Trading and Emotions

[stevet]

Skimbleshanks

if you were giving back 25% gains - there would be a point when you catch on that there are some days where the effort to make money is just not worth it and those would be the days that you give back that 25% - so in the end you learn to just walk away from those days and suddenly that loss day is hardly making a dent in your P&L

and there is a reason for the cr*p days - basically its because all the professional traders spot the cr*p days early and experience has told them to walk way - and as each layer of traders cuts and runs for the day, the market will start to die down or give some real uncomfotable moves due to lack of liquididy - so, like so many things in life, its a self reinforcing law

 

[blash]

stevet,

its simply because they have a methodology that takes advantage of pricing inefficiencies in the market and they apply that methodology

I presume your talking about trading using futures and options together to take advantage these 'market inefficiencies'.

Cheers,

 

[Rognvald]

Stevet
You have been making some very convincing arguments on this board recently. The shark/parasite picture says it all for me.

 

[sidinuk]

I know under what conditions my system is likely to produce a losing day so I stopped trading those days. But I got bored just sitting back so now I just reverse my original signals on those days and turn them from losing days to winning days!

 

[stevet]

blash

it doesnt really matter what you trade - as long as you trade something where there is chance to take advantage of market inefficiencies

for outright positions, any derivative is going to be at the top of that list, since the more inputs to the pricing of the tradeable contract, the more opportunity for inefficient pricing - plus the opportunity in derivatives for good leverage

and options have to lead the list since they have a greater number of imputs in order to evaluate their pricing

stocks are gonna be bottom of the list since they have the least inputs to pricing

but if you tie more than one trading contract together, with different pricing attributes - the advanges of the most inefficient priced trading vehicle then extends to the least inefficient trading vehicle

 

[stevet]

jonnyy40

i wish!

no one can tell what the day is gonna bring - and i never ever go into a day with a preconcieved notion -and if you go in with a preconcieved notion, then you are gonna misinterpret the tell tale signals of how the day is really unfolding

but everyone recognises when some days you cant get anything but winners - and the same works the other way

so if you start off and it seems like hard work - time to back away - and if it seems easy - start pushing harder - my trading is fundamentally based in mathematics - but its hard sometimes not to just think that there are days when you are going to make bucks no matter what and other days - when making a buck is an uphill fight

 

[blash]

stevet,

right, so trading 'market inefficiencies' is trading off the differences in 2 instruments or trading say options and futures in the same instrument.

What causes these inefficiencies, as most markets are electronic they usually move in time together.

How many inefficiencies can appear in a day and over what time-frame?

Cheers

 

[stevet]

blash

bit deeper than that since all tradeable things have a relationship, stocks, bonds, gold, currencies, right down to the realtionship between an undelying stock and the index it is in, and market forces cause the relationships to diverge and then market forces cause the relationship to converge

 

[jsd]

jonnyy40

but its hard sometimes not to just think that there are days when you are going to make bucks no matter what

hmmmm i recognise that as perhaps we all do, i first came across it in the new market wizards (book, interviews with americas super star? traders), mark richie who was being interviewed by schwager, (i think it was him from memory) said something like

"The thing is in knowing the difference between what you want the market to do and KNOWING what it is going to do"

now that i beleive is the feeling we perhaps get of being exposed to EXPERIENCE of trading the markets, maybe on a subconscious filter through to conscious mind that we have seen that pattern before in the markets. And im open to the idea that pattern recognition perhaps is a natural asset that the brain works with. Whether its for protection of ourselves or for the benefit of ourselves. Maybe some would call it instinct, the impulse to act when we get those feelings of just KNOWING. The moment of absolute Truth, as some have labelled it, whereby one can see the future in that instant. How you or I choose to deal with these moments is down to our egos i suspect and our whole belief system / values that we have conditioned into us from birth and the ones we gain exposure to stumbling through life.

I realised later rather than sooner as Most? do i suspect that Psychology , who we are and how we think, how we have come to be is why 95% struggle LONG TERM with the markets because we are rather SHORT TERM with OURSELVES.

JD

 

[blash]

stevet,

just to make sure I'm understanding correctly,

trading 'market inefficiencies' is related to or maybe even the same as 'intermarket analysis' ?

cheers

 

[stevet]

blash

trading market inefficiencies is based on intermarket analysis

 

[Trader333]

jsd,

................and KNOWING what it is going to do"

I have never met anyone who can do this and all the best traders I know of react to what they see they dont try and predict


Paul

 

[qaza]

Stevet
You have been making some very convincing arguments on this board recently. The shark/parasite picture says it all for me.

Agree, Great posts Stevet !

 

[jsd]

jsd,
I have never met anyone who can do this and all the best traders I know of react to what they see they dont try and predict

well maybe they are supressing their instinct ,held back by fear or some other environmental pressure, maybe its because theyv'e heard a rumour that all the best traders dont do that. they react to the people who KNOW maybe? who have already initiated a position

hmmm yes i realise its a concept that may well fly in the face of conventionalism for some, but dont forget what the market is, its a visual representation of human psychology relating to the collective opinions of value plotted before us in the form of tick charts etc, just as psycho analysts could well know what a person would do in certain situations, i see it no differently with crowd psychology in the markets.

its no different from people who say that 90-95% who trade will not make it long term, what do they Know? how can they predict the future of that ? based on figures from tading accounts i suppose, whats wrong with knowing at times where the price is going to go ?

JD

 

[options]

Nothing wrong with knowing where the price is going. Everyone gets those gut instincts from time to time. You just feel such a prat when you know where the market is going, but it doesn't.

That knowing has broke a lot of good traders. Jesse Livermore went bust 3 or 4 times using that knowledge.

He was arguably one of the best traders ever. He would have been the best if he had learnt to keep all his money and not to try to tell the market where to go.

 

[Trader333]

jsd,

.......whats wrong with knowing at times where the price is going to go ?

Nothing wrong with that at all if you know of people who can do it then you have genuinely found the Holy Grail. I spent years thinking that somewhere there is someone who knows which way the markets are going to move so I searched extensively for it and never found it or anyone who could do it.

During my search I came across literally hundreds of people, methods and systems that claimed predictive capability and all but all of them failed. I would love this not to be the case but I am afraid that it is.

Your statement about human psycholgy is the exact reason why prediction is not possible because what you are attempting to do is predict mass temporarily polarised and volatile human psychology which can and does change at any second.

But there are still thousands of traders out there that believe market direction can be predicted. We have commentry on this site about which direction various markets are going to take and then an explaination as to why they didnt afterwards.

The day I realised that no-one out there knows for sure which way a market is going to move was the day that I started becoming a profitable trader and I have never looked back since.

My focus is on risk reduction at entry and improving probabilities of success but when I enter a trade I dont know if I am going to be profitable or not.

I challenge anyone to prove me wrong on this and I would love to be proved wrong but I doubt anyone will ever do so and I do not mean getting a couple of trades correct I mean consistently being right around 90% of the time with a huge Reward to Risk Ratio


Paul

 

[jpwone]

<i>The day I realised that no-one out there knows for sure which way a market is going to move was the day that I started becoming a profitable trader and I have never looked back since.

My focus is on risk reduction at entry and improving probabilities of success but when I enter a trade I dont know if I am going to be profitable or not.
</i>

Got to agree absolutely with the above. Personally, I have fought the markets tooth and nail at times. I have hung onto some terrible losers knowing i am right and had the market prove yet once more that its not about being right or wrong its about making money.

I now have a very simple trading method. I wait until I have what I consider to be a high probability entry and then set a stop and then enter the trade. If i am correct then the trade will make money. If I am wrong I will hit the stop and lose money. Simply because I am in the market (with a limited and known loss/risk ) when a trade does go in my favour it will on occasions go significantly in my favour. This is when the real money is made.

Forecasting and predicting are something the weatherman does. Risk evaluation and money management are what a trader should be doing.

 

[Grey1]

Quote "Forecasting and predicting are something the weatherman does. Risk evaluation and money management are what a trader should be doing. "


An awesome statement..

 

[mma]

* Four days profitability in any consecutive five day period, with the losses not exceeding 25% of the gains? *

HAHAHAHAHAHHAAH . sorry just had to laff at this one .

5 days ? any fool could do that . It would all depend on luck as to which 5days one actually picked . that's why a longer time period is needed .

I changed the target's downwards to give these fakers more of a chance to prove they can make money every single day . if ANYTHING it is making the task easier , and now she comes up with 5 days , if you're gonna move the target that much you might as well say - the next 2 minutes .

Talk about moving it and shooting yourself in the foot - ridiculous even to make such a remark.


There is NO such thing as a guarantee that one can be profitable for even 1 day out of any 5 over a sustained period , the market just isn't that predictable or reliable .

anyone who says so to this BB is lying or does not know the market well enough .

Just think about this , if someone was so sure that he could be profitable 4/5 days every week over a sustained period - why NOT TRADE FOR YOURSELF , WHY MAKE ALL THIS GUARANTEED PROFITS FOR SOME STUPID BOSS ?

A = coz it's a lie , and it can't be done like that .

emotional stability is VERY importatant to traders - I'd rather have an emotionally stable trader than one who is not . VERY FOOLISH to say otherwise .

What do interviews have to do with trading ? since when is a good interviewee a good trader ?

these comments are getting more irrelevant.

Where does this * pro trader * get all this time to wax lyrical on the net ? I thought he said he made 100's of trades a day - he must work 30 hours a day .

* system allows him to be profitable over about 20 trades, why can a much shorter term trader (placing 20 trades/day for e.g.) whose system provides a similar R:R profile, not expect to be profitable every day? *

Try this yourself everyday over 6 months , 1 year , and then 2 years , then tell me what the result is . I'm willing to bet you that there will be many many days in all these periods when you are not profitable.

* It seems to me that you believe there is only 1 way to trade the market *

NEVER said that . perfect case in point as to what is a p*ss taking statement . can't be bothered to read what I have actually said and then makes false accusations - of this I fully entitled to retort vigourously.

* there's no need to have a fit or to start challenging people to prove themselves. *

OK , I can reword myself and say there is no evidence to support the claim - happy .

BUT it is misleading and dangerous to let people believe that you can be profitable EVERY day . IT is disrespectful to the public to make such wild claims.

* I presume your talking about trading using futures and options together to take advantage these 'market inefficiencies'. *

called arbitrage and it is NOT risk free - can be even more riskier than normal trading . look up LTCM .

 

[mma]

finlayson,

* I respect your directness & u come up with very valid arguments *

I have to add now that you have given your honest view , you would no doubt have * offended * a couple of people here for having NOT given them the kudos they they wrongly feel they deserve and to add salt to wound who percieve that it has been given to their * rival * ( ironic as popularity contests are of zero value to me ) .