Dao of Trading

[martyschwartz]

I have just started a new thread on another site and I would like to mirror the information here for discussion.

Dao De Ching (Tao Te Ching) based on Stephen Mitchell's translation of Lao Tzu's classic http://www.edepot.com/tao4.html

Chapter 1

"The tao that can be told
is not the eternal Tao
The name that can be named
is not the eternal Name."

Conceptual imputation of the truth is not the same as directly experiencing the truth. Once we put labels upon and conceptualize the truth, its essence is lost.

The key to the truth is honesty. Make-belief and preconceptions are impediments to direct experience. Dao (tao) is both the vision and the path. One facet of the puzzle is that a trader has to know who he is... What is his weakness? What is his strength? His methodology should reflect that... there is a better way for him to travel.

P.S. I have some random B.S. about trading that I would like to get out of my head... But as Lao Tzu said... the truth is lost in words.

BTW, Larry W. Phillips have already written a great book "The Tao of Poker."

 

[martyschwartz]

Chapter 1 cont...

"The unnamable is the eternally real.
Naming is the origin
of all particular things.

Free from desire, you realize the mystery.
Caught in desire, you see only the manifestations."


The truth pervades everything. If you label the truth as A, then it is not B. Fragmentation of the mind leads to dualistic visions (bull/bear market). Dualistic visions lead to hope and fear. Hope and fear promote fixations and perspective is lost.

A trader should not fixate on a single trade in which the success is a function of luck. He should keep perspective on how his edge is doing over time (many trades) which should be more of a function of probability/statistics. If the edge is not quantifiable, it will be hard to tell when it is sick and when it is healthy.... Hope and fear are only naturally triggered by the unknown.

Assuming the P/L distribution of trades are normally distributed (bell curve), a sample size of at least 30 is a general rule of thumb for estimating population mean and variance etc.

 

[martyschwartz]

Chapter 1 cont...

"Yet mystery and manifestations
arise from the same source.
This source is called darkness.

Darkness within darkness.
The gateway to all understanding."


Although you can't see anything in "darkness"... being empty of characteristics... darkness also includes everything... leaves all possibilities to the imagination.

As described in Buddhism, the awareness (wisdom) and the projection (concepts) of the mind coemerge like ocean and its waves. You cannot abandon one and favor another. A meditator trying to suppress thoughts is making a futile effort. He should embrace everything and resolve their nature.

In trading, it is only natural for both profit (winners) and loss (losers) to occur. They are equally valid outcomes from a statistical run. As long as the drawdowns are within reasons, we should not accept one and abandon another. Monte Carlos simulation (randomizes the historical trade sequences to get many sets of results as a population for statistical testing) and confidence level testing can give some ideas for the drawdown.

End of Chapter 1

 

[CJIA]

Go with the flow,finding it is another matter.It takes time but eventually you will find it.
Wonderful aspect on trading look forward to more of your perception or awareness in trading.

 

[martyschwartz]

Go with the flow,finding it is another matter.It takes time but eventually you will find it.
Wonderful aspect on trading look forward to more of your perception or awareness in trading.

In the chapter "Preservation of Life" of another Taoist classic "Chuang Tzu", the author told the story of Cook Ding. Being a butcher for nineteen years, Cook Ding saw no need of re-sharpening his knife because he had never gone against the flow of things.

 

[TheBramble]

Being a butcher for nineteen years, Cook Ding saw no need of re-sharpening his knife because he had never gone against the flow of things.

Yes. But the reason his knife never net with bone was because he had such a thorough knowledge of his subject i.e. the carcass.

To simply attempt to become 'one with' or 'get in the zone/flow' whatever - isn't going to do it.

You need to know your subject thoroughly to make it look that easy.

Chopping up carcasses for 19 years should do it.

How many have been trading for 19 years?

You have to know what there is you need to flow around before you can get into the flow...

BTW Is the "Tao pf Poker" sufficiently different from "The Zen Of poker" by the same author to warrant allotting the time to read it?

 

[martyschwartz]

Yes. But the reason his knife never net with bone was because he had such a thorough knowledge of his subject i.e. the carcass.

To simply attempt to become 'one with' or 'get in the zone/flow' whatever - isn't going to do it.

You need to know your subject thoroughly to make it look that easy.

Chopping up carcasses for 19 years should do it.

How many have been trading for 19 years?

You have to know what there is you need to flow around before you can get into the flow...

BTW Is the "Tao pf Poker" sufficiently different from "The Zen Of poker" by the same author to warrant allotting the time to read it?

What you said is very true... it's never that easy. But I think one should at least have the intention not to go against the flow. For a beginner discretionary trader, he might not want to fade the trend etc. If he fights, he might dig a hole quickly. He might want to decrease his size during a losing streak to increase comfort level while sacrificing potential income.
For a system trader, he might not want to fight with the flow of his system... For a Turtles type of system, it might mean to take every trade because a bulk of the profits comes from a few big moves which he can't afford to miss.

I think the "Tao of Poker" is different enough and deals with more other stuff than "the Zen and the Art of Poker". To tell you the truth, I haven't gotten far into the "Tao" book myself.

 

[martyschwartz]

Chapter 2

When people see some things as beautiful,
other things become ugly.
When people see some things as good,
other things become bad.

Being and non-being create each other.
Difficult and easy support each other.
Long and short define each other.
High and low depend on each other.
Before and after follow each other.

Not being in touch with the nature of mind, we clings onto our dualistic visions as real permanent independent entities... constantly overestimating and underestimating... We see good/bad, friends/enemies, gods/demons and profit/loss then experience pleasure/pain and hope/fear. In Buddhism, they are the "relative" truth due to fixations.

 

[Simon Gordon]

It is mental.

There is clutter in the market.

Keeping it simple - the key.

The Tao teaches - don't over intellectualise.

Practice and experience is important, yet it is the simplicity of the trade that shines through each time.

The impermanence of market noise.

Non-attachment to the trade.

Being at peace in the trade - you understand the trade - it is clear - the outcome - the expectation.

Meditating in the noise - letting it come and letting it go.

Not forcing.

Just being.

Simple - ha ha ha......

 

[martyschwartz]

It is mental.

There is clutter in the market.

Keeping it simple - the key.

The Tao teaches - don't over intellectualise.

Practice and experience is important, yet it is the simplicity of the trade that shines through each time.

The impermanence of market noise.

Non-attachment to the trade.

Being at peace in the trade - you understand the trade - it is clear - the outcome - the expectation.

Meditating in the noise - letting it come and letting it go.

Not forcing.

Just being.

Simple - ha ha ha......

As pointed out earlier by TheBramble, unfortunately most things are easier said than done. Part of the problem is that the great points you brought up are contra-habitual. Consistency might require a decent amount of introspection and spiritual retreats to uproot the problem rather than reading a book or two. The other part of the problem is that we tend to set traps for ourselves which makes things worse... a more layman approach to this part of the problem is what I try to focus the discussions on at this time.

 

[Simon Gordon]

Personally, I think joining a Meditation Group is a much better way to proceed than reading books.

I find reading Taoism or Buddhism adds more clutter.

I like the Zen approach of just sitting - full stop.

I think it is easy - it is our lazy mind that says it is difficult.

30 Minutes in the morning and 30 Minutes in the evening is a great starter for a Trader - take a break from information.

The Market is dead simple - buy low, sell high.

Of course you can move into complicated trades/swaps, etc - why?

I think simple trades suit me.

Some folk like intellectualising and hence go for complicated trades - they are free to choose.

Going the Tao route for me is brilliant - I have so much time.

As to consistency, I think once you have grasped the Tao it is you.

 

[martyschwartz]

Yes, information overload just creates more concepts and due to our own confusion, they lead to more fixation and hence more stress and tension. If they don't kill you in the market, they kill you in life. Meditation is great! Unfortunately, I am a little lazy...

 

[sulong]

Meditation is great! Unfortunately, I am a little lazy...

Fortunately, there is no law or rule that says meditation has to be done in isolation of another activity.
One can meditate while eating, walking or doing dish'es.

 

[martyschwartz]

Simon, there is one thing that bothers me is when you said "full stop." I hope you don't believe there is any benefits in stopping your mind. One cannot stop the mind by efforts (there is an undercurrent of subtle thoughts) and that is not the point of the meditation anyway. I was taught the point is more to resolve the nature of the thoughts being no different from the nature of awareness or mind.... Blah blah blah... :?:

 

[martyschwartz]

Fortunately, there is no law or rule that says meditation has to be done in isolation of another activity.
One can meditate while eating, walking or doing dish'es.

That is usually called "post-meditation" practice... but it is meditation as long as you can hold your awareness. Great stuff.

 

[Simon Gordon]

Sulong - excellent point = mindfulness.

Marty - I did not mean to stop thinking, just to sit - nothing more. When sitting you are thinking, but you are training your mind and moving into tranquility - more mental space - relaxation.

Marty, I thank you for starting this interesting thread.

In NY there are some topnotch Zen classes - check it out. Also there are some Temples outside the City - you can go on introductory retreats.

 

[martyschwartz]

Sulong - excellent point = mindfulness.

Marty - I did not mean to stop thinking, just to sit - nothing more. When sitting you are thinking, but you are training your mind and moving into tranquility - more mental space - relaxation.

Marty, I thank you for starting this interesting thread.

In NY there are some topnotch Zen classes - check it out. Also there are some Temples outside the City - you can go on introductory retreats.

Thanks. I do follow Buddhism (Tibetan) but recently I am getting side-tracked by responsibilities.

 

[Simon Gordon]

Yeah it's tough - but you carry it with you always.

I studied Tibetan for a few years then moved onto Zen.

The Tibetan group was lovely - very intellectual, they took exams and did a sort of degree course.

I love listening to the Dharma - so evocative and poetic. Blissful and the music and pictures and statues. Sweet memories!

The Zen people are great but a bit cooler - all that sitting - more introspective.

I had to stop classes due to ill health - but when I am better I fancy going to a French Zen Temple for a whole summer - a lovely thought.

I wish you well.

 

[martyschwartz]

Hope you get better soon and your retreat goes well as you envision.

 

[Simon Gordon]

Yeah - cheers.

Dwelling on this thread the word that keeps recurring in my mind is stillness.

How, as a trader , can I be still in the midst of constant information feeding in through my PC and TV, on into my mind. Do I keep devouring the data? Am I wasting cognition?

Taoism teaches that force is wasted energy. How we interact with the market and use the energy it creates decides if we make profit.

I think day trading uses too much energy and a more tranquil way to create wealth is by buying a stock that is priced too cheaply. By owning the stock and being still within the stock, because I have done methodical research that is continuous The stillness comes from my belief in the stock. I do not need to pay detailed attention to the market and economy. I am stiller, not so anxious as my variable risk is lower.

I have more time to meditate on finding the next stock - but I only hold one stock at time. I am totally focused - I am sitting in my stock - I live it - If I cannot live within it I sell it - but meditative research reduces the risk of a bum purchase.

The force of the market passes me by as I sit in my stock - yes the price will fluctuate but I am at peace. I am happy - tranquil.

The stillness arises from the trade.

Just my thoughts - nothing concrete.