Call me Vidvad - I day trade futures

Agreed, but consider the fact that the roulette epiphany (or thinking in probabilities as Mark Douglas puts it) doesn't appear until after more than halfway through Trading in the Zone, while the first half of the book could be said to lay the foundation for the importance of the roulette epiphany by laying the groundworks for what's to come.

I don't know about you, but I think that a lot of importance (relating to subjectivity and intuition) for understanding the importance (and the intended learning outcomes) of the mechanical stage is covered in that first half. Which is why i said what I said in my previous post.

Differently put: If you really understand the first half of the book, perhaps the mechanical stage will be accomplished a lot faster?

The roulette epiphany is directly related to the fact that I did understand the Douglas's mechanical stage, and as a result, I told myself that I had accepted the risk.

The epiphany was that I really had not accepted the risk. Losses still bothered me a great deal more than I had been consciously aware of them doing.

I started another evaluation account with Topstep to test the "One instrument, One Method, One Week" hypothesis.

I'll be trading ES primarily and I will manage risk by reducing size using micros (MES) as well. I started this morning. I'm on the road (actually "on the rails") and I was trading on a train using a tiny surface pro, and as a result I missed my first buy stop order, and had to wait for it to be filled on a pullback with a limit order.

I'll post a screenshot later to document the process. I'll be posting all the trades - the good, the bad, and the ugly.

One Instrument, One Method, One Week.

To me the juice of the book is the first half. Once it becomes how-to....well I never related to that either.

And perhaps I like the first chapter after the intro stuff the most, i.e. the one entitled Taking Responsibility, with memorable words such as


Says a lot to me, and can help one overcome fear of losses.

Hi medici

You quoted.
“You have to understand, with every fiber of you being, the ways in which you are and are not responsible for your success as a trader.”


Winning is actually a choice, you either choose to win or you choose to be a loser. You are totally responsible for your success as a trader because if you are not profitable, you need to find out what you aren’t prepared to do.
How many traders here are prepared to spend 1 hour a day tagging their trades into a professional trading journal and reviewing every trade they take after the session has ended. Replay those trades again to improve your execution and watch video clips of your trading in real time.
This is how they find their edge?

This is our responsibility, our choice to become either a winner or not. Winners do what most are unprepared to do, work harder than every one else.

just my 2cent suggestion ...... look for divergence between es, nq and ym, you can catch some big easy moves

and if you trade oil then look for divergence between oil, rb and harbor oil

Hi Rick,

Thank you for thoughtful and helpful reply.

When I made that quote, I didn't mean to suggest any particular answer to or interpretation of it. To me the 'every fiber of your being' part suggests that deep reflection is required, and that any worthwhile answer would be deeply personal. The 'ways in which you are and are not responsible for your success' part suggests that the reflection would have to include all your activities as well as the environment in which they take place.

So thank you for responding to exactly that

My understanding differs from yours. The quote among those shared by bluesteele that most resonates with me is that by Jim Rogers: “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

To me that says that my profits aren't my doing, just like the wind when I go sailing isn't my doing. Instead I'm the recipient of a gift - the market makes money available, and all I need to do is to pick it up.

And the gift isn't really that there's money lying in the corner, but that I have the eyes to see it, which is my market model which is a chosen cognitive frame through which to view things. That model isn't really my doing either. Having been involved in market model development for quite some time, I have come to see the process by which they emerge as a remarkable journey of discovery, and I don't know where the insights and ideas come from; I make myself available and they appear. And in addition to the eyes to see I also need the tools to pick the money up, which is my trading strategy and that has evolved in a way similar to the models.

My job is to show up at the screens, and attend to and respond to the market according to my chosen model and strategy. That's my job, and any profits are entirely secondary and not my doing. I view the whole endeavour as comprising three parts: making myself deserving of any profits by (1) executing the strategy well. and (2) to constantly be learning by (a) listening to the market as intimately as I can, and (b) by reviewing my trading records in ways similar to what you describe, and finally (3) by continually developing and refining my models and strategies based on my learning.

To summarise: No winners or losers around; instead an all-powerful market which gives everyone what they deserve. My participation in that is about learning rather than earning, and the profits are a side-effect.

Reading all the posts lately. I went dug out my "Trading in the zone" book. It is interesting to see how I have changed over the years. I have a wall of trading books and books on economics in general. I have read most of them 3 or 4 times. Still pick up something every time I pick one up.

The markets are a school that you never graduate from

I have a small shelf of trading books in my home office that I consider a part of my trading syllabus. If I were to put together a course to teach myself to teach myself from scratch, "knowing now what I didn't know then," those are the books on my shelf. Trading in the Zone is one of them. But I'd not read the whole book, rather just a few selected chapters.

I have many trading books and most of them are in a large book case located elsewhere in my house. I've sold many on Amazon and I go through burst of activity where I'll list them and sell dozens of them before I grow tired of packing them up and waiting in line to ship them at the post office. Most of the trading books I've read will never get a second read. But those on my syllabus shelf have been read three or more times and I will continue to read them.

As for the books on my syllabus, there are some that many here will likely have read, for example, Trading in the Zone, the Market Wizards series, and Pitbull by Marty Schwartz.

There are others that are more obscure or seemingly not strictly a book about trading, at least not on the surface. For example, Zen and the Art of Poker and The Man with the $100,000 Breasts.

I think I only have two books that could be considered "technical," as in relating to technical analysis. One is called Trading the Measured Move. I don't use the trading system in that book, but I have adopted some of it for use as a money management tool over the years. The other is not a technical manual, but more of a history. It is The Evolution of Technical Analysis. Other historical market related books I love are Extraordinary Popular Delusions and the Madness of Crowds, a favorite of mine, and Manias, Panics, and Crashes, a History of Financial Crises.

I could fund several small trading accounts, or buy hundreds of prop firm evaluation accounts with the money I've invested in books over the years. One thing my wife and I gae our children that makes me very happy is that in spite of them being "Gen Z' they all prefer to hold an actual book in their hands when they read rather than scroll up and down a screen on a Kindle or iPad. There is something reading and turning the printed page that nurtures the brain and the human soul in ways the glowing screen can never do.

I believe that trading is a lifelong calling for those truly built to endure its ups and downs.

This sounds much better than stating out loud that it is also probably an addiction for many of us lol.

I spent part of the morning reading through some of the systems threads here at FF.

One observation I made is that most FF members who are exploring the use of indicators to build a system seem to pay little to any attention to whT I have come to view as the most important elements of technical trading: Price itself, and time. Too much focus on the indicator and what it is doing and none paid to what price itself is doing, and when it is doing it. As a result, I'll look at a chart posted to a systems thread of an instrument I don't even trade, and yet by looking past or through the indicators, I can see patterns of price and time that would greatly help the poster discover why some signals result in quick profits while others end in quick, sometimes "surprising" losses. But instead, what does the poster do? He or she adds yet another indicator to filter the indicators already on the chart!

Oh brother, have I "been there, done that." For too long and too many times to count.

When I had the roulette epiphany, I chose a method that had no indicators other than previous highs and lows, the current day's open, the previous day's close. I can say for certain that spending those first 6 to 8 weeks without any indicators of any kind greatly improved my ability to "read price." But the indicator realm is a strong magnet. When I ran into difficulties with my method die to increased volatility, it didn't take me long to go running for the Heiken Ashi candles, the moving averages, the oscillators, etc.

Thankfully, I was able to sort out that the difficulty I had as a result of increased volatility was not a problem with my method itself but was a result of an arbitrarily defined money management method that was 100% disconnected from price itself.

I've now returned to trading a method whereby the chart is completely devoid of what TRO calls "squiggly lines."

I used squiggly lines for too long and I made too many profits from their use for me ever to fall into the "anti-indicator" camp. However, many of those who are firmly in the "must use indicators" camp would benefit from taking all the indicators off of their charts and just watch price for a few weeks. That might mean not trading, which will be hard if not impossible for many, as trading is both a calling and, unfortunately for many of us, an addiction.

But if you're struggling to put together a profitable system you can stick to, the problem is not the indicators, but the engineer building the craft and the pilot of said craft, both of whom are one and the same individual.

Think about it this way: Our indicators are all derived from a mathematical formula applied to price data. Wouldn't it benefit us in our use and application of these indicators if we first had a better understanding of what price itself was telling us directly?

You got that right!

Yes I am currently in recovery, expect that I refuse to quit. It is the opposite of my other work and so that relaxes me. believe or not.

The problem with the roulette epiphany is that, unlike the casino, in the markets the probabilities are not serially uncorrelated.

What does that mean? It means that every edge will stop working sooner or later.

More than once I've developed edges that have performed miraculously well...until they stopped working. At that point it's easy to give back money by trying to beat a dead horse back to life. I know that from experience.

A former colleague of mine, and head of algo trading, once said that one of the most essential skills is to know when to turn the algos on and off. Which goes for mechanical retail trading too.

So for retail day trading the most essential skill may be to know when to stop and rethink. It'll be needed over and over again.

Or, if you don't agree, show us a day trading strategy that has worked consistently for the past ten years.

There is no problem with the roulette epiphany. In fact, no matter what anyone wishes to call it, the roulette epiphany is an essential psychological commitment one must make before one is able to become and remain a consistently profitable trader. It is so basic to trading success that it may not merely be a necessary component of one's trading belief system, it may be a sufficient condition on its own to assure eventual success.

Why?

Because the roulette epiphany is simply the awareness and the acknowledgement and the acceptance that one must honestly commit to experiencing the inevitable losses and therefore accepting the risk that any edge will generate and still stick to that edge for the long term, i.e. trade through the periods of drawdown. The roulette epiphany is the awareness and acceptance that if you have an edge then the law of large numbers will inexorably and inevitably lead you to long-term profitability.

This is simply not true. The irony of this belief being expressed here in the context of this journal is that it is a common belief that arises out of the failure to experience the roulette epiphany!

Price action edges don't stop working. Now, if you are referring to and limiting your comment to arbitrage edges or edges that rely on a particular volatility environment or edges that rely on the existence of a particular market that no longer exists, I'll concede your point, but only on those limited types of edges. Assuming, however, that we are limiting ourselves specifically to edges that are defined by a set of variables explicitly derived from price action, then any period during which the edge appears to no longer work is simply a period where the frequency distribution of wins and losses tilt towards losses. That will occur periodically no matter the edge. Similarly, those periods where an edge appears to work like magic are simply periods during which the probabilities have tilted toward wins.

Honestly, the most important skill for retail traders need to develop once one decides which method one is going to commit to is to stop thinking, view the market as a slot machine rigged in his or her favor, and just keep putting the quarters in the slot and pulling that one-armed bandit which is the market.

Here you go!


This was published in 1988. Two years later Toby Crabel published a book full of data supporting the method, and then almost immediately went on a campaign to buy up every copy he could get his hands on, feeling, no doubt, that the edge he revealed might stop working if followed by too many traders and institutions.

But here we are, almost 40 years later, and its edge endures. It isn't sexy and it doesn't require colorful charts full of squiggly lines. It may require periodic adjustment of the interval one is using to define the opening range. It may require periodic adjustment of the buffer used to define an opening range breakout. But the strategy endures.

If I'm not mistaken, the ACD method presented in Mark Fisher's 2002 book The Logical Trader is either a more accessible or more esoteric version of the ORB method, depending upon particular reader of the book. I personally found the book to be lacking in clarity. Others swear by it and claim to have made trading careers out of it. For myself, I prefer the information in that 8-part series Crabel published in the late 1980's. That 8-part series is more valuable than the book itself, which is good. The articles are free, whereas finding an old copy of the book will set you back $400 or more and there isn't anything in the book that is relevant to today that is not in those articles.

So, medici, I agree with almost none of your post, but I want you to know I appreciate your post more than any other recent post because it made me articulate more clearly that I have yet done as to the specific nature of what I refer to as the roulette epiphany. My epiphany was the sudden and sharp awareness that I never, not once, really accepted the risk that any of the many methodologies I traded inherently contained. As a result, as soon as my edge du jour "stopped working," I'd abandon it and start again searching for a new edge, a new market, a new set of indicators. In other words, I'd start doing exactly what you and your friend would say I should have done! And yet that was the very behavior preventing me from achieving consistent profitability!

The epiphany came when I heard this part of the documentary video about Gonzalo Garcia-Pelayo:

"Finally, after a lot of hard work armed with their fine-tuned data and a year after Gonzalo's initial experience, they're in a position to play ball and win. They enter Madrid's Premier Casino individually. Gonzalo and his family believe they have a 6% advantage, more than double the house edge. In theory they should be able to win money from the casino at twice the speed it's usually lost. European Roulette gives the house a 2.7% edge over the player because there's only one green number on the wheel, the number zero. Betting rules are simple: players can bet on an exact number where the payout is 35 to1, or they can bet a red or black number will come up at even odds. The Pelayos aren't interested in betting red or black. They're here for the bias alone. It means that most of the time they bet they'll lose. However, because of the bias, the 35 to1 wins they hit will drastically outweigh the losses. Except things haven't started well. For the first two hours the numbers they've been betting on don't connect. Spin after spin, loss after loss, their already small bank roll is disappearing fast. A stressed-out Gonzalo knows he needs to be patient. Then probability bites back! Dealing the team several high stakes wins in a row! Despite the early losses, their first serious night of roulette is a profitable one. But Gonzalo has no intention of leaving it there."

"Except things haven't started well ... loss after loss, their already small bankroll is disappearing fast ... [but] a stressed out Gonzalo knows he needs to be patient. Then probability bites back!"

That right there is the roulette epiphany being demonstrated as clearly as it can demonstrated. It is itself not esoteric or mathematical. It is simply the knowledge that when one is playing a probabilities-based game, i.e. a game of chance where each outcome is uncertain and independent from each preceding and subsequent outcome, and one has a known edge in one's favor, one must not deviate from that edge, even when doing so would be the easiest and quickest way to stop the pain. The pain is an illusion, as it is a reaction to a temporary run of losses, which is normal for any positive expectancy edge.

Hi Vidvad, I am glad that you are taking my little provocation in the right spirit. Still, we may have some question marks to straighten out.

Do you really believe that all price action edges last forever and can be traded mechanically as such? If so, why not code one that you like and let the algo take care of the work?

I started out as a price action trader, and it's been my experience repeatedly that some price action strategies wear out. At the same time, I can think of some very short term ones that I believe are very robust, and that I might get around to coding if and when I get the energy for that.

Stopping to think? Really? But of course, if you think your edge will last forever, then yes. Markets rigged in favour of retail traders? You must mean something else. In any case, for most people I know better than through an online forum, the view is more like I described, but of course not as categorically and provocatively.

Having said all this, I wish you all the best in your endeavour to develop appropriate risk acceptance.

[quote=medici;15153101]{quote} Markets rigged in favour of retail traders? You must mean something else./quote]

No where did I post that. You are either putting words into my mouth or grossly misreading what I wrote.



What I am saying is that just as Jesse Livermore said that to hold for the big swing he had to stop thinking and just sit tight, so too the day trader must trade his method, stop thinking he can tweak it on a trade-by-trade basis, and instead sit tight, both with each individual trade and the chosen method itself.

You said this:


Which seems to be a consequence of the belief that price action edges last forever and can be traded mechanically as such.

"View the market as if it is rigged" is not the same saying the market is rigged for or against them.

If you have a machine that you can drop in a dollar, and 40% of the time you lose your dollar, and 60% of the time you get your dollar back plus 2 more, when are you going to stop dropping dollars i that machine?

Instead of thinking that the trader needs a new method because his method just had 5 losses in a row, better to view the method as rigging the market in his favor, stop thinking, and stick to the method.

Price action edges endure for generations. Give us an example of a price action edge that you used in the past that no longer has an edge.