my journal

[Yamato]

Ok. I downloaded and finally have started reading "trading in the zone", the famous book, since a reader advised me to do so. It starts like this, more or less, and because of how it starts it's more appealing to me:

I started trading in 1978. At the time, I was managing a commercial casualty insurance agency in
the suburbs of Detroit, Michigan. I had a very successful career and thought I could easily transfer that
success into trading. Unfortunately, I found that was not the case.
By 1981, I was thoroughly disgusted with my inability to trade effectively while holding another job,
so I moved to Chicago and got a job as a broker with Merrill Lynch at the Chicago Board of Trade.
How did I do? Well, within nine months of moving to Chicago, I had lost nearly everything I owned...

I am liking it. Yesterday I read the other book by Larry Harris, "trading and exchanges".

More good ideas from the Foreword (written by someone else I suppose):

...To the novice, the only challenge appears to be to find a way to make money. Once the novice
learns that tips, brokers' advice, and other ways to justify buying or selling do not work consistently, he
discovers that he either needs to develop a reliable trading strategy or purchase one. After that, trading
should be easy, right? All you have to do is follow the rules, and the money will fall into your lap.
At this point, if not before, novices discover that trading can turn into one of the most frustrating
experiences they will ever face.
This experience leads to the oft-started statistic that 95 percent of futures traders lose all of their money
within the first year of trading. Stock traders generally experience the same results, which is why
pundits always point to the fact that most stock traders fail to outperform a simple buy and hold
investment scenario.
So, why do people, the majority of whom are extremely successful in other occupations, fail so
miserably as traders? Are successful traders born and not made? Mark Douglas says no. What's
necessary, he says, is that the individual acquire the trader's mindset. It sounds easy, but the fact is, this
mindset is very foreign when compared with the way our life experiences teach us to think about the
world.
That 95-percent failure rate makes sense when you consider how most of us experience life, using
skills learned as we grow. When it comes to trading, however, it turns out that the skills we learn to
earn high marks in school, advance our careers, and create relationships with other people, the skills we
are taught that should carry us through life, turn out to be inappropriate for trading. Traders, we find
out, must learn to think in terms of probabilities and to surrender all of the skills we have acquired to
achieve in virtually every other aspect of our lives...

Reading his attitude survey right now, on page 6. I'll comment on the questions right here, as I answer them:

ATTITUDE SURVEY

1. To make money as a trader you have to know what the market is going to do next.
Disagree but close: you have to know what the market is most likely going to do next.

2. Sometimes I find myself thinking that there must be a way to trade without having to take a loss.
Disagree

3. Making money as a trader is primarily a function of analysis.
Disagree (I won't fall for this one).

4. Losses are an unavoidable component of trading.
Agree

5. My risk is always defined before I enter a trade.
Agree that it should be done but it's not the case with me

6. In my mind there is always a cost associated with finding out what the market may do next.
Agree Disagree... it is not phrased clearly. Go back and write this question all over again.

7. I wouldn't even bother putting on the next trade if I wasn't sure that it was going to be a winner.
Agree Disagree... this is a repetition of question number 1.

8. The more a trader learns about the markets and how they behave, the easier it will be for him to
execute his trades.
Agree

9. My methodology tells me exactly under what market conditions to either enter or exit a trade.
Agree but I don't follow it, and I am wrong

10. Even when I have a clear signal to reverse my position, I find it extremely difficult to do.
Agree Disagree... I never have such signals, so I can't answer.

11. I have sustained periods of consistent success usually followed by some fairly drastic draw-downs
in my equity.
Agree, that's what happened with my discretionary trading so far.

12. When I first started trading I would describe my trading methodology as haphazard, meaning some
success in between a lot of pain.
Agree

13. I often find myself feeling that the markets are against me personally.
Agree

14. As much as I might try to "let go," I find it very difficult to put past emotional wounds behind me.
Agree

15. I have a money management philosophy that is founded in the principle of always taking some
money out of the market when the market makes it available.
Disagree

16. A trader's job is to identify patterns in the markets' behavior that represent an opportunity and then
to determine the risk of finding out if these patterns will play themselves out as they have in the past.
Agree

17. Sometimes I just can't help feeling that I am a victim of the market.
Agree

18. When I trade I usually try to stay focused in one time frame.
Disagree

19. Trading successfully requires a degree of mental flexibility far beyond the scope of most people.
Agree

20. There are times when I can definitely feel the flow of the market; however, I often have difficulty
acting on these feelings.
Disagree, I feel the flow even when it's not there, and I act on these feelings all the time. I am on a trading rampage most of the time.

21. There are many times when I am in a profitable trade and I know the move is basically over, but I
still won't take my profits.
Disagree: I take my profits too early usually (when trading discretionary)

22. No matter how much money I make in a trade, I am rarely ever satisfied and feel that I could have
made more.
Disagree: I am satisfied very fast and that is why I cut my profits short, mistakenly.

23. When I put on a trade, I feel I have a positive attitude. I anticipate all of the money I could make
from the trade in a positive way.
Agree (and then the trade goes the other way, and since I had a positive attitude, I can't exit, so it'd be better to have a negative attitude and expect the worst).

24. The most important component in a trader's ability to accumulate money over time is having a
belief in his own consistency.
Agree Disagree... bull****, how can you say this is the most important? Bull****. Having an edge is more important. Give me a 95% system, and I'll take care of having faith in my consistency.

25. If you were granted a wish to be able to instantaneously acquire one trading skill, what skill would
you choose?
The skill of never getting it wrong. But if I can't have that, the skill of not taking it personally when the market tells me I am wrong, which is the thing that drives me mad the most, since my dad favorite sport was always telling that I was wrong, that asshole...

26. I often spend sleepless nights worrying about the market.
Disagree: sleepless yes, but about other things.

27. Do you ever feel compelled to make a trade because you are afraid that you might miss out?
Yes, as I said earlier: I am often on a trading rampage, so I never miss any potential profit, nor any potential loss.

28. Although it doesn't happen very often, I really like my trades to be perfect. When I make a perfect
call it feels so good that it makes up for all of the times that I don't.
Agree, and it makes me forget that I am unprofitable: it's dead on target. Thanks, I am starting to like your book a lot. You're better than Elder I'd say. Actually, tell you what: you're the only trading book worth reading.

29. Do you ever find yourself planning trades you never execute, and executing trades you never
planned?
No and yes. As I told you earlier, I tend to overtrade, so if anything I make trades that I don't plan. I certainly do not miss any trades.

30. In a few sentences explain why most traders either don't make money or aren't able to keep what
they make.
That's a good question, thanks for asking me. The best phrasing would be "why most traders are unprofitable". They are unprofitable because they either do not have an edge, or have an edge and do not use it, and make trades that do not rely on that edge. And this is my case: I'd have an edge to be profitable but I trade outside of that edge.

 

[Yamato]

More from trading in the zone:

...On any given day, week, or month, the markets make available vast amounts of money to anyone who has the capacity to put on a trade. Since the markets are in constant motion, this money is also constantly flowing, which makes the possibilities for success greatly magnified and seemingly within your grasp. I use the word "seemingly" to make an important distinction between the two groups of traders.

For those who have learned how to be consistent, or have broken through what I call the "threshold of consistency,"the money is not only within their grasp; they can virtually take it at will. I'm sure that some will find this statement shocking or difficult to believe, but it is true. There are some limitations, but for the most part, money flows into the accounts of these traders with such ease and effortlessness that it literally boggles most people's minds.

However, for the traders who have not evolved into this select group, the word "seemingly" means
exactly what it implies. It seems as if the consistency or ultimate success they desire is "at hand," or
"within their grasp," just before it slips away or evaporates before their eyes, time and time again...

 

[Yamato]

Traders who make it beyond "the threshold of consistency" usually experience a great deal of pain (both emotional and financial) before they acquire the land of attitude that allows them to function effectively in the market environment. The rare exceptions are usually those who were born into successful trading families or who started their trading careers under the guidance of someone who understood the true nature of trading, and, just as important, knew how to teach it.

It reminds me of someone I know.

 

[Yamato]

If I engage in an activity that is inherently risky, then I must be a risktaker. This is a perfectly reasonable assumption for any trader to make. In fact, not only do virtually all traders make this assumption, but most traders take pride in thinking of themselves as risk-takers. The problem is that this assumption couldn't be further from the truth. Of course, any trader is taking a risk when you put on a trade, but that doesn't mean that you are correspondingly accepting that risk. In other words, all trades are risky because the outcomes are
probable—not guaranteed. But do most traders really believe they are taking a risk when they put on a
trade? Have they really accepted that the trade has a non-guaranteed, probable outcome? Furthermore,
have they fully accepted the possible consequences?

The answer is, unequivocally, no! Most traders have absolutely no concept of what it means to be a
risk-taker in the way a successful trader thinks about risk.

The best traders not only take the risk, they have also learned to accept and embrace that risk. There is a huge psychological gap between assuming you are a risk-taker because you put on trades and fully accepting the risks inherent in each trade. When you fully accept the risks, it will have profound implications on your bottom-line performance. The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely and without hesitation or conflict, admit it isn't working. They can get out of the trade—even with a
loss—and doing so doesn't resonate the slightest bit of emotional discomfort. In other words, the risks
inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence. If you are unable to trade without the slightest bit of emotional discomfort (specifically, fear), then you
have not learned how to accept the risks inherent in trading.

Trading in the zone, the only trading book worth reading.

This last part of the quote reminded me of Christopher Lloyd in the movie Twenty Bucks (which I didn't like too much otherwise), who was a robber and how cool he was as a robber, because he knew exactly the risks involved, as opposed to Steve Buscemi who did not and wasn't calm at all, and that was his problem. Maybe that part qualifies it as a good trading movie. I'd recommend the movie just for that part.

I think I should start watching some movies about robbing banks as a trading course. Because I suppose many of the robbers must have the same characteristics that traders have: knowing the risks, and minimizing them, and then executing the plan accordingly. Another movie mentioning and depicting clearly this concept is this one (which otherwise sucks as well as the other one):
http://www.letmewatchthis.com/watch-2344-Bandits

While trading you risk blowing out your account, at each trade you place (that's what happens if it goes wrong and you keep it open). While robbing a bank (like in Bandits) or a store (like in Twenty Bucks), you risk your life, at each robbery. I think trading is easier than robbing banks, because it's very hard to keep cool while you're risking your life, but it's easier while you're risking your account. And yet I can't do that either (keeping cool while risking my account). I think robbing banks would be good practice for trading.

Just like for Elder's trading for a living, I suppose that chapter one of Douglas' trading in the zone is the best chapter of the book. Let me tell you once again that Elder's book wasn't very promising beyond chapter one so I didn't bother to read any further than a few more pages. Whereas Douglas' book seems more promising.

Oh, look, I resumed my reading of chapter one, and, sure enough, he makes a similar comparison to mine and says that risking your money is on the same "things we fear" list (even though lower) as risking your life (when robbing a bank, in my example) and that is why it's hard for us to keep cool:

...If you are unable to trade without the slightest bit of emotional discomfort (specifically, fear), then you have not learned how to accept the risks inherent in trading. This is a big problem, because to whatever degree you haven't accepted the risk, is the same degree to which you will avoid the risk.

Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.
Learning to truly accept the risks in any endeavor can be difficult, but it is extremely difficult for traders, especially considering what's at stake. What are we generally most afraid of (besides dying or public speaking)? Certainly, losing money and being wrong both rank close to the top of the list.

 

[Yamato]

 

[Yamato]

More from trading in the zone, chapter one:

Learning to accept the risk is a trading skill—the most important skill you can learn. Yet it's rare that developing traders focus any attention or expend any effort to learn it.
When you learn the trading skill of risk acceptance, the market will not be able to generate information
that you define or interpret as painful. If the information the market generates doesn't have the potential
to cause you emotional pain, there's nothing to avoid. It is just information, telling you what the
possibilities are. This is called an objective perspective—one that is not skewed or distorted by what
you are afraid is going to happen or not happen.

And:

I don't think I could put the difference between the consistent winners and everyone else more simply
than this: The best traders aren't afraid.

And:

You can't perceive other possibilities or act on them properly, even if you did manage to perceive them, because fear is immobilizing.

And:

You won't think about all the rational things you've learned about the market until you are
no longer afraid and the event is over. Then you will think to yourself, "I knew that. Why didn't I think
of it then?" or, "Why couldn't I act on it then?"
It's extremely difficult to perceive that the source of these problems is our own inappropriate attitudes.
That's what makes fear so insidious. Many of the thinking patterns that adversely affect our trading are
a function of the natural ways in which we were brought up to think and see the world. These thinking
patterns are so deeply ingrained that it rarely occurs to us that the source of our trading difficulties is
internal, derived from our state of mind. Indeed, it seems much more natural to see the source of a
problem as external, in the market, because it feels like the market is causing our pain, frustration, and
dissatisfaction.

What I am now thinking is that probably fear paralyzes us and causes the worst outcome in all situations of life, yet in trading, if we want to become profitable, we have to solve the problem we're faced with repeatedly and incessantly.

Take those guys who threw a bottle at me when I was crossing the bridge. Probably fear paralyzed me as I saw a car driving by and sensed some threat. Probably if I were faced with the same situation every day, with cars driving by and throwing bottles at me, I might find out that the best behaviour is to run towards the car and yell something, instead of just keep on walking. Or maybe I'd find out that it would get me killed. But what I mean to say is that trading forces us to first realize and then solve problems - by forcing us to face the same situation every time - that might exist in other areas of our lives but that we have never realized, because they do not happen as frequently nor cause as much damage. I mean, how many times do you get a bottle thrown at you from a running car? Once in a lifetime. So what opportunities do you have to learn what the best reaction or rather prevention could be? Zero, so it's impossible to learn and profit from it.

But trading is like a gymn for life. It tells us repeatedly we're doing something wrong, and keeps on taking money from us until we do things wrong. So this suggests to me that since automated trading works so well, maybe I should also implement some form of automated living. Which is actually partly what I am doing already by using a braun electric toothbrush. It works better, and it costs less efforts.

 

[Yamato]

More from chapter one of trading in the zone:

If we aren't aware of, or don't understand, how our beliefs and attitudes affect our perception of market information, it will seem as if it is the market's behavior that is causing the lack of consistency. As a result, it would stand to reason that the best way to avoid losses and become consistent would be to learn more about the markets.

This bit of logic is a trap that almost all traders fall into at some point, and it seems to make perfect
sense. But this approach doesn't work. The market simply offers too many - often conflicting - variables to consider. Furthermore, there are no limits to the market's behavior. It can do anything at any moment. As a matter of fact, because every person who trades is a market variable, it can be said that any single trader can cause virtually anything to happen.

This means that no matter how much you learn about the market's behavior, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money. So if you are afraid of being wrong or losing money, it means you will never learn enough to compensate for the negative effects these fears will have on your ability to be objective and your ability to act without hesitation.

In other words, you'll never be good enough to never lose, and therefore you should focus on managing losses, rather than on trying to avoid them. That's why I've said before that I have enough of an edge already and that my problem is all psychological. I don't wish to focus any further on increasing my edge (as long as by "edge" we only mean knowing what will probably happen next, rather than the entire trading system, including money management, stoplosses and so on).

Wow, I am loving this book, because it just says things I already was thinking. I always thought this was the case. We call "intelligent" people we understand. We call "good taste" people who have our same taste. So maybe it's useless to read a good book, because it's just a book that's saying things I am already thinking. So I could say "what a totally interesting useless book this is!", or "what a totally boring and frustrating useful book this is!" (which applies to Walkenbach's excel manuals).

Anyway, here he goes again, confirming what I was thinking:

...In other words, you won't be confident in the face of constant uncertainty. The hard, cold reality of trading is that every trade has an uncertain outcome. Unless you learn to completely accept the possibility of an uncertain outcome, you will try either consciously or unconsciously to avoid any possibility you define as painful. In the process, you will subject yourself to any number of self-generated, costly errors.

If it is true as the Latins said that repeating things helps, "repetita iuvant", then at least reading things that I was already thinking will help me. But maybe repeating things doesn't help. I am not even sure about this. I know it's a pleasure to read things I am already thinking, and reading things I understand, and reading things I agree with. But shouldn't becoming profitable be a hard and painful process as Douglas himself said? Then how is this book helping me, since it's so pleasurable to read it? Maybe what I'd need is not reading this book, but rather a trading coach whipping me.

Well, what do you know... this is the Americans I was telling you about, the guys who threw a bottle at me. I found them on Youtube:

Now, with these people, I can't keep cool, because I don't want to get into a fight with them, since they care so little about getting hurt that they have fun hurting themselves. So next time I am on that bridge, I will not run towards the car, nor yell anything at them. Oh man, I don't want to meet these guys... man, what a world...

 

[Yamato]

It all boils down to understanding the need for a stoploss

More on the same concept and from the same book and chapter:

Now, I am not suggesting that we don't need some form of market analysis or methodology to define
opportunities and allow us to recognize them; we certainly do. However, market analysis is not the path
to consistent results. It will not solve the trading problems created by lack of confidence, lack of discipline, or improper focus. When you operate from the assumption that more or better analysis will create consistency, you will be driven to gather as many market variables as possible into your arsenal of trading tools. But what happens then? You are still disappointed and betrayed by the markets, time and again, because of something you didn't see or give enough consideration to. It will feel like you can't trust the markets; but the reality is, you can't trust yourself.

Yeah, basically it all boils down to this. How much are you expecting to lose at the most from this trade? 400. How much are you expecting to make at the most from this trade? 400. Is making 400 more probable than losing 400? If yes, then make the trade and don't worry about anything else.

The problem arises when you did not have the knowledge necessary to make that appraisal that you were more likely to win than to lose. But at least there will not be other problems. Whereas if you get scared and uncertain, you might allow that same trade to 2000, and only make 100 if it goes your way - and all because of fear: fear of taking a loss (and then you allow it to grow) and fear of not taking a profit (and then you don't allow it to grow).

So, once again, recapitulating: two things. One is to know how much you'll lose at the most, and this could be translated exactly into risk/reward (essentially and simplistically, stoploss/takeprofit). And the other factor is whether you really have an edge or not, and this could be translated directly into percentage of wins, or win/loss ratio.

The two above are the famous two things we've written about for many posts with wprins, sometimes even polemically.

One more summary, to make it all clearer in my mind. You ask yourself these two questions:
1) How much do i stand to lose and win on this trade? (risk/reward)
2) How likely am I to win? (% of wins of your strategy)

If you can correctly assess both and if it makes sense to trade based on that assessment, then you should just trade and have all the confidence in the world.

The problems are that often we do not even appraise #1 (how much we stand to lose on a trade, nor how much we'll let profit run), and at that point it's meaningless to appraise #2.

My case is usually that I have a 90% of wins, because I can't stand to lose, but then to make that happen, I decrease my reward to a few hundreds and increase my risk to blowing out my account.

The mastery of these two key elements of our trading strategy is what I've always missed in my discretionary trading. Now it's all in focus, and I'll see if I can finally turn profitable.

My automated trading is another matter, because it's entirely under control, but that is why I rarely talk about it here, as there are no problems to solve in this area (except lack of capital, which I am trying to solve with discretionary trading).

But how does this related to my supposed "trading addiction"?

I think that if you are addicted as I am, it will be harder to focus on those two key elements. It will keep you distracted from those two points for 12 years, as it happened to me. I've been trading like a moron. My journal shows in many of its posts how most of my discretionary trades were about hoping and fearing and few of them were about calculating and appraising those two elements I mentioned (how much do you stand to win and lose and how likely are you to win and lose).

What douglas said in his quote above, which I will requote here...

Now, I am not suggesting that we don't need some form of market analysis or methodology to define
opportunities and allow us to recognize them; we certainly do. However, market analysis is not the path
to consistent results. It will not solve the trading problems created by lack of confidence, lack of discipline, or improper focus. When you operate from the assumption that more or better analysis will create consistency, you will be driven to gather as many market variables as possible into your arsenal of trading tools. But what happens then? You are still disappointed and betrayed by the markets, time and again, because of something you didn't see or give enough consideration to. It will feel like you can't trust the markets; but the reality is, you can't trust yourself.

... is basically that it's pointless to focus on improving your win/loss ratio if you don't focus on risk, and when you incur losses you allow them to blow out your account.

In other words, his book and all that a trader needs to know could be summarized in what everyone keeps on writing on forums: stoploss. That's all a trader ever needs to understand, and most of books and posts written by traders are basically an effort to explain to others and to ourselves what this single word implicates.

It is true that there's more written about #2 than about #1, and focus on increasing your win/loss ratio. But I don't think I've come across a word used more often than stoploss, and that is the subject of more posts on forums and books. Basically the whole Douglas' book is about providing explanations for using the stoploss.

 

[Yamato]

More:

As long as you are susceptible to the lands of errors that are the result of rationalizing, justifying,
hesitating, hoping, and jumping the gun, you will not be able to trust yourself. If you can't trust yourself to be objective and to always act in your own best interests, achieving consistent results will be next to impossible. Trying to do something that looks so simple may well be the most exasperating thing you will ever attempt to do. The irony is that, when you have the appropriate attitude, when you have acquired a "trader's mind-set" and can remain confident in the face of constant uncertainty, trading will be as easy and simple as you probably thought it was when you first started out.

Just like everyone says on forums: keep emotions out of trading. After all, I've always said that posts are just as good as books, if not better, because less pretentious. But the good connection he suggests is that you have to keep emotions out of trading because emotions make you lose your objectivity.

But I know this from playing risk, foosball and other games. If you're rational, you play better. If you get upset because you lost... I don't even know if this is true. Maybe for trading is different. Actually I do care about playing foosball a lot and get upset when I lose, but I was the best player in highschool. So maybe things are different. I also take risk games very personally, and yet I play well.

Well, I guess I can't find patterns that apply to everything. What matters now is trading, so let's not try to find the laws governing the universe each time I write a post.

 

[Yamato]

More:

The successful trader that you want to become is a future projection of yourself that you have to grow
into. Growth implies expansion, learning, and creating a new way of expressing yourself. This is true even if you're already a successful trader and are reading this book to become more successful. Many of the new ways in which you will learn to express yourself will be in direct conflict with ideas and beliefs you presently hold about the nature of trading. You may or may not already be aware of some of these beliefs. In any case, what you currently hold to be true about the nature of trading will argue to keep things just the way they are, in spite of your frustrations and unsatisfying results. These internal arguments are natural. My challenge in this book is to help you resolve these arguments as efficiently as possible. Your willingness to consider that other possibilities exist—possibilities that you may not be aware of or may not have given enough consideration to—will obviously make the learning process faster and easier.

 

[Yamato]

Hi Travis,
There is one book I read 6 months ago and planning to read it again. (After first time I read it, I had 20 winning days in a row) It is Trading In The Zone by Mark Douglas.
Regards

So, do I have to read it every time I want to get 20 winning days in a row or is it enough to read it once? Anyway, thanks for the advice. That thing you said about 20 winning days in a row is what made me read it.

This book is so much powerful knowing that it made you profitable (or more profitable), and it is powerful to me also because I am expecting the author to be a profitable trader. I believe in this. But even if he were a professor studying and describing profitable traders, it would still be valuable.

 

[Yamato]

More on emotions keeping you from reasoning.

I remember how I was writing dozens of posts for each trade I was placing and some said: don't worry about it, place the trade and then leave. And they were right - i realize now - but somehow I was unable to do it. It was a symptom of emotional trading. I wasn't actually explaining my understanding of the markets but mostly stating what I hoped the markets would do next. Useless and a symptom that I was hoping, and I was hoping because I didn't know whether I had an edge or not. And when you trade not knowing whether you have an edge or not, you basically do not have an edge, because that uncertainty itself will make you hesitate to take profits or losses, and that will make you unprofitable.

So basically just to remind myself: whenever I am storming my journal with analyses of the markets and I have an on-going trade, it is just a lot of bull****, and I am only writing down what I hope the markets will do. I should spare myself those posts, and I should have spared myself that trade.

 

[Yamato]

chapter 2, trading in the zone:

At one point, the editor asked me if a possible explanation for this phenomenon might be that people were getting into trading for the wrong reasons.

I had to pause for a moment to think about this. I agree that many of the typical reasons people are
motivated to trade—the action, euphoria, desire to be a hero, the attention one can draw to himself by
winning, or the self-pity that comes from losing—create problems that will ultimately detract from a
traders performance and overall success. But the true underlying attraction to trading is far more
fundamental and universal. Trading is an activity that offers the individual unlimited freedom of
creative expression, a freedom of expression that has been denied most of us for most of our lives.

I agree, that's partly why I like it.

 

[piker]

More from trading in the zone, chapter one:

And:


And:


And:


What I am now thinking is that probably fear paralyzes us and causes the worst outcome in all situations of life, yet in trading, if we want to become profitable, we have to solve the problem we're faced with repeatedly and incessantly.

Take those guys who threw a bottle at me when I was crossing the bridge. Probably fear paralyzed me as I saw a car driving by and sensed some threat. Probably if I were faced with the same situation every day, with cars driving by and throwing bottles at me, I might find out that the best behaviour is to run towards the car and yell something, instead of just keep on walking. Or maybe I'd find out that it would get me killed. But what I mean to say is that trading forces us to first realize and then solve problems - by forcing us to face the same situation every time - that might exist in other areas of our lives but that we have never realized, because they do not happen as frequently nor cause as much damage. I mean, how many times do you get a bottle thrown at you from a running car? Once in a lifetime. So what opportunities do you have to learn what the best reaction or rather prevention could be? Zero, so it's impossible to learn and profit from it.

But trading is like a gymn for life. It tells us repeatedly we're doing something wrong, and keeps on taking money from us until we do things wrong. So this suggests to me that since automated trading works so well, maybe I should also implement some form of automated living. Which is actually partly what I am doing already by using a braun electric toothbrush. It works better, and it costs less efforts.

Maybe we aren't meant trade our own analysis. City traders are told to buy this & that & they try to get best prices, we (retail) are faced with an ongoing dilemma - is signal still valid? Market conditions are always different & when they change - do I hold or do I fold?

 

[Yamato]

Yeah, and it is somehow related to what I was about to quote, before reading your message:

The editor paused for a moment and asked, "But why would having access to such an unrestricted
environment result in fairly consistent failure?" I answered, "Because unlimited possibilities coupled
with the unlimited freedom to take advantage of those possibilities present the individual with unique
and specialized psychological challenges, challenges that very few people are properly equipped to deal
with, or have any awareness of for that matter, and people can't exactly work on overcoming something
if they don't even know its a problem."

We're not all ready to handle the total freedom that trading gives us. For example, how responsible am I at work? Not very much. I work very hard, but occasionally I just skip work. People around us forcing up to do things for them are not there when we trade. If they were, they might be able to enforce stoplosses. But in trading, you are your own boss, with all its advantages and disadvantages. You cannot take advantage of all the freedom that trading gives you.

He continues:

The freedom is great. All of us seem to naturally want it, strive for it, even crave it. But that doesn't mean
that we have the appropriate psychological resources to operate effectively in an environment that has
few, if any, boundaries and where the potential to do enormous damage to ourselves exists. Almost
everyone needs to make some mental adjustments, regardless of their educational background,
intelligence or how successful they've been in other endeavors.

The kind of adjustments I'm talking about have to do with creating an internal mental structure that
provides the trader with the greatest degree of balance between the freedom to do anything and the
potential that exists to experience both the financial and psychological damage that can be a direct
result of that freedom.

 

[Yamato]

back at 6k and flat

Ok, closed all ZN positions, and back at 6k. Now i am ready to start trading with probability in mind, without emotions, and considering only win/loss and risk/reward ratios.

 

[inzider]

Re: back at 6k and flat

Ok, closed all ZN positions, and back at 6k. Now i am ready to start trading with probability in mind, without emotions, and considering only win/loss and risk/reward ratios.

Way to go! Keep it simple in act and mind!
Wish you the best!

Later!

 

[Yamato]

Thanks.

 

[bedsit]

So, do I have to read it every time I want to get 20 winning days in a row or is it enough to read it once? Anyway, thanks for the advice. That thing you said about 20 winning days in a row is what made me read it.

This book is so much powerful knowing that it made you profitable (or more profitable), and it is powerful to me also because I am expecting the author to be a profitable trader. I believe in this. But even if he were a professor studying and describing profitable traders, it would still be valuable.

I don't know if that winning period was a coincidence or something else, but I liked the book (to my mind one of the best books on trading).
When I complained about my recent losses month ago or so to one professional trader, he asked if I read the book. When I replied that I know about the book (and have read it), he suggested to read it again (obviously I haven't read it properly!?)
Although it is a demanding book, worth reading again.

 

[Yamato]

Watching this now:
http://www.letmewatchthis.com/tv-4130-The-Sopranos/season-1

Not bad at all.

From:
http://en.wikipedia.org/wiki/The_Sopranos

A major commercial and critical success, The Sopranos is the most financially successful cable series in the history of television and is acknowledged as one of the greatest television series of all time and a seminal dramatic production.[1] The series is noted for its high level of quality in every aspect of production and is particularly recognized for its writing and the performances of its lead actors.[2] The show is credited with bringing a greater level of artistry to the television medium and paving the way for many successful drama series that followed.[3][4] It also won numerous awards, including twenty-one Emmys and five Golden Globes.