Efficient Trading

[Jerry Olson]

I suspect that the vast majority have gone through this (if not everybody). The market is particularly good at teaching the new to do the wrong thing. You try to control losses and think that the easiest and simplest way of doing this is to make your stops tight. So you make your stops tight, the trade seems to be good, reverses, takes out your stop, then resumes its move in the original direction. This happens just enough to persuade you to widen your stop. So you widen your stop just in time to catch that reversal that not only wipes out all the profits you made in the last week/month, but also puts you in a mental state that is hardly conducive to making the best decisions.

There are all sorts of variations on this, from entering on the basis of a coin flip then entering an MOC order then going to the zoo, to scalping for ticks and having to urinate into a bucket while subsisting on potato chips and Twinkies.

There is a general presumption of failure and a fear of loss in these posts that is self-sabotaging. I don't know why the thread is called "Efficient Trading" since the focus seems to be on stops. But I suggest that focusing on how to win rather than on how to avoid loss might be of equal or greater benefit.

Hi dbphoenix et all

wonderful disscussion of major importance really... if we all just take a step back i can say with impunity i have been there and done it all, over the years. I have tried everything known to mankind to be a successsful trader.

What i found out was to keep it very very simple. The more you tinker with this trading business the worse you'll do for darn sure.

So i just refined my metodology, my charting, my trading, and simply scalp trade only never holding over night ever, could care less which way the market moves the next day, keep your biases to neutral and trade what you see.

It's the "thinking" part of the equation along with the emotions of trading with your real hard earned money that creates panic and havoc all at the same time during a trade. The underlying problems we all faced at one time or another is our overly zealous trade size, way above what we can afford, that's greed for sure, then this enormous sense of dynamic fear sets in as the trade goes against you and lo and behold you panic out of a perfectlty good trade...

so all and all it's a host of elements that have to come togerther for us traders to make things simpler and much easier to control. If we can try to take the emotions out of the trade then we have part of the battle in place. We all know that much right?

The mantra i think we all might consider useful is this: Trade the least amount of shares per trade and the least amount of trades per day to acheive your daily goal. Reduce it to that level and you might begin to feel a bit better on each trade. Set all daily goals lower at first, use smaller lot sizes till you are consitantly hitting singles not home runs, and always folks sell too soon.

If you wait for a reversal stick on your chart you lost your profit. I always try to sell that 5 minute bar as it powers up. Not waiting for the "next" best bar to appear.

ohh heck i could go on forever with all that i garnered from a lot of other good traders over the years. Suffice it to say i have narrowed it down to where i am comfortable day trading for a living, without fear or greed, being as robotic & mechanical as i can be on each and every trade.

Heck i just push buttons all day long...............

anyway just few tidbits form the sidelines...hope it helps someone out there.

 

[chump]

Zupcon,
"With each pass of the spiral I gather information, I form a hypothisis, I test, I adjust, and I start the process again" ....
excellent...this is iteration such as you might find in a simplex approach to finding the answer to a complex mathematical problem ,but applied to the learning process.
In this case what you have to ensure is simple enough , you have make sure that in each iterative cycle you do not give up more resources than you gain. This is not the same as saying you must gain more money than you lose. The exchange might be that you gain a piece of experience at a financial /emotional cost on this cycle that allows you improve the exchange on future cycles.
We might summarise the resources to be financial , emotional and the solution we are trying to solve is the acquisition of 'skill' (experience). We conserve religiously our resources that we exchange for the required 'skill' (experience)
On each iteration we need to make sure we get the right exchange.
Now there are already plenty of very good proposals on this thread as to how one might go about setting up this iterative process including 'tight' stops when that part of the iterative process is reached.

 

[charliechan]

......
There is a general presumption of failure and a fear of loss in these posts that is self-sabotaging. I don't know why the thread is called "Efficient Trading" since the focus seems to be on stops. But I suggest that focusing on how to win rather than on how to avoid loss might be of equal or greater benefit.

for several reasons.

1. socrates was about to elaborate on the first major post that discussed tight stops in relation to efficient trading. some people then decided they had little else better to do than cause arguments and insults. the thread was then split in a futile attempt to calm things down (cutting the member never removes the emotion). i would imagine socrates then decided not to bother if that was the thanks he was to receive. quite understandable imo.

2. all is not lost. you could take the stance that tight stops leads to the efficient use of capital. as a traders job is to manage capital, we could say that the use of tight stops is therefore efficient trading - but not quite the whole picture.

you also state:

But I suggest that focusing on how to win rather than on how to avoid loss might be of equal or greater benefit

may i respectfully suggest that the professionals primary concern is preservation of capital? newbie look at profits first with their red eyed greed. isnt this why you yourself go to such great lengths to emphasise the importance of back testing, forward testing, sideways testing, demo account, small lots, small-medium lots, medium-small-lots etc etc? isnt the reason you do this designed to preserve capital and protect the ego (rather than rid the ego entirely)?

when a teenager leans to drive, do they first learn safety stuff, or are they first taught about the accelerator (gas peddle), 5th gear and short-cuts? we all know which the boy racer wants to learn first, and we know he has no interest in safety first, but we know better. the teenager thinks we are boring etc - you know the rest......so no, learning how to win would not be of greater benefit at all. in fact, it would be quite dangerous. especially to the teenagers who just want to sit on the park bench and hurl insults.

second thoughts, it may speed up their demise! may be we should. please - go ahead and tell them.........