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This is a discussion on my journal within the Trading Journals forums, part of the Reception category; Originally Posted by travis The only discipline you need is to paper trade until you have a profitable method. Disagree. ...

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Old Sep 10, 2009, 7:07am   #21
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Originally Posted by travis View Post
The only discipline you need is to paper trade until you have a profitable method.
Disagree. You can get a profitable method anywhere. In no time flat. Grief and despair provide the discipline and they are unavailable in a demo account.

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Old Sep 10, 2009, 8:16am   #22
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Originally Posted by yellowlion View Post
Disagree. You can get a profitable method anywhere. In no time flat. Grief and despair provide the discipline and they are unavailable in a demo account.

Yeah, this method may work for you (did you become profitable "in no time flat"?), but would you say that it works for a majority of traders? If it were this way, everyone would be profitable "in no time flat". Could you say that this is the case? Or would you say that they don't learn because they all paper trade? Then why do they all say that 95% of traders lose?

On the other hand, you could have a point if we consider that not everyone might experience the same level of "grief and despair" for losing money - for example, I admit that I was never in despair for losing a few hundreds a month, or giving back the few thousands that my system had made. Maybe that's the problem. Maybe the majority of traders lose, because they really don't mind losing very much.

However, those people who experience "grief and despair" for losing real money will be even more motivated to come up with a good strategy when they are paper trading. I have a friend, who's unemployed and he really can't afford to lose any money, and I am letting him use my paper trading account to see if he can come up with a good method, that will produce consistent profits for a few months. If he will succeed, I will give him the money to trade it (if I'll still have any left). He kept at it for a month and a half already, and he never told me "let me trade your real money immediately, so I can learn faster". Not just that he hasn't told me, but I think he never thought it, and I think if he did, it would be a warning sign of "gambler's mentality", and that I shouldn't give him any money.

To tell you the truth, acting like a gambler myself (and that is why I am now preaching to the contrary) I thought I would make money immediately or I that I would learn faster by investing real money, but it didn't happen. Maybe instead it would have happened (becoming profitable) if I took away the thrill of investing real money until I came up with a profitable method via paper trading. You see, I didn't paper trade also because it seemed pointless and boring. Whereas I think I should have also seen and used paper trading as a "punishment" for not having been profitable in the previous month. Instead, I just kept on filling up my trading account to cover my losses, and that way losses didn't hurt as much. I think in this sense it was an addiction.

Overall I agree with you that, to learn to do things right, you need "some" pain when you make a mistake ("panic" is too much, and it interferes with your logical thinking), which is the reward and punishment method. But if the trader actually doesn't feel pain for losing (like in my case, and in many other cases), then the necessary "punishment" (as in "reward and punishment") is to paper trade until he finds a profitable method, or else he'll just keep on losing money, without caring too much about it. On the other hand, the person who feels real pain and grief for losing will want to paper trade as well, because, as my friend, he won't be able to afford to lose.

Realistically, you can't become profitable "in no time flat" and, whether you care about losing money or you don't care too much (it's like a fee to you, worth paying for the excitement you get), if you want to learn without losing a lot of money in the process, paper trading is the way to go.

It's paradoxycal but, if you want to prove that you are serious as a trader and you seriously want to become profitable, then you actually prove it by paper trading - it's a sign of respect for your money. And if you have no respect for your money, then you can't become profitable. Trust me, I've been screwing around with trading for years. Yes, in the meanwhile, I learned a lot, but I made a majority of superficial trades. The most serious and hard-working part of my trading career has been the work I've done on trading systems, and the automation of them. The rest was a lot of screwing around.

That's the way I feel. At least I can certainly say this applies to me, and probably to all those traders who don't only trade to make money, but, whether they admit it or not, for the thrill of it (or "out of boredom", if you wish). Paper trading is a sacrifice to us, and if we do it, it means we are serious about making money, because we are not trading for the thrill of it, but only to find a method that works. The thrill is taken out. Well, I have explained my point more than enough, by any standards. The truth is that I was explaining it to myself.

Last edited by Yamato; Sep 10, 2009 at 9:30am.
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Old Sep 10, 2009, 11:24am   #23
Joined Nov 2001
It is not possible to be continually successful with a discretionary attitude to trading, I agree with you, there, because you make up new rules as you go along. I believe in the KISS method, in other words, as few rules as possible because, if there are too many one rule will break another, but some rules, nevertheless.

Having said that, I'm afraid that I am not perfect at obeying rules. I try to but.........

Threads , such as these, do help concentrate the mind.
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Old Sep 10, 2009, 12:56pm   #24
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Yamato started this thread " concentrate the mind"? Thank you. I thought someone by now would have written they "help you go to sleep".
"...concentrate the mind"... funny that you say that, because I am an advocate of automated trading, whereby your mind should not deal with the markets during trading hours, but rather after trading hours, if you are developing your systems, and not at all, afterwards.
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Old Sep 10, 2009, 3:54pm   #25
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Hi Travis,

Just about everything that might be suggested as a way round the problems, you already know, quite well, from what you have said.

The most obvious one being:
Originally Posted by travis
So now all that I still need to do is to quit this discretionary trading addiction.
When I stopped smoking, it had to be cold-turkey. That may be the only way here.
Perhaps get a trusted friend or family member to run the automated system for you to provide income, and you stay well away from the markets.

Maybe in 6 months or a few years or some long time from now, assuming you have some financial security to take that pressure of you, you might try trading manually again. I think some people react well to those kind of pressures and others don't. Only you know which you are.
Still learning my trade.

Just because it worked, it doesn't mean that it works.
Think of losing trades as your training fees.
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Old Sep 10, 2009, 4:05pm   #26
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Yamato started this thread Yeah, I've tried stopping cold turkey. I start again later. I think I need a more realistic approach. I should say to myself: I have limits, let's try to get a little better. Without pushing myself too hard. I can't say "never again". I've said too many times. It hasn't worked. Maybe, paradoxycally, I should actually allow myself to waste up to 100 dollars a week - so it doesn't get out of control. For example, I smoke a couple of sigarettes (given to me by people) per week, and I never got addicted to it. Well, I don't know what I am saying - actually I totally get addicted to trading and it immediately goes out of control - so I do have to either do nothing, or paper trade. If I get started again, I could blow out my account again (it happened 3 times this year).
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Old Sep 10, 2009, 9:20pm   #27
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Originally Posted by travis View Post
" concentrate the mind"? Thank you. I thought someone by now would have written they "help you go to sleep".
"...concentrate the mind"... funny that you say that, because I am an advocate of automated trading, whereby your mind should not deal with the markets during trading hours, but rather after trading hours, if you are developing your systems, and not at all, afterwards.
What I meant was the thread helps to concentrate the mind on what has to be done to arrive at that idyllic state where one does not have to think----just do!

Like good cooking, most of the work is in the preparation.

I lost a trade this morning because I had a rule that the bar must complete before action is taken. I entered the trade and the bar reversed before completion and resulted in a continuation, instead of a reversal.

That is, partly, the reason why am I reading this thread. If I had made a profit, instead, would I be here?

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Old Sep 10, 2009, 9:25pm   #28
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Yamato started this thread Ok, you want to hear my advice from the viewpoint of someone who lost for 12 years with discretionary trading? Simple. Does that rule work in the past? Has it been tested to work? Because if it hasn't, then it makes no sense to use your discipline to follow such rule. If the profitability of that rule cannot be backtested because it's part of a larger discretionary method (that relies heavily on your "discretion"), then you should paper trade that method until facts prove it ("it" or your instincts and intuition, if the method relies on them) to be profitable (by making consistent paper profits for a few months). I haven't tried this method myself and succeeded, but I am simply advising you not to do what I've been doing unsuccessfully for 12 years. Lost, on average, a few hundreds every month, for a total of 50,000 in 12 years. But, wait, recently I've lost much more, because I could afford to lose all the money the automated system was making.

Here's my golden rules again, from another post I wrote above:
  1. If you have a profitable method, use it (it will come natural).
  2. If you don't have a profitable discretionary method yet, paper trade.
  3. Don't go trying to force yourself to follow rules that are not proven to work - forget this psycho-bull****, it will just throw you off course, for years. If you are not making money, it's not because there's something wrong with your personality but because you didn't develop a profitable method. The only discipline you need is to paper trade until you have a profitable method. Discipline won't make you a profitable trader (like they say), but it will keep you from losing real money until you become one. Should someone learn how to juggle with balls or with knives right away?

Last edited by Yamato; Sep 10, 2009 at 9:36pm.
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Old Sep 11, 2009, 11:07am   #29
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Yamato started this thread Mmh... "a need to be abused", the recurring "self-sabotage" thing, mentioned by many traders who use it to motivate their losses...

I am not so sure it's true. I used to say it all the time: "maybe I want to lose". "Maybe I lose because I want to lose". However, it's not true. I hate my job, I hate being at this office, and I would like to get out of here and resign. But I can't because I lost much of my automated trading gains with my discretionary trading. And did I do that because I self-sabotaged? I don't think so. I think I did it because I wanted to succeed too much, so much that I acted impatiently (as I was trading discretionary) and didn't wait for the right entry and exit time. But even before engaging into discretionary trading, I acted impatiently by trying to make money with discretionary trading when I still do not have a consitently profitable method. And, as I say all the time, if you don't have such a method, you should paper trade. Then, maybe I can't develop that method, because of my psychology and because of how I take losses personally (and can't accept them, and therefore do not conceive using a stoploss)...

So I have to rectify everything I said once again. Psychology does play a role after all. If I can't find a profitable method because of my personality, then learning discretionary trading is indeed largely based on psychological factors. Mind you, I said "learning" a profitable method, not "using" a profitable method. Indeed, once you have a profitable method, psychology won't matter. The problem is that because of psychology you may never learn that method. This only as far as discretionary trading. Automated trading has nothing to do with psychology.

So we can sum it up and say that psychology plays a role in one fourth of all trading - the ability of the trader to develop a profitable discretionary trading method. It does not play any role in automated trading, and it does not play any role in using that profitable discretionary method once you have it. Then of course to all those for whom learning a profitable method is the thing they're dealing with, it will appear that it's all about psychology as they say. WhaI I wish to add is also that if you have the wrong psychological make-up you will not be able to learn a profitable discretionary method, like it was for me (12 years of constant losses).

So if you consider that you either are fit to trade discretionary or you are not fit, then psychology's role is again at zero, or rather the need to work on your psychology is zero, because if you are unfit for discretionary trading usually you cannot fix it. So discretionary trading depends on psychology, but you still won't become profitable by working on psychology. It will be faster to become profitable by developing an automated trading system (which is exactly what happened to me).

Let me describe what happens to me when I engage in discretionary trading. At the start I am calm. I look at the chart and see an opportunity. I hesitate a few minutes, then I enter. That's going to be the best and most objective trade of the day. Then if it goes my way, and I make money, I get out of it and everything is fine, but there is one new problem: I am feeling good and confident. This will encourage me to make another trade and if it will be successful, it will make me even more confident and cause me a second problem: it will make me excited.

Pretty soon, my eyes are wide open with excitement, and I look like I took some drugs, maybe marijuana. I take my third trade, and I may get lucky this time, because by now I am not reasoning any more. Then I keep going until I finally make a mistake, definitely by my fifth trade. When that happens, I wait and hope, and then, as loss increases, it becomes a Hail Mary trade. Usually it can go on either until it turns profitable, or until, after a few days, my margin is not enough any more. Recently I have been doubling up on losers as well, which makes me recoup (easily), or almsot blow out my account within one day.

When I trade discretionary, after staring at charts for over 20 minutes, I turn into a junkie in every aspect. I don't think there is a solution. In 12 years, I haven't found a profitable way to discretionary trade. I can't keep calm, I can't keep distant, I can't be patient, I can't help taking losses very personally, I can't do half of the things I'd need to do. I basically have such characteristics that I blow out my account within a few days of discretionary trading.

Originally Posted by tenbobtrader View Post
Many people will not improve because they cannot bear self knowledge

The bad player will not deign to determine what he thinks by watching what he does. To do so might reveal a need to be abused ...

in calling what must be a superior hand

a need to have Daddy relent

in trying to bluff out the obvious best hand

et cetera ..........

its not easy to face ~ that rather than playing cards in spite of our losses, we are playing cards because of them.

David Mamet
things I have learned playing poker on the hill

Last edited by Yamato; Sep 11, 2009 at 11:50am.
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Old Sep 11, 2009, 1:16pm   #30
Joined Jun 2009
"some people lose their heads cold sober. Cards, dice, pool, it makes no difference.

You want to be a winner, you got to keep your head. You got to remember that there's a loser somewhere in you, whining at you.

You got to learn to cut his water off."


in Walter Tevis
The Hustler

all the best & good luck with it Travis


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