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  • #61
  • Mar 6, 2011 9:14am Mar 6, 2011 9:14am
Quoting medici
I wasn't aware of it, but somebody else has made the same point as my most recent post here.

See the words of Charles Faulkner in this post:

http://www.forexfactory.com/showpost...1&postcount=36
Interesting thread. The Market Wizards books are interesting reads! I agree with Jack S. viewing the markets as the ultimate puzzle. I never thought of it as a game, or a beast etc. Just a fun and challenging puzzle.

Peace
SatchFan
  • #62
  • Mar 6, 2011 1:25pm Mar 6, 2011 1:25pm
Quoting SatchFan
Interesting thread. The Market Wizards books are interesting reads! I agree with Jack S. viewing the markets as the ultimate puzzle. I never thought of it as a game, or a beast etc. Just a fun and challenging puzzle.

Peace
SatchFan
Glad you like it And welcome to FF and the thread.

I read the two Market Wizards books when they were first out, and then re-read some time later. Great stuff!

And I have also been attracted by the 'operating metaphor' of the markets as a puzzle - it was particularly attractive given my background in puzzle-solving/mathematics.

In the early days, for everyone, I suppose the market is a puzzle, but these days I have come to think that trading can and should be simple, at least for the short-term speculator.

In mathematics the best people don't think of the problems they are working on as the 'master puzzle'. Quite to the contrary they assume it to be simple - it's just that they haven't figured it out yet. And maybe something similar may be true in trading. A lot of very good traders are very far from being puzzle-solvers.

So now it's simply a matter of listening to the rhythm of the market and following, much like dancing. And I become the puzzle - am I fit to trade, can I hear the rhythm, am I flexible and supple enough to move with the market?
  • #63
  • Mar 6, 2011 9:10pm Mar 6, 2011 9:10pm
Quoting Porkpie
http://www.brettsteenbarger.com/articles.htm

Here's what I did a while ago. I created a spreadsheet with my actual results and my potential results based on my exact rules. I then created a chart to follow daily of the results with two trendlines of data. The further away they were from each other showing bigger discrepancy of results, the greater I lacked discipline in following my rules. My daily trading aim was to have these lines merge together and I could only do this by sticking to my rules regardless of whether my daily results...
You can do similar exercise to calibrate your confidence levels. The way you could do it is to rate your actual confidence level for each setup you take. Then you plot the curve against actual results. Van Tharp has a whole chapter on calibrating yourself in his book “How to use risk”. I find such calibration very useful for discretionary traders.


Quoting bug

For those in the know, is van Tharp in the same camp as Douglas? I didn't like his books because they were childish (the cartoons really made me doubt everything) and full of references to god (what is it about people that they so badly need to prove others of their faith?) and really didn't help me. I didn't think there was much to learn and didn't read past the first 30 pages. If Douglas is a fraud then comparing those two, I wouldn't be surprised to hear that Tharp is a fraud too.
I’ve worked through almost all Tharp’s materials, and yet I haven’t come across anything that references to God. Perhaps you’re confusing it with spirituality and psychological clearing, and development of awareness and eliminating self-sabotage which he sometimes does through the spiritual beliefs. Tharp is a performance psychological coach, and top traders clearly believe in such importance. For example John Henry is into Zen Meditation, Paul Tudor Jones was spending large amount of money every year on psychological coaching, Ed Seykota studied psychology, and Ed’s book “The Trading Tribe” is about psychology.

And as far as Mark Douglas goes, Mark is a trader. The last time I’ve heard him speak, was trading Larry Pesaventos methods, such as AB=CD, and so on. Both Van Tharp and Mark Douglas are brilliant when it comes to trader’s development. Here are couple of gems of trading wisdom from Mark Douglas book;

Here are his The 5 Fundamental Truths

  1. Anything can happen.
  2. You don’t need to know what is going to happen next in order to make money.
  3. There is a random distribution between wins and losses for any given set of variables that define an edge.
  4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
  5. Every moment in the market is unique.

Here are his 7 principles of consistency:

  1. I objectively identify my edges.
  2. I predefine the risk of every trade.
  3. I completely accept the risk or I am willing to let go of the trade.
  4. I act on my edges without reservation or hesitation.
  5. I pay myself as the market makes money available to me.
  6. I continually monitor my susceptibility for making errors.
  7. I understand the absolute necessity of these principles. I never violate them.

Believe me, once you get into psychological work, your trading will go to a whole new level. Unfortunately people don’t want to hear this, yet alone immerse themselves into seriously working on themselves they, just want a holy grail system which will “make” them rich quickly.

  • #64
  • Mar 6, 2011 9:46pm Mar 6, 2011 9:46pm
Quoting medici
In his later years, when interviewed by a reporter, Albert Einstein's response to the question "What is in your opinion the most important question facing humanity today?" was "I think the most important question facing humanity is, 'Is the universe a friendly place?' This is the first and most basic question all people must answer for themselves."

Similarly, the most important question facing the trader is whether the market is a friendly place, and that is a question that the trader must answer for himself.

To understand why this is the...
What Einstein was proposing is based on duality. Van Tharp in his book “How to Control Losing Attitudes”, actually analyses the above mentioned Einstein’s statement. Tharp goes to point out that there is a way of thinking that goes beyond human judgment. In this book he describes and the 20 beliefs of top traders. What is interesting, is that the most important of those beliefs are actually spiritual beliefs.

Anyway, going back to medici’s discussion whether or not it is useful to believe that the market is hostile or friendly place, is perhaps the wrong question. The market has to be viewed from a neutral perspective. The market just is what it is, it has no agenda, and trying to come up with a positive or negative answer would introduce bias in my opinion.

I think it is more productive to get to know myself better, to focus on working inside my own mental environment, which is what I have control of !!! I’m the biggest risk factor in my own trading, and perceiving market as hostile or friendly could potentially affect my perception of a risk. The market is neutral, and I need to think from the market’s perspective, instead of categorizing the information it is giving me into hostile or friendly category. That’s my two cents.
  • #65
  • Mar 6, 2011 10:03pm Mar 6, 2011 10:03pm
Quoting Herd_master
Y
Here are his The 5 Fundamental Truths

  1. Anything can happen.


What went through my mind when I read #1 is something I have been telling myself lately which is similar.

You don't know how far the market will go.

Let's be honest. How many times have you seen a market blow through support/resistance without even a flinch? Many times, right? What about a market that just keeps on making new highs/lows even when you've been looking for a bottom/top? Keeps on rolling till the end right?

So I don't know how far it will go and I let the market tell me when its time to get out or when the trend has changed. It always leaves clues.
  • #66
  • Mar 6, 2011 10:41pm Mar 6, 2011 10:41pm
IMO, there are 2 big problems in forex trading by newer users.

Problem 1: Emotions: once emotions come into play, losses are right behind them - emotional trading almost always leads to a loss.

Problem 2: Lack of Education: proper beginner trading in forex requires a minimum of a year of study. That would be 6months of daily learning and 6mo of daily demo trading. Remember, learning forex is like learning a new language, the information is vast and hard to grasp.
  • #67
  • Edited 4:43am Mar 7, 2011 4:30am | Edited 4:43am
Thank you for very relevant and insightful post I agree with every word you are saying. Thank you also for book tip. Haven't read that one.

Quoting Herd_master
What Einstein was proposing is based on duality. Van Tharp in his book “How to Control Losing Attitudes”, actually analyses the above mentioned Einstein’s statement. Tharp goes to point out that there is a way of thinking that goes beyond human judgment. In this book he describes and the 20 beliefs of top traders. What is interesting, is that the most important of those beliefs are actually spiritual beliefs.
That is also what I am trying to point out here, but I thought concepts such as non-duality would be a bit much, at least to begin with.

Quote
Anyway, going back to medici’s discussion whether or not it is useful to believe that the market is hostile or friendly place, is perhaps the wrong question. The market has to be viewed from a neutral perspective. The market just is what it is, it has no agenda, and trying to come up with a positive or negative answer would introduce bias in my opinion.

Totally agree. Nevertheless, the question is relevant for uncovering current emotions held in relationship to the market.

Psychologists use projective techniques to uncover sub-consciously held emotions. For example, one such question could be "If the market were a natural phenomenon, what would it be?"

After some honest introspection, one may discover things of value out of such a question. Is the market a mad monkey, angry cobra, a volcano, waves against the shore, or what?

Your answer could tell you a lot about your deeper issues in trading, and could point in the direction where further work needs to be done.

Quote
I think it is more productive to get to know myself better, to focus on working inside my own mental environment, which is what I have control of !!! I’m the biggest risk factor in my own trading, and perceiving market as hostile or friendly could potentially affect my perception of a risk. The market is neutral, and I need to think from the market’s perspective, instead of categorizing the information it is giving me into hostile or friendly category. That’s my two cents.

Totally agree, and that's, as said before, what I tried to point at. Thanks for clarifying response.
  • #68
  • Mar 7, 2011 4:33am Mar 7, 2011 4:33am
Quoting SatchFan
What went through my mind when I read #1 is something I have been telling myself lately which is similar.

You don't know how far the market will go.

Let's be honest. How many times have you seen a market blow through support/resistance without even a flinch? Many times, right? What about a market that just keeps on making new highs/lows even when you've been looking for a bottom/top? Keeps on rolling till the end right?

So I don't know how far it will go and I let the market tell me when its time to get out or when the trend has...
Thanks for pertinent example. An instance of the "Don't anticipate, follow" principle, don't you think?
  • #69
  • Mar 7, 2011 4:50am Mar 7, 2011 4:50am
Quoting medici
"If the market were a natural phenomenon, what would it be?"
a tornado, of course

http://www.steinbachweather.ca/weath...ie_tornado.jpg
Invincibility lies in the defence, the possibility of victory in the attack
  • #70
  • Mar 7, 2011 5:33am Mar 7, 2011 5:33am
Quoting Herd_master
I’ve worked through almost all Tharp’s materials, and yet I haven’t come across anything that references to God. Perhaps you’re confusing it with spirituality and psychological clearing, and development of awareness and eliminating self-sabotage which he sometimes does through the spiritual beliefs.
I'm sorry to be so blunt about this, but you must not have read any* of his books - there are 3 references to god in Trade Your Way to Financial Freedom, 15 references in Super Trader, 4 references in Financial Freedom Through Electronic Day Trading (I used Google books to search for references). There could be more, I didn't bother to check each and every book of his.

However, I'm not denying the importance of inner spirituality and some sort of harmony with oneself, indeed I think it is very important for the reasons you have already pointed out in your post, but personally I can't stand it if someone tells me I need to pray, go to church and service some god to succeed in trading and life in general.

*I don't mean to pick a fight here. I actually don't think you're pretending to having read them, maybe you just missed those references when reading yourself. Just laying out the fact that there are numerous references to god and there needn't be. But that's just me. If you like his works I'm fine with it.
If you don't risk, you don't ever have to lose.
  • #71
  • Mar 7, 2011 6:41am Mar 7, 2011 6:41am
Quoting bug
I'm sorry to be so blunt about this, but you must not have read any* of his books - there are 3 references to god in Trade Your Way to Financial Freedom, 15 references in Super Trader, 4 references in Financial Freedom Through Electronic Day Trading
I didn't read the book, I've actually studied it. I know you're not picking a fight, so I'll clarify it for you.

Quoting bug
but personally I can't stand it if someone tells me I need to pray, go to church and service some god to succeed in trading and life in general.
He doesn't tell you that you "need to pray, go to church and service some god to succeed in trading and life in general." You've made such assumption yourself.

There are words such as "God" in the book, but not in the context of religious “faith” as you believe.

I think you’re confusing the content with the context. He uses the word God in the same context as Eckhart Tolle does, that is as a concept of relationship with our universe, and the energy which our universe is made up of (proven by quantum physics). It has nothing to do with God as per se (as some "old guy with a beard").

But most importantly, it has to do with Belief Examination Paradigm shifts. That's the context. So don't just look at the word "God" and immediately assign meaning to it, because what it does, it take things out of context. It's like reading; "the dog bit johny", and then using the same semantics and giving it different context, and ending up with "johnny bit the dog".

Carefully read the part “working on yourself” in “super trader”. Not because I want to prove that a point, but rather to gain benefits from his outstanding insights.
  • #72
  • Mar 7, 2011 6:44am Mar 7, 2011 6:44am
Quoting medici
That is also what I am trying to point out here, but I thought concepts such as non-duality would be a bit much, at least to begin with.
Nice posts medici, feel free to introduce the concept of non-duality if you like, and how it is relevant to successful trading. Though as you’ve indicated, it might be too much for most people.

I think that as a rule of thumb, people first have to suffer a lot to create a crack in their egos, and then through such opening, the meaning of everything is all of the sudden perceived from a whole new perspective. Harry Palmer wrote; "I experience what I believe, unless I believe I won't, in which case I don't! Which means I did."

The best traders think differently than the rest of us, and are no longer susceptible to trading errors. They no longer see trading as a away to make money, but instead they use trading activities as a mirror of their own personal development.
  • #73
  • Mar 7, 2011 6:51am Mar 7, 2011 6:51am
Quoting bonniesmith
IMO, there are 2 big problems in forex trading by newer users.

Problem 1: Emotions: once emotions come into play, losses are right behind them - emotional trading almost always leads to a loss.

Problem 2: Lack of Education: proper beginner trading in forex requires a minimum of a year of study. That would be 6months of daily learning and 6mo of daily demo trading. Remember, learning forex is like learning a new language, the information is vast and hard to grasp.
One of the frustrating problems with learning to trade, is that people spent years studying what is in a sense irrelevant to successful trading. Consequently they can waste years running to the west running for a sunrise.

Trading is full of contradictions and paradoxes as it is, yet there are unfortunately also many self-appointed gurus selling snake oil which adds another layer of difficulty to the innocent newbie victim. Good luck on your trading journey, and remember, successful trading is not a destination you arrive to, instead it is an ongoing process.
  • #74
  • Mar 7, 2011 8:09am Mar 7, 2011 8:09am
Quoting Herd_master
There are words such as "God" in the book, but not in the context of religious “faith” as you believe.

I think you’re confusing the content with the context.
In Western culture, god has a very straight-forward meaning and it is not generally up to interpretation, especially not in the US where Tharp is from (and where most of his audience lives). In any case, whatever interpretation someone gives it, I still think that pleasing a supernatural being is plain stupid and ignores the scientific revolution man has witnessed over the last couple hundred years. One needs to work on oneself and one's emotional and psychological responses, not pray that they suddenly get 'fixed' one day.

I guess we'll have to agree to disagree and end it at that. No more posts from me on this topic.
If you don't risk, you don't ever have to lose.
  • #75
  • Mar 7, 2011 11:18am Mar 7, 2011 11:18am
Some very good posts in here now and obviously some very clever people as well

As I was saying earlier in this thread, the ability to analyse oneself and know when they are in a mindset that is able to make sound trading decisions or when they should stop, is one of the things I believe everyone needs to learn.

two weeks ago I saw a load of trades work out which I had avoided for whatever reason. I could have had 5 or 6 wins in a row.

Then when the market finally gave me what I considered a high probability setup, I took it. and gues what? I was stopped!.

This kind of thing can really throw a trader and lead them to extreme frustration and cause them to make stupid mistakes, and perhaps even revenge trading.

Now I was not that bothered, in the past I probably would have gotten really mad. then I would make more mistakes, and so on...

I took last week off, and and just let my brain recover and get back into gear, now i have almost forgotten about what happened a couple of weeks ago and it will not affect my trades in anyway.

The second the trader feels any form of frustration or anger or emotion towards the market, its time for a break. Its simply not possible to trade profitably when the mind is not in gear.

looking forward to more posts.
  • #76
  • Mar 7, 2011 12:00pm Mar 7, 2011 12:00pm
Great posts and great discussion by all.

I have a problem with the following statement-
Quoting Herd_master
...And as far as Mark Douglas goes, Mark is a trader.
Don't get me wrong I like Trading in the Zone as well... it is a rare work.

Read his Preface again...

Quick Summary
(from Preface, Trading in the Zone)

1978, started trading, unsuccessful
1981, got a job as broker for Merrill at CBOT, "within 9 months, lost nearly everything I owned"
1982, started working on his first book "The Disciplined Trader..."
1983, left Merrill to start a consulting firm, "where I presently develop and conduct seminars on trading psychology...act in the capacity of trading coach", "as of this writing I have spent the last 17 years discussing the psychological dynamics behind trading."
2000, Trading in the Zone published

Mark Douglas is a writer, perhaps "trading psychologist", but...
I see no evidence of him being a successful trader.
  • #77
  • Edited 2:17pm Mar 7, 2011 12:49pm | Edited 2:17pm
Quoting bonniesmith
IMO, there are 2 big problems in forex trading by newer users.

Problem 1: Emotions: once emotions come into play, losses are right behind them - emotional trading almost always leads to a loss.

Problem 2: Lack of Education: proper beginner trading in forex requires a minimum of a year of study. That would be 6months of daily learning and 6mo of daily demo trading. Remember, learning forex is like learning a new language, the information is vast and hard to grasp.
I don't think it's either one of these. A trade gets through with a bit of understanding and a bit of luck. Emotions are a symptom of this, not a cause; and, education merely produces a better edge.

Aggression and passivity are the cause.
If one is sympathetic with the market, one initiates the fight-or-flight response, with which the market is a natural fit. One may or may not also ride the market wave with one's emotions, that is, with the market emotion cycle.
If, instead, one is parasympathetic with the market, one initiates the relaxation response, with which trading is a natural fit. Then, one has the opportunity to read the market's passive-aggressive bent and profit from it.

Of course, relaxing oneself away from expressing negative emotions toward the market is half the battle (, the other half being accepting negative emotions toward oneself from mistakes in edge or follow-thru, to spur oneself to correct the errors and return to neutral, any positive emotions reserved for spending that money.)


One could also shift the blame of who is relaxed and thinking clearly and who is passive and/or aggressive, from the market to something else.

A first one is to simply exaggerate the market's chart appearance:
The market is unpersuadable. It is at once manic-depressive and all-powerful.
If we try to beat it, we are lost; if we join it in its insanity, we, again, are lost.
The only answer, I think, is to accept its power and thus relax around it, so as not to try and change it, and thus not to anger it so it strikes back; and, we understand and trade upon its insanity, all the while protecting ourselves from its unpredictable moves.

Another is to study how the market's few, real decisionmakers trade:
There, aggression could be a reasonable thing to do, since supporting it is a group of fairly relaxed, stable traders. While a retail trader may not be able to see the same information, trains of thought and small clues linked to that information help guide one through a mostly random (i.e., to others, manic-depressive) chart.

Deeper in, one exaggerates one basic element of the market:
Put crowd psychology into price levels, relating to the market as a spouse, suggesting different groups of similar prices are at war with each other, and so on.
  • #78
  • Mar 7, 2011 1:58pm Mar 7, 2011 1:58pm
Quoting ha-pattern
I don't think it's either one of these. A trade gets through with a bit of understanding and a bit of luck. Emotions are a symptom of this, not a cause; and, education merely produces a better edge.

Aggression and passivity are the cause.
If one is sympathetic with the market, one initiates the fight-or-flight response, with which the market is a natural fit. One may or may not also ride the market wave with one's emotions, that is, with the market emotion cycle.
If, instead, one is parasympathetic with the market, one initiates the relaxation...
I like the terms you went with...it is a very true way of explaining the motivation behind market moves. One way I have always looked at it was out of "fear" and greed" people are greedy to a point....then begin to fear losing the profits they have and get out. Once enough people change their thoughts from greed based to fear based we get a change of direction.

---but again I like the way you put it because it takes the "emotional excuse" out of being right and wrong.
  • #79
  • Edited Mar 8, 2011 2:28am Mar 7, 2011 2:57pm | Edited Mar 8, 2011 2:28am
Quoting bug
In Western culture, god has a very straight-forward meaning and it is not generally up to interpretation, especially not in the US where Tharp is from (and where most of his audience lives). In any case, whatever interpretation someone gives it, I still think that pleasing a supernatural being is plain stupid and ignores the scientific revolution man has witnessed over the last couple hundred years. One needs to work on oneself and one's emotional and psychological responses, not pray that they suddenly get 'fixed' one day.

I guess we'll have...
Hello bug, apologies if my reply to your post finds you irritated or annoyed, but I think it's important for the topic of the thread. And I hope that you may see its value too.

I don't know your educational background, but it seems like the beliefs you express have at least to some extent been influenced by teachers, priests, journalists and other people whose role it is to help the general public deal with the fear of uncertainty.

Generally they tell us stories to believe, as a story believed tends to lessen the anxiety we may feel. And, of course, those stories may serve other purposes too.

You seem to have discarded the stories provided by the representatives of the church, but not the ones related as science. If you had learned your science from some of the creators of science, you might have come to a different conclusion - that those are just stories too, efficient in practice perhaps but not to be believed any more than other stories we're being told.

Sir Arthur Eddington, considered by Albert Einstein as one of the persons who had best understood the theory of relativity, said in one of his books that "The world is made of mind-stuff.", and he continued

The mind-stuff of the world is, of course, something more general than our individual conscious minds…. The mind-stuff is not spread in space and time; these are part of the cyclic scheme ultimately derived out of it…. It is necessary to keep reminding ourselves that all knowledge of our environment from which the world of physics is constructed, has entered in the form of messages transmitted along the nerves to the seat of consciousness…. Consciousness is not sharply defined, but fades into subconsciousness; and beyond that we must postulate something indefinite but yet continuous with our mental nature…. It is difficult for the matter-of-fact physicist to accept the view that the substratum of everything is of mental character. But no one can deny that mind is the first and most direct thing in our experience, and all else is remote inference.

If you think about it, that is a very natural point of view for somebody creating the stories of science. To create such stories one has to tolerate being in a state of not knowing out of which perhaps some insights may appear.

And if that state of not knowing is not just tolerated, but recognised to be your home and the deepest truth about reality, then one may come to hold views similar to Eddington's. And then the "facts" of science will be seen for what they are - metaphors and stories appearing out of nowhere and returning to where they came from upon close inspection - from a vantage point that is as solid as rock.

That state of not knowing is also at the root of the spiritual traditions of the world. It may be less apparent in the Christian tradition, and in my experience the deepest penetration into the matter is expressed in the ancient Indian tradition of Advaita Vedanta. For a taster, listen to a Londoner reading from one of the ancient texts:

Inserted Video


Note that he says that these are not teachings but "spontaneous utterances that emanated out of that perfect state", i.e. that same state of not knowing. Now don't make the mistake of considering this to be about abstruse things like relativity theory or metaphysics. Listen to what one of the world's leading authorities on neuro-science, Thomas Metzinger, says in the introduction to his recent book The Ego Tunnel:

It has now become clear that we will never solve the philosophical puzzle of consciousness...if we don't come to terms with this simple proposition: that to the best of our current knowledge there is no thing, no indivisible entity, that is us, neither in the brain nor in some metaphysical realm beyond this world. So when we speak of conscious experience, what is the entity having these experiences?

So welcome to the state of not knowing. It's not an academic matter, but very practical - who are you?

And that state of not knowing, or "that perfect state", is The Holy Grail.
  • #80
  • Mar 7, 2011 3:02pm Mar 7, 2011 3:02pm
Quoting Intu
Great posts and great discussion by all.

I have a problem with the following statement-


Don't get me wrong I like Trading in the Zone as well... it is a rare work.

Read his Preface again...

Quick Summary
(from Preface, Trading in the Zone)

1978, started trading, unsuccessful
1981, got a job as broker for Merrill at CBOT, "within 9 months, lost nearly everything I owned"
1982, started working on his first book "The Disciplined Trader..."
1983, left Merrill to start a consulting firm, "where I presently...
Hi Intu, and welcome onboard

Thanks for pointing that out...I agree and am very skeptical about this particular character.
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