A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

This is a discussion on A "First Steps" forum ? lol! Here is my advice: newbies, just quit ! within the First Steps forums, part of the Reception category; Whether the failure rate statistic above is as high as the oft quoted 95% for retail traders - there is ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Mar 19, 2012, 10:42am   #22
 
bbmac's Avatar
Joined Jan 2003
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

Whether the failure rate statistic above is as high as the oft quoted 95% for retail traders - there is no way of knowing. What is clear though is that the failure rate is very high. Below I list some of the reasons for this.

a. The sub culture that surrounds trading as I intimated above suggests that you can ' get rick quick ' and work ' just five minutes day ' etc. This is plainly false and very misleading. It causes many to follow these apparent shortcuts letting their hope / greed cloud their common sense. If it looks too good to true - it usually is !

b. When they commence live trading - they simply don't know what it is they need to know and are distracted by false noises such as detailed in point a. above. They have no idea that actually trading isn't about getting involved in as many opportunities as possible - but about disregarding as many risks as possible to leave only the highest probability trading opportunities. This requires patience and discipline. It was Aristotle that said ' Patience is bitter - but it's fruit is sweet. '

The 1st goal of a trader should always be capital preservation, (Ie you have to be able to 'stay in the game ' through sensible and proven risk management techniques.) Only then can you achieve the 2nd goal which is to grow that capital. The 3rd task is to learn from every trade you place.

c. They are generally under funded and as a result of this (and greed) are over leveraged. Whilst the leveraging of margin can magnify gains it can magnify losses also. All too often they take advantage of the ridiculous levels of leverage willingly offered by the brokers and the result in more cases than not is that sooner or later they blow out their accounts and lose their trading margin.

d. They have no idea what a Trading Edge is, how to acquire one or what they then need to know about it in order to ensure that it throws up no surprises that can lead to problems, and a loss of trading margin.

e. They don't understand the psychological barriers that can prevent them from achieving their trading aims even with a proven Trading Edge. In his book Reminiscences Of A Stock Operator about the legendary Wall Street Trader Jesse Livermore, Edwin Lefevre suggests that one of the prime reasons most never make it is because;

i. When the natural human instinct is to hope - in trading you have to fear

ii. When the natural human instinct is to fear - in trading you have to hope

I.e: Most times the necessary cognitive responses required in trading run counter to the instinctive human ones. Furthermore when entering a market you have to be right at the right time, not right at the wrong time - because this is the same as being wrong. For example in a bullish market you have to know what the highest probability set-ups are to buy to profit from the rising price. If you buy in the wrong place and price corrects to the downside, even though it may resume it's rise you have been stopped out for a loss. You were right - the market was bullish - but you were right at the wrong time !

My experience is that developing the necessary 'trading psychology' can prove harder than mastering the technical stuff. Getting a proven consistently profitable way to trade (ie a Trading Edge) that can be relied upon to produce a regular income is one thing, but as the excellent Mark Douglas (Trading in the Zone, The Disciplined Trader etc) points out - it is the destructive effects of the human emotions connected with any discretionary trading that can lead to the ' Profit Gap, ' ie the difference between having a proven trading edge and actually being able to make a reliable and consistent income from it yourself. Of course the first step is to actually acquire a proven consistently profitable trading edge, but even given this - some never close this 'profit gap.'

G/L
__________________
I can stand the despair - it's the hope I can't manage (John Cleese - Clockwork.)
bbmac is offline   Reply With Quote
Thanks! The following members like this post: Liquid validity , travis , ChocolateDigestive , tim3
Old Mar 19, 2012, 10:49am   #23
 
bbmac's Avatar
Joined Jan 2003
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

I am reminded of Brett Steenbarger's 5 principles of trading:

Principle #1: Trading is a performance activity

Like the playing of a concert instrument or the playing of a sport, trading entails the application of knowledge and skills to real time performances and this is the core idea behind my most recent book. Success at trading, as with other performances, depends upon a developmental process in which intensive, structured practice and experience over an extended time yield competence and expertise. Many trading problems are attributable to attempts to succeed at trading prior to undergoing this learning process. My research suggests that professional traders account for well over three-quarters of all share and futures contract volume. It is impossible to sustain success against these professionals without honing one's performance--and by making sure that you don't lose your capital in the learning process. Confidence in one's trading comes from the mastery conferred by one's learning and development, not from psychological exercises or insights.

Principle #2: Success in trading is a function of talents and skills
Trading, in this sense, is no different from chess, Olympic events, or acting. Inborn abilities (talents) and developed competencies (skills) determine one's level of success. From rock bands to ballet dancers and golfers, only a small percentage of participants in any performance activity are good enough to sustain a living from their performances. The key to success is finding a seamless fit between one's talents/skills and the specific opportunities available in a performance field. For traders, this means finding a superior fit between your abilities and the specific markets and strategies you will be trading. Many performance problems are the result of a suboptimal fit between what the trader is good at and how the trader is trading.

Principle #3: The core skill of trading is pattern recognition
Whether the trader is visually inspecting charts or analyzing signals statistically, pattern recognition lies at the heart of trading. The trader is trying to identify shifts in demand and supply in real time and is responding to patterns that are indicative of such shifts. Most of the different approaches to trading--technical and fundamental analysis, cycles, econometrics, quantitative historical analysis, Market Profile--are simply methods for conceptualizing patterns at different time frames. Traders will benefit most from those methods that fit well with their cognitive styles and strengths. A person adept at visual processing, with superior visual memory, might benefit from the use of charts in framing patterns. Someone who is highly analytical might benefit from statistical studies and mechanical signals.

Principle #4: Much pattern recognition is based on implicit learning
Implicit learning occurs when people are repeatedly exposed to complex patterns and eventually internalize those, even though they cannot verbalize the rules underlying those patterns. This is how children learn language and grammar, and it is how we learn to navigate our way through complex social interactions. Implicit learning manifests itself as a "feel" for a performance activity and facilitates a rapidity of pattern recognition that would not be possible through ordinary analysis. Even system developers, who rely upon explicit signals for trading, report that their frequent exposure to data gives them a feel for which variables will be promising and which will not during their testing. Research tells us that implicit learning only occurs after we have undergone thousands of learning trials. This is why trading competence--like competence at other performance activities such as piloting a fighter jet and chess--requires considerable practice and exposure to realistic scenarios. Without such immersive exposure, traders never truly internalize the patterns in their markets and time frames.

Principle #5: Emotional, cognitive, and physical factors disrupt access to patterns we have acquired implicitly
Once a performer has developed skills and moved along the path toward competence and expertise, psychology becomes important in sustaining consistency of performance. Many performance disruptions are caused when shifts in our cognitive, emotional, and/or physical states obscure the felt tendencies and intuitions that lie at the heart of implicit learning. This most commonly occurs as a result of performance anxiety--our fears about the outcome of our performance interfere with the access to the knowledge and skills needed to facilitate that performance. Such performance disruptions also commonly occur when traders trade positions that are too large for their accounts and/or do not maintain sound risk management with their positions. The large P/L swings cause shifts in emotional states that interfere with the (implicit) processing of market data. Cognitive, behavioral, and biofeedback methods can be very useful in teaching traders skills for maintaining the "Yoda state" of calm concentration needed to access implicit knowledge.

The most important question I can ask an aspiring trader is: Are you engaged in a structured training process? Education--simply reading articles in magazines, websites, blogs, and books--is important, but it is not training. Training is the systematic work on oneself to build skills and hone performance. It requires constant feedback about your performance--what is working and what isn't--and it requires a steady process of drilling skills until they become automatic. No amount of talking with a coach or counselor will substitute for the training process: not in trading, not in athletics, and not in the dramatic arts. Training yourself to proficiency is the path to a positive psychology.
__________________
I can stand the despair - it's the hope I can't manage (John Cleese - Clockwork.)
bbmac is offline   Reply With Quote
Thanks! The following members like this post: MoonRocket
Old Mar 19, 2012, 10:58am   #24
Joined Oct 2011
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

Thanks for posting bbmac
__________________
"Human beings are best understood as being risk-averse when making a decision that offers hope of a gain
but risk-seeking when making a decision that will lead to a certain loss." - Daniel Kahneman

"Men who can both be right and sit tight are uncommon.
I found it one of the hardest things to learn."
- Jesse Livermore
MoonRocket is offline   Reply With Quote
Old Mar 19, 2012, 11:12am   #25
 
bbmac's Avatar
Joined Jan 2003
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

The patience and discipline thing is absolutely vital and most can't master it....for eg: Loook at spot gbpusd this morning so far - a 29 pip range inbetween the Friday hi 5860 and the Friday pullback lo off that Hi-5816. Now I have only seen 1 hi-probability trading opportunity since 0730am this morning and that was the re-test of the previous 1hr swing lo zone created by that pullback lo..other than that - nothing in over 2.5 hrs of being sat at the desk.

Of course there is a good chance of an upside follow thru on Friday's bullish thrust candle/last week's weekly bullish engulf candle (at some point.)

G/L
Attached Thumbnails
z.jpg  
__________________
I can stand the despair - it's the hope I can't manage (John Cleese - Clockwork.)
bbmac is offline   Reply With Quote
Old Mar 19, 2012, 11:24am   #26
Joined Oct 2011
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

Ok I'm adding two more....
8. The ability to take a positive from a crushing negative (the ability to come back).
9. Totally ignore the good feeling from a good win.
__________________
"Human beings are best understood as being risk-averse when making a decision that offers hope of a gain
but risk-seeking when making a decision that will lead to a certain loss." - Daniel Kahneman

"Men who can both be right and sit tight are uncommon.
I found it one of the hardest things to learn."
- Jesse Livermore
MoonRocket is offline   Reply With Quote
Old Mar 19, 2012, 11:26am   #27
Global Moderators are volunteer members with senior administrative powers to moderate all forums.
 
counter_violent's Avatar
Joined Aug 2004
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

Quote:
Originally Posted by MoonRocket View Post
Ok I'm adding two more....
8. The ability to take a positive from a crushing negative (the ability to come back).
9. Totally ignore the good feeling from a good win.
What happened to 6 and 7 ?
__________________
Spreading the madness across this suite of forums.

Those are my principles and if you don't like them, well..... I have others.
counter_violent is offline   Reply With Quote
Old Mar 19, 2012, 11:33am   #28
Joined Oct 2011
Re: A "First Steps" forum ? lol! Here is my advice: newbies, just quit !

Quote:
Originally Posted by counter_violent View Post
What happened to 6 and 7 ?
See post #17
__________________
"Human beings are best understood as being risk-averse when making a decision that offers hope of a gain
but risk-seeking when making a decision that will lead to a certain loss." - Daniel Kahneman

"Men who can both be right and sit tight are uncommon.
I found it one of the hardest things to learn."
- Jesse Livermore
MoonRocket is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Problem with chart images in "First Steps" Revel First Steps 2 Aug 23, 2008 3:11pm
Establish a "Trading By Price" forum under Methodologies: Technical Analysis dbphoenix T2W Feedback & Announcements 5 May 12, 2005 1:45pm
Calling all "Senior Members T2W" Experienced traders! Help Newbies? Gardan First Steps 579 Dec 6, 2004 11:55am
Bush and Blairs "Endless love" - lol Merlins The Foyer 0 May 14, 2003 6:13am

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)