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I Had No Idea I Took So Much For Granted

  • #41
  • Apr 13, 2006 9:40pm Apr 13, 2006 9:40pm
Jimmy,

What do you think about this idea that a discretionary rule after being repeated so often can become a mechanical rule. it seems to be along the lines of what you are saying here... or is it? thanks SMJ
"
I think the original question was about the rules for ones methods of trading, money managment, and style. I think that these might be broken down into seperate catagories, and you might decide to write down the "rules" for each seperately, because, for instance your rules for your frame of mind before entering a trade might chage over time, but your mechanical reasons for entering the trade might not, or vice versa."

Quoting JaxPacific
I would say yes and for that exact reason. But it ends up looking a lot like a journal. I've gone through three notebooks doing this. Sad I know but I'm dedicated. What happens is: you have your basic system and a few discretionary rules. You'll keep finding better and better rules (or just better ways of explaining them) until after a while some work so well they become a part of the mechanical system. Is this helping at all??
  • #42
  • Apr 13, 2006 9:55pm Apr 13, 2006 9:55pm
Quoting smjones
Jimmy,

What do you think about this idea that a discretionary rule after being repeated so often can become a mechanical rule. it seems to be along the lines of what you are saying here... or is it? thanks SMJ
"
I think the original question was about the rules for ones methods of trading, money managment, and style. I think that these might be broken down into seperate catagories, and you might decide to write down the "rules" for each seperately, because, for instance your rules for your frame of mind before entering a trade might chage over time, but your mechanical reasons for entering the trade might not, or vice versa."
SMJ,

I think we're on the same page here. I think that a "discretionary rule" is an oxymoron. A rule is a rule, I'm not sure where discretion would come in. A "mechanical rule" seems more logical to me. If you have a mechanical system, then it must be comprised of the "rules" of the system to be consistant and disciplined, not to say that some discretion could not be used.

For example, say you have a system where you look for price to reach a certain ma, then you wait for price to move away, then look for a retrace to the ma, and look for price action to initiate a trade (like a reversal day). Well your discretion would determine whether it was a reversal day or not.

I guess my point is that there are so many aspects to each individuals trading style that it would be impossible to sum it all up into one catagory.

Hope I'm making sense here. What do you think?
Jimmy
  • #43
  • Apr 13, 2006 10:01pm Apr 13, 2006 10:01pm
Yes, I see your point. It is like the eb and flow. Discretion/mechanical.
For example lets say we are looking for angle and seperation of say, MACD for example. Certainly that must be a discretionary decision, within the framework of a mechanical set of rules... SMJ


Quoting dangerman
SMJ,

I think we're on the same page here. I think that a "discretionary rule" is an oxymoron. A rule is a rule, I'm not sure where discretion would come in. A "mechanical rule" seems more logical to me. If you have a mechanical system, then it must be comprised of the "rules" of the system to be consistant and disciplined, not to say that some discretion could not be used.

For example, say you have a system where you look for price to reach a certain ma, then you wait for price to move away, then look for a retrace to the ma, and look for price action to initiate a trade (like a reversal day). Well your discretion would determine whether it was a reversal day or not.

I guess my point is that there are so many aspects to each individuals trading style that it would be impossible to sum it all up into one catagory.

Hope I'm making sense here. What do you think?
Jimmy
  • #44
  • Apr 13, 2006 10:07pm Apr 13, 2006 10:07pm
SMJ,

Along the same thought, that might be right. If you performed the same discretionary action enough times, at what point might it become a rule?

I'm thinking at that point it might be more of a habit, and then I might want to step back and wonder if I were doing something just because that's the way I always did it, or is it the right thing to do in this circumstance.

Maybe that could be one of the rules, "periodically look at the rules of my system to see if they are the rules, or something new I am unconsiously incorporating every time that should be discretion".

Pretty convoluted huh?
Jimmy
  • #45
  • Apr 13, 2006 10:21pm Apr 13, 2006 10:21pm
Of course that leads back to the idea of updating rules on a regular basis. Maybe to bring to our attention what is habit and useful and what is just habit...

SMJ


Quoting dangerman
SMJ,

Along the same thought, that might be right. If you performed the same discretionary action enough times, at what point might it become a rule?

I'm thinking at that point it might be more of a habit, and then I might want to step back and wonder if I were doing something just because that's the way I always did it, or is it the right thing to do in this circumstance.

Maybe that could be one of the rules, "periodically look at the rules of my system to see if they are the rules, or something new I am unconsiously incorporating every time that should be discretion".

Pretty convoluted huh?
Jimmy
  • #46
  • Apr 13, 2006 10:34pm Apr 13, 2006 10:34pm
I don't mean to monopolize the thread. If anyone else has an opinion chime right in...SMJ
  • #47
  • Apr 13, 2006 11:54pm Apr 13, 2006 11:54pm
Hey SMJones, in an effort to expand the topic; who specifically do you extract profit from when you win a trade and why? Who takes your money when you lose and why?
  • #48
  • Apr 14, 2006 2:59pm Apr 14, 2006 2:59pm
I am not sure I understand what you are asking...

I have not given that concept too much thought. I suppose if I am long and profit, it must come out of someone's account who is short and took a loss.

Have got more information on this? Am I sliding down a slippery slope?

Thanks SMJ


Quoting Darkstar
Hey SMJones, in an effort to expand the topic; who specifically do you extract profit from when you win a trade and why? Who takes your money when you lose and why?
  • #49
  • Apr 14, 2006 4:37pm Apr 14, 2006 4:37pm
I meant on a deeper level. Why is the individual short in your example? What information is he using to determine what the market will do?

For someone to put on a trade they have somehow established an expectation that prices will move in a certain way. Can you isolate why an individual is taking the other side of your trade?
  • #50
  • Apr 14, 2006 4:56pm Apr 14, 2006 4:56pm
Boy, that is a tough one, Why would anyone want to take the other side of my trade? I mean with my track record. LOL

No seriously, It is odd that there can be such a divers opinion in a given market.
However, when I think about it, people place trades for all sorts of reasons. Some to adjust a portfolio without regard to the movement of the currency. Some to hedge. Some for tax reasons.

I suppose what I am saying is that the other side of the trade could be for reasons that have nothing at all to do with the direction of a currency.

For example, the net effect of COTs that are reported each week. Their motivation is for such a longer time frame that it can easily be opposite of what the shorter term traders are doing. They may be interested in where price will be 6 to 9 months from now and place a trade accordingly. That trade could be the other side of my trade. Ultimately they most likely will be right as they are a sharp bunch., but I may also be right as my time frame is shorter and the direction could easily play out for me...

What do you think...

SMJ


Quoting Darkstar
I meant on a deeper level. Why is the individual short in your example? What information is he using to determine what the market will do?

For someone to put on a trade they have somehow established an expectation that prices will move in a certain way. Can you isolate why an individual is taking the other side of your trade?
  • #51
  • Apr 14, 2006 4:58pm Apr 14, 2006 4:58pm
I should say a small piece of the COTs trade could be the other side of my trade...



Quoting smjones
Boy, that is a tough one, Why would anyone want to take the other side of my trade? I mean with my track record. LOL

No seriously, It is odd that there can be such a divers opinion in a given market.
However, when I think about it, people place trades for all sorts of reasons. Some to adjust a portfolio without regard to the movement of the currency. Some to hedge. Some for tax reasons.

I suppose what I am saying is that the other side of the trade could be for reasons that have nothing at all to do with the direction of a currency.

For example, the net effect of COTs that are reported each week. Their motivation is for such a longer time frame that it can easily be opposite of what the shorter term traders are doing. They may be interested in where price will be 6 to 9 months from now and place a trade accordingly. That trade could be the other side of my trade. Ultimately they most likely will be right as they are a sharp bunch., but I may also be right as my time frame is shorter and the direction could easily play out for me...

What do you think...

SMJ
  • #52
  • Apr 14, 2006 5:11pm Apr 14, 2006 5:11pm
I have re read your answer and I see there is more to it. That goes to the discretionary part of rule making I think. Why can two different traders have the opposite view of a trade? Well that to me is a conundrum. It would have to be that in the final analysis both or one are relying on discretion. and one or both are relying on a mechanical rule... Man, I am going to have to think about that for awhile. SMJ



Quoting Darkstar
I meant on a deeper level. Why is the individual short in your example? What information is he using to determine what the market will do?

For someone to put on a trade they have somehow established an expectation that prices will move in a certain way. Can you isolate why an individual is taking the other side of your trade?
  • #53
  • Apr 14, 2006 6:48pm Apr 14, 2006 6:48pm
I'll give you a couple examples.

Price is moving towards a resistance point and trader 1 is in a trade with the expectation that price will move to and bounce off of it. Price moves a few pips beyond the resistance point and the position is liquidated to a breakout trader looking for the move to continue. A scalper takes a position expecting price to pullback, which it does. The scalper liquidates to a chartist who sees the pullback as a reversal.

At this point lets say price breaks the resistance point: the breakout trader will have profited from the chartist (literally) and trader 1 (conceptually). The scalper profited from someone outside the example.

Were price to reverse at the resistance, the chartist profited from the breakout trader (literally) and the scalper (conceptually). Trader 1 profited from someone outside the example.

So who are you profiting from or losing to when you take a trade?

It may seem esoteric, but when you start to look at your trades in this way it opens a whole new dimension of analysis. Looking at charts it is easy to forget that actual people are behind each tick of the price. Knowing who these people are and what their thinking can be a powerful edge...
  • #54
  • Apr 14, 2006 7:01pm Apr 14, 2006 7:01pm
Darkstar, on that note I have to run, but I want to come back and discuss this idea more... thanks much, SMJ
  • #55
  • Apr 29, 2006 2:45am Apr 29, 2006 2:45am
please, continue.

The thought occurred to me that there are traders looking at many different timeframes. Being aware of sigificant levels on all timeframes would be smart.
  • #56
  • Sep 11, 2006 5:57am Sep 11, 2006 5:57am
aren't you really hankering after some kind of trading plan to write your rules in? that way you can divide your rules into various subject headings and update them when necessary in the future...(there is a template in the beginner's section you could use)

sorry for digging up old threads, i've got my shovel out and am currently catching up on old posts...

Quoting smjones
Jimmy,

What do you think about this idea that a discretionary rule after being repeated so often can become a mechanical rule. it seems to be along the lines of what you are saying here... or is it? thanks SMJ
"
I think the original question was about the rules for ones methods of trading, money managment, and style. I think that these might be broken down into seperate catagories, and you might decide to write down the "rules" for each seperately, because, for instance your rules for your frame of mind before entering a trade might chage over time, but your mechanical reasons for entering the trade might not, or vice versa."
  • #57
  • Sep 11, 2006 6:07am Sep 11, 2006 6:07am
Iso, You have hit the proverbial nail on the head. That is exactly what I ended up doing. And this plan has been key to success. From it flows the strategy, the Money management and the mind set.

Wow, talk about ghosts from the past... I better be careful what I write... Never know when they will rise again... LOL

Scott


Quoting Isotonic
aren't you really hankering after some kind of trading plan to write your rules in? that way you can divide your rules into various subject headings and update them when necessary in the future...(there is a template in the beginner's section you could use)

sorry for digging up old threads, i've got my shovel out and am currently catching up on old posts...
  • #58
  • Apr 1, 2010 9:46pm Apr 1, 2010 9:46pm
Quoting smjones
Wow, talk about ghosts from the past... I better be careful what I write... Never know when they will rise again... LOL

Scott
So did you ever answer Darkstars' question?

(Ninja bump of the decade IMHO)
  • #59
  • Last Post: Apr 2, 2010 3:28am Apr 2, 2010 3:28am
Think about Sports. Could you make a rule about how to get your golfball into its hole with the least amount of hits? Well playing in direction of the hole might help but that's about it. Still this "Rule" won't make anyone Tiger Woods.
The concept is simple but in practice it's not easy. In my opinion it's excatly the same with Trading. There are things you can't put into rules. If all you needed where a method and some rules you could always build some kind of EA.

I belive that every moment in the market is unique so apart from some MM Rules I rather trade discretionary. I still got my Setups but I won't take all of them. That's where tacit knowledge comes into play. You just can't transfere Experience and other non explicit knowledge from one person to another.

EDIT: *cough* All the dust here
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