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Make Your Own Road

  • #21
  • Jul 19, 2009 11:11pm Jul 19, 2009 11:11pm
Quoting doblece
Not at all freaky... though a bit tricky

The trader can't control the markets. But he/she can control him/herself and thus the trades made, by means of a series of rules, a strict discipline to follow those rules, money management, etc... as well as control the personal environment in which the actions will be performed (prevention, prevision, etc.)
I object to the "a bit" part Doblece, it can be very tricky to lots of people.

Of course, the trader can't control the market. Yet, many will get angry at the market when it doesn't go the way a trader wants it to go. This to me makes as much sense as being angry with the rain for being wet or the sun for being hot.

Self control is the most difficult part and key to success. I'm still having issues with self control. It can be self control to get out of a trade when it's time, getting in when it's time. It can be self control to have one cheeseburger instead of two, one beer instead of 3, etc.

Self control to me, to give it an analogy is the little devil on your shoulder. It usually manifests by that voice inside your head. There is no little angel on the other side

So that little devil will tell me to get in a trade at the wrong time. It will tell me to exit a trade at the wrong time. It will tell me that it's ok to have that extra beer and so on and so forth.

The choice is to be stronger than that little devil
Not all sins are created equal
  • #22
  • Edited 12:29am Jul 20, 2009 12:09am | Edited 12:29am
Quoting Jay Walker
I object to the "a bit" part Doblece, it can be very tricky to lots of people.
...
The choice is to be stronger than that little devil
Indeed, I was referring more particularly to the "trickiness" of the term "control" in itself, which can lead a trader to think that, as the markets can't be controlled, there's nothing else that can be controlled either and use that as an excuse ("luck") to justify the failures...

The "little devil's" inner voice strength feeds off fear, greed and overconfidence... not to mention lazyness and carelessness... the "angel's" (or, more properly, plain awareness) inner voice is barely heard or recognized unless one feeds it steadily and patiently through practice, discipline, observation and a thorough learning of the markets behaviour... then little by little it will acquire more strength while the other voice slowly fades ... but never disappears entirely from the scene and will be waiting for any tiny slip... so it's also important to recognize it and be able to tell the difference... using it as a gauge to detect that it might not be the best moment to decide on a trade, or a reminder to reinforce one's own discipline.

Self-control has to be paired with knowledge to unfold its real power.
  • #23
  • Jul 20, 2009 6:31am Jul 20, 2009 6:31am
Quoting andypips
Hi Chicky and Jay
I often refer to a poem that I had read at school but was brought to me in the context of trading by John Bollingers' book.
The poem is by Robert Frost and is "The Road Not Taken".
For anyone not familiar it starts with a choice of roads in a wood.
I so often like others have taken the most used road and followed the herd. As time has gone by (3 years) I am now firmly in the "my way or no way camp". It's no good blindly following someone elses ideas.
The poem finishes with taking the path least traveled.

To quote Bollinger
"Your...

thought of the song, return to innocence by enigma. just change a few words. then the songs will relate to trading and almost has the same meaning. as the poem by robert frost.

then both song n poem will relate to what we r trying to do here. which is to make our own decisions in trading n take responsibility for it. thanks
  • #24
  • Jul 20, 2009 6:36am Jul 20, 2009 6:36am
Quoting Bizken
I am not a Confucian, but I read somewhere that Yin and Yang represent two opposing forces or entities that sustain life or universe and not apparent outcomes of an action. And if you look at that way Yin and Yang could be fear and greed that keep financial markets afloat.

confucianism is mostly about life's principle. how a society should be governed. how a king should behave and govern it people n how a person should conduct itself n live it's own life.

the concept of yin/yang is a cornerstone of taoism. which talks about the concept about the universe n nature. about how it is made up of these 2 opposites. to achieve harmony, these 2 forces must be in balance. thanks
  • #25
  • Edited 12:48pm Jul 20, 2009 12:47pm | Edited 12:48pm
Basic Trading Principles - Draft

  1. Market never remains stable. It always moves up or down. Whatever direction it moves, it never goes straight in that direction. [Doblece added] However, each different market has its own steady and recognizable stepping and pace.
  2. All market movements are based on collective demand and supply which keeps on changing.
  3. Market tend to respect psychological levels, fibs, waves, supports and resistances
  4. There are breaks and retraces
  5. It forms trends and consolidations
  6. It sometimes shows high volatility and forms spikes
  7. [Jay Walker added] Risk has, does, and always will exist. You can chose to either fear it or acknowledge it.

http://www.forexfactory.com/showpost...1&postcount=15

The Thief of Wall Street
  • #26
  • Jul 20, 2009 5:36pm Jul 20, 2009 5:36pm
Quoting Chicky
[*][Jay Walker added] Risk has, does, and always will exist. You can chose to either fear it or acknowledge it. [/list]Would appreciate additions / refinement to these draft principles.
Not only does a trader need to acknowledge risk you must plan for it as well. In my mind risk management is CRITICAL to becomming a good trader.
  • #27
  • Jul 20, 2009 5:53pm Jul 20, 2009 5:53pm
Quoting ce_me_flow
Not only does a trader need to acknowledge risk you must plan for it as well. In my mind risk management is CRITICAL to becomming a good trader.
How many trades exactly have you entered saying "I'm going to lose that trade"?

You can plan for it just as much as you can plan getting hit by a car.

But acknowledging risk is doable.
Not all sins are created equal
  • #28
  • Edited 7:36pm Jul 20, 2009 7:21pm | Edited 7:36pm
Quoting ce_me_flow
Not only does a trader need to acknowledge risk you must plan for it as well. In my mind risk management is CRITICAL to becomming a good trader.
I my pinion this point needs further consideration. Following are some basic methods of Risk Management. Kindly note that risk management and money mangement are two different things

Risk Management Methods

A. Identify the risk, its type, timing, likelyhood of occurance, and impact of your business

B. Manage Risk by:
1. Avoid risk - by not getting involved in a risky venture or reduce the level of such operation
2. Diversify or spread risk - don't put all your eggs in one basket
3. Share risk - partner with someone who absorbs part of the risk
4. Transfer risk - Transfer your risk to some else (maybe at a cost) e.g. Hedge, take insurance
5. Control risk - Be more vigilant, careful and implement safeguarding measures e.g. use stoplosses, appoint guards, keep precious assets under lock and key, etc
6. Accept risk - Accept more than remote possibility of incurring a loss and make sure your business will be able to absorb such setback
The Thief of Wall Street
  • #29
  • Edited 10:14pm Jul 21, 2009 10:04pm | Edited 10:14pm
Quoting ce_me_flow
Not only does a trader need to acknowledge risk you must plan for it as well. In my mind risk management is CRITICAL to becomming a good trader.
Ce_me_flow,

Can we reword your statement as follows?

Trade planning is essential in calculating risk in a trade and to implement money management techniques aiming at capital preservation
The Thief of Wall Street
  • #30
  • Jul 25, 2009 4:00pm Jul 25, 2009 4:00pm
Quoting Patience
Lol - you always seem to make things sound so simple. I like simple.

Hi Chicky - I've been trading what I see for a long time now. I like to flick through the threads in the forum and see what everyone else is saying or seeing but it is always my decision to enter and exit a trade. I do find it a little uncomfortable though when I see traders that I respect calling the opposite
Sound simple? LOL! Things are simple. We humans make things complex.

Have you read HOW WE DECIDE by Jonah Lehrer?

"Humans, Lehrer points out, are wired for prediction: Our ability to think ahead is such an extraordinary evolutionary advantage that when our decisions validate an apparently correct prediction, our brain's anterior cingulate cortex receives a pleasurable jolt of dopamine. It's also why we're predisposed to find patterns where there are none; we take random clusters in sports and believe they are "hot streaks," and schizophrenics and slot-machine addicts desperately seek patterns where none exists."

Have you noticed after you stop out that in the future, your trade would have been a winner? How do you process that information? Does it cause you to not stop out and risk ruin or does it indicate that if you reenter the trade at your stop point, you may get your money back and then some?

After you enter a trade, the market makes you a winner or a loser. You are just along for the ride. All you can do is minimize the loss.
  • #31
  • Jul 25, 2009 4:09pm Jul 25, 2009 4:09pm
Attached Image (click to enlarge)
Click to Enlarge Name: ! gbppip.gif Size: 14 KB


Make your own road? That requires a lot of work. Would you want to have to make your own road when you drive your car? Of course, not. What makes traders want to make their own road?

The chart shows you the road. Maybe, the chart shows you the "intersections" describes it better. Do you see how price during the London session ( pink background ) usually crosses the high or low of the Asian session ( yellow background )?

Imagine you are standing at the intersection. Could you see which way the traffic ( price ) is going? Does that make is simpler? What else ( do you think ) you need?
  • #32
  • Jul 25, 2009 4:25pm Jul 25, 2009 4:25pm
Quoting gbppip
Attachment

Make your own road?...
Would you want to be told specifically at which time of the day you can and cannot drive? Perhaps you are taking the "road" figure of speech too literally.

I cross the road at any time that I see fit. I'm the jaywalker for a reason
Not all sins are created equal
  • #33
  • Jul 25, 2009 4:49pm Jul 25, 2009 4:49pm
Quoting Jay Walker
Would you want to be told specifically at which time of the day you can and cannot drive? Perhaps you are taking the "road" figure of speech too literally.

I cross the road at any time that I see fit. I'm the jaywalker for a reason
What if I am taking the bus? I would like to know what time the bus is expected to arrive.

What if I am fishing? I want to know what time they are feeding.

What if I am going to the store? I want to know what time they are open.

What if I am going to the movies? I want to know what time it starts.

What if I am ....
  • #34
  • Jul 25, 2009 4:56pm Jul 25, 2009 4:56pm
Quoting gbppip
What if I am taking the bus? I would like to know what time the bus is expected to arrive.
Yes. But you are not carried onto the bus. At least, I hope you're not.

Quoting gbppip
What if I am fishing? I want to know what time they are feeding.
Yes. And who will you believe to know what time they are feeding. "some guy on a forum" or will you find the information yourself?

Quoting gbppip
What if I am going to the store? I want to know what time they are open.
Yes. And who will you believe to know what time they are open. "some guy on a forum" or will you find the information yourself?

Quoting gbppip
What if I am going to the movies? I want to know what time it starts.
Yes. And who will you believe to know what time the movie starts at. "some guy on a forum" or will you find the information yourself?

Quoting gbppip
What if I am ....
What if you are? Are you?
Not all sins are created equal
  • #35
  • Jul 25, 2009 5:22pm Jul 25, 2009 5:22pm
Quoting gbppip
Attachment

Make your own road?...
LOL. You still need some sort of road to drive your car on

If you can't determine the correct way to go at your intersection, this is a clear indication to wait until you do know. Something newcomers must understand or they'll fail, and miserably at that. Even if it means holding up traffic (profits) until you do

Nice thread to btw Chicky. And your contributions are sweeperb as always Jay.

I am walking down my own road, that I myself have paved. Certain people have assisted me along the way (James16, Jacko, Peter Crowns, Shamus). But ultimately, it's my road and I am the only one who can pave it the way I like to walk/drive/run/whatever.

May I add that if the road is created incorrectly, I risk it collapsing at a critical point (i.e. an edge of a cliff).
  • #36
  • Edited 6:02pm Jul 25, 2009 6:01pm | Edited 6:02pm
Make your own road - Why?

 

  1. Do we know what kind of terrain we are in? This is no Manhattan, every street, avenue and building marked, GPS, traffic sings and police officers to guide you. Fx is like a jungle or a desert.
  2. This fx traffic cannot move a single inch if everyone wants to go in the same direction with same method. If am buying a definite number of lots of an identified pair at a particular point of time, I need the other party or parties who want/s to do the opposite, for the same pair, for equal number of lots and at the same time.
  3. Fx traffic will only flow smoothly if there are no roads, no directions, no signs and the terrain keeps on changing every pip. This is the beauty of these markets.

We have two options 1) get ourselves lost in this maze, 2) make our own road - based on certain most probable market and human behaviors.

In this thread we are trying to list these most probable market and human behaviors in form of Basic Trading Principles, believing that these principles will provide some raw material for making one’s own road.

The Thief of Wall Street
  • #37
  • Jul 25, 2009 6:11pm Jul 25, 2009 6:11pm
Quoting Chicky
Make your own road - Why?
[list][*]Do we know what kind of terrain we are in? This is no Manhattan, every street, avenue and building marked, GPS, traffic sings and police officers to guide you. Fx is like a jungle or a desert.[*]This fx traffic cannot move a single inch if everyone wants to go in the same direction with same method. If am buying a definite number of lots of an identified pair at a particular point of time, I need the other party or parties who want/s to do the opposite, for the same pair, for equal number of lots and...
Trading is about making money. That's it.

As a trader you do that by selling for more than you paid or buying cheaper than you sold. That's it.

Quote
Humans, Lehrer points out, are wired for prediction: Our ability to think ahead is such an extraordinary evolutionary advantage that when our decisions validate an apparently correct prediction, our brain's anterior cingulate cortex receives a pleasurable jolt of dopamine. It's also why we're predisposed to find patterns where there are none; we take random clusters in sports and believe they are "hot streaks,"...
  • #38
  • Edited 6:27pm Jul 25, 2009 6:19pm | Edited 6:27pm
Quoting gbppip
Trading is about making money. That's it.

As a trader you do that by selling for more than you paid or buying cheaper than you sold. That's it.
Agreed.

However, in oder to do anything repeately one needs a system.

Human body has systems because it has to repeately do certain tasks. Think about digestive system, respiratory system, blood circulation system, etc.

If it is about only a single trade, one can always go and bet to make or lose a fortune without a system.
The Thief of Wall Street
  • #39
  • Jul 25, 2009 7:45pm Jul 25, 2009 7:45pm
Quoting gbppip
Trading is about making money. That's it.

As a trader you do that by selling for more than you paid or buying cheaper than you sold. That's it.

A rational motivation to trade Forex markets could be money, but are we rational? Dan Ariely and many behavioral economists told us a different rationale.

Inserted Video

http://en.wikipedia.org/wiki/Predictably_Irrational
http://www.amazon.com/Sway-Irresisti...ref=pd_sim_b_1


When we look at history of mankind for the last 3000 years or more, it makes more sense that, it is irrationality that would prevail and dominate human mind.
No Fear, No Regrets A sense of purpose makes life meaningful
  • #40
  • Jul 25, 2009 7:55pm Jul 25, 2009 7:55pm
Quoting Chicky
Agreed.

However, in oder to do anything repeately one needs a system.

Human body has systems because it has to repeately do certain tasks. Think about digestive system, respiratory system, blood circulation system, etc.

If it is about only a single trade, one can always go and bet to make or lose a fortune without a system.
That sounds like a wise course of action. However, that is what misleads most traders to ruin. A "system" is only part of the solution.

What can you repeatedly do? You can determine your position size. You can decide when to enter a trade. You can exit a trade at a certain loss level. Anything else is beyond your control. The market is in control. No system can change these facts. It's a hard pill to swallow but it's the truth.
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