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Lessons by Joe Ross

  • #121
  • Jul 18, 2009 7:06am Jul 18, 2009 7:06am
Quoting pipmutt

You're probably right creativity can be dangerous for the newcomer but in time, and once he's thoroughly learned the business, he'll appreciate the value and necessity to be creative and adaptable in an ever-changing market. If/when that time comes, then he can open a live trading account.
I agree, once you have an understanding of the market and developed some intuition you then have an aptitude to be flexible in the way you trade the various market conditions, and that's basically about being creative.

However, the traders journey to this point is often disrupted by the idea that complexity is creativity. I see it all the time in FF forums whereby traders are using all sorts of different types of wiggly lines, flashing lights and arrows in an effort to try and complete the missing piece of the puzzle. I am sure most traders have been at the indicator overload stage. Only to find themselves stripping down the charts to the bare basics. I believe until this stage of the journey is achieved, its only then can you really become creative. Creativity is about simplicity not complexity.
  • #122
  • Jul 18, 2009 11:52am Jul 18, 2009 11:52am
Quoting Chicky
ps. The first and foremost "creativity" (as defined above) is to accept the fact that trading is gambling. Then apply all the gambling rules. If one is not willing to think differently and accept this fact, screw the creativity in trading.
Gosh, I'm really surprised that there have been no responses to your PS. This is a touchy subject with some traders. I know that when I first started trading forex a very intelligent male friend of mine informed me that it was "gambling". I didn't think it was at the time but I wasn't up for having a debate with him - he would have squashed me like a bug with all his big words - he, he.

Then a little while later I thought it was and now I've come full circle and I personally don't believe it is gambling anymore. If I compare forex to a horse race, lottery ticket or a pokie machine, once that money has been paid or put down the slot, there is only one outcome - you either win or lose. With forex, if your account is big enough and your position size appropriate and you have enough patience, you can always wait for the market to come back to you thus avoiding a loss and even possibly come out with a profit. I have done it many times.

If I can also quote Wikipedia:


"Some speculative investment activities are particularly risky, but are still usually considered separately from gambling:

  1. Foreign currency exchange (forex) transactions
  2. Prediction markets
  3. Securities derivatives, such as options or futures, where the value of the derivative is dependent on the value of the underlying asset at a specific point in time (typically the derivative's associated expiration date)"

http://en.wikipedia.org/wiki/Gambling#Other_gambling

Good trades

Nothing worth having is easy.
  • #123
  • Jul 18, 2009 12:04pm Jul 18, 2009 12:04pm
It is "touchy" because most traders refuse to acknowledge the role "luck" plays in trading.

I asked the following question on another thread:

If you can not control the outcome of a trade, then what do you call it when a favorable or desirable outcome happens?

Luck (also called fortuity) is a chance happening, or that which happens beyond a person's control. Luck can be good or bad (as in; Good fortune or misfortune). - from wiki

What usually happens after a trader enters a trade and it goes their way? They take their profits and wait for the next trigger.

What usually happens after a trader enters a trade and it goes against them? Most traders will say they "missed" seeing something on their chart. They have a belief that a past occurrence could have "predicted" the future.
  • #124
  • Edited 12:40pm Jul 18, 2009 12:15pm | Edited 12:40pm
Quoting gbppip
It is "touchy" because most traders refuse to acknowledge the role "luck" plays in trading.
Really? interesting. As much as I believe forex isn't gambling, I also believe luck can play a part in your trading e.g. any Central Bank intervention especially the SNB lately. Am I contradicting myself here? Hope not, I'm a bit slow sometimes.

Okay, I've had a little think about it now and I take it you are of the opinion that trading is pure "luck" all the time? Yes, I guess I agree with that. There have been times when I have analysed charts to death and I am absolutely sure where PA is going to go and, bam, it goes in totally the other direction, so bad luck to me ...
Nothing worth having is easy.
  • #125
  • Edited 1:40pm Jul 18, 2009 1:19pm | Edited 1:40pm
Quoting Patience
Gosh, I'm really surprised that there have been no responses to your PS. This is a touchy subject with some traders. I know that when I first started trading forex a very intelligent male friend of mine informed me that it was "gambling". I didn't think it was at the time but I wasn't up for having a debate with him - he would have squashed me like a bug with all his big words - he, he.

Then a little while later I thought it was and now I've come full circle and I personally don't believe it is gambling anymore. If I compare forex to a horse...
Thanks Patience. I 100% agree with you. In fact I posted on this subject some time ago differentiating Gambling Vs. Wagering. And again, the gambling - Punting Vs. Bookmaking. However, my this post is about Creativity, looking at the things away from their traditional context. If one wants creativity in trading, look at it from a different angle, and that different angle is lookin at it from gambling point of view - not debating on speculation vs. gambling.

I screw all traditional definitions of gambling and speculation. To me anything that has more than remote possibility of a significant risk is gambling. Retail traders are at the opposite side of Hedging. which is anit-gambling to protect assets against appreciation and depreciation from price movement. What would you call an anit-anti-gambling?

Ps. My family owned, trained, raced and made bookmaking on race horses - for decades. I know what it is. Horse racing is betted upon only because horses have great sense of competition and they know what the races are all about. They are happy when they win and annoyed when they lose. One horse even bit the cheek of a horse "Golden Durby" when Golden Durby passed that horse. There are several factors involved in deciding odds on horse racing, exactly like the factors we have in currecny or commodity trading. Horse racing is not like lottery where odds are always fixed and in favor of bookmkers. This is one reason rates fluctuate in horse race betting like we see on our trading charts.
The Thief of Wall Street
  • #126
  • Jul 18, 2009 1:46pm Jul 18, 2009 1:46pm
Quoting Chicky
However, my this post is about Creativity, looking at the things away from their traditional context. If one wants creativity in trading, look at it from a different angle, and that different angle is lookin at it from gambling point of view - not debating on speculation vs. gambling.

There are several factors involved in deciding odds on horse racing, exactly like the factors we have in currecny or commodity trading. Horse racing is not like lottery where odds are always fixed and in favor of bookmkers. This is one reason rates fluctuate...
Trust me to get the wrong end of the stick

Sorry my mistake, I should not have said horse racing. I get what you mean about the odds etc and that there is more skill involved when betting in this arena - track conditions, horse's fitness, jockey etc. I just meant that once you place your bet, you either win or lose and have no chance of recouping your money, as you can with forex if you are able to sit the bad trade out.
Nothing worth having is easy.
  • #127
  • Jul 18, 2009 1:59pm Jul 18, 2009 1:59pm
Quoting Patience
Trust me to get the wrong end of the stick

Sorry my mistake, I should not have said horse racing. I get what you mean about the odds etc and that there is more skill involved when betting in this arena - track conditions, horse's fitness, jockey etc. I just meant that once you place your bet, you either win or lose and have no chance of recouping your money, as you can with forex if you are able to sit the bad trade out.
Patience, I regard your opinion. You know why more than 90% new traders fail and many good traders are successful (for most of the time)? Perception. I am just looking at the things with my perception, regardless of what the facts are. It was a nice disucssion. By the way, I consider trading a very useful economic activity unlike gambling on non-productive income earning activities.
The Thief of Wall Street
  • #128
  • Jul 18, 2009 2:25pm Jul 18, 2009 2:25pm
Quoting Chicky
By the way, I consider trading a very useful economic activity unlike gambling on non-productive income earning activities.
Absolutely.

Some of these threads go way over my head sometimes but I know (from your posts around the forum) that you have a very mathematical (and clever) mind (something which I sorely lack). I'm more of a simple kind of gal And I've probably taken this thread way off it's original theme with my post to you about gambling but nice discussing with you.

Apologies to the OP.
Nothing worth having is easy.
  • #129
  • Jul 18, 2009 2:39pm Jul 18, 2009 2:39pm
I donno why but chiky always wants to associate forex with some kind of gambling(may be just coz her family is involve in bookmaking from decades) but i must admit forex is not gambling at all... many factors involve and those are facts not just guess or luck.

but yeah luck does involves in all businesses and all life matters.
  • #130
  • Edited 3:03pm Jul 18, 2009 3:03pm | Edited 3:03pm
Quoting Alihuzaifa
I donno why but chiky always wants to associate forex with some kind of gambling(may be just coz her family is involve in bookmaking from decades) but i must admit forex is not gambling at all... many factors involve and those are facts not just guess or luck.

but yeah luck does involves in all businesses and all life matters.
His.

Forex is not gambling. 100% true. But very profitable if you take it as gambling.

This is one of the very few markets that provide an opportunity to a punter to step into shoes of a bookmaker, you can grow your business to whatever level you want to, legal, moral, ethical. What else one needs to pass family skills to next generation by finding a very very acceptable form to keep business going?

This is the only reason I am in this business.
The Thief of Wall Street
  • #131
  • Jul 18, 2009 3:10pm Jul 18, 2009 3:10pm
Quoting Chicky
His.
Holy moley! I so got that one wrong. My apologies to you also.
Nothing worth having is easy.
  • #132
  • Jul 18, 2009 3:13pm Jul 18, 2009 3:13pm
Quoting Patience
Really? interesting. As much as I believe forex isn't gambling, I also believe luck can play a part in your trading e.g. any Central Bank intervention especially the SNB lately. Am I contradicting myself here? Hope not, I'm a bit slow sometimes.

Okay, I've had a little think about it now and I take it you are of the opinion that trading is pure "luck" all the time?...
Not "all" luck.

The skill involved has to do with risk and money management. The most important skill to master is quitting while ahead.
  • #133
  • Jul 18, 2009 3:48pm Jul 18, 2009 3:48pm
To win the trading game you must not follow the crowd. You don't need to spend money on software, education or gurus.

Here's what you need to know:

RISK = STOP LOSS * POSITION SIZE. Most say risk no more than 2%. That will work. If you start with $1,000 that's $20 per trade.

THE REASON YOU ENTER HAS NO EFFECT ON THE OUTCOME OF YOUR TRADE. If this was not true, trading would no longer exist. Don't be fooled by the latest system hype.

Quote
Luck (also called fortuity) is a chance happening, or that which happens beyond a person's control. Luck can be good or bad (as in; Good fortune or misfortune).
GBPUSD moves over 100 pips per day on average from open to high and/or open to low. If you enter at the daily open, price may hit your stop or net you over 100 pips. You may have a risk/reward pay out over 10 to 1. How many days per week or per month do you need to win to come out ahead?
  • #134
  • Jul 18, 2009 3:55pm Jul 18, 2009 3:55pm
Quoting Joe Ross
Trading is a great business for those who master it, and those who master it are traders who have mastered themselves

the above sentence is what everyone should be striving for. but i wonder how many actually realise the significance of it??
  • #135
  • Jul 18, 2009 4:37pm Jul 18, 2009 4:37pm
My friends,

Regarding gambling -
Trading is what you think of it. For some, it is gambling. For some, it's more about luck than it is about knowledge. For some, it is a source of thrill and excitement. For some it is just a source of self-justification. I believe all this matters little and thus there is no use in trying to convince anybody to think about the markets the way I do. If someone starts trading and is willing to change his attitudes as he receives feedback from the market about what works and what does not, then chances are he is going to succeed. (no sexism here - I used the 2nd meaning)
If he can't change, he's doomed to fail whether or not he started as a gambler.

Regarding luck -
If there's a power outage right before you wanted to close your short at a price that turns out to be the year's low, or if a phone call distracts you from buying a breakout and price does not come back to the level at all, how would you call this? Well, bad luck. Luck can affect individual trades now and then but in the long run these can work for you as well as against you so you're compensated.
I don't consider it to be "luck" if I make 100 pips on a breakout instead of "only" 50. If there are more buyers, prices will move higher. Nothing to do with luck. There is a reason behind every tick move, but I don't have to understand all the reasons to be profitable.

Regarding creativity -
In my point of view, it is a very very important thing. Cannot be over-emphasized. I see you folks are talking about almost everything except the original subject?
I think every trader develops some new ideas, a new "pattern" on the charts which turns out to be profitable. Maybe not a pattern that can actually be traded, but a pattern that can be used as a warning sign to avoid losing trades.

As in the first post:

Your mind quickly scans various concepts and ideas, almost unconsciously. Suddenly this wealth of information combines and you see something new.

I tell you some examples of "patterns" I'm watching all the time:
1. I trade GBP more often than anything else. Had .. uhhh.. 303 trades on GU, 194 on GJ and 176 on GC this year. I noticed the more those 3 charts are "alike", the better chances I have for profits. These days GU and GC look very different - in fact GC looks the inverse of EURGBP. But there were times when - so I say - the pound was aligned: GU, GJ and GC charts looked very much the same and I made my best trades with biggest confidence back then.

2. I noticed the chances for reversal are much better if at least two pairs of a currency are near "an important level". Even if the charts don't look the same. One quick example - see attachment. As you can see both GU and GC reached support at the same time (red arrow). GC support line does not need explanation, why GU spike marked with yellow arrow was considered support? Well not my invention, read the No brainer thread, it's BRV's great idea that actually works. I went long on GU but ... bad luck? Missed the 400 pips move because had to leave and pulled SL to BE too early... got stopped out.

3. I noticed at the end of an uptrend it may occur that one red candle breaks below the last couple of green candles, then prices rally back quickly, and often make a new high shortly after that. If the new high does not hold, prices fall back, then I won't buy longs on that pair (for a while). Not a short signal, but a "no-long" signal. A chart is worth a thousand words, here is a recent one I actually played with some profits. Something similar can be seen on USDCAD 3 hourly too.

I consider these as "creative" stuff and they helped me not only to gain some profits but also to avoid losses (which is also important).
I'm not saying these are super-duper infallible 101% sure things... but what is sure in the markets anyways? (the past, right?)

So what does creativity mean to you?
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forget about tomorrow, just steal away into the night
  • #136
  • Edited 5:26pm Jul 18, 2009 4:39pm | Edited 5:26pm
Quoting gbppip
It is "touchy" because most traders refuse to acknowledge the role "luck" plays in trading.

I asked the following question on another thread:

If you can not control the outcome of a trade, then what do you call it when a favorable or desirable outcome happens?

Luck (also called fortuity) is a chance happening, or that which happens beyond a person's control. Luck can be good or bad (as in; Good fortune or misfortune). - from wiki

What usually happens after a trader enters a...
It's appreciated to read and agree with your and others' related wise words. Trading on any perception (or "reason for entry") of the future must be handled as a gambler would. Only, I would imagine that the creativity leading to this perception is very different than anything a gambler would do.
One approach to creating a perception is to treat a chart as reflecting human behavior, an amalgam from lots of people for one complex opinion at a time. Human behavior depends a lot on action - reaction, which leads to some predictability. For example, news happens, and those in the know interpret it mostly one way, and the chart follows this. Or, there's a runup in a general area of contention, and the runup slowly goes away.
Not that a gambler doesn't study human behavior. It's that a trader studies a chart, a picture, and draws on it, more like an artist perhaps would, to reflect upon human behavior.


-----

Spekitox,

Missed your post. Great charts! Trendlines and bars, the way to go.
You bring up the point of creativity versus systemization, how much you take for granted so that you can just glance at a bars-only chart and 'get it' with some cursory observations.
I need more systemization than that. Yes, I'm trendlines and bars, too, only I need them tied down to some greater organization before I can regularly trust doing something like yours.
Best of luck in your being able to avoid a dilemma such as mine.
  • #137
  • Edited 8:18pm Jul 18, 2009 8:15pm | Edited 8:18pm
Quoting ha-pattern
It's appreciated to read and agree with your and others' related wise words. Trading on any perception (or "reason for entry") of the future must be handled as a gambler would. Only, I would imagine that the creativity leading to this perception is very different than anything a gambler would do.
.
Great words Ha.

Trading is a business. All major businesses manage their risks. They manage risks becuase there are risks in business. But every venture involving risk is not gamble. The factor determining a venture is gambling or not is its economic utility. The term gambling is different from wild punting - which can be both in a business or a gamble. Businesses manage their projects like the gamblers would manage their bets becuase of the similarity.

Trading is not gambling doesn't mean it wont kick you in the butt if you don't manage your risk.

When Makr Douglas says pesistency, odds in your favor, uniformity of trade, win on edge like vegas casinos do, etc everyone appreciates and claps. When I say take it as gambling - many people try to defend trading. What a contrast. Either they don't know what is trading or they have no idea what is gambling.
The Thief of Wall Street
  • #138
  • Jul 18, 2009 8:18pm Jul 18, 2009 8:18pm
http://en.wikipedia.org/wiki/Gambling

Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Typically, the outcome of the wager is evident within a short period.

Financial Market trading fits closely into the definition above. It is possible that fixed-odds of traditional gambling and variable-odds of financial markets give a different perception.
No Fear, No Regrets A sense of purpose makes life meaningful
  • #139
  • Jul 19, 2009 11:27am Jul 19, 2009 11:27am
Trading and gambling have similarities and differences.

The main difference is in trading you do not have to lose your entire wager on a trade.
  • #140
  • Jul 22, 2009 3:27pm Jul 22, 2009 3:27pm
To become a truly successful trader you must become a truly committed trader. How do you get yourself to be in control?

Statistics and society may predict, but you alone determine whether you will succeed or fail. You alone are in control. You alone must take responsibility for your performance and your life. There are always tremendous opportunities in the markets. It is not what happens; it is what you do with what happens that makes the difference between profit and loss.

Many eventually successful traders move from trading method to trading method until they find one that suits them… one that is comfortable to run, and tests well first by back-testing, then forward testing and finally by real testing.

Some traders never stop looking for the “right” way to trade. THAT is a problem. There are many ways to trade that can generate nice profits over time. To settle on a right way for you to trade:

• First, you have to believe in the process which leads to the generation of your entry signals. Does that process make sense to you?

Maybe you’re a visual sort of person and you are drawn to Candlestick charting. Take the time to understand why the patters mean “reversal” and not just accept the “picture”. Go deep.
Choose a guru to follow. Maybe you learn best from mentoring. Choose wisely.

• Second, back-test and forward-test the method you decide to go with. In today’s modern world of software, there’s no excuse not to run all the back data you can through your method and see what the results would have been. Then forward-test to see how the method works out as each price bar appears on your chart. Be sure to use a statistically valid sample of trades for doing this.

• Third, THINK about the process you are choosing and why it’s right for you. THINK about the results you get from your back-testing and real-time testing of your system.

• Fourth, BE A MACHINE (DON’T THINK) when you are trading your method.
This is why I am a huge proponent of mental training for traders. Unless you can control yourself, you can never control your trading. In order to control yourself and your emotions, you have to believe totally in the way you trade. Do the work. Do your thinking before you trade. Then don’t think—just follow your plan.
'Trade what you see, not what you think!' -JR
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