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Make Your Own Road

  • #41
  • Edited 11:43pm Jul 25, 2009 10:26pm | Edited 11:43pm
Quoting Bizken
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.

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.
Bizken, very good post.

Let me give a relevant example. It took me several months to overcome this relevance issue.

I enter a position let's say for a 100 pip profit, with stoploss of 80 pips. The trade goes against me. It goes against me by 70 or 75 pips almost touching my stoploss. Then situation changes, PA starts coming back and gets back to the point where I originally entered. From break-even it goes further up and I am now 10 or 20 pip positive. I used to close my position for those 10 or 20 pips rather than wating for it to hit my TP of 100 pips. Fearing that it could again go back to my stoploss.

Same used to be true for PA first moving in my desired direction, then coming back and showing me a loss of 10 or 20 pips.

It took me months not to think in terms of this relevance and stick to the TP and SL as originally set.
The Thief of Wall Street
  • #42
  • Jul 25, 2009 10:46pm Jul 25, 2009 10:46pm
Quoting gbppip
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.
Exactly, Gbppip.

I learned this hardway at the cost of time and money. Finally came to conclusion that the best system is the one that gives you a likely outcome i.e. probability of more than 50% favorable outcome based on certain proven assumptions (but still assumptions). This is the most one can do. Trading to me is an Art, not a science, and it in fact is an Art.

These Basic Trading Principles idea is to list down those proven assumptions (not forgetting their limitations) in order to check whatever system one selects or designs against these parameters.

Thanks for the input.
The Thief of Wall Street
  • #43
  • Edited 5:32am Jul 26, 2009 12:05am | Edited 5:32am
Quoting doblece
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...
Great post. Link for 'awareness' (Aware Ego), 'inner voice' (Inner Critic) here .

-----

Here's my take on the last several ones:

A technical system can reduce the chance of a miss or mm increase the capture of a hit to negate the other's utility. A way to explain technicals-to-mm use in trading follows.

People are built to study motion; they have to be, to survive. Watch a moving chart and trade as if your life depended on it (or at least study it in offtime, also, to keep interest high) for years -- some say the minimum is 10,000 hours -- and you develop a great kinaesthetic awareness of how a chart, and thus a trade, moves, more likely thru s&r / simple patterns one has internalized and can respond to in microseconds.

That doesn't mean we'll listen to ourselves after we have a flash of brilliance saying when to enter, exit or stop poor timing. Both a system, to a deep kinaesthetic awareness trained in realtime charts, and mm, to a consistent obedience to awareness' call to trade, are redundant. There may be other, more-pressing matters out of our control to involve us and a rational sense of one's chart-training limits, and a system's feature of explaining a trade more simply at times depends on for accuracy, or mm's physical stop or limit, is there to save us.

How one creates the redundant abilities from the more-innate ones is next. I'd imagine the inner critic, or 'devil', enjoys having full reign of the amygdala, seat of negative emotions. For reason of a greater unknown threat from others, the inner voice prepares one for a challenge to internalized ability or for a lack of focus around trading distractions, which one externalizes through using mm.
While losing an innate capacity to learn a new language early in life, adults gain the ability to share a job-related terminology or find in studies a set of patterns that explains what it covers in language-like terms. Our personality then finds a method to suit our ability to deal with our self's inner trade call and the world's call for our attention. The aware ego then follows through on this technical method ('system').
  • #44
  • Jul 26, 2009 9:01am Jul 26, 2009 9:01am
Quoting Chicky
Exactly, Gbppip.

I learned this hardway at the cost of time and money. Finally came to conclusion that the best system is the one that gives you a likely outcome i.e. probability of more than 50% favorable outcome based on certain proven assumptions (but still assumptions). This is the most one can do. Trading to me is an Art, not a science, and it in fact is an Art.

These Basic Trading Principles idea is to list down those proven assumptions (not forgetting their limitations) in order to check whatever system one selects or designs against...
You're most welcome, Chicky. Try not to get caught up in dualities such as right/wrong, good/bad and art/science. It's not either/or nor is it shades of gray. It just is. The market "flows". When you learn to go with the flow, there is no mystery.
  • #45
  • Edited 8:57pm Aug 6, 2009 8:53pm | Edited 8:57pm
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.
  8. [Addition based on ce_me_flow's feedback] Trade planning is essential in calculating risk in a trade and to implement money management techniques aiming at capital preservation
  9. Mega trends do not easily reverse

The Thief of Wall Street
  • #46
  • Edited Aug 14, 2009 3:40pm Aug 13, 2009 9:44pm | Edited Aug 14, 2009 3:40pm
Pre-requisites of a trading method

All market movements are based upon collective demand and supply created by millions of buyers and sellers. Since objectives and levels of such demands and supplies among these sellers and buyers vary second by second, market never remains stable at one price level. It always keeps on moving either up or down. However, whatever direction it moves, it never goes straight in that direction. Each currency pair has its own personality with steady and recognizable patterns and pace. This seems a bit strange, but it is an undeniable fact that market tends to respect psychological levels, pivots, fibs, waves, trend lines, etc. as supports and resistances. Market flows from one point to next forming price trends and consolidations. Price consolidations ultimately break, followed by retraces. Market sometimes shows high volatility and forms spikes, especially near news releases. It takes much force to stop and reverse a mega market trend and therefore reversals of main trends take time.

Any trading method developed acknowledging the above features of forex market would have better chances of success as it would generate more winners than number of losing trades. At constant dollar amount of risk and reward per trade, such method should produce positive overall results in long run. Higher the number of trades, more would be the chance of getting overall favorable results.

Trade planning is essential in calculating risk and reward in a trade and also to implement money management techniques aiming at capital preservation. Risk has, does, and always will exist. You can chose to either fear it or acknowledge it.

No risk no business, ………………but blind risk, also no business.

Now, you may like to make your own road to success in trading business.


Each different market has its own steady and recognizable stepping and pace - Doblece

Risk has, does, and always will exist. You can chose to either fear it or acknowledge it - Jay Walker

Trade planning is essential in calculating risk in a trade and to implement money management techniques aiming at capital preservation - ce-me-flow
The Thief of Wall Street
  • #47
  • Aug 21, 2009 1:17pm Aug 21, 2009 1:17pm
“I prefer to be wrong on my own terms, than be right on yours"- Jay Walker

Would like to add to Jay's above statement that "... because I know that I would be wrong on my own terms lesser number of times than yours - and this is all I want from my trading"
The Thief of Wall Street
  • #48
  • Aug 21, 2009 1:19pm Aug 21, 2009 1:19pm
Can you beat the rat?
If you only trade long, then you can't always be wrong.
  • #49
  • Edited 1:30pm Aug 21, 2009 1:22pm | Edited 1:30pm
Quoting FrankenPip
Can you beat the rat?
During daytime - Yes, During night - No.
In the open - Yes. In a tunnel - No.
One rat - Yes. Many - No.
Few times - Yes. Always - No.
Big rat - Yes. Small rat - No.
-------- - Yes. -------- No.
-------- - Yes. -------- No.


However, the bigger question is: Can rats beat me with my this approach?
The Thief of Wall Street
  • #50
  • Aug 21, 2009 1:30pm Aug 21, 2009 1:30pm
Quoting Chicky
During daytime - Yes, During night - No.
In the open - Yes. In a tunnel - No.
One rat - Yes. Many - No.
Few times - Yes. Always - No.
Big rate - Yes. Small rate - No.
-------- - Yes. -------- No.
-------- - Yes. -------- No.


However, the bigger question is: Can rats beat me with my this approach?
"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

P64 HOW WE DECIDE

I believe the rat will beat you.
If you only trade long, then you can't always be wrong.
  • #51
  • Edited 2:28pm Aug 21, 2009 1:57pm | Edited 2:28pm
Quoting FrankenPip
"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't...
Thanks buddy, I liked this example. It is very true.

But my method is a very smiple one, derived from pinciples of bookmaking (or one may say probabilities). In other words I try to be a Rat not a Yale graduate. Plus I have the advantage of learing my first lessons in the streets before graduating and getting professional certification with majors in what I initially learned in the streets. Believe me, that gave me tremendous edge over other students who never got a chance of such learning. Then I moved to teaching Business Studies. Changed the moto of my college, stole this new logo from somewhere but it represented what I tried to introduce together with my team. Long after I left that job as the college principal their moto still is "We don't teach, we make the rules of business"

May be Yale graduates are right but they don't know that they are right....... probably with 52% success rate they are getting bites bigger than what rats are getting with their 60% success rate or at least their chances of getting bites bigger than rats are 15.384615384% better than rats.

ps. Let me add

By thinking like a Rat - Yes. By wearing a coat and a tie but thinking like an idiot - No.
(Thats why title of this thread says Make Your Own Road).
The Thief of Wall Street
  • #52
  • Aug 21, 2009 2:44pm Aug 21, 2009 2:44pm
HI Chicky:

I am glad you enjoyed that quote. Whenever I am tempted to start playing with an indicator or new system, I ask myself if I am going to let the rat beat me. That puts an end to all of the nonsense.

Traders love to say you have to learn how the market works. There is nothing to learn! That's the secret.
If you only trade long, then you can't always be wrong.
  • #53
  • Aug 21, 2009 4:40pm Aug 21, 2009 4:40pm
Quoting FrankenPip
HI Chicky:

I am glad you enjoyed that quote. Whenever I am tempted to start playing with an indicator or new system, I ask myself if I am going to let the rat beat me. That puts an end to all of the nonsense.

Traders love to say you have to learn how the market works. There is nothing to learn! That's the secret.
100% true.

Trading is simple but not easy. That's the secret I learned it hard way.......... did I mention the word "learned"? Many don't want to accept this fact that trading is plainly simple.

Very nice to see you here and benefit from your views. Thanks.
The Thief of Wall Street
  • #54
  • Aug 21, 2009 4:45pm Aug 21, 2009 4:45pm
I tried making my own road once.
It's not easy.
That asphalt won't come out of your clothes.
  • #55
  • Edited 5:06pm Aug 21, 2009 4:55pm | Edited 5:06pm
Quoting billbss
I tried making my own road once.
It's not easy.
That asphalt won't come out of your clothes.
I am a fifth grader. Will appreciate if you kindly let me know more about making the road using asphalt. Maybe the time and money I spent can buy some right detergent.
The Thief of Wall Street
  • #56
  • Aug 21, 2009 5:54pm Aug 21, 2009 5:54pm
Quoting Chicky
100% true.

Trading is simple but not easy. That's the secret I learned it hard way.......... did I mention the word "learned"? Many don't want to accept this fact that trading is plainly simple.

Very nice to see you here and benefit from your views. Thanks.
"It's so simple even a cave man can do it"
If you only trade long, then you can't always be wrong.
  • #57
  • Edited 11:18am Aug 23, 2009 11:11am | Edited 11:18am
Quoting FrankenPip
"It's so simple even a cave man can do it"
"It's so simple that a caveman can invent it but next generations find difficult even to trade"
The Thief of Wall Street
  • #58
  • Aug 23, 2009 12:18pm Aug 23, 2009 12:18pm
Quoting Chicky
"It's so simple that a caveman can invent it but next generations find difficult even to trade"
That's because they believe they can out think the market, Mate.
  • #59
  • Last Post: Aug 23, 2009 4:20pm Aug 23, 2009 4:20pm
Quoting winningfx
hey, i remember that part. just can't remember the name of the big shark. seeing how fx bucketshops r screwing traders trades. we can know that there r alot of " boy plungers " around. hahahaha

The tip to buy sugar was given to Deacon S. V. White
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