some unknown factor,
Then every trade we enter is speculation.
indeed, as we often say : "give me one good reason" (only one reason to do something)
As part of Blue's trading style, system, philosophy, whatever you want to call it, he states (paraphrased) "Require three reasons to enter a trade but only one to exit". Incorporating this one simple rule has improved my trading dramatically.

This leads to a great quote I read in someone's sig (sorry, forget who):
"It's better to be out of a good trade looking in than to be in a bad trade looking out."
Axiom 8: a profitable trader can use any system and make money.

That's because they know when to stay out of a trade, and when to bail out, regardless of what the system says.
Axiom 9: A successful trader cannot tell you exactly what they do.

They have an "instinct" honed by many hours of education and experience. Basics can be taught, but that cannot be.
Axiom 10: Every trader uses a different set of tools, even if the difference is slight.

Therefore, considering Axioms 8, 9, and 10, I postulate that every trader has to discover or develop his or her own system.
I finally got it, folks.

Axiom 11: It has to be fun, or you will not succeed.

If it's not fun, you certainly won't succeed. That's why you have to find YOUR system. We're all different, so what's fun will be different to each person. Trading can be extremely stressful. If it's all stress, it will just kill you. Find a system that's fun, that takes the stress out of it for YOU.

Happy trading, everyone!
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