This is a discussion on my journal within the Trading Journals forums, part of the Reception category; I am on a regular diet, so no specific "diet". I eat minestrone every day, or boiled vegetables, then some ...
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|Sep 9, 2009, 12:06am||#9|
Joined Mar 2003
I am on a regular diet, so no specific "diet". I eat minestrone every day, or boiled vegetables, then some meat or fish every once in a while. Not much fruit. Milk, one liter a day. Some cereals, with it. Every once in a while I get drunk or buy sweets, just like once every two weeks.
Timeframe of my evil discretionary trading varies. If it works, it lasts shorter than if it doesn't work. I cut profits and let losses run, the worst possible trader I could be. I can't help it. If it works (4 wins out of 5 trades) they last about 30 minutes. If they don't work (one out of 5), I hold the loser until I pretty much blow out my account or can at least get to breakeven (like today). I am really the worst discretionary trader there is. I could never find a method that worked. Even if I used stoplosses which clearly is not the case, I would lose every day. I am mostly impatient, I would say. I simply shouldn't trade, but at least once every two weeks I feel the urge to do so. I can't seem to cure it.
As an automated trader, there are 24 systems running, each makes one trade per day, each trade lasting a few hours to a whole day. Definitely different time-frames. Also, if I tried to trade the automated system manually I certainly couldn't do it, because as I said I am quite impatient. I would definitely exit early if I am making money, and exit late if I am losing money, most likely doubling up on losing positions. A few times I carred losing positions in future contracts until their expiration, and blew out my account or close to. The only thing that stopped my trade was the expiration of the contracts. I feel paralyzed as soon as my trade becomes unprofitable, even by 20 dollars. I can't close it anymore. This doesn't happen with automated trading systems.
|Sep 9, 2009, 12:48am||#10|
Joined May 2008
Thanks for replying Travis. What I was getting at really was what TF charts are you trading off?
I am about to PM you, so perhaps you might look out for it in due course.
|Sep 9, 2009, 1:23am||#11|
Joined May 2003
Why not just go with it? Open a "play" account with limited funding so that you can only take relatively small positions and then have your discretionary fun to your hearts content ( well, 'til you have to top it up anyway ).
|Sep 9, 2009, 8:56am||#12|
Joined Mar 2003
Thanks for your advice. Unfortunately, my money by now is so limited that a "play" account would be 300 dollars, and so I cannot trade futures with it. Of course, maybe I am lucky not to have had a million because by now I would have lost it all. Then another option would have been to paper trade but the problem of the addiction is that I feel that I will make money so I trade with real money on purpose. I think in this area and in another areas of my life, as I said, I have a problem with acting in my own self-interest. Why do I go to sleep late every night? I haven't been able to fix it...
|Sep 9, 2009, 2:13pm||#13|
Joined Mar 2003
It's very interesting. Today, depressed about yesterday's relapse into discretionary trading, I was browsing on a pretty good web site where a trading expert writes on the basics of trading and as usual he has a section about "psychology and trading".
He starts off by saying, as usual, that in trading, discipline is very important. And discipline - he says - means adhering to rules of entry and exit.
Now discretionary traders generally trade by instinct but, I agree, they might have a a given number of fixed rules to follow.
But then a problem arises: because of the elements of improvisation, freedom, flexibility of discretionary trading, you can say that your method has worked in the past, but you cannot back-test it and you cannot say whether it will work in the future, since your profitability as a discretionary trader is partially based on your intuition. So, even for a discretionary trader who has been consistently profitable, you cannot say "discipline brings profit", because also "intuition brings profit", since his system is based on both fixed and flexible rules.
Now, as stated, the utility of discipline is partial even for a discretionary trader who has found a profitable discretionary (flexible) method.
What happens if the trader doesn't have a profitable discretionary method yet?
If you are a discretionary trader and still do not have a profitable trading method it doesn't make sense to tell you to be disciplined in following rules, since you do not know what rules are profitable. And yet these experts are talking precisely to those traders who do not have a profitable method yet. "Always use a stoploss" they say. But a stoploss alone doesn't guarantee anything. If it's placed in the wrong place it could make you unprofitable. And so on.
They all say that "you don't make money because you are not disciplined and don't use a stoploss" or similar, but the truth is that you'll lose money even using a stoploss. You'll lose money until you'll find out where it is profitable to place that stoploss, and where to enter and exit. Also, you will not be using a stoploss in a consistent and disciplined manner if you are still testing out where that stoploss should be placed - so it makes no sense to prescribe discipline to you if you still do not know what's the profitable thing to do.
What instead they should prescribe is "paper trade until you find a profitable method, and find out as many fixed rules as you can, leaving as little as possible to discretion". That is, if any, the way to go with discretionary trading.
Saying "always use a stoploss" doesn't lead to profitability. "Find out where it's profitable to place a stoploss" with trial and error or better yet with back-tests (which is hard with discretionary trading) is what should be told.
Once you find out what works, it's effortless to follow those rules. If you don't know what works, it doesn't make sense to tell you to follow some general rules, which could be applied in very unprofitable ways (stoploss, trailing profit, and so on). Psychology does not bring profitability. Testing different things until you find something that works brings profitability. And then, once you find it, psychology is useless.
Psychology is useless, discipline is useless. What you need is a clearly outlined profitable method. Then, of course, you'll follow it.
What this talk about psychology and discipline causes is just confusion in the minds of beginning traders, because they use the stoploss, see that it doesn't work, and stop being disciplined. Of course, why should you use something that doesn't work? They start being insecure, and losing track of their progress. It then becomes hopeless. The best way to keep track of your progress is automated trading, which means only dealing with fixed and univocal rules. Discretion screws the whole thing up, and forces you to keep track of changes and improvements by estimate and in your head, which in most cases proves impossible. Only few can achieve consistent and permanent profitability through discretionary trading, because of their ability to keep a clear idea in their minds of their whole trading career (all the stats).
Now, how does all this apply to me? I have an automated system and I use it. So far so good. No psychology needed here. Once I realized that it worked, I started using more and more.
But I have a trading addiction which has kept me trading for 12 years even though I never found a profitable discretionary method. It's a wonder how stupid I am for not finding one, and it's a wonder how sick I can be for not quitting this addiction. But discipline only comes into play in quitting here, not in making me profitable in ANY way. The only discipline would be in quitting, get it?
Last edited by travis; Sep 9, 2009 at 3:06pm.
|Sep 9, 2009, 2:30pm||#14|
Joined May 2008
On your subsequent posting about rules, psychology, etc, I don't claim to be an expert...as it says in my sig I'm still learning my trade...but reading more experienced traders on here, I get the impression that they have a framework of rules which they generally stick to, but years of experience can tell them when to override their own rules. I think this is true of any area of expertise actually.
As in the refrain from the old Status Quo song, "Everybody has to sometimes break the rules".
On the other hand, if one always breaks the rules then the frame of reference disappears, like navigating without chart or compass.
Still learning my trade.
Just because it worked, it doesn't mean that it works.
Trade what you see, but make sure that what you see means what you think it means.
Last edited by montmorencyt2w; Sep 9, 2009 at 5:40pm. Reason: add missing word in last para
|Sep 9, 2009, 3:35pm||#15|
Joined Mar 2003
I agree about everything you said. Especially the last sentence: if you have rules that can be broken, and that it makes sense to break because it will bring profits, then they are not rules, are they? On the other hand, I understand if you say that usually you should not break them. It does make a difference. But once again, that trader is a trader who trades by instinct, and doesn't even know exactly what he's doing. He knows he's been making money, most likely he'll keep on making money... but it's all up to his mind. If it works well... otherwise he'll start losing tomorrow.
With automated trading, I can be excited or depressed, but the system won't care. Since I am so unstable, it's the only way for me to go.
Yes, I did make money, a lot of it. Lost most of it with discretionary trading. I still have some left. It's pretty depressing considering how much money I threw away, and each time I was hoping to "help" my systems make more money. Sometimes I got home and saw a loss by the system so I tried to cover it with a discretionary trade, but most of the time I made things worse. Or rather 4 times out of 5 I made money, and on the fifth time I lost everything I had made in the previous 4 discretionary trades plus much more.
I simply do not have a profitable discretionary method, and I might never be able to develop one. Sure, I could manually trade my automated system, but that is not a discretionary method. Also, if I add any discretion to it, by slightly changing its choices, I just end up hurting profits. But then why do I want a discretionary method? Because I want to make more money and because it's exciting. I have fun making profitable trades. I dislike just sitting and hoping for my system to make money as fast as possible.
How long have i been recapitulating this stuff, over and over again? Months. First of all I want to make things clear in my head by stating them out loud.
I just got home from work.
I want to recapitulate one more time.
1) If you have a profitable method you'll use it - there's no psycho-mumble needed here, about self-sabotage and so on (if you were that masochistic, you wouldn't have developed a profitable system to begin with).
2) If you do not have a profitable method, you have two options:
The first option also excludes the utility of any psycho-mumble, because it brings you to point #1, or it doesn't cause you any financial damage, so there's no stress in either case.
The second option, one of not having a profitable method and still trading real money, does have to do with psychology. It has to do with the illusion of all gamblers: it's easy, I'll make it back if I keep trying. But the solution has once again nothing to do with the psycho-mumble on financial web sites. The answer is: you're not that good, it's not that easy to process in your head what works and what doesn't, so go back to option #1 and paper trade or back-test. Nothing to do with "you weren't disciplined enough to use the stoploss". It makes no sense to force yourself to use a stoploss if you're not sure whether it works or not (what level, etc.). You're not going to become profitable by forcing yourself to follow rules that you don't know to work. So it makes no sense to talk of developing your discipline, but only of developing your intuition and feel for the market, by paper-trading, once again. Or by back-testing, and taking the automated trading route. All this talk about discipline and psychology is therefore bull****.
Once again, here you have the summary of all trading manuals in the world in just 3 lines and free of charge:
Last edited by travis; Sep 9, 2009 at 4:44pm.
|Sep 9, 2009, 8:31pm||#16|
Joined May 2003
you keep saying you don't have a decent discretionary method, yet you also keep saying "Or rather 4 times out of 5 I made money, and on the fifth time I lost everything I had made in the previous 4 discretionary trades plus much more". Potentially, 4 out of 5 sounds decent as long as you can ditch the killer 5th. 'Course if they were of the same ilk - going deeply offside then coming back to some profit (except the 5th) then you don't have a decent strategy. Otherwise, what was different about them and what conclusions have you drawn about the differences?
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